DEAN WITTER MID-CAP GROWTH FUND
Two World Trade Center, New York, New York 10048
LETTER TO THE SHAREHOLDERS May 31, 1996
DEAR SHAREHOLDER:
During the 12 months ended May 31, 1996--the fiscal year for Dean Witter
Mid-Cap Growth Fund--stocks posted near-record returns. This performance is
attributable to modest economic activity and a very restrained rate of
inflation. The fiscal period was also very productive for the Fund, which
posted a total return of 53.02 percent. By contrast, over the same period,
the Standard & Poor's Midcap Index returned 28.46 percent and the average
mid-cap fund returned 36.90 percent, according to Lipper Analytical Services,
Inc. Since inception, the Fund has returned 65.66 percent, versus 42.02
percent for the S&P Midcap Index.
The accompanying chart illustrates the growth of a $10,000 investment in the
Fund at inception (September 29, 1994) through the fiscal year ended May 31,
1996, versus a similar hypothetical investment in the issues that comprise
the S&P MidCap Index.
POSITIONING THE FUND
In the summer of 1995 the Fund was positioned to take advantage of a strong
capital spending cycle and consistent attractive growth in the health care
arena. At this time, the Fund's largest concentration of assets was in
technology, 45 percent of the portfolio at its peak. Technology sector
holdings were concentrated in the semiconductor, computer,
telecommunications, telecommunications equipment and software industries,
with all areas experiencing tremendous earnings growth. However, given the
Fund's strategy of selecting industries using both top down (where we are in
the economic cycle) and bottom up (what companies are actually experiencing
today) approaches, the portfolio manager anticipated that the capital
spending cycle was likely to tail off because of a slowing economy and thus
focused on any bottom up signs of a slow down in the technology sector. The
first signs of decelerating capital spending appeared in September 1995.
As a result, over the fall, the portfolio manager significantly cut the
Fund's technology weighting to under 10 percent of net assets. Interest-rate
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
LETTER TO THE SHAREHOLDERS May 31, 1996, continued
sensitive exposure, which began 1995 at 16 percent of the portfolio, doubled
by the end of the calendar year as further evidence of a slowing economy--and
the likelihood that rates would decline--mounted. At fiscal year end, the
health care sector represented about 13 percent of the Fund, with investments
in attractive growth segments such as medical supplies, biotechnology and
health care information systems. In late 1995, positions in retail were
initiated with the early emphasis on specialty retailers and food chains.
DEAN WITTER MID-CAP GROWTH FUND
GROWTH OF $10,000
DATE TOTAL S&P MIDCAP IX
- ----------------------------------------------------------------
September 29, 1994 $10000 $10000
- ----------------------------------------------------------------
May 31, 1995 $10826 $11057
- ----------------------------------------------------------------
May 31, 1996 $16166(3) $14204
================================================================
CUMULATIVE TOTAL RETURNS
ONE YEAR LIFE OF FUND
================================================
53.02 (1) 35.29 (1)
------------------------------------------------
48.02 (2) 33.32 (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) (1 year-5%, since inception
4%). See the Fund's current prospectus for complete details on fees
and sales charges.
(3) Closing value after the deduction of a 4% CDSC, assuming a complete
redemption on May 31, 1996.
(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. The Index is unmanaged and should not be considered an
investment.
Over the course of the first quarter of 1996, the economy gathered momentum
as employment, industrial production and consumer spending began to
accelerate. Given the growing evidence of the economy's rebound, the
portfolio was tilted to provide increased exposure to cyclical stocks in
order to take advantage of the growth that lay ahead. At that time, the
portfolio manager increased the Fund's exposure to the consumer cyclical area
to approximately 15 percent of the portfolio to include industries such as
retail, specialty retail and automobile-related. Technology was increased to
a third of the Fund's net assets with an emphasis on non-commodity,
inherently higher growth, networking and telecommunications markets. Since
rates typically rise on signs of increasing economic activity, interest-rate
sensitive areas became underweighted. A commitment to the energy services
sector was also established (about 5 percent) as this area is expected to
benefit from increased global energy consumption and improving pricing for
exploration equipment.
LOOKING AHEAD
Despite a rebound in economic growth, we anticipate that overall earnings
growth in 1996 will be more muted than in the last economic rebound and that
participating industries will be fewer. In general, earnings during 1996 are
expected to be up between five and seven percent. In 1996, consumer cyclicals
are expected to be the major beneficiaries as they are typically early
leaders in an economic rebound, while capital spending and basic cyclical
industry groups are not expected to post attractive earnings growth until
1997. Because consumer spending subsided in 1995,
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
LETTER TO THE SHAREHOLDERS May 31, 1996, continued
1996 comparisons are not difficult and earnings should stand out relative to
other sectors. In contrast, capital spending and cyclical earnings were quite
strong and therefore these areas are up against difficult earnings
comparisons.
While overall corporate profit growth remains muted, the earnings outlook for
mid-cap stocks remains vibrant. This earnings advantage accrues to mid-cap
stocks because they are typically in younger industries characterized by more
dynamic growth than the overall economy. In times of modest overall corporate
growth, the robust earnings of the mid-cap sector particularly stand out.
Additionally, the strengthening dollar is expected to continue to serve as an
earnings penalty to larger multinational companies into 1997, lending a
further earnings advantage to mid-cap companies. Moreover, when compared to
larger-capitalization companies, mid-sized companies are selling at a lower
multiple of their expected threeto five-year expected growth rates.
Summing up, we believe that the long-term prospects for mid-sized stocks
continue to be attractive, as they continue to offer more attractive relative
earnings growth rates and valuations, even after the significant appreciation
experienced over the last year.
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,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS May 31, 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (97.4%)
Agriculture Related (2.1%)
75,000 AGCO Corp. ..................................................... $2,259,375
40,000 IMC Global, Inc. ............................................... 1,465,000
23,500 Pioneer Hi-Bred International, Inc. ............................ 1,327,750
20,000 Potash Corp. of Saskatchewan, Inc. (Canada) .................... 1,330,000
--------------
6,382,125
--------------
Apparel (2.7%)
31,700 Fila Holding SpA (ADR) (Italy) ................................. 2,746,012
50,000 Jones Apparel Group, Inc.* ..................................... 2,550,000
30,000 Nike, Inc. (Class B) ........................................... 3,011,250
--------------
8,307,262
--------------
Auto Related (1.6%)
65,000 Autozone, Inc.* ................................................ 2,283,125
15,000 Lear Corp.* .................................................... 579,375
52,000 OEA, Inc.* ..................................................... 2,132,000
--------------
4,994,500
--------------
Banks (0.9%)
20,000 First Bank System, Inc. ........................................ 1,207,500
45,000 First Tennessee National Corp. ................................. 1,513,125
--------------
2,720,625
--------------
Basic Cyclicals (0.5%)
9,000 Cytec Industries, Inc.* ........................................ 805,500
36,100 Polymer Group, Inc.* ........................................... 694,925
--------------
1,500,425
--------------
Biotechnology (2.8%)
59,000 Biochem Pharma, Inc.* .......................................... 2,706,625
40,000 Centocor, Inc.* ................................................ 1,405,000
70,000 Cephalon Inc.* ................................................. 1,890,000
3,500 Genzyme Corp.* ................................................. 202,125
50,000 IDEC Pharmaceuticals Corp.* .................................... 1,287,500
5,300 Millennium Pharmaceuticals, Inc.* .............................. 107,325
50,000 QLT Phototherapeutics, Inc.* ................................... 1,068,750
--------------
8,667,325
--------------
Capital Goods (0.8%)
40,000 Crane Co. ...................................................... 1,685,000
20,000 Sundstrand Corp. ............................................... 705,000
--------------
2,390,000
--------------
<PAGE>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------
Communications (10.0%)
60,000 ACT Networks, Inc.* ............................................ $ 2,535,000
9,000 ADC Telecommunications, Inc.* .................................. 414,000
41,000 Ascend Communications, Inc.* ................................... 2,736,750
52,000 Cascade Communications Corp.* .................................. 2,931,500
45,000 Cisco Systems, Inc.* ........................................... 2,458,125
26,000 FORE Systems, Inc.* ............................................ 2,099,500
50,000 Geoworks* ...................................................... 1,725,000
30,000 Pairgain Technologies, Inc.* ................................... 3,037,500
8,500 Premiere Technologies, Inc.* ................................... 395,250
37,000 Premisys Communications, Inc.* ................................. 2,109,000
2,900 Sawtek, Inc.* .................................................. 79,025
33,000 Shiva Corp.* ................................................... 2,450,250
25,000 Stratacom, Inc.* ............................................... 1,356,250
50,000 Tellabs, Inc.* ................................................. 3,200,000
38,000 U.S. Robotics Corp.* ........................................... 3,458,000
--------------
30,985,150
--------------
Communications -Equipment &
Software (1.2%)
43,000 Adtran, Inc.* .................................................. 2,945,500
25,000 EchoStar Communications Corp. (Class A)* ....................... 850,000
--------------
3,795,500
--------------
Computer Equipment (2.0%)
60,000 Dell Computer Corp.* ........................................... 3,307,500
80,000 Gateway 2000, Inc.* ............................................ 3,020,000
--------------
6,327,500
--------------
Computer Services (1.8%)
25,000 Cambridge Technology Partners, Inc.* ........................... 1,900,000
16,600 First USA Paymentech, Inc. ..................................... 769,825
2,400 NOVA Corp.* .................................................... 91,200
34,750 Remedy Corp.* .................................................. 2,667,062
3,500 Renaissance Solutions, Inc.* ................................... 124,250
--------------
5,552,337
--------------
Computer Software (8.6%)
25,000 Arbor Software Corp.* .......................................... 1,518,750
22,000 Atria Software, Inc.* .......................................... 1,391,500
26,000 Baan Company NV* (Netherlands) ................................. 936,000
30,000 BMC Software, Inc.* ............................................ 1,890,000
70,000 Business Objects S.A. (ADR)* (France) .......................... 3,255,000
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS May 31, 1996, continued
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------
40,000 Citrix Systems, Inc.* .......................................... $ 2,970,000
24,300 Cognos, Inc.* (Canada) ......................................... 577,125
28,000 Computer Horizons Corp.* ....................................... 1,295,000
27,000 Edify Corp.* ................................................... 1,134,000
31,200 Forte Software, Inc.* .......................................... 1,996,800
2,300 Mechanical Dynamics, Inc.* ..................................... 40,537
30,000 Parametric Technology Corp.* ................................... 1,368,750
23,000 Peoplesoft, Inc.* .............................................. 1,615,750
43,100 Rational Software Corp.* ....................................... 2,666,813
73,000 Viasoft, Inc.* ................................................. 3,905,500
--------------
26,561,525
--------------
Consumer Business Services (8.0%)
80,100 Accustaff, Inc.* ............................................... 2,523,150
30,000 Alternative Resources Corp.* ................................... 1,155,000
66,000 CBT Group PLC (ADR)* (Ireland) ................................. 3,036,000
25,000 Corestaff, Inc.* ............................................... 1,106,250
70,000 Corporate Express, Inc.* ....................................... 2,931,250
20,000 Culligan Water Technologies, Inc.* ............................. 762,500
79,700 Dendrite International, Inc.* .................................. 2,151,900
55,000 DST Systems, Inc.* ............................................. 1,918,125
28,000 First Data Corp. ............................................... 2,233,000
40,000 Interim Services, Inc.* ........................................ 1,870,000
1,400 PIA Merchandising Services, Inc.* .............................. 22,400
17,000 Reynolds & Reynolds Co. (Class A) .............................. 847,875
46,900 Service Corp. International .................................... 2,620,538
30,000 Transaction Systems Architects, Inc. (Class A)* ................ 1,665,000
--------------
24,842,988
--------------
Consumer Products (3.4%)
30,000 Avon Products, Inc. ............................................ 2,775,000
37,000 Cannondale Corp.* .............................................. 795,500
1,500 Clorox, Co. .................................................... 127,688
30,000 Luxottica Group SpA (ADR) (Italy) .............................. 2,321,250
55,000 Oakley, Inc.* .................................................. 2,798,125
70,000 Whitman Corp. .................................................. 1,758,750
--------------
10,576,313
--------------
Educational Services (2.2%)
56,000 Apollo Group, Inc. (Class A)* .................................. 2,632,000
9,500 Devry, Inc.* ................................................... 377,625
10,000 ITT Educational Services, Inc.* ................................ 302,500
181,000 National Education Corp.* ...................................... 3,371,125
--------------
6,683,250
--------------
<PAGE>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------
Energy (6.3%)
90,000 Baker Hughes Inc. .............................................. $ 2,823,750
48,600 BJ Services Co.* ............................................... 1,640,250
11,400 Chesapeake Energy Corp.* ....................................... 874,950
80,000 Diamond Offshore Drilling, Inc.* ............................... 3,830,000
56,700 Global Marine, Inc.* ........................................... 694,575
217,000 Marine Drilling Company, Inc.* ................................. 2,170,000
90,000 Reading & Bates Corp.* ......................................... 1,980,000
50,000 Rowan Companies, Inc.* ......................................... 756,250
67,000 Tidewater, Inc. ................................................ 2,763,750
30,100 Western Atlas Inc.* ............................................ 1,843,625
--------------
19,377,150
--------------
Entertainment/Gaming & Lodging (3.5%)
55,000 HFS, Inc.* ..................................................... 3,430,625
100,000 International Game Technology .................................. 1,587,500
55,000 Mirage Resorts, Inc.* .......................................... 3,128,125
2,900 Premier Parks, Inc. ............................................ 58,725
100,000 Showboat, Inc. ................................................. 2,787,500
--------------
10,992,475
--------------
Financial -Miscellaneous (1.8%)
25,000 Aames Financial Corp. .......................................... 818,750
19,400 Advanta Corp. (Class A) ........................................ 1,086,400
5,900 Conseco Inc. ................................................... 213,875
32,300 First USA, Inc. ................................................ 1,873,400
47,700 Green Tree Financial Corp. ..................................... 1,562,175
--------------
5,554,600
--------------
Healthcare Products & Services (6.4%)
2,000 Aksys, Ltd.* ................................................... 33,000
30,000 Elan Corporation PLC (ADR)* (Ireland) .......................... 1,882,500
24,500 HBO & Co. ...................................................... 3,056,375
45,000 Health Management Associates, Inc. (Class A)* .................. 1,552,500
20,000 Healthsouth Corp.* ............................................. 700,000
50,000 HPR Inc.* ...................................................... 1,162,500
15,300 Medic Computer Systems, Inc.* .................................. 1,415,250
60,000 Phycor, Inc.* .................................................. 3,255,000
54,300 Renal Treatment Centers, Inc.* ................................. 1,846,200
60,000 Rotech Medical Corp.* .......................................... 1,260,000
18,000 Shared Medical Systems Corp. ................................... 1,201,500
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS May 31, 1996, continued
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------
8,600 Sunrise Assisted Living, Inc.* ................................. $ 208,550
23,500 Total Renal Care Holdings, Inc.* ............................... 969,375
44,800 Vivra, Inc.* ................................................... 1,528,800
--------------
20,071,550
--------------
Internet (4.7%)
37,000 America Online, Inc.* .......................................... 2,090,500
30,000 HNC Software, Inc. ............................................. 1,290,000
2,000 NETCOM On-Line Communication Services, Inc.* ................... 68,000
46,000 Netscape Communications Corp.* ................................. 3,128,000
23,000 PsiNet, Inc.* .................................................. 327,750
40,000 Security Dynamics Technologies, Inc.* .......................... 3,550,000
90,000 Sterling Commerce, Inc.* ....................................... 3,948,750
--------------
14,403,000
--------------
Media Group (5.3%)
40,000 Argyle Television, Inc. (Class A)* ............................. 960,000
21,000 Clear Channel Communications, Inc.* 1,706,250
74,500 Emmis Broadcasting Corp. (Class A)* ............................ 3,240,750
50,000 Evergreen Media Corp. (Class A)* ............................... 1,975,000
70,000 Gartner Group, Inc. (Class A)* ................................. 2,502,500
78,750 Gaylord Entertainment Co. (Class A) ............................ 2,057,344
46,400 Renaissance Communications Corp.* .............................. 1,392,000
50,000 Sinclair Broadcast Group, Inc. (Class A)* ...................... 1,850,000
10,000 Telemundo Group, Inc. (Class A)* ............................... 208,750
20,000 United Video Satellite Group, Inc. (Class A)* .................. 385,000
--------------
16,277,594
--------------
Medical Products & Supplies (2.4%)
42,000 Guidant Corp. .................................................. 2,436,000
2,600 Heartport, Inc.* ............................................... 100,100
41,000 Idexx Laboratories, Inc.* ...................................... 1,773,250
42,500 Spine-Tech, Inc.* .............................................. 1,232,500
23,000 Target Therapeutics, Inc.* ..................................... 1,121,250
15,000 Thermo Cardiosystems, Inc.* .................................... 765,000
--------------
7,428,100
--------------
Medical Supplies (2.5%)
9,600 Becton, Dickinson & Co. ........................................ 816,000
40,000 Martek Biosciences Corp.* ...................................... 1,430,000
<PAGE>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------
25,000 Physio-Control International Corp.* ............................ $ 484,375
20,000 SangStat Medical Corp.* ........................................ 397,500
40,000 Thermo Electron Corp. .......................................... 2,550,000
40,000 ThermoTrex Corp.* .............................................. 2,120,000
--------------
7,797,875
--------------
Restaurants (0.8%)
29,700 Landry's Seafood Restaurants, Inc.* ............................ 712,800
10,000 Planet Hollywood International, Inc. (Class A)* ................ 265,000
61,000 Starbucks Corp.* ............................................... 1,639,375
--------------
2,617,175
--------------
Retail (9.3%)
100,000 Bed Bath & Beyond, Inc.* ....................................... 2,812,500
11,800 CompUSA, Inc.* ................................................. 516,250
4,500 Gadzooks, Inc.* ................................................ 149,625
60,000 Gucci Group NV* (Italy) ........................................ 4,020,000
20,000 Just For Feet, Inc.* ........................................... 1,067,500
40,000 Kohl's Corp.* .................................................. 1,325,000
20,000 Kroger Co.* .................................................... 785,000
3,900 Loehmann's Holdings, Inc.* ..................................... 98,475
60,000 Officemax, Inc.* ............................................... 1,567,500
30,000 Orchard Supply Hardware Stores Corp.* .......................... 858,750
55,000 Pacific Sunwear of California* ................................. 1,361,250
30,000 PetSmart, Inc.* ................................................ 1,320,000
30,000 Proffitt's, Inc.* .............................................. 1,102,500
53,000 Quiksilver, Inc.* .............................................. 2,305,500
80,000 Safeway, Inc.* ................................................. 2,700,000
8,500 Saks Holdings, Inc.* ........................................... 276,250
49,000 Tiffany & Co. .................................................. 3,717,875
25,000 Urban Outfitters, Inc.* ........................................ 1,043,750
40,000 Vons Companies, Inc.* .......................................... 1,460,000
--------------
28,487,725
--------------
Semiconductors (0.2%)
17,000 Atmel Corp.* ................................................... 603,500
--------------
Telecommunications (3.5%)
36,000 Brooks Fiber Properties, Inc.* ................................. 1,197,000
70,000 MFS Communications Company, Inc.* .............................. 2,415,000
30,000 Newbridge Networks Corp.* (Canada) ............................. 2,133,750
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS May 31, 1996, continued
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------
100,000 Winstar Communications, Inc.* .................................. $ 3,112,500
40,000 WorldCom, Inc.* ................................................ 1,945,000
--------------
10,803,250
--------------
Transportation (2.1%)
42,000 Atlas Air, Inc. ................................................ 2,446,500
36,000 Continental Airlines, Inc. (Class A)* .......................... 2,047,500
75,000 Southwest Airlines Co.* ........................................ 2,053,125
--------------
6,547,125
--------------
TOTAL COMMON STOCKS
(Identified Cost $257,953,160) ................................. 301,247,944
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------- ---------------------------------------------------------------- -------------
<S> <C> <C>
SHORT-TERM INVESTMENT (1.0%) REPURCHASE AGREEMENT
The Bank of New York 5.25% due 06/03/96 (dated 05/31/96;
proceeds $3,100,281; collateralized by $3,048,892 U.S.Treasury
Bond 7.25% due 08/15/22 valued at $3,160,904) (Identified Cost
$3,099 $3,098,925) .................................................... $3,098,925
-------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $261,052,085)
(a) .............................. 98.4% 304,346,869
OTHER ASSETS IN EXCESS OF
LIABILITIES ...................... 1.6 4,924,842
-------- -------------
NET ASSETS ....................... 100.0% $309,271,711
======== =============
</TABLE>
- ------------
ADR American Depository Receipt.
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes is $262,251,582.
The aggregate gross unrealized appreciation is $45,023,592 and the
aggregate gross unrealized depreciation is $2,928,305, resulting in
net unrealized appreciation of $42,095,287.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $261,052,085) ............ $304,346,869
Receivable for:
Investments sold ......................... 6,591,569
Shares of beneficial interest sold ...... 3,224,129
Dividends ................................ 41,613
Deferred organizational expenses ........... 103,110
Receivable from affiliate .................. 3,875
Prepaid expenses ........................... 14,179
TOTAL ASSETS ............................. 314,325,344
--------------
LIABILITIES:
Payable for:
Investments purchased .................... 4,212,683
Shares of beneficial interest
repurchased ............................ 305,425
Plan of distribution fee ................. 248,099
Investment management fee ................ 186,074
Accrued expenses and other payables ....... 101,352
--------------
TOTAL LIABILITIES ........................ 5,053,633
--------------
NET ASSETS:
Paid-in-capital ............................ 238,479,393
Net unrealized appreciation ................ 43,294,784
Accumulated undistributed net realized gain 27,497,534
--------------
NET ASSETS ............................... $309,271,711
==============
NET ASSET VALUE PER SHARE,
20,474,077 shares outstanding (unlimited
shares authorized of $.01 par value) ..... $ 15.11
==============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended May 31, 1996
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
Income
Interest .............................. $ 1,056,112
Dividends (net of $4,133 foreign
withholding tax) ..................... 893,612
-------------
TOTAL INCOME ........................ 1,949,724
-------------
EXPENSES
Plan of distribution fee .............. 1,958,421
Investment management fee ............. 1,468,816
Transfer agent fees and expenses ..... 245,751
Custodian fees ........................ 91,475
Registration fees ..................... 83,485
Shareholder reports and notices ...... 60,303
Professional fees ..................... 49,756
Organizational expenses ............... 30,312
Trustees' fees and expenses ........... 18,372
Other ................................. 5,552
-------------
Total Expenses ...................... 4,012,243
-------------
NET INVESTMENT LOSS ................. (2,062,519)
-------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ..................... 45,084,990
Net change in unrealized appreciation 36,875,007
-------------
NET GAIN ............................ 81,959,997
-------------
NET INCREASE .......................... $79,897,478
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR SEPTEMBER 29, 1994*
ENDED THROUGH
MAY 31, 1996 MAY 31, 1995
- ------------------------------------------------------ -------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss ................................... $ (2,062,519) $ (102,556)
Net realized gain ..................................... 45,084,990 1,744,548
Net change in unrealized appreciation ................. 36,875,007 6,419,777
-------------- -------------------
NET INCREASE ........................................ 79,897,478 8,061,769
Distributions from net realized gain .................. (17,035,698) (131,657)
Net increase from transactions in shares of beneficial
interest ............................................. 131,283,761 107,096,058
-------------- -------------------
TOTAL INCREASE ...................................... 194,145,541 115,026,170
NET ASSETS:
Beginning of period ................................... 115,126,170 100,000
-------------- -------------------
END OF PERIOD ....................................... $309,271,711 $115,126,170
============== ===================
</TABLE>
- ------------
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS May 31, 1996
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's investment objective is to
seek long-term capital growth. The Fund seeks to achieve its objective by
investing primarily in domestic and foreign equity securities of "mid-cap"
companies. The Fund was organized as a Massachusetts business trust on May
25, 1994 and had no operations other than those relating to organizational
matters and the issuance of 10,000 shares of beneficial interest for $100,000
to Dean Witter InterCapital Inc. (the "Investment Manager") to effect the
Fund's initial capitalization. The Fund commenced operations on September 29,
1994.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at
its latest sale price on that exchange prior to the time when assets are
valued; if there were no sales that day, the security is valued at the latest
bid price (in cases where securities are traded on more than one exchange,
the 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); 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
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
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS May 31, 1996, continued
except for certain dividends on foreign securities which are recorded as soon
as the Fund is informed after the ex-dividend date. Discounts are accreted
over the life of the respective securities. Interest income is accrued daily.
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 for the full amount thereof. Such expenses have been deferred and
are being amortized 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 the 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, 1996, 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 dividend or capital gain
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, the account executives of Dean
Witter Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and
Distributor, and other employees or selected broker-dealers 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 incurred 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 year ended May 31, 1996,
it received approximately $490,000 in contingent deferred sales charges from
certain redemptions of the Fund's shares.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended May 31, 1996 aggregated
$729,117,032 and $622,251,752, respectively. Included in the aforementioned
are purchases and sales of U.S. Government securities of $56,684,788 and
$58,054,855, respectively.
For the year ended May 31, 1996, the Fund incurred $114,915 in brokerage
commissions with DWR for portfolio transactions executed on behalf of the
Fund.
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS May 31, 1996, continued
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At May 31, 1996, the Fund had
transfer agent fees and expenses payable of approximately $16,000.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR SEPTEMBER 29, 1994*
ENDED THROUGH
MAY 31, 1996 MAY 31, 1995
------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Sold 22,165,276 $ 297,479,183 13,151,977 $133,121,351
Reinvestment of distributions 1,247,724 15,771,239 12,288 122,022
-------------- --------------- ------------- --------------
23,413,000 313,250,422 13,164,265 133,243,373
Repurchased (13,590,922) (181,966,661) (2,522,266) (26,147,315)
-------------- --------------- ------------- --------------
Net increase 9,822,078 $ 131,283,761 10,641,999 $107,096,058
============== =============== ============= ==============
</TABLE>
- ------------
* Commencement of operations.
6. FEDERAL INCOME TAX STATUS
As of May 31, 1996, the Fund had temporary book/tax differences attributable
to capital loss deferrals on wash sales and permanent book/tax differences
primarily attributable to a net operating loss. To reflect reclassifications
arising from permanent book/tax differences for the year ended May 31, 1996,
accumulated undistributed net realized gain was charged $2,062,093,
paid-in-capital was charged $426 and net investment loss was credited
$2,062,519.
<PAGE>
DEAN WITTER MID-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 YEAR SEPTEMBER 29, 1994*
ENDED THROUGH
MAY 31, 1996 MAY 31, 1995
- ----------------------------------------- -------------- -------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .... $ 10.81 $ 10.00
-------------- -------------------
Net investment loss ...................... (0.10) (0.01)
Net realized and unrealized gain ........ 5.60 0.84
-------------- -------------------
Total from investment operations ........ 5.50 0.83
-------------- -------------------
Less distributions from net realized gain (1.20) (0.02)
-------------- -------------------
Net asset value, end of period ........... $ 15.11 $ 10.81
============== ===================
TOTAL INVESTMENT RETURN+ ................. 53.02% 8.26% (1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................. 2.05% 2.21% (2)
Net investment loss ...................... (1.05)% (0.16)% (2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands . $309,272 $115,126
Portfolio turnover rate .................. 328% 199% (1)
Average commission rate paid ............. $0.0582 --
</TABLE>
- ------------
* Commencement of operations.
+ Does not reflect the deduction of sales charge.
(1) Not annualized.
(2) Annualized.
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, 1996, the results of its
operations for the year then ended, and the changes in its net assets and the
financial highlights for the year then ended and 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 audits. We conducted
our audits 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 audits, which included confirmation of securities at May 31,
1996 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
July 8, 1996
1996 FEDERAL TAX NOTICE (unaudited)
During the year ended May 31, 1996, the Fund paid to its shareholders
$0.02 per share from long-term capital gains. For such period, 4.07% of
the income paid qualified for the dividends received deduction
available to corporations.
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
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
Kirk Balzer
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
ANNUAL REPORT
MAY 31, 1996
