<PAGE> 1
MORGAN STANLEY DEAN WITTER MID-CAP GROWTH FUND Two World Trade Center New York,
New York 10048
LETTER TO THE SHAREHOLDERS November 30, 1998
DEAR SHAREHOLDER:
Many of the world's equity markets experienced record levels of volatility in
late summer 1998. Persistent financial woes in Asia, Russia's default and
devaluation and the near-collapse of a multibillion-dollar hedge fund prompted
significant declines in stock prices as investors worried about the threat of
recession. To keep a global credit crunch and recession at bay the Federal
Reserve Board sharply lowered interest rates, as did many central banks around
the world. The stock market rallied in response, recouping nearly all of its
losses by the end of November.
PERFORMANCE
For the six-month period ended November 30, 1998, Morgan Stanley Dean Witter
Mid-Cap Growth Fund's Class B shares produced a total return of -9.73 percent,
while the Fund's Class A shares returned -9.37 percent, Class C shares returned
- -9.73 percent and Class D shares returned -9.47 percent. During the same period,
the Standard & Poor's MidCap 400 Index and the Lipper Mid Cap Fund Index
registered total returns of -1.56 percent and -4.72 percent, respectively. The
performance of the Fund's four share classes varies because each class has
different expenses.
Much of the Fund's unfavorable relative performance can be attributed to the
portfolio's diversification into the smaller and mid-sized end of the mid-cap
arena, which worked so admirably in fiscal year 1997, but failed to produce
returns commensurate with those of large-cap stocks over the past six months.
Similar to what occurred in large-cap stocks, where the "nifty fifty" names
carried the S&P 500 higher, the same situation prevailed within the mid-cap
arena, with the largest mid-cap stocks outperforming the average mid-sized
issue.
THE PORTFOLIO
Over the past six months, the Fund was heavily weighted in the technology,
financial services and retail sectors, which witnessed disparate price declines
over the period, although each of these areas
<PAGE> 2
MORGAN STANLEY DEAN WITTER MID-CAP GROWTH FUND
LETTER TO THE SHAREHOLDERS November 30, 1998, continued
eventually rebounded strongly. As of November 30, 1998, the Fund had 16 percent
of its net assets invested in financial/interest-rate-sensitive stocks, 32
percent in technology/capital goods, 26 percent in the consumer/consumer-related
sector and 21 percent in health care.
The Fund's largest holdings at the end of November included Medicis
Pharmaceutical Corp. (pharmaceuticals), Total Renal Care Holdings, Inc.
(medical/nursing services), Ascend Communications, Inc.
(computers/communications), Capital One Financial Corp. (diversified financial
services) and America Online, Inc. (Internet-related).
LOOKING AHEAD
Going forward, we are optimistic about the Fund's prospects. We believe that
many of the mid- and small-capitalization issues in which the Fund invests are
attractive on valuation and fundamental bases, and are poised for improved
performance in the second half of the Fund's fiscal year.
We appreciate your ongoing support of Morgan Stanley Dean Witter Mid-Cap Growth
Fund and look forward to continuing to serve your investment needs.
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO
CHARLES A. FIUMEFREDDO
Chairman of the Board
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS November 30, 1998 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (98.8%)
Accident & Health Insurance
(2.2%)
180,000 AFLAC, Inc. ................. $ 6,637,500
100,000 UNUM Corp. .................. 5,387,500
------------
12,025,000
------------
Advertising (3.1%)
375,000 Outdoor Systems, Inc.* ...... 10,125,000
180,000 Snyder Communications,
Inc.*....................... 6,401,250
------------
16,526,250
------------
Auto Parts (1.0%)
100,000 Federal Mogul Corp. ......... 5,675,000
------------
Banking (0.4%)
95,000 Banco Santander Puerto
Rico*....................... 2,185,000
------------
Biotechnology (4.0%)
115,000 Biogen, Inc.*................ 8,725,625
300,000 Chiron Corp.*................ 6,787,500
65,000 Immunex Corp.*............... 5,984,062
------------
21,497,187
------------
Broadcast Media (1.3%)
125,000 Jacor Communications,
Inc.*....................... 7,273,437
------------
Building Materials (1.5%)
140,000 Southdown, Inc. ............. 8,155,000
------------
Business Services (0.8%)
110,000 Metzler Group, Inc. (The)*... 4,565,000
------------
Clothing/Shoe/Accessory Stores
(1.6%)
150,000 Abercrombie & Fitch Co.
(Class A)*.................. 8,400,000
50,000 Pier 1 Imports, Inc. ........ 537,500
------------
8,937,500
------------
Computer Software (8.0%)
250,000 CheckFree Holdings Corp.*.... 4,062,500
116,000 Citrix Systems, Inc.*........ 9,628,000
175,000 Compuware Corp.*............. 10,893,750
175,000 Learning Company, Inc.
(The)*...................... 5,085,937
115,000 Legato Systems, Inc.*........ 5,491,250
157,000 Network Associates, Inc.*.... 7,987,375
------------
43,148,812
------------
Computer/Video Chains (1.7%)
100,000 Gateway 2000, Inc.*.......... $ 5,612,500
75,000 Synopsis, Inc.*.............. 3,543,750
------------
9,156,250
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Computer - Equipment (1.3%)
175,000 American Power Conversion
Corp.*...................... $ 7,229,687
------------
Computers - Services (1.0%)
150,000 NCR Corp.*................... 5,587,500
------------
Computers Communications (3.1%)
200,000 Ascend Communications,
Inc.*....................... 11,225,000
75,000 Sun Microsystems, Inc.*...... 5,545,312
------------
16,770,312
------------
Computers Software & Services
(4.7%)
150,000 At Home Corp. (Series A)*.... 8,718,750
325,000 General Instrument Corp.*.... 9,140,625
325,000 Rational Software Corp.*..... 7,373,437
------------
25,232,812
------------
Contract Drilling (0.6%)
550,000 Global Industries, Ltd.*..... 3,128,125
------------
Diversified Commercial Services
(0.6%)
100,000 HA-LO Industries, Inc.*...... 3,193,750
------------
Diversified Financial Services
(5.1%)
100,000 Capital One Financial
Corp. ...................... 11,000,000
110,000 FINOVA Group, Inc. .......... 5,809,375
115,000 Providian Financial Corp. ... 10,558,438
------------
27,367,813
------------
Drug Store Chains (2.9%)
190,000 Duane Reade, Inc.*........... 7,623,750
150,000 Express Scripts, Inc. (Class
A)*......................... 8,250,000
------------
15,873,750
------------
Electronic Data Processing
(1.6%)
140,000 Gemstar International Group
Ltd. (Virgin Islands)*...... 8,505,000
------------
Electronics - Semiconductors/
Components (1.8%)
350,000 Advanced Micro Devices,
Inc.*....................... 9,690,625
------------
Finance (1.6%)
200,000 MGIC Investment Corp. ....... 8,787,500
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS November 30, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Food Chains (1.2%)
125,000 Fred Meyer, Inc.*............ $ 6,359,375
------------
Generic Drugs (6.6%)
175,000 ALZA Corp.*.................. 9,143,750
175,000 Forest Laboratories, Inc.*... 8,159,375
325,000 Mylan Laboratories, Inc. .... 10,785,938
140,000 Watson Pharmaceuticals,
Inc.*....................... 7,542,500
------------
35,631,563
------------
Health Care Diversified
(0.7%)
75,000 Universal Health Services,
Inc. (Class B)*............. 4,021,875
------------
Home Building (1.0%)
225,000 Kaufman & Broad Home Corp. .. 5,667,188
------------
Housewares (1.9%)
175,000 Best Buy Co., Inc.*.......... 10,084,375
------------
Internet (7.4%)
125,000 America Online, Inc.*........ 10,945,313
80,000 CSG Systems
International, Inc.*........ 5,020,000
150,000 Earthlink Network, Inc.*..... 9,112,500
125,000 Infoseek Corp.*.............. 4,242,188
60,000 MindSpring Enterprises,
Inc.*....................... 3,855,000
35,000 Yahoo! Inc.*................. 6,717,812
------------
39,892,813
------------
Investment Bankers/Brokers/
Services (2.2%)
85,000 Bear Stearns Companies,
Inc. ....................... 3,570,000
200,000 Paine Webber Group, Inc. .... 8,175,000
------------
11,745,000
------------
Major U.S. Telecommunications
(0.9%)
175,000 Winstar Communications,
Inc.*....................... 4,867,188
------------
Medical Specialties (0.5%)
100,000 IDEXX Laboratories, Inc.*.... 2,575,000
------------
Medical/Nursing Services (4.0%)
375,000 Renal Care Group, Inc.*...... 10,078,125
435,000 Total Renal Care Holdings,
Inc.*....................... 11,554,688
------------
21,632,813
------------
Mid-Sized Banks (1.4%)
100,000 Firstar Corp. ............... 7,325,000
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Multi-Line Insurance (1.9%)
225,000 American Bankers Insurance
Group, Inc. ................ $ 10,209,375
------------
Office Equipment/Supplies
(3.6%)
130,000 Lexmark International Group,
Inc. (Class A)*............. 9,928,750
300,000 Office Depot, Inc.*.......... 9,750,000
------------
19,678,750
------------
Other Pharmaceuticals (2.3%)
200,000 Medicis Pharmaceutical Corp.
(Class A)*.................. 12,600,000
------------
Other Specialty Stores (1.5%)
225,000 Staples, Inc.*............... 7,846,875
------------
Railroad Equipment (1.4%)
200,000 Trinity Industries, Inc. .... 7,737,500
------------
Restaurants (2.6%)
225,000 Outback Steakhouse, Inc.*.... 7,987,500
140,000 Papa John's International,
Inc.*....................... 5,871,250
------------
13,858,750
------------
Retail (1.4%)
40,000 Amazon.com, Inc.*............ 7,680,000
------------
Retail - Specialty (1.0%)
200,000 Eagle Hardware & Garden,
Inc.*....................... 5,637,500
------------
Semiconductors (1.6%)
70,000 Broadcom Corp. (Class A)*.... 6,251,875
60,000 Veeco Instruments, Inc.*..... 2,190,000
------------
8,441,875
------------
Services to the Health Industry
(1.4%)
160,000 Bard (C.R.), Inc. ........... 7,330,000
------------
Specialty Foods/Candy (0.7%)
175,000 Fresh Del Monte Produce
Inc.*....................... 3,850,000
------------
Utilities - Electric (1.7%)
200,000 AES Corp.*................... 9,150,000
------------
TOTAL COMMON STOCKS
(Identified Cost
$462,970,642)................ 534,334,125
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS November 30, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (1.4%)
REPURCHASE AGREEMENT
$ 7,510 The Bank of New York 4.625%
due 12/01/98 (dated
11/30/98; proceeds
$7,511,629) (a)
(Identified Cost $7,510,664) $ 7,510,664
------------
TOTAL INVESTMENTS
(Identified Cost $470,481,306)
(b)............................. 100.2% 541,844,789
OTHER LIABILITIES IN
EXCESS OF ASSETS................ (0.2) (1,297,835)
------- ------------
NET ASSETS...................... 100.0% $540,546,954
======= ============
</TABLE>
- ---------------------
* Non-income producing security.
(a) Collateralized by $4,980,438 Federal Home Loan Banks 6.615% due 03/05/08
valued at $5,059,638 and $2,560,846 Federal Home Loan Banks 6.55% due
08/27/08 valued at $2,602,741.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $77,858,116 and the
aggregate gross unrealized depreciation is $6,494,633, resulting in net
unrealized appreciation of $71,363,483.
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER MID-CAP GROWTH FUND
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1998 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $470,481,306)............................. $541,844,789
Receivable for:
Investments sold........................................ 14,182,824
Shares of beneficial interest sold...................... 626,416
Dividends............................................... 62,250
Deferred organizational expenses............................ 27,495
Prepaid expenses and other assets........................... 95,569
------------
TOTAL ASSETS............................................ 556,839,343
------------
LIABILITIES:
Payable for:
Investments purchased................................... 12,492,255
Shares of beneficial interest repurchased............... 2,971,809
Plan of distribution fee................................ 445,441
Investment management fee............................... 336,110
Accrued expenses and other payables......................... 46,774
------------
TOTAL LIABILITIES....................................... 16,292,389
------------
NET ASSETS.............................................. $540,546,954
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $466,822,686
Net unrealized appreciation................................. 71,363,483
Net investment loss......................................... (4,572,306)
Accumulated undistributed net realized gain................. 6,933,091
------------
NET ASSETS.............................................. $540,546,954
============
CLASS A SHARES:
Net Assets.................................................. $3,403,534
Shares Outstanding (unlimited authorized, $.01 par value)... 217,299
NET ASSET VALUE PER SHARE............................... $15.66
============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value)........ $16.53
============
CLASS B SHARES:
Net Assets.................................................. $529,655,893
Shares Outstanding (unlimited authorized, $.01 par value)... 34,175,785
NET ASSET VALUE PER SHARE............................... $15.50
============
CLASS C SHARES:
Net Assets.................................................. $6,328,424
Shares Outstanding (unlimited authorized, $.01 par value)... 408,280
NET ASSET VALUE PER SHARE............................... $15.50
============
CLASS D SHARES:
Net Assets.................................................. $1,159,103
Shares Outstanding (unlimited authorized, $.01 par value)... 73,937
NET ASSET VALUE PER SHARE............................... $15.68
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER MID-CAP GROWTH FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended November 30, 1998 (unaudited)
NET INVESTMENT LOSS:
INCOME
Interest.................................................... $ 574,310
Dividends (net of $8,001 foreign withholding tax)........... 429,897
------------
TOTAL INCOME............................................ 1,004,207
------------
EXPENSES
Plan of distribution fee (Class A shares)................... 3,948
Plan of distribution fee (Class B shares)................... 2,814,048
Plan of distribution fee (Class C shares)................... 30,126
Investment management fee................................... 2,137,384
Transfer agent fees and expenses............................ 405,144
Registration fees........................................... 55,408
Shareholder reports and notices............................. 35,399
Professional fees........................................... 33,208
Custodian fees.............................................. 29,829
Organizational expenses..................................... 15,156
Trustees' fees and expenses................................. 6,635
Other....................................................... 10,228
------------
TOTAL EXPENSES.......................................... 5,576,513
------------
NET INVESTMENT LOSS..................................... (4,572,306)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss........................................... (81,520,747)
Net change in unrealized appreciation....................... 20,988,322
------------
NET LOSS................................................ (60,532,425)
------------
NET DECREASE................................................ $(65,104,731)
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER MID-CAP GROWTH FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
NOVEMBER 30, 1998 MAY 31, 1998*
- ---------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss.................................. $ (4,572,306) $ (7,517,206)
Net realized gain (loss)............................. (81,520,747) 120,508,014
Net change in unrealized appreciation................ 20,988,322 (3,609,267)
------------ ------------
NET INCREASE (DECREASE).......................... (65,104,731) 109,381,541
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN:
Class A shares....................................... -- (57,133)
Class B shares....................................... -- (38,691,036)
Class C shares....................................... -- (196,298)
Class D shares....................................... -- (20,585)
------------ ------------
TOTAL DISTRIBUTIONS.............................. -- (38,965,052)
------------ ------------
Net increase (decrease) from transactions in shares
of beneficial interest.............................. (39,923,222) 156,406,489
------------ ------------
NET INCREASE (DECREASE).......................... (105,027,953) 226,822,978
NET ASSETS:
Beginning of period.................................. 645,574,907 418,751,929
------------ ------------
END OF PERIOD
(Including a net investment loss of
$4,572,306 and $0, respectively)................. $540,546,954 $645,574,907
============ ============
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS November 30, 1998 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley 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. On July 28, 1997, the Fund
commenced offering three additional classes of shares, with the then current
shares designated as Class B shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price (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 Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Manager"), that sale or bid prices are not
reflective of a security's market value, portfolio securities are valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the Trustees (valuation of debt securities for
which market quotations are not readily available may be based upon current
market prices of securities which are comparable in coupon, rating and maturity
or an appropriate matrix utilizing similar factors); and
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS November 30, 1998 (unaudited) continued
(4) short-term debt securities having a maturity date of more than sixty days at
time of purchase are valued on a mark-to-market basis until sixty days prior to
maturity and thereafter at amortized cost based on their value on the 61st day.
Short-term debt securities having a maturity date of sixty days or less at the
time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date
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. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
F. 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
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS November 30, 1998 (unaudited) continued
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
following annual rates to the net assets of the Fund as of the close of each
business day: 0.75% to the portion of net assets not exceeding $500 million and
0.725% to the portion of the daily net assets exceeding $500 million.
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.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A -- up
to 0.25% of the average daily net assets of Class A; (ii) Class B -- 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Class B shares
since the inception of the Fund (not including reinvestment of dividend or
capital gain distributions) less the average daily aggregate net asset value of
the Class B shares redeemed since the Fund's inception upon which a contingent
deferred sales charge has been imposed or waived; or (b) the average daily net
assets of Class B; and (iii) Class C -- up to 1.0% of the average daily net
assets of Class C. In the case of Class A shares, amounts paid under the Plan
are paid to the Distributor for services provided. In the case of Class B and
Class C shares, amounts paid under the Plan are paid to the Distributor for (1)
services provided and the expenses borne by it and others in the distribution of
the shares of these Classes, including the payment of commissions for sales of
these Classes and incentive compensation to, and expenses of, Morgan Stanley
Dean Witter Financial Advisors and others who engage in or support distribution
of the shares or who service shareholder accounts, including overhead and
telephone expenses; (2) printing and distribution of
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS November 30, 1998 (unaudited) continued
prospectuses and reports used in connection with the offering of these shares to
other than current shareholders; and (3) preparation, printing and distribution
of sales literature and advertising materials. In addition, the Distributor may
utilize fees paid pursuant to the Plan, in the case of Class B shares, to
compensate Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Investment
Manager and Distributor and other selected broker-dealers for their opportunity
costs in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts, including
carrying charges, totaled $13,830,116 at November 30, 1998.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the six months ended November 30, 1998, the distribution fee
was accrued for Class A shares and Class C shares at the annual rate of 0.25%
and 1.0%, respectively.
The Distributor has informed the Fund that for the six months ended November 30,
1998, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $520,989 and $4,210,
respectively and received approximately $14,241 in front-end sales charges from
sales of the Fund's Class A shares. The respective shareholders pay such charges
which are not an expense of the Fund.
4. FEDERAL INCOME TAX STATUS
As of May 31, 1998, the Fund had temporary book/tax differences attributable to
capital loss deferrals on wash sales.
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS November 30, 1998 (unaudited) continued
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
NOVEMBER 30, 1998 MAY 31, 1998*
-------------------------- ---------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold....................................................... 117,956 $ 1,815,033 223,859 $ 3,887,750
Reinvestment of distributions.............................. -- -- 3,525 57,133
Redeemed................................................... (67,014) (1,000,514) (61,027) (1,101,805)
---------- ------------- ----------- -------------
Net increase -- Class A.................................... 50,942 814,519 166,357 2,843,078
---------- ------------- ----------- -------------
CLASS B SHARES
Sold....................................................... 4,314,088 68,146,572 20,515,049 348,155,548
Reinvestment of distributions.............................. -- -- 2,245,246 36,260,726
Redeemed................................................... (7,172,789) (110,071,822) (14,102,658) (237,680,244)
---------- ------------- ----------- -------------
Net increase (decrease) -- Class B......................... (2,858,701) (41,925,250) 8,657,637 146,736,030
---------- ------------- ----------- -------------
CLASS C SHARES
Sold....................................................... 145,037 2,369,763 388,549 6,774,774
Reinvestment of distributions.............................. -- -- 11,759 190,027
Redeemed................................................... (74,663) (1,170,192) (62,402) (1,095,646)
---------- ------------- ----------- -------------
Net increase -- Class C.................................... 70,374 1,199,571 337,906 5,869,155
---------- ------------- ----------- -------------
CLASS D SHARES
Sold....................................................... 791,299 11,590,905 132,955 2,212,136
Reinvestment of distributions.............................. -- -- 495 8,020
Redeemed................................................... (779,805) (11,602,967) (71,007) (1,261,930)
---------- ------------- ----------- -------------
Net increase (decrease) -- Class D......................... 11,494 (12,062) 62,443 958,226
---------- ------------- ----------- -------------
Net increase (decrease) in Fund............................ (2,725,891) $ (39,923,222) 9,224,343 $ 156,406,489
========== ============= =========== =============
</TABLE>
- ---------------------
* For Class A, C and D shares, for the period July 28, 1997 (issue date) through
May 31, 1998.
6. 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, 1998 aggregated
$1,032,646,536 and $1,051,922,418, respectively.
For the six months ended November 30, 1998, the Fund incurred $60,123 in
brokerage commissions with DWR for portfolio transactions executed on behalf of
the Fund. At November 30, 1998, the Fund's
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER MID-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS November 30, 1998 (unaudited) continued
receivable for investments sold and payable for investments purchased included
unsettled trades with DWR of $791,051 and $3,212,876, respectively.
For the six months ended November 30, 1998, the Fund incurred $202,845 in
brokerage commissions with Morgan Stanley & Co., Inc., an affiliate of the
Investment Manager and Distributor, for portfolio transactions executed on
behalf of the Fund.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At November 30, 1998, the Fund had
transfer agent fees and expenses payable of approximately $1,100.
14
<PAGE> 15
MORGAN STANLEY 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 SIX FOR THE YEAR ENDED MAY 31 SEPTEMBER 29, 1994*
MONTHS ENDED ------------------------------ THROUGH
NOVEMBER 30, 1998++ 1998**++ 1997 1996 MAY 31, 1995
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA
Net asset value, beginning of period.......... $17.17 $14.76 $15.11 $10.81 $10.00
------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment loss.......................... (0.13) (0.22) (0.13) (0.10) (0.01)
Net realized and unrealized gain (loss)...... (1.54) 3.79 0.94 5.60 0.84
------ ------ ------ ------ ------
Total income (loss) from investment
operations................................... (1.67) 3.57 0.81 5.50 0.83
------ ------ ------ ------ ------
Less distributions from net realized gain..... -- (1.16) (1.16) (1.20) (0.02)
------ ------ ------ ------ ------
Net asset value, end of period................ $15.50 $17.17 $14.76 $15.11 $10.81
====== ====== ====== ====== ======
TOTAL RETURN+................................. (9.73)%(1) 24.68% 6.01% 53.02% 8.26 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses...................................... 1.96 %(2)(3) 1.93% 1.99% 2.05% 2.21 %(2)
Net investment loss........................... (1.61)%(2)(3) (1.31)% (1.06)% (1.05)% (0.16)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands....... $529,656 $635,816 $418,752 $309,272 $115,126
Portfolio turnover rate....................... 188 %(1) 169% 209% 328% 199 %(1)
</TABLE>
- ---------------------
* Commencement of operations.
** Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER MID-CAP GROWTH FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 28, 1997*
MONTHS ENDED THROUGH
NOVEMBER 30, 1998 MAY 31, 1998
- ----------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA
Net asset value, beginning of period........................ $17.29 $16.43
------ ------
Income (loss) from investment operations:
Net investment loss........................................ (0.07) (0.10)
Net realized and unrealized gain (loss).................... (1.56) 2.12
------ ------
Total income (loss) from investment operations.............. (1.63) 2.02
------ ------
Less distributions from net realized gain................... -- (1.16)
------ ------
Net asset value, end of period.............................. $15.66 $17.29
====== ======
TOTAL RETURN+............................................... (9.37)%(1) 12.77%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.21 %(2)(3) 1.19 %(2)
Net investment loss......................................... (0.86)%(2)(3) (0.70)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $3,404 $2,876
Portfolio turnover rate..................................... 188 % 169 %
CLASS C SHARES++
SELECTED PER SHARE DATA
Net asset value, beginning of period........................ $17.17 $16.43
------ ------
Income (loss) from investment operations:
Net investment loss........................................ (0.13) (0.20)
Net realized and unrealized gain (loss).................... (1.54) 2.10
------ ------
Total income (loss) from investment operations.............. (1.67) 1.90
------ ------
Less distributions from net realized gain................... -- (1.16)
------ ------
Net asset value, end of period.............................. $15.50 $17.17
====== ======
TOTAL RETURN+............................................... (9.73)%(1) 12.01%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.96 %(2)(3) 1.94 %(2)
Net investment loss......................................... (1.61)%(2)(3) (1.40)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $6,328 $5,802
Portfolio turnover rate..................................... 188 % 169 %
</TABLE>
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE> 17
MORGAN STANLEY DEAN WITTER MID-CAP GROWTH FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 28, 1997*
MONTHS ENDED THROUGH
NOVEMBER 30, 1998 MAY 31, 1998
- ----------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA
Net asset value, beginning of period........................ $17.31 $16.43
------ ------
Income (loss) from investment operations:
Net investment loss........................................ (0.05) (0.06)
Net realized and unrealized gain (loss).................... (1.58) 2.10
------ ------
Total income (loss) from investment operations.............. (1.63) 2.04
------ ------
Less distributions from net realized gain................... -- (1.16)
------ ------
Net asset value, end of period.............................. $15.68 $17.31
====== ======
TOTAL RETURN+............................................... (9.47)%(1) 12.89%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.96 %(2)(3) 0.93 %(2)
Net investment loss......................................... (0.61)%(2)(3) (0.41)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $1,159 $1,081
Portfolio turnover rate..................................... 188 % 169 %
</TABLE>
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE> 18
(This Page Intentionally Left Blank)
<PAGE> 19
(This Page Intentionally Left Blank)
<PAGE> 20
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
Peter Hermann
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
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.
MORGAN STANLEY
DEAN WITTER
MID-CAP
GROWTH FUND
[MORGAN STANLEY GRAPHIC]
SEMIANNUAL REPORT
NOVEMBER 30, 1998
