<PAGE>
DEAN WITTER MID-CAP GROWTH FUND TWO WORLD TRADE CENTER, NEW YORK, NEW YORK
10048
LETTER TO THE SHAREHOLDERS NOVEMBER 30, 1996
DEAR SHAREHOLDER:
For the six-month period ended November 30, 1996, Dean Witter Mid-Cap Growth
Fund registered a total return of -1.99 percent versus 7.39 percent for the
Standard & Poor's Mid-Cap Index. Since its inception on September 29, 1994,
through November 30, 1996, the Fund has produced an average annual total return
of 25.01 percent, versus 21.28 percent for the S&P Mid-Cap Index.
THE SECTOR-ROTATION STRATEGY AT WORK
Early in the Fund's fiscal year, the portfolio was positioned defensively in an
effort to take advantage of a slowing economy. In July, economic data emerged
which suggested that the economy was slowing and possibly on its way back to a
two percent growth rate, which is considered non-inflationary by the Federal
Reserve Board. The Fund's strategy is to invest in sectors with the strongest
relative earnings prospects at a particular stage of the economic cycle. Given
the portfolio management team's expectation that both the economy and earnings
would decelerate, half of the Fund's portfolio was moved into steady growth
companies (beverages, cosmetics, drugs and food stores). The other half was
allocated to early-cycle companies such as shoes, computer software,
communication software and computer networking, which tend to show an earnings
acceleration as the economy emerges from a slowdown. At that time, concerns
regarding corporate earnings intensified to the extent that the market
experienced a significant correction. With the market gravitating toward the
safety and earnings visibility of larger companies, the correction was more
extreme among mid- and small-cap issues. As a result, the Fund's recent
performance has lagged that of the broader market.
In the late summer the market rebounded as reported second-quarter earnings
surprisingly exceeded expectations, even against the backdrop of a slowing
economy. The Fund's exposure to cyclical growth sectors such as retailing and
technology was increased as evidence emerged that business in this area was
firming. The Fund's energy weighting
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
LETTER TO THE SHAREHOLDERS NOVEMBER 30, 1996, CONTINUED
was also increased as Iraqi oil supplies continued to be prevented from entering
world markets and also given strong demand from Asia and Latin America. With
inflation during this period remaining remarkably controlled, the Fund's
exposure to interest-rate sensitive sectors (banks, insurance and brokerage
firms) was also increased. The Fund was also tilted toward the larger end of the
mid-cap sector because of the liquidity and steady earnings these companies tend
to exhibit.
During the fall, retail sales flattened and housing starts declined, indicating
a slow down in consumer durable spending. This data suggested that the economy
had peaked in the second quarter of 1996 and that a deceleration was indeed in
place. As a result, the interest-rate sensitive and consumer staple sectors
outperformed the consumer and basic cyclical sectors. At that time, the
portfolio was repositioned in an effort to take advantage of the longer-term
effects of these economic conditions. Technology positions were maintained and
in some cases expanded as earnings prospects continued to improve. The
technology sector's strength was driven by a significant draw-down in what had
been excessive semiconductor inventories and a strong new-product cycle in the
personal computer area.
OUTLOOK
Currently, leading liquidity indicators such as housing refinancings, money
supply and increased business lending suggest that the economy may bottom out
sometime between March and June of 1997. While the Fund's portfolio management
team believes that the economy should rebound next year, the recovery is likely
to be muted, with economic growth rising to about 2.5 percent. As conditions
improve, the portfolio will be tilted modestly toward more economically
sensitive sectors -- particularly the technology and capital-spending sectors.
The portfolio will likely continue to be overweighted in the interest-rate
sensitive sectors as low levels of inflation are confirmed. Consolidation in
these sectors is expected to result in upward revaluations.
The Fund's portfolio management team believes that the outlook for mid-cap stock
investing is positive over the next few quarters. A rebound in liquidity
indicators, together with an expected acceleration of economic growth, should
particularly favor mid-cap issues. Additionally, valuations are much more
attractive for mid caps versus large caps, as measured by their three to
five-year growth rates. Therefore, the portfolio management team expects the
mid-cap sector to reassert its long-term leadership in 1997.
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
LETTER TO THE SHAREHOLDERS NOVEMBER 30, 1996, CONTINUED
We appreciate your support of the Dean Witter Mid-Cap Growth Fund and look
forward to continuing to serve your investment needs and objectives.
Very truly yours,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (95.9%)
AGRICULTURE RELATED (3.3%)
83,000 Dekalb Genetics Corporation (Class
B).................................. $ 3,008,750
28,000 Delta & Pine Land Co................ 899,500
42,100 IMC Global, Inc..................... 1,520,862
50,000 New Holland NV* (Netherlands)....... 1,006,250
60,000 Pioneer Hi-Bred International,
Inc................................. 4,185,000
15,000 Potash Corp. of Saskatchewan, Inc.
(Canada)............................ 1,130,625
---------------
11,750,987
---------------
APPAREL & FOOTWEAR (1.8%)
77,200 Jones Apparel Group, Inc.*.......... 2,373,900
44,000 Nike, Inc. (Class B)................ 2,502,500
40,000 Reebok International Ltd.
(England)........................... 1,520,000
---------------
6,396,400
---------------
AUTO RELATED (0.2%)
20,600 Miller Industries, Inc.*............ 571,650
---------------
BANKS (7.7%)
45,000 Comerica, Inc....................... 2,632,500
10,000 Crestar Financial Corp.............. 696,250
30,000 Fifth Third Bancorp................. 2,100,000
75,000 First Chicago NBD Corp.............. 4,406,250
70,000 Firstar Corp........................ 3,736,250
90,000 KeyCorp............................. 4,713,750
20,000 Northern Trust Corp................. 1,452,500
50,000 Norwest Corp........................ 2,337,500
45,000 Signet Banking Corp................. 1,361,250
50,000 U.S. Bancorp........................ 2,137,500
40,000 Washington Mutual, Inc.............. 1,740,000
---------------
27,313,750
---------------
BASIC CYCLICALS (0.2%)
30,000 Worthington Industries, Inc......... 596,250
---------------
BIOTECHNOLOGY (4.1%)
80,000 Biochem Pharma, Inc.*............... 3,410,000
104,000 Biogen, Inc.*....................... 3,978,000
150,000 Centocor, Inc.*..................... 4,143,750
100,000 IDEC Pharmaceuticals Corp.*......... 2,412,500
18,500 Vertex Pharmaceuticals Inc.*........ 587,375
---------------
14,531,625
---------------
CAPITAL GOODS (0.8%)
70,000 Sundstrand Corp..................... 2,730,000
---------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
COMMUNICATIONS EQUIPMENT (6.6%)
16,000 Adtran, Inc.*....................... $ 708,000
4,100 Advanced Fibre Communications,
Inc.*............................... 199,875
60,000 Andrew Corp.*....................... 3,472,500
25,000 Ascend Communications,
Inc.*............................... 1,778,125
80,000 Brightpoint, Inc.*.................. 2,890,000
25,000 Cascade Communications Corp.*....... 1,718,750
80,000 Cisco Systems, Inc.*................ 5,430,000
70,000 Ericsson (L.M.) Telephone Co. (Class
B) (ADR) (Sweden)................... 2,152,500
55,000 Pairgain Technologies, Inc.*........ 3,499,375
40,000 Tellabs, Inc.*...................... 1,590,000
---------------
23,439,125
---------------
COMPUTER EQUIPMENT (6.3%)
80,000 Adaptec, Inc.*...................... 2,970,000
40,000 Dell Computer Corp.*................ 4,065,000
120,000 EMC Corp.*.......................... 3,870,000
55,000 Gateway 2000, Inc.*................. 2,949,375
100,000 Seagate Technology, Inc.*........... 3,950,000
90,000 Western Digital Corp.*.............. 4,837,500
---------------
22,641,875
---------------
COMPUTER SERVICES (2.0%)
80,000 Gartner Group, Inc.
(Class A)*.......................... 2,920,000
39,000 Transaction Systems Architects, Inc.
(Class A)*.......................... 1,413,750
100,000 Vanstar Corp.*...................... 2,725,000
---------------
7,058,750
---------------
COMPUTER SOFTWARE (5.0%)
10,000 Baan Company, NV* (Netherlands)..... 355,000
80,000 BMC Software, Inc.*................. 3,480,000
40,000 Parametric Technology Corp.*........ 2,175,000
33,000 Peoplesoft, Inc.*................... 3,019,500
117,700 Rational Software Corp.*............ 4,060,650
5,700 Rogue Wave Software*................ 72,675
10,000 Select Software Tools Ltd. (ADR)*
(United Kingdom).................... 175,000
35,000 Siebel Systems, Inc.*............... 1,548,750
60,000 Veritas Software Co.*............... 2,760,000
---------------
17,646,575
---------------
CONSUMER - NONCYCLICAL (5.3%)
52,000 Alberto-Culver Co. (Class B)........ 2,470,000
60,000 Avon Products, Inc.................. 3,345,000
17,500 Clorox, Co.......................... 1,824,375
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1996 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
40,000 Coca-Cola Enterprises, Inc.......... $ 1,805,000
80,000 Consolidated Cigar Holdings Inc.
(Class A)*.......................... 1,950,000
40,000 Hershey Foods Corp.................. 1,995,000
60,000 Interstate Bakeries Corporation..... 2,707,500
3,600 Nu Skin Asia Pacific Inc. (Class
A)*................................. 106,650
60,000 PanAmerican Beverages, Inc. (Class
A) (Mexico)......................... 2,805,000
---------------
19,008,525
---------------
CONSUMER BUSINESS SERVICES (2.0%)
3,800 Cybermedia, Inc.*................... 75,050
39,300 DeVry, Inc.*........................ 1,753,762
25,000 Diebold, Inc........................ 1,490,625
34,100 National Education Corp.*........... 481,662
30,000 Saville Systems, PLC (ADR)*
(Ireland)........................... 1,237,500
65,000 Service Corp. International......... 1,958,125
---------------
6,996,724
---------------
CONSUMER PRODUCTS (4.4%)
100,000 Arbor Drugs, Inc.................... 2,575,000
52,900 Callaway Golf Company............... 1,606,837
21,300 Dominick's Supermarkets, Inc.*...... 447,300
24,000 Kroger Co.*......................... 1,107,000
75,000 Safeway, Inc.*...................... 3,046,875
180,000 Thrifty PayLess Holdings, Inc.
(Class B)*.......................... 4,612,500
45,000 Vons Companies, Inc.*............... 2,368,125
---------------
15,763,637
---------------
DRUGS (1.4%)
68,000 Dura Pharmaceuticals, Inc.*......... 2,516,000
20,500 Idexx Laboratories, Inc.*........... 717,500
25,000 Warner-Lambert Co................... 1,787,500
---------------
5,021,000
---------------
ENERGY (6.7%)
14,000 Apache Corp......................... 509,250
66,000 Baker Hughes, Inc................... 2,417,250
30,000 Cooper Cameron Corp.*............... 1,972,500
50,000 Diamond Offshore Drilling, Inc.*.... 3,187,500
32,500 Falcon Drilling Company, Inc.*...... 1,291,875
161,700 Global Marine, Inc.*................ 3,153,150
37,000 Louisiana Land & Exploration Co..... 2,210,750
62,000 Marine Drilling Company, Inc.*...... 984,250
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
60,000 Reading & Bates Corp.*.............. $ 1,740,000
80,000 Rowan Companies, Inc.*.............. 1,890,000
35,000 Smith International, Inc.*.......... 1,430,625
35,000 Transocean Offshore, Inc............ 2,108,750
15,100 Western Atlas, Inc.*................ 1,064,550
---------------
23,960,450
---------------
ENTERTAINMENT/GAMING & LODGING (3.0%)
25,000 HFS, Incorporated*.................. 1,618,750
140,500 International Game Technology....... 2,739,750
60,900 MGM Grand, Inc.*.................... 2,352,262
80,000 Mirage Resorts, Inc.*............... 1,930,000
130,000 Sodak Gaming, Inc.*................. 2,063,750
---------------
10,704,512
---------------
FINANCIAL - MISCELLANEOUS (9.4%)
40,000 Alex Brown, Inc..................... 2,405,000
125,000 Bear Stearns Companies, Inc......... 3,437,500
83,600 Crescent Real Estate Equities,
Inc................................. 3,667,950
80,000 Edwards (A.G.), Inc................. 2,500,000
20,000 Finova Group, Inc................... 1,320,000
15,600 Infinity Financial Technology,
Inc.*............................... 253,500
50,600 Lehman Brothers Holdings, Inc....... 1,473,725
69,000 Merrill Lynch & Co., Inc............ 5,537,250
65,000 MGIC Investment Corp................ 4,866,875
65,000 Morgan Stanley Group, Inc........... 3,908,125
69,000 PMI Group, Inc...................... 4,002,000
---------------
33,371,925
---------------
HEALTHCARE PRODUCTS & SERVICES (2.3%)
150,000 Health Management Associates, Inc.
(Class A)*.......................... 3,318,750
50,000 PhyCor, Inc.*....................... 1,612,500
31,800 Thermo Electron Corp.*.............. 1,152,750
74,800 Vivra, Inc.*........................ 2,300,100
---------------
8,384,100
---------------
HOUSING RELATED (0.3%)
29,000 American Standard Companies,
Inc.*............................... 1,105,625
---------------
INSURANCE (3.8%)
30,000 CMAC Investment Corp................ 2,287,500
73,000 Conseco Inc......................... 4,078,875
60,000 CRA Managed Care, Inc.*............. 2,700,000
108,000 Sunamerica Inc...................... 4,522,500
---------------
13,588,875
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1996 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
INTERNET (1.4%)
67,100 America Online, Inc.*............... $ 2,373,663
40,000 Netscape Communications Corp.*...... 2,235,000
5,000 Security Dynamics Technologies,
Inc.*............................... 205,625
---------------
4,814,288
---------------
MEDIA GROUP (3.2%)
43,000 Argyle Television, Inc. (Class
A)*................................. 1,085,750
12,700 Clear Channel Communications,
Inc.*............................... 876,300
13,200 Emmis Broadcasting Corp. (Class
A)*................................. 448,800
60,000 Evergreen Media Corp. (Class A)*.... 1,485,000
66,000 Heftel Broadcasting Corp. (Class
A)*................................. 2,161,500
42,900 Outdoor Systems, Inc.*.............. 1,088,588
30,000 Telemundo Group, Inc. (Class A)*.... 847,500
27,700 Universal Outdoor Holdings, Inc.*... 744,438
63,100 Univision Communications, Inc.
(Class A)*.......................... 2,508,225
---------------
11,246,101
---------------
MEDICAL SUPPLIES (1.0%)
50,000 Boston Scientific Corp.*............ 2,918,750
11,800 Medicis Pharmaceutical Corp. (Class
A)*................................. 516,250
---------------
3,435,000
---------------
METALS (0.0%)
4,000 Titanium Metals Corp.*.............. 132,000
---------------
RESTAURANTS (1.9%)
95,000 Boston Chicken, Inc.*............... 3,681,250
30,000 Rainforest Cafe, Inc.*.............. 862,500
65,000 Starbucks Corp.*.................... 2,250,625
---------------
6,794,375
---------------
RETAIL (3.1%)
44,500 Eagle Hardware & Garden, Inc.*...... 1,073,563
27,900 Gucci Group NV (Italy).............. 2,047,163
14,100 Lowe's Companies, Inc............... 572,813
25,500 Neiman-Marcus Group, Inc.*.......... 886,125
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
48,000 PetSmart, Inc.*..................... $ 1,224,000
80,000 Price/Costco, Inc.*................. 1,860,000
48,000 Proffitt's, Inc.*................... 1,932,000
40,000 Tiffany & Co........................ 1,475,000
---------------
11,070,664
---------------
SEMICONDUCTORS (7.7%)
45,000 Altera Corp.*....................... 3,397,500
70,000 Analog Devices, Inc.*............... 2,248,750
100,000 Applied Materials, Inc.*............ 3,812,500
55,000 DuPont Photomasks, Inc.*............ 2,268,750
32,000 Intel Corp.......................... 4,056,000
90,000 KLA Instruments Corp.*.............. 3,195,000
63,000 Maxim Integrated Products, Inc.*.... 2,913,750
30,000 Microchip Technology, Inc.*......... 1,432,500
50,000 Micron Technology, Inc.............. 1,656,250
25,000 Novellus Systems, Inc.*............. 1,437,500
42,000 Tencor Instruments*................. 1,113,000
---------------
27,531,500
---------------
TELECOMMUNICATIONS (1.0%)
50,000 McLeod, Inc. (Class A)*............. 1,425,000
54,000 Teleport Communications Group Inc.
(Class A)*.......................... 1,788,750
17,000 WorldCom, Inc.*..................... 393,125
---------------
3,606,875
---------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $306,624,738)...... 341,213,163
---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS (1.5%)
$ 4,000 U.S. Treasury Note Strips
0.00% due 11/15/18.................. 942,240
19,000 U.S. Treasury Note Strips
0.00% due 05/15/19.................. 4,321,550
---------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $4,808,650)........ 5,263,790
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1996 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (2.4%)
U.S. GOVERNMENT AGENCY (1.4%) (a)
$ 5,000 Federal National Mortgage
Association 5.33% due 12/02/96
(Amortized Cost $4,999,259)......... $ 4,999,259
---------------
REPURCHASE AGREEMENT (1.0%)
3,661 The Bank of New York 5.125% due
12/02/96 (dated 11/29/96; proceeds
$3,663,047; collateralized by
$2,255,000 U.S. Treasury Bond 7.875%
due 02/15/21 valued at $2,632,358
and $1,094,271 Federal National
Mortgage Association 8.00% due
11/01/16 valued at $1,133,218)
(Identified Cost $3,661,483)........ 3,661,483
---------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $8,660,742)........ 8,660,742
---------------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST
$320,094,130) (b)........... 99.8% $355,137,695
OTHER ASSETS IN EXCESS OF
LIABILITIES................. 0.2 867,109
----- ------------
NET ASSETS.................. 100.0% $356,004,804
----- ------------
----- ------------
<FN>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security 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 approximates identified
cost. The aggregate gross unrealized appreciation is $40,224,081 and the
aggregate gross unrealized depreciation is $5,180,516, resulting in net
unrealized appreciation of $35,043,565.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $320,094,130)............................ $355,137,695
Receivable for:
Investments sold........................................ 15,890,227
Shares of beneficial interest sold...................... 1,578,003
Dividends............................................... 127,285
Foreign withholding taxes reclaimed..................... 2,291
Interest................................................ 1,043
Deferred organizational expenses............................ 87,954
Prepaid expenses............................................ 61,338
------------
TOTAL ASSETS........................................... 372,885,836
------------
LIABILITIES:
Payable for:
Investments purchased................................... 16,162,348
Plan of distribution fee................................ 286,544
Investment management fee............................... 214,908
Shares of beneficial interest repurchased............... 141,081
Accrued expenses and other payables......................... 76,151
------------
TOTAL LIABILITIES...................................... 16,881,032
------------
NET ASSETS:
Paid-in-capital............................................. 289,518,784
Net unrealized appreciation................................. 35,043,565
Net investment loss......................................... (2,008,615)
Accumulated undistributed net realized gain................. 33,451,070
------------
NET ASSETS............................................. $356,004,804
------------
------------
NET ASSET VALUE PER SHARE,
24,039,100 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$14.81
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $7,146 foreign withholding tax)........... $ 787,032
Interest.................................................... 395,036
-----------
TOTAL INCOME........................................... 1,182,068
-----------
EXPENSES
Plan of distribution fee.................................... 1,590,864
Investment management fee................................... 1,193,148
Transfer agent fees and expenses............................ 210,093
Custodian fees.............................................. 73,922
Registration fees........................................... 41,342
Shareholder reports and notices............................. 31,001
Professional fees........................................... 28,482
Organizational expenses..................................... 15,156
Trustees' fees and expenses................................. 6,164
Other....................................................... 511
-----------
TOTAL EXPENSES......................................... 3,190,683
-----------
NET INVESTMENT LOSS.................................... (2,008,615)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 5,953,536
Net change in unrealized appreciation....................... (8,251,219)
-----------
NET LOSS............................................... (2,297,683)
-----------
NET DECREASE................................................ $(4,306,298)
-----------
-----------
</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 SIX
MONTHS ENDED FOR THE YEAR
NOVEMBER 30, 1996 ENDED
(UNAUDITED) MAY 31, 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss......................................... $ (2,008,615) $ (2,062,519)
Net realized gain........................................... 5,953,536 45,084,990
Net change in unrealized appreciation....................... (8,251,219) 36,875,007
----------------- ------------
NET INCREASE (DECREASE)................................ (4,306,298) 79,897,478
Distributions from net realized gain........................ -- (17,035,698)
Net increase from transactions in shares of beneficial
interest.................................................. 51,039,391 131,283,761
----------------- ------------
NET INCREASE........................................... 46,733,093 194,145,541
NET ASSETS:
Beginning of period......................................... 309,271,711 115,126,170
----------------- ------------
END OF PERIOD
(INCLUDING NET INVESTMENT LOSS OF $2,008,615 AND $0,
RESPECTIVELY)........................................... $356,004,804 $309,271,711
----------------- ------------
----------------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS NOVEMBER 30, 1996 (UNAUDITED)
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
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 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-
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS NOVEMBER 30, 1996 (UNAUDITED) CONTINUED
dividend date 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 -- Dean Witter InterCapital Inc. (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
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS NOVEMBER 30, 1996 (UNAUDITED) CONTINUED
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.
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.
Although there is no legal obligation for the Fund to pay expenses incurred in
excess of payments made to the Distributor under the Plan and the proceeds of
contingent deferred sales charges paid by investors upon redemption of shares,
if for any reason the Plan is terminated, the Trustees will
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS NOVEMBER 30, 1996 (UNAUDITED) CONTINUED
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 $11,087,834 at November 30, 1996.
The Distributor has informed the Fund that for the six months ended November 30,
1996, it received approximately $305,000 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 six months ended November 30, 1996 aggregated
$497,817,585 and $450,290,905 respectively. Included in the aforementioned are
purchases and sales of U.S. Government securities of $17,616,409 and
$12,873,750, respectively.
For the six months ended November 30, 1996, the Fund incurred $52,480 in
brokerage commissions with DWR for portfolio transactions executed on behalf of
the Fund. At November 30, 1996, the Fund's receivable for investments sold and
payable for investments purchased included unsettled trades with DWR of $443,200
and $3,021,698, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At November 30, 1996, the Fund had
transfer agent fees and expenses payable of approximately $18,000.
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
NOVEMBER 30, 1996 MAY 31, 1996
---------------------------- --------------------------
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 10,853,908 $ 153,716,288 22,165,276 $297,479,183
Reinvestment of distributions.................................... -- -- 1,247,724 15,771,239
----------- -------------- ----------- ------------
10,853,908 153,716,288 23,413,000 313,250,422
Repurchased...................................................... (7,288,885) (102,676,897) (13,590,922) (181,966,661)
----------- -------------- ----------- ------------
Net increase..................................................... 3,565,023 $ 51,039,391 9,822,078 $131,283,761
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
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.
<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
FOR THE SIX MONTHS YEAR FOR THE PERIOD
ENDED ENDED SEPTEMBER 29,
NOVEMBER 30, 1996 MAY 31, 1994* THROUGH
(UNAUDITED) 1996 MAY 31, 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $15.11 $10.81 $10.00
------ ---------- ------
Net investment loss..................... (0.08) (0.10) (0.01)
Net realized and unrealized gain
(loss)................................. (0.22) 5.60 0.84
------ ---------- ------
Total from investment operations........ (0.30) 5.50 0.83
------ ---------- ------
Less distributions from net realized
gain................................... -- (1.20) (0.02)
------ ---------- ------
Net asset value, end of period.......... $ 14.81 $ 15.11 $ 10.81
------ ---------- ------
------ ---------- ------
TOTAL INVESTMENT RETURN+................ (1.99)%(1) 53.02% 8.26%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses................................ 2.01%(2) 2.05% 2.21%(2)
Net investment loss..................... (1.26)%(2) (1.05)% (0.16)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands.............................. $356,005 $309,272 $115,126
Portfolio turnover rate................. 149%(1) 328% 199%(1)
Average commission rate paid............ $0.0592 $0.0582 --
<FN>
- ---------------------
* Commencement of operations.
+ 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.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<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
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DEAN WITTER
MID-CAP
GROWTH FUND
[GRAPHIC]
SEMIANNUAL REPORT
NOVEMBER 30, 1996
