<PAGE> 1
DEAN WITTER BALANCED GROWTH FUND Two World Trade Center, New York, New York
10048
LETTER TO THE SHAREHOLDERS July 31, 1997
DEAR SHAREHOLDER:
The economy started 1997 off nicely with employment expanding, income climbing
and consumer confidence rising. Concern over inflation, however, was heightened
when the Federal Reserve Board chairman hinted that a preemptive move against
rising pressure on prices might be necessary. This concern permeated the bond
markets during January and February, resulting in lackluster performance.
As anticipated, the central bank voted to raise the federal-funds rate by 25
basis points, at its March 25, 1997, meeting. Although this move initially sent
stocks and bonds lower, many economists applauded the Fed's action, which was
viewed as a strike against any increase in inflation before it could occur, thus
prolonging the current economic expansion. By the end of March, the 30-year U.S.
Treasury bond rose above the important 7 percent level for the first time since
September 1996.
While it first appeared as if the Federal Reserve was poised for a number of
further rate increases, a slight cooling of economic data and subdued inflation
during the second quarter, as well as progress toward a balanced budget
agreement, have argued against a quick succession of tightening moves. As a
result, interest rates actually declined during the second quarter of 1997.
Although the current inflation environment remains favorable, members of the
Federal Open Market Committee have voiced concerns regarding the continuing
strength in employment and the probable rise of inflationary pressures in the
near future.
PERFORMANCE AND PORTFOLIO
As of July 28, 1997, the Fund began offering four classes of shares: A, B, C and
D, each with its own sales charge and distribution fee structure. Fund shares
held prior to July 28 (other than shares which were acquired in exchange for
shares of Dean Witter Funds offered with a front-end sales charge or a
contingent deferred sales charge (CDSC) and shares acquired through the
reinvestment of dividends and distributions) have
<PAGE> 2
DEAN WITTER BALANCED GROWTH FUND
LETTER TO THE SHAREHOLDERS July 31, 1997, continued
been designated Class C shares. Shares held prior to July 28, 1997, which were
acquired in exchange for shares of a Dean Witter Fund sold with a front-end
sales charge, including shares acquired through the reinvestment of dividends
and distributions, have been designated Class A shares, and shares held prior to
July 28, 1997, which were acquired in exchange for shares of Dean Witter Funds
sold with a CDSC, including shares acquired through the reinvestment of
dividends and distributions, have been designated Class B shares. A revised
prospectus, which includes complete details regarding the Fund's conversion to
multiple classes of shares, was mailed to shareholders in mid-summer.
For the six-month period ended July 31, 1997, the Fund's Class C shares produced
a total return of 16.68 percent compared to 22.50 percent for the Standard &
Poor's 500 Composite Stock Price Index (S&P 500), 5.76 percent for the Lehman
Brothers Government/Corporate Bond Index and 14.03 percent for the Lipper
Balanced Funds Index. The Fund has performed particularly well when compared to
its Lipper peer group: For the one-year period ended July 31, 1997, the Fund is
in the top 32 percent of the Lipper Balanced Funds category and since inception
(March 28, 1995), it is in the top 21 percent. During the period under review,
the Fund's net assets grew from $119.4 million to $172.3 million.
The Fund's asset mix during the period was 65 percent equities and 35 percent
fixed income. In the equity portion of the portfolio, two positions were
initiated -- Unicom Corp and Gallaher Group PLC -- and one -- Pacific Gas &
Electric -- eliminated.
The fixed-income portion of the Fund was invested as follows: 72 percent
mortgage-backed securities, 19 percent U.S. Treasuries, 6 percent U.S. agency
obligations and 3 percent money market instruments. During the period under
review, as cash flows permitted we purchased current coupon mortgages at
attractive prices, enhancing the Fund's prospects for higher total returns.
During this time, mortgage-backed securities continued to outperform
comparable-maturity treasuries.
LOOKING AHEAD
We believe that the current environment of low inflation combined with strong
corporate profits should continue for the foreseeable future and will provide a
favorable environment for the Fund. We appreciate your ongoing support of Dean
Witter Balanced 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> 3
DEAN WITTER BALANCED GROWTH FUND
RESULTS OF SPECIAL MEETING (unaudited)
* * *
On May 21, 1997, a special meeting of shareholders of Dean Witter Balanced
Growth Fund was held for the purpose of voting on four separate matters, the
results of which are as follows:
(1) APPROVAL OF A NEW INVESTMENT MANAGEMENT AGREEMENT BETWEEN THE FUND AND DEAN
WITTER INTERCAPITAL INC., IN CONNECTION WITH THE MERGER OF MORGAN STANLEY
GROUP INC. WITH DEAN WITTER, DISCOVER & CO.:
<TABLE>
<S> <C>
For..................................................................... 4,703,012
Against................................................................. 183,166
Abstain................................................................. 626,957
</TABLE>
(2) ELECTION OF TRUSTEES:
<TABLE>
<S> <C> <C> <C> <C> <C>
Michael Bozic John R. Haire Michael E. Nugent
For................... 5,081,682 For................... 5,083,609 For................... 5,112,974
Withheld.............. 431,453 Withheld.............. 429,526 Withheld.............. 400,161
Charles A. Fiumefreddo Wayne E. Hedien Philip J. Purcell
For................... 5,080,981 For................... 5,111,693 For................... 5,087,321
Withheld.............. 432,154 Withheld.............. 401,442 Withheld.............. 425,814
Edwin J. Garn Dr. Manuel H. Johnson John L. Schroeder
For................... 5,111,136 For................... 5,112,742 For................... 5,110,102
Withheld.............. 401,999 Withheld.............. 400,393 Withheld.............. 403,033
</TABLE>
(3) APPROVAL OF A NEW INVESTMENT POLICY WITH RESPECT TO INVESTMENTS IN CERTAIN
OTHER INVESTMENT COMPANIES:
<TABLE>
<S> <C>
For..................................................................... 4,585,824
Against................................................................. 198,642
Abstain................................................................. 728,669
</TABLE>
(4) RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP AS THE FUND'S
INDEPENDENT ACCOUNTANTS:
<TABLE>
<S> <C>
For..................................................................... 4,878,597
Against................................................................. 64,780
Abstain................................................................. 569,758
</TABLE>
<PAGE> 4
DEAN WITTER BALANCED GROWTH FUND
PORTFOLIO OF INVESTMENTS July 31, 1997 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (65.0%)
Aerospace & Defense (2.5%)
77,000 Raytheon Co. ................ $ 4,302,375
------------
Aluminum (2.6%)
51,000 Aluminum Co. of America...... 4,513,500
------------
Automotive (5.1%)
103,500 Ford Motor Co. .............. 4,230,563
74,800 General Motors Corp. ........ 4,628,249
------------
8,858,812
------------
Banking (5.3%)
82,000 Banc One Corp. .............. 4,602,250
60,400 BankAmerica Corp. ........... 4,560,200
------------
9,162,450
------------
Beverages - Soft Drinks
(2.7%)
118,000 PepsiCo Inc. ................ 4,520,875
------------
Chemicals (2.6%)
67,400 Du Pont (E.I.) de Nemours &
Co., Inc. .................. 4,511,588
------------
Computer Equipment (2.5%)
41,000 International Business
Machines Corp. ............. 4,335,750
------------
Conglomerates (2.5%)
92,000 Tenneco, Inc. ............... 4,289,500
------------
Drugs & Healthcare (2.5%)
55,000 Bristol-Myers Squibb Co. .... 4,314,063
------------
Electric - Major (2.5%)
60,500 General Electric Co. ........ 4,246,344
------------
Foods (2.6%)
64,000 ConAgra, Inc. ............... 4,500,000
------------
Machinery - Agricultural
(2.5%)
77,000 Deere & Co. ................. 4,379,375
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------
<C> <S> <C>
Natural Gas (2.6%)
117,000 Enron Corp. ................. $ 4,438,688
------------
Oil - Domestic (2.7%)
62,500 Atlantic Richfield Co. ...... 4,675,781
------------
Paper & Forest Products
(2.7%)
74,000 Weyerhaeuser Co. ............ 4,606,500
------------
Railroads (2.8%)
77,000 CSX Corp. ................... 4,754,750
------------
Retail (2.7%)
72,000 Dayton-Hudson Corp. ......... 4,653,000
------------
Retail - Department Stores (2.7%)
82,000 May Department Stores Co. ... 4,581,750
------------
Steel (2.6%)
127,000 Timken Co. .................. 4,468,812
------------
Telecommunications (2.6%)
91,500 Sprint Corp. ................ 4,529,250
------------
Tobacco (2.4%)
77,500 Fortune Brands, Inc. ........ 2,746,406
77,500 Gallaher Group PLC (ADR)
(United Kingdom)*........... 1,390,156
------------
4,136,562
------------
Utilities - Electric (5.3%)
130,000 General Public Utilities
Corp. ...................... 4,509,375
206,000 Unicom Corp. ................ 4,673,625
------------
9,183,000
------------
TOTAL COMMON STOCKS
(Identified Cost $83,487,775)... 111,962,725
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 5
DEAN WITTER BALANCED GROWTH FUND
PORTFOLIO OF INVESTMENTS July 31, 1997 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT & AGENCY
OBLIGATIONS (37.5%)
$ 3,000 Federal Home Loan Banks
0.00% due 07/02/12........... $ 958,230
Federal National Mortgage
Assoc.
1,839 6.00% due
01/01/11 - 03/01/11......... 1,800,475
933 6.50% due
08/01/10 - 03/01/11......... 928,100
3,000 6.50%**..................... 2,984,064
11,744 7.00% due
03/01/12 - 06/01/27......... 11,792,149
1,000 7.00%**..................... 998,125
7,736 7.50% due
06/01/25 - 05/01/27......... 7,861,581
2,000 7.50%**..................... 2,032,500
839 8.00% due
05/01/24 - 05/01/25......... 864,868
Government National Mortgage
Assoc.
3,748 7.00% due
07/15/23 - 01/15/27......... 3,748,668
1,000 7.00%**..................... 997,500
9,775 7.50% due
06/15/24 - 06/15/27......... 9,946,426
3,817 8.00% due
04/15/26 - 08/15/26......... 3,941,413
5,500 Resolution Funding Corp.
Coupon Strips
0.00% due
04/15/04 - 01/15/08......... 3,235,885
1,500 U.S. Treasury Coupon Strip
0.00% due 11/15/04.......... 970,170
4,000 U.S. Treasury Strip
0.00% due
11/15/06 - 02/15/07......... 2,681,010
U.S. Treasury Notes
1,000 5.875% due 06/30/00......... 1,002,650
5,000 6.00% due 08/31/97.......... 5,000,200
1,000 6.25% due 01/31/02.......... 1,014,000
1,000 6.375% due 03/31/01......... 1,017,140
500 6.875% due 03/31/00......... 513,425
400 7.125% due 02/29/00......... 412,840
------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Identified Cost
$63,785,995)................ 64,701,419
------------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT (1.0%)
REPURCHASE AGREEMENT
$ 1,667 The Bank of New York 5.75%
due 08/01/97 (dated
07/31/97; proceeds
$1,667,216) (a)
(Identified Cost
$1,666,950)................. $ 1,666,950
------------
178,331,094
TOTAL INVESTMENTS
(Identified Cost $148,940,721)
(b)................................ 103.5%
LIABILITIES IN EXCESS OF
OTHER ASSETS...................... (3.5) (6,008,630)
----- ------------
NET ASSETS......................... 100.0% $172,322,464
===== ============
</TABLE>
- ---------------------
<TABLE>
<C> <S>
ADR American Depository Receipt.
* Non-income producing security.
** Security was purchased on a forward commitment
basis with an approximate principal amount and no
definite maturity date; the actual principal
amount and maturity date will be determined upon
settlement.
(a) Collateralized by $391,631 Federal Home Loan
Banks 6.685% due 08/05/97 valued at $399,136,
$176,793 U.S. Treasury Bill 0.00% due 06/25/98
valued at $168,521, $500,000 U.S. Treasury Note
7.875% due 11/15/04 valued at $562,067 and
$550,000 U.S. Treasury Note 6.25% due 08/31/00
valued at $570,565.
(b) The aggregate cost for federal income tax
purposes approximates identified cost. The
aggregate gross unrealized appreciation is
$29,521,298 and the aggregate gross unrealized
depreciation is $130,925, resulting in net
unrealized appreciation of $29,390,373.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
DEAN WITTER BALANCED GROWTH FUND
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1997 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $148,940,721).......... $178,331,094
Receivable for:
Investments sold...................... 882,039
Shares of beneficial interest sold.... 658,260
Interest.............................. 440,497
Dividends............................. 258,750
Deferred organizational expenses......... 90,273
Prepaid expenses and other assets........ 63,058
------------
TOTAL ASSETS.......................... 180,723,971
------------
LIABILITIES:
Payable for:
Investments purchased................. 7,990,483
Shares of beneficial interest
repurchased.......................... 144,967
Plan of distribution fee.............. 140,115
Investment management fee............. 84,074
Accrued expenses and other payables...... 41,868
------------
TOTAL LIABILITIES..................... 8,401,507
------------
NET ASSETS............................ $172,322,464
============
COMPOSITION OF NET ASSETS:
Paid-in-capital.......................... $139,897,958
Net unrealized appreciation.............. 29,390,373
Accumulated undistributed net investment
income.................................. 424,929
Accumulated undistributed net realized
gain.................................... 2,609,204
------------
NET ASSETS............................ $172,322,464
============
CLASS A SHARES:
Net Assets............................... $195,923
Shares Outstanding (unlimited authorized,
$.01 par value)......................... 13,122
$14.93
NET ASSET VALUE PER SHARE............. ============
MAXIMUM OFFERING PRICE PER SHARE
(net asset value plus 5.54% of net
asset value)......................... $15.76
CLASS B SHARES:
Net Assets............................... $64,147,486
Shares Outstanding (unlimited authorized,
$.01 par value)......................... 4,296,460
$14.93
NET ASSET VALUE PER SHARE............. ============
CLASS C SHARES:
Net Assets............................... $107,968,874
Shares Outstanding (unlimited authorized,
$.01 par value)......................... 7,234,358
$14.92
NET ASSET VALUE PER SHARE............. ============
CLASS D SHARES:
Net Assets............................... $10,181
Shares Outstanding (unlimited authorized,
$.01 par value)......................... 682
$14.93
NET ASSET VALUE PER SHARE............. ============
STATEMENT OF OPERATIONS
For the six months ended July 31, 1997*
(unaudited)
NET INVESTMENT INCOME:
INCOME
Interest................................. $ 1,697,905
Dividends................................ 1,183,848
------------
TOTAL INCOME.......................... 2,881,753
------------
EXPENSES
Plan of distribution fee (Class B
shares)................................. 3,507
Plan of distribution fee (Class C
shares)................................. 672,941
Investment management fee................ 410,981
Transfer agent fees and expenses......... 60,554
Registration fees........................ 52,723
Professional fees........................ 33,108
Shareholder reports and notices.......... 21,178
Organizational expenses.................. 16,846
Custodian fees........................... 8,787
Trustees' fees and expenses.............. 6,697
Other.................................... 1,992
------------
TOTAL EXPENSES........................ 1,289,314
------------
NET INVESTMENT INCOME................. 1,592,439
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................ 2,627,502
Net change in unrealized appreciation.... 18,806,089
------------
NET GAIN.............................. 21,433,591
------------
NET INCREASE............................. $ 23,026,030
============
</TABLE>
- ---------------------
* Class A, Class B and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 7
DEAN WITTER BALANCED GROWTH FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX
MONTHS ENDED FOR THE YEAR
JULY 31, ENDED
1997* JANUARY 31, 1997
- -------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................. $ 1,592,439 $ 1,873,391
Net realized gain..................................... 2,627,502 2,814,299
Net change in unrealized appreciation................. 18,806,089 6,423,885
------------ ------------
NET INCREASE...................................... 23,026,030 11,111,575
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class C shares...................................... (1,425,847) (1,821,421)
Net realized gain
Class C shares...................................... (1,089,898) (1,797,082)
------------ ------------
TOTAL DIVIDENDS AND DISTRIBUTIONS................. (2,515,745) (3,618,503)
------------ ------------
Net increase from transactions in shares of beneficial
interest.............................................. 32,396,192 64,326,927
------------ ------------
NET INCREASE...................................... 52,906,477 71,819,999
NET ASSETS:
Beginning of period................................... 119,415,987 47,595,988
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$424,929 and $258,337, respectively).............. $172,322,464 $119,415,987
============ ============
</TABLE>
- ---------------------
* Class A, Class B and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
DEAN WITTER BALANCED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS July 31, 1997 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Balanced 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 capital growth
with reasonable current income. The Fund seeks to achieve its objective by
investing in common stock of companies which have a record of paying dividends
and have the potential for increasing dividends, securities convertible into
common stock and in investment grade fixed income securities. The Fund was
organized as a Massachusetts business trust on November 23, 1994 and the Fund
commenced operations on March 28, 1995. On July 28, 1997, the Fund commenced
offering three additional classes of shares, with the then current shares, other
than shares which were acquired in exchange for shares of Funds for which Dean
Witter InterCapital Inc. serves as Investment Manager ("Dean Witter Funds")
offered with either a front-end sales charge or a contingent deferred sales
charge ("CDSC") and shares acquired through reinvestment of dividends and
distributions thereon, have been designated as Class C shares. Shares held prior
to July 28, 1997 which were acquired in exchange for shares of a Dean Witter
Fund sold with a front-end sales charge, including shares acquired through
reinvestment of dividends and distributions thereon, have been designated Class
A shares and shares held prior to July 28, 1997 which were acquired in exchange
for shares of a Dean Witter Fund sold with a CDSC, including shares acquired
through reinvestment of dividends and distributions thereon, have been
designated 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, 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 securities are
valued on
<PAGE> 9
DEAN WITTER BALANCED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS July 31, 1997 (unaudited) continued
the exchange designated as the primary market pursuant to procedures adopted by
the Trustees); (2) all other portfolio securities for which over-the-counter
market quotations are readily available are valued at the latest available bid
price prior to the time of valuation; (3) when market quotations are not readily
available, including circumstances under which it is determined by Dean Witter
InterCapital, 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); (4) certain portfolio
securities may be valued by an outside pricing service approved by the Trustees.
The pricing service may utilize a matrix system incorporating security quality,
maturity and coupon as the evaluation model parameters, and/or research and
evaluations by its staff, including review of broker-dealer market price
quotations, if available, in determining what it believes is the fair valuation
of the securities valued by such pricing service; and (5) short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
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.
Discounts are accreted over the life of the respective securities. Dividend
income and other distributions are recorded on the ex-dividend date. Interest
income is accrued daily.
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 the income is earned or expenses and
realized and unrealized gains and losses are incurred. Distribution fees are
charged directly to the respective class.
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
<PAGE> 10
DEAN WITTER BALANCED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS July 31, 1997 (unaudited) continued
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 $171,000 of which
approximately $141,000 have been reimbursed. 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 0.60% 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.
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. 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 -- 0.25% of the average
daily net assets of Class A; (ii) Class B -- 1.0% of the average daily net
assets of Class B; and (iii) Class C -- 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,
<PAGE> 11
DEAN WITTER BALANCED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS July 31, 1997 (unaudited) continued
amounts paid under the Plan are paid to the Distributor for 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, the account executives of Dean
Witter Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and
Distributor, and others who engage in or support distribution of the 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 these shares to other than current shareholders; and
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 DWR 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.
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 account executives may be reimbursed in the subsequent
calendar year. For the period ended July 31, 1997, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
0.99%, respectively.
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 July 31, 1997 aggregated
$51,938,659 and $12,571,569 respectively. Included in the aforementioned are
purchases and sales of U.S. Government securities in the amount of $19,716,065
and $3,602,290, respectively.
For the six months ended July 31, 1997, the Fund incurred brokerage commissions
of $18,310 with DWR for portfolio transactions executed on behalf of the Fund.
At July 31, 1997, the Fund's receivable
<PAGE> 12
DEAN WITTER BALANCED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS July 31, 1997 (unaudited) continued
for investments sold and payable for investments purchased included unsettled
trades with DWR of $325,278 and $758,652, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At July 31, 1997 the Fund had
transfer agent fees and expenses payable of approximately $675.
5. SHARES OF BENEFICIAL INTEREST +
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JULY 31, 1997 FOR THE YEAR
--------------------------- ENDED
JANUARY 31, 1997
(unaudited) ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES*
Sold.......................................................... 760 $ 11,154 -- --
---------- ------------ ---------- ------------
CLASS B SHARES*
Sold.......................................................... 12,112 179,703 -- --
Redeemed...................................................... (46,268) (684,916) -- --
---------- ------------ ---------- ------------
Net decrease - Class B........................................ (34,156) (505,213) -- --
---------- ------------ ---------- ------------
CLASS C SHARES
Sold.......................................................... 3,645,059 48,887,333 8,783,556 $108,772,818
Reinvestment of dividends and distributions................... 161,267 2,224,442 258,244 3,243,279
Redeemed...................................................... (1,408,935) (18,231,540) (3,853,609) (47,689,170)
---------- ------------ ---------- ------------
Net increase - Class C........................................ 2,397,391 32,880,235 5,188,191 64,326,927
---------- ------------ ---------- ------------
CLASS D SHARES*
Sold.......................................................... 682 10,016 -- --
---------- ------------ ---------- ------------
Net increase in Fund.......................................... 2,364,677 $ 32,396,192 5,188,191 $ 64,326,927
========== ============ ========== ============
</TABLE>
- ---------------------
+ On July 28, 1997, 12,362 shares representing $181,608 were transferred to
Class A and 4,330,616 shares representing $63,616,743 were transferred to
Class B.
* For the period July 28, 1997 (issue date) through July 31, 1997.
<PAGE> 13
DEAN WITTER BALANCED GROWTH FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED FOR THE YEAR MARCH 28, 1995*
JULY 31, ENDED THROUGH
1997*** JANUARY 31, 1997 JANUARY 31, 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................................... $ 13.01 $ 11.92 $ 10.00
-------- -------- --------
Net investment income.................................................. 0.15 0.25 0.31
Net realized and unrealized gain....................................... 2.00 1.33 1.88
-------- -------- --------
Total from investment operations....................................... 2.15 1.58 2.19
-------- -------- --------
Less dividends and distributions from:
Net investment income............................................... (0.14) (0.27) (0.27)**
Net realized gain................................................... (0.10) (0.22) --
-------- -------- --------
Total dividends and distributions...................................... (0.24) (0.49) (0.27)
-------- -------- --------
Net asset value, end of period......................................... $ 14.92 $ 13.01 $ 11.92
======== ======== ========
TOTAL INVESTMENT RETURN+............................................... 16.68%(1) 13.44% 22.13%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses............................................................... 1.88%(2) 1.92%(3) --%(2)(3)
Net investment income.................................................. 2.28%(2) 2.31%(3) 4.25%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands................................ $107,969 $119,416 $47,596
Portfolio turnover rate................................................ 9%(1) 16% 2%(1)
Average commission rate paid........................................... $0.0548 $0.0516 --
</TABLE>
- ---------------------
* Commencement of operations.
** Includes a capital gain distribution of $0.004.
***Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date, other than shares which were acquired in
exchange for shares of Funds for which Dean Witter InterCapital Inc. serves
as Investment Manager ("Dean Witter Funds") offered with either a front-end
sales charge or a contingent deferred sales charge ("CDSC") and shares
acquired through reinvestment of dividends and distributions thereon, have
been designated Class C shares. Shares held prior to July 28, 1997 which were
acquired in exchange for shares of a Dean Witter Fund sold with a front-end
sales charge, including shares acquired through reinvestment of dividends and
distributions thereon, have been designated Class A shares and shares held
prior to July 28, 1997 which were acquired in exchange for shares of a Dean
Witter Fund sold with a CDSC, including shares acquired through reinvestment
of dividends and distributions thereon, have been designated Class B shares.
+ 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)If the Investment Manager had not reimbursed expenses and waived the
management fee, the annualized expense and net investment income ratios would
have been 2.42% and 1.83%, respectively, for the period ended January 31,
1996, and 1.95% and 2.28%, respectively, for the year ended January 31, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 14
DEAN WITTER BALANCED GROWTH FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
JULY 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................................................................... $ 14.69
--------
Net investment income.......................................................................................... 0.01
Net realized and unrealized gain............................................................................... 0.23
--------
Total from investment operations............................................................................... 0.24
--------
Net asset value, end of period................................................................................. $ 14.93
========
TOTAL INVESTMENT RETURN+....................................................................................... 1.63%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses....................................................................................................... 1.03%(2)
Net investment income.......................................................................................... 7.70%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........................................................................ $196
Portfolio turnover rate........................................................................................ 9%(1)
Average commission rate paid................................................................................... $0.0548
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................................................................... $ 14.69
--------
Net investment income.......................................................................................... 0.01
Net realized and unrealized gain............................................................................... 0.23
--------
Total from investment operations............................................................................... 0.24
--------
Net asset value, end of period................................................................................. $ 14.93
========
TOTAL INVESTMENT RETURN+....................................................................................... 1.63%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses....................................................................................................... 1.78%(2)
Net investment income.......................................................................................... 6.93%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........................................................................ $64,147
Portfolio turnover rate........................................................................................ 9%(1)
Average commission rate paid................................................................................... $0.0548
</TABLE>
- ---------------------
* The date the shares were first issued. Shareholders who held shares of the
Fund prior to July 28, 1997 (the date the Fund converted to a multiple class
share structure) should refer to the Financial Highlights of Class C to
obtain the historical per share data and ratio information of their shares.
+ 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.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 15
DEAN WITTER BALANCED GROWTH FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
JULY 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................................................................... $ 14.69
--------
Net investment income.......................................................................................... 0.01
Net realized and unrealized gain............................................................................... 0.23
--------
Total from investment operations............................................................................... 0.24
--------
Net asset value, end of period................................................................................. $ 14.93
========
TOTAL INVESTMENT RETURN+....................................................................................... 1.63%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses....................................................................................................... 0.78%(2)
Net investment income.......................................................................................... 7.94%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........................................................................ $10
Portfolio turnover rate........................................................................................ 9%(1)
Average commission rate paid................................................................................... $0.0548
</TABLE>
- ---------------------
* The date the shares were first issued.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 16
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
Paul D. Vance
Vice President
Rajesh K. Gupta
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust FSB
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
BALANCED
GROWTH FUND
[PHOTO]
Semiannual Report
July 31, 1997
