<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
Two World Trade Center, New York, New York 10048
LETTER TO SHAREHOLDERS
DEAR SHAREHOLDER:
Over the course of Dean Witter Mid-Cap Growth Fund's brief existence, the
U.S. financial markets have turned decidedly more constructive. The Fund was
introduced in the fall of 1994 as the stock and bond markets were in the
midst of establishing major bottoms in reaction to fears that an overheating
economy would reignite inflation and send interest rates higher. In
retrospect, the timing of the Fund's introduction was quite favorable, as the
markets soon became convinced that the economy's excessive growth rate was in
the process of moderating to a more sustainable and less volatile pace. In
response, the U.S. financial markets have handily advanced over the first
five months of 1995.
PERFORMANCE REVIEW
For the period September 29, 1994 through May 31, 1995, the Fund registered a
total return of 8.26 percent versus a return of 8.78 percent for the Lipper
Analytical Services, Inc. mid-cap mutual fund index, an equally weighted
index of the largest qualifying funds in Lipper's mid-cap universe. The index
is adjusted for capital gains distributions and income dividends and does not
include sales charges. During the same period, the Standard & Poor's MidCap
Index gained 10.57 percent. The Fund's underperformance versus the S&P MidCap
Index is attributable to its conservative posture in the first quarter. The
portfolio has since been repositioned more aggressively to include greater
representation in the technology and financial services sectors. The
accompanying chart illustrates the growth of a $10,000 investment in the Fund
from inception through May 31, 1995, versus the performance of a similar
hypothetical investment in the issues that comprise the Standard & Poor's
MidCap Index.
POSITIONING THE FUND'S PORTFOLIO
The Fund's portfolio management team works to identify investment sectors
which they believe will exhibit the most attractive relative earnings
momentum based on the current stage of the economic cycle. Following this,
extensive company analysis is done to select mid-cap stocks which
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
LETTER TO SHAREHOLDERS, continued
represent industries identified as timely. The Fund's current weightings are
the result of a rotation into growth-oriented industries, a strategy that
began in the fourth quarter of 1994 and is attributable to a flattening yield
curve. Historically, a flat yield curve (i.e., little difference between
short- and long-term interest rates) has suggested that the market was
beginning to discount an economic slowdown.
As of May 31, 1995, the Fund is invested in the four principal sectors which
historically perform well at this stage of the economic cycle: technology
(Symantec Corp., Analog Devices, Inc., KLA Instruments
Corp. and Cisco Systems, Inc.); interest-rate-sensitive
(BayBanks, Inc., Green Tree Financial Corp. and SunAmerica Inc.);
consumer/business services (First Financial Management Corp., La Quinta Inns,
Inc., Westwood One, Inc. and Gaylord Entertainment Co.); and
healthcare (HBO & Co. and Medtronic, Inc.). The Fund
also has minor exposure to consumer staples (Avon Products, Inc.) and select
economically sensitive stocks.
DEAN WITTER MID-CAP GROWTH FUND
GROWTH OF $10,000
DATE TOTAL S&P MIDCAP IX
---- ----- -------------
September 29, 1994 $10000 $10000
September 30, 1994 $10000 $10000
October 31, 1994 $10190 $10109
November 30, 1994 $ 9940 $ 9653
December 31, 1994 $10095 $ 9742
January 31, 1995 $ 9845 $ 9843
February 28, 1995 $10245 $10360
March 31, 1995 $10606 $10530
April 30, 1995 $10706 $10751
May 31, 1995 $10326(3) $11010
CUMULATIVE TOTAL RETURNS
LIFE OF FUND
8.26 (1)
3.26 (2)
____ Fund ____ S&P MIDCAP IX(4)
Past performance is not predictive of future returns.
________________________________________
(1) Figure shown does not reflect the deduction of any sales charges.
(2) Figure shown assumes the deduction of the maximum applicable contingent
deferred sales charge (CDSC) (Since inception 5%). See the Fund's current
prospectus for complete details on fees and sales charges.
(3) Closing value after the deduction of a 5% CDSC, assuming a complete
redemption on May 31, 1995.
(4) The S&P Midcap Index is a market-value weighted index, the performance of
which is based on the average performance of 400 domestic stocks chosen
for market size, liquidity, and industry group representation. The index
does not include any expenses, fees or charges.
MID-CAPS POISED TO OUTPERFORM AFTER INITIAL LAG
While stocks in general have rallied in 1995, larger companies have
outperformed mid-sized companies thus far. Several related factors have led
to this trend. The first is that large-cap companies typically derive a
materially greater portion of their sales from abroad. Also, a significant
recovery in Europe and continued growth in the Pacific Rim has given a
significant boost to international sales in 1995. International earnings have
been further enhanced by the U.S. dollar's significant decline versus the
deutschemark and the yen.
It appears that the dollar may be in the process of bottoming and could even
post a rebound over the next few years. There are three principal factors
suggesting that the dollar is approaching its lows: 1) The dollar remains
undervalued versus foreign currencies based on standard international
economic measures; 2) Progress is being made toward reduction of both the
U.S. trade and budget deficits; and 3) The U.S. is the developed world's low
cost producer of goods. Should the dollar regain strength, the low overseas
exposure of mid-cap companies compared to large-caps will swing from a
disadvantage to an advantage, and market leadership would be expected to
shift back to the mid-cap sector.
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
LETTER TO SHAREHOLDERS, continued
Finally, it should be noted that "Bull" markets typically proceed in stages.
The Fund's portfolio manager believes the initial stage in which large or
"blue-chip" stocks outperform has ended, giving way to a period of small- and
mid-cap stock leadership. Given this market evolution, we believe the mid-cap
sector, in general, and the Fund, in particular, hold the potential for
attractive returns in the second half of 1995.
WHY MID-CAP STOCKS?
Over the last 70 years, mid-cap stocks have widely outperformed their
large-cap counterparts. This is because of the tendency of mid-caps to have
superior growth rates in both sales and earnings. Compared to the Standard &
Poor's 500 Index, which measures the performance of larger companies, the S&P
MidCap Index has exhibited a sales and earnings growth advantage of 75 and
150 percent, respectively, over the last five years. These superior growth
rates are attributable to the fact that mid caps tend to be in a much earlier
and more dynamic phase of their life cycles than large-cap companies and
generally represent industries which typically have better growth
characteristics.
At the same time, mid-cap companies tend to be less volatile than small-cap
companies. Unlike smaller, younger companies, mid caps are not considered
"emerging" stocks since they have track records and have evolved to a point
where their business risk is reduced and the likelihood of sustained earnings
per share is the greatest.
LOOKING AHEAD
In the Fund's next fiscal year, we expect a positive mix of modest economic
growth, a more pronounced rotation to small- and medium-sized equity issues,
subdued inflation and continued low interest rates to benefit the financial
markets. In this economic environment, mid-cap stocks should regain their
earnings advantage as international sales slow for larger companies and
overall corporate profit growth decelerates to a more normalized 5 to 10
percent rate. As this occurs, the faster inherent earnings growth rate of the
average mid-cap company will look particularly attractive and investors may
be inclined to pay more for these stocks. We believe the Fund is positioned
to perform well given this outlook.
We appreciate your support of Dean Witter Mid-Cap Growth Fund and look
forward to continuing to serve your investment needs and objectives.
Very truly yours,
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS May 31, 1995
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- -------------
<S> <C> <C>
COMMON STOCKS (97.3%)
Auto Related (1.0%)
40,000 Dana Corp. $ 1,130,000
-------------
Banks (6.3%)
35,000 Ahmanson (H.F.) & Co. 796,250
25,000 Banc One Corp. 868,750
45,000 Bank of Boston Corp. 1,642,500
15,000 Baybanks, Inc. 1,083,750
35,000 Golden West Financial Corp. 1,719,375
55,000 Great Western Financial Corp. 1,203,125
-------------
7,313,750
-------------
Basic Cyclicals (2.9%)
35,000 Alcan Aluminium Ltd. 1,036,875
20,000 Bowater Inc. 785,000
30,000 Crown Cork & Seal Co., Inc.* 1,410,000
1,000 Potash Corp. of Saskatchewan, Inc. 47,875
-------------
3,279,750
-------------
Biotechnology (0.6%)
10,000 Amgen Inc.* 723,750
-------------
Brokerages (2.3%)
50,000 Bear Stearns Companies, Inc. 1,012,500
40,000 Edwards (A.G.), Inc. 905,000
20,000 Schwab (Charles) Corp. 700,000
-------------
2,617,500
-------------
Business Services (1.1%)
30,000 Green Tree Financial Corp. 1,308,750
-------------
Cable/Cellular (2.5%)
20,000 California Microwave, Inc.* 620,000
20,000 Glenayre Technologies, Inc.* 1,265,000
20,000 Nokia Corp. (ADR) (Finland)* 930,000
-------------
2,815,000
-------------
Capital Equipment (3.1%)
30,000 Crane Co. 1,027,500
25,000 Loral Corp. 1,196,875
23,500 Sunstrand Corp. 1,304,250
-------------
3,528,625
-------------
Communications - Equipment & Software
(1.1%)
20,000 3Com Corp.* 1,275,000
-------------
Computer Equipment (1.1%)
25,000 Dell Computer Corp.* 1,256,250
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- -------------
<S> <C> <C>
Computer Software (6.9%)
21,500 Computer Sciences Corp.* $ 1,139,500
27,000 Informix Corp.* 1,137,375
15,000 Intuit, Inc.* 945,000
25,000 Parametric Technology Corp.* 1,050,000
29,600 Peoplesoft, Inc.* 1,457,800
70,000 Symantec Corp.* 1,601,250
17,500 Tivoli Systems Inc.* 625,625
-------------
7,956,550
-------------
Computer Software & Services (1.0%)
30,000 Seagate Technology, Inc.* 1,076,250
4,000 VideoServer, Inc.* 103,500
-------------
1,179,750
-------------
Consumer Business Services (1.7%)
1,000 CBT Group PLC (ADR) (Ireland)* 35,750
15,000 First Financial Management Corp. 1,065,000
35,500 Fiserv, Inc.* 923,000
-------------
2,023,750
-------------
Drugs (0.3%)
8,000 Scherer (R.P.) Corp.* 357,000
-------------
Electronics - Semiconductors (7.7%)
35,000 Advanced Micro Devices, Inc. 1,150,625
25,000 Cypress Semiconductor Corp.* 809,375
10,000 Integrated Device Technology, Inc.* 432,500
15,000 Intel Corp. 1,681,875
20,000 LSI Logic Corp.* 1,345,000
50,000 Micron Technology, Inc. 2,231,250
10,000 Texas Instruments Inc. 1,156,250
-------------
8,806,875
-------------
Electronics - Specialty (4.9%)
17,000 Altera Corp.* 1,323,875
21,000 Analog Devices, Inc.* 653,625
15,000 Linear Technology Corp. 915,000
32,600 Maxim Integrated Products Inc.* 1,475,150
15,000 Xilinx, Inc.* 1,263,750
-------------
5,631,400
-------------
Energy (3.2%)
50,000 Baker Hughes Inc. 1,125,000
20,000 Kerr-McGee Corp. 1,115,000
60,000 Occidental Petroleum Corp. 1,380,000
-------------
3,620,000
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS May 31, 1995, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- -------------
<S> <C> <C>
Entertainment (3.7%)
10,000 America Online, Inc.* $ 353,750
40,000 CUC International, Inc.* 1,470,000
26,250 Gaylord Entertainment Co. 584,062
11,000 Macromedia, Inc.* 378,125
12,500 Polygram NV (ADR) (Netherlands) 729,688
45,000 Sierra On-Line, Inc.* 798,750
-------------
4,314,375
-------------
Entertainment/Gaming (1.5%)
60,000 Players International, Inc.* 1,245,000
20,000 Primadonna Resorts, Inc.* 465,000
-------------
1,710,000
-------------
Financial - Miscellaneous (5.9%)
30,000 Advanta Corp. 1,162,500
25,000 Capital One Financial Corp. 525,000
35,000 CMAC Investment Corp. 1,452,500
10,000 Crescent Real Estate Equities, Inc. 296,250
35,000 MGIC Investment Corp. 1,645,000
25,000 Olympic Financial Ltd.* 359,375
27,000 SunAmerica Inc. 1,383,750
-------------
6,824,375
-------------
Foods (1.3%)
45,000 ConAgra, Inc. 1,501,875
-------------
Foods & Beverages (0.1%)
2,000 International Flavors & Fragrances Inc. 98,500
-------------
Healthcare Products & Services (4.3%)
20,000 Amerisource Health Corp.* 450,000
35,000 Coram Healthcare Corp.* 630,000
20,000 HBO & Co. 960,000
14,000 Healthsouth Rehabilitation Corp.* 241,500
15,000 Medaphis Corp.* 900,000
15,000 Medic Computer Systems, Inc.* 570,000
4,000 Omnicare, Inc. 190,000
30,000 Shared Medical Systems Corp. 993,750
-------------
4,935,250
-------------
Hotels/Motels (4.4%)
45,000 Hospitality Franchise Systems, Inc.* 1,355,625
50,000 La Quinta Inns, Inc. 1,418,750
40,000 Marriot International Inc. 1,355,000
100,000 Prime Hospitality Corp.* 975,000
-------------
5,104,375
-------------
Household Products (3.5%)
12,000 Avon Products, Inc. 808,500
40,000 Black & Decker Corp. 1,320,000
6,000 Clorox, Co. 359,250
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- -------------
<S> <C> <C>
30,000 Dial Corp. $ 735,000
20,000 Tambrands, Inc. 857,500
-------------
4,080,250
-------------
Housing Related (1.6%)
45,000 Clayton Homes, Inc. 781,875
40,000 Oakwood Homes Corp. 1,005,000
-------------
1,786,875
-------------
Insurance (2.3%)
30,000 American Re Corp. 1,117,500
30,000 St. Paul Companies, Inc. 1,526,250
-------------
2,643,750
-------------
Media Group (2.6%)
20,000 Cablevision Systems Corp.* 1,197,500
15,000 Emmis Broadcasting Corp.* 311,250
20,000 Renaissance Communications Corp.* 675,000
65,000 Westwood One, Inc.* 836,875
-------------
3,020,625
-------------
Medical Products & Supplies (5.5%)
65,000 Biomet, Inc.* 950,625
45,000 Boston Scientific Corp.* 1,293,750
5,200 Cordis Corp.* 356,200
13,000 Guidant Corp.* 310,375
27,000 Idexx Laboratories, Inc.* 1,194,750
17,000 Medtronic, Inc. 1,279,250
21,000 St. Jude Medical, Inc.* 950,250
-------------
6,335,200
-------------
Pollution Control (1.2%)
35,000 Browning-Ferris Industries, Inc. 1,246,875
10,000 US Filter Corp.* 171,250
-------------
1,418,125
-------------
Restaurants (0.3%)
10,000 Papa John's International, Inc.* 337,500
-------------
Retail (1.0%)
41,250 Dollar General Corp. 1,170,469
-------------
Semiconductors (4.6%)
25,000 Applied Materials, Inc.* 1,918,750
22,000 KLA Instruments Corp.* 1,523,500
30,000 Silicon Valley Group, Inc.* 933,750
31,000 Ultratech Stepper, Inc.* 922,250
-------------
5,298,250
-------------
Telecommunications (5.3%)
30,000 ADC Telecommunications, Inc.* 915,000
11,000 Ascend Communications, Inc.* 419,375
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS May 31, 1995, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- -------------
<S> <C> <C>
30,000 Cisco Systems, Inc.* $ 1,308,750
56,000 Tellabs, Inc.* 1,834,000
19,000 U.S. Robotics Corp.* 1,581,750
-------------
6,058,875
-------------
Tobacco (0.5%)
20,000 UST, Inc. 597,500
-------------
TOTAL COMMON STOCKS (Identified Cost
$105,640,092) 112,059,869
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------- -------------
<S> <C> <C>
SHORT-TERM INVESTMENT (5.7%)
U.S. GOVERNMENT AGENCY (a)
Federal Home Loan Mortgage
Corp. 6.10% due 06/01/95
$6,520 (Amortized Cost $6,520,000) 6,520,000
-------------
TOTAL INVESTMENTS
(Identified Cost $112,160,092) (b) 103.0% 118,579,869
LIABILITIES IN EXCESS OF OTHER
ASSETS ............................ (3.0) (3,453,699)
-------- -------------
NET ASSETS ........................ 100.0% $115,126,170
======== =============
- ---------------
<FN>
ADR American Depository Receipt.
* Non-income producing security.
(a) U.S. Government agency was purchased on a discount basis. The
interest rate shown has been adjusted to reflect a money market
equivalent yield.
(b) The aggregate cost for federal income tax purposes is $112,451,881;
the aggregate gross unrealized appreciation is $7,807,240 and the
aggregate gross unrealized depreciation is $1,679,252, resulting in
net unrealized appreciation of $6,127,988.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value (identified cost $112,160,092) .. $118,579,869
Receivable for:
Investments sold ................................................... 1,186,450
Shares of beneficial interest sold ................................. 512,437
Dividends .......................................................... 101,678
Deferred organizational expenses ..................................... 133,422
Prepaid expenses and other assets .................................... 26,210
Receivable from Affiliate ............................................ 3,764
--------------
TOTAL ASSETS ....................................................... 120,543,830
--------------
LIABILITIES:
Payable for:
Investments purchased .............................................. 1,643,948
Shares of beneficial interest purchased ............................ 183,898
Plan of distribution fee ........................................... 102,908
Investment management fee .......................................... 77,181
Payable to bank ...................................................... 3,291,757
Accrued expenses and other payables .................................. 117,968
--------------
TOTAL LIABILITIES .................................................. 5,417,660
--------------
NET ASSETS:
Paid-in-capital ...................................................... 107,196,058
Net unrealized appreciation .......................................... 6,419,777
Undistributed net realized gain ...................................... 1,510,335
--------------
NET ASSETS ......................................................... $115,126,170
==============
NET ASSET VALUE PER SHARE, 10,651,999 shares outstanding (unlimited
shares authorized of $.01 par value) ................................ $ 10.81
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
FINANCIAL STATEMENTS, continued
Statement of Operations
For the period September 29, 1994* through May 31, 1995
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest ......................................... $ 783,329
Dividends (net of $2,787 foreign withholding tax) 501,210
-----------
TOTAL INCOME ................................... 1,284,539
-----------
EXPENSES
Plan of distribution fee ......................... 627,367
Investment management fee ........................ 470,526
Transfer agent fees and expenses ................. 100,998
Professional fees ................................ 61,128
Registration fees ................................ 44,030
Custodian fees ................................... 27,328
Organizational expenses .......................... 22,935
Shareholder reports and notices .................. 19,141
Trustees' fees and expenses ...................... 13,642
-----------
TOTAL EXPENSES ................................. 1,387,095
-----------
NET INVESTMENT LOSS ............................ (102,556)
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ................................ 1,744,548
Net unrealized appreciation ...................... 6,419,777
-----------
NET GAIN ....................................... 8,164,325
-----------
NET INCREASE ..................................... $8,061,769
===========
<FN>
- ---------------
* Commencement of operations.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
FINANCIAL STATEMENTS, continued
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
<S> <C>
FOR THE PERIOD
SEPTEMBER 29, 1994*
THROUGH MAY 31,
1995
- ------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss ............................................ $ (102,556)
Net realized gain .............................................. 1,744,548
Net unrealized appreciation .................................... 6,419,777
-------------------
NET INCREASE ................................................. 8,061,769
-------------------
Distributions to shareholders from net realized gain .......... (131,657)
Net increase from transactions in shares of beneficial interest 107,096,058
-------------------
TOTAL INCREASE ............................................... 115,026,170
NET ASSETS:
Beginning of period ............................................ 100,000
-------------------
END OF PERIOD ................................................ $115,126,170
===================
<FN>
- ---------------
* Commencement of operations.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS May 31, 1995
1. Organization and Accounting Policies
Dean Witter Mid-Cap Growth Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund was organized as a
Massachusetts business trust on May 25, 1994 and commenced operations on
September 29, 1994. On July 12, 1994, the Fund issued 10,000 shares of
beneficial interest to Dean Witter InterCapital Inc. (the "Investment
Manager") for $100,000 to effect the Fund's initial capitalization.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York Stock Exchange, American Stock Exchange 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 security is valued on the exchange
designated as the primary market 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 the Investment Manager that sale or bid
prices are not reflective of a security's market value, portfolio securities
are valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Trustees (valuation
of debt securities for which market quotations are not readily available may
be based upon current market prices of securities which are comparable in
coupon, rating and maturity or an appropriate matrix utilizing similar
factors); (4) certain of the Fund's portfolio securities may be valued by an
outside pricing service approved by the Trustees. The pricing service
utilizes a matrix system incorporating security quality, maturity and coupon
as the evaluation model parameters, and/or research and evaluations by its
staff, including review of broker-dealer market price quotations, if
available, in determining what it believes is the fair valuation of the
securities valued by such pricing service; and (5) short-term debt securities
having a maturity date of more than sixty days at time of purchase are valued
on a mark-to-market basis until sixty days prior to maturity and thereafter
at amortized cost based on their value on the 61st day. Short-term 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 on the identified cost
method. Dividend income is recorded on the ex-dividend date except with
respect to certain
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS May 31, 1995, continued
dividends on foreign securities which are recorded as soon as the Fund is
informed after the ex-dividend date. Interest income is accrued daily and
includes amortization of discounts of certain short-term securities.
C. 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.
D. 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.
E. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $156,000 which have been
reimbursed by the Fund for the full amount thereof. Such expenses have been
deferred and are being amortized by the Fund on the straight-line method over
a period not to exceed five years from the commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays its Investment
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.75% 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.
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS May 31, 1995, continued
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by 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
pursuant to which the Fund pays the Distributor compensation, accrued daily
and payable monthly, at an annual rate of 1.0% of the lesser of: (a) the
average daily aggregate gross sales of the Fund's shares since the Fund's
inception (not including reinvestment of dividends or capital gains
distributions) less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or upon which such charge has been waived; or
(b) the Fund's average daily net assets. Amounts paid under the Plan are paid
to the Distributor to compensate it for the services provided and the
expenses borne by it and others in the distribution of the Fund's shares,
including the payment of commissions for sales of the Fund's shares and
incentive compensation to, and expenses of, account executives of Dean Witter
Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and
Distributor, and others who engage in or support distribution of the Fund's
shares or who service shareholder accounts, including overhead and telephone
expenses, printing and distribution of prospectuses and reports used in
connection with the offering of the Fund's shares to other than current
shareholders and preparation, printing and distribution of sales literature
and advertising materials. In addition, the Distributor may be compensated
under the Plan for its opportunity costs in advancing such amounts, which
compensation would be in the form of a carrying charge on any unreimbursed
expenses by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred
but not yet recovered may be recovered through future distribution fees from
the Fund and contingent deferred sales charges from the Fund's shareholders.
The Distributor has informed the Fund that for the period ended May 31, 1995,
it received approximately $158,000 in contingent deferred sales charges from
certain redemptions of the Fund's shares. The Fund's 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 period ended May 31, 1995
aggregated $270,519,718 and $166,619,245, respectively. Included in the
aforementioned are purchases and sales of U.S. Government securities of
$7,190,234 and $7,381,406, respectively.
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS May 31, 1995, continued
For the period ended May 31, 1995, the Fund incurred brokerage commissions of
$70,688 with DWR for portfolio transactions executed on behalf of the Fund.
Included in the Fund's payable for investment purchased is $727,573 for
unsettled trades with DWR.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At May 31, 1995, the Fund had
transfer agent fees and expenses payable of approximately $13,000.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD SEPTEMBER 29,
1994* THROUGH MAY 31, 1995
-----------------------------
SHARES AMOUNT
------------- --------------
<S> <C> <C>
Sold ......................... 13,151,977 $133,121,351
Reinvestment of distributions 12,288 122,022
------------- --------------
13,164,265 133,243,373
Repurchased .................. (2,522,266) (26,147,315)
------------- --------------
Net increase ................. 10,641,999 $107,096,058
============= ==============
<FN>
- ---------------
* Commencement of operations.
</TABLE>
6. FEDERAL INCOME TAX STATUS
As of May 31, 1995, the Fund had temporary book/tax differences attributable
to capital loss deferrals on wash sales and permanent book/tax differences
attributable to a net operating loss. To reflect reclassifications arising
from permanent book/tax differences for the period ended May 31, 1995,
undistributed net realized gain was charged and net investment loss was
credited $102,556.
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout the period:
<TABLE>
<CAPTION>
FOR THE PERIOD
SEPTEMBER 29, 1994*
THROUGH
MAY 31, 1995
-------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE :
Net asset value, beginning of period $ 10.00
-------------------
Net investment loss (0.01)
Net realized and unrealized gain 0.84
-------------------
Total from investment operations 0.83
-------------------
Less distributions from net realized gain (0.02)
-------------------
Net asset value, end of period $ 10.81
===================
TOTAL INVESTMENT RETURN+ 8.26 %(1)
RATIOS TO AVERAGE NET ASSETS :
Expenses 2.21 %(2)
Net investment loss (0.16)%(2)
SUPPLEMENTAL DATA :
Net assets, end of period, in thousands $115,126
Portfolio turnover rate 199 %(1)
<FN>
- ---------------
* Commencement of operations.
+ Does not reflect the deduction of sales charge.
(1) Not annualized.
(2) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER MID-CAP GROWTH FUND
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Dean Witter
Mid-Cap Growth Fund (the "Fund") at May 31, 1995, and the results of its
operations, the changes in its net assets and the financial highlights for
the period September 29, 1994 (commencement of operations) through May 31,
1995, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of securities owned at May 31, 1995 by correspondence with the
custodian and brokers, provides a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
New York, New York
July 13, 1995
1995 FEDERAL TAX NOTICE (unaudited)
During the period from September 29, 1994 (commencement of operations)
through May 31, 1995, 22.48% of the income paid qualified for the
dividends received deduction available to corporations.
<PAGE>
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Anita H. Kolleeny
Vice President
Peter Hermann
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
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.
DEAN WITTER
MID-CAP
GROWTH FUND
[LOGO]
ANNUAL REPORT
MAY 31, 1995
