<PAGE>
MORGAN STANLEY DEAN WITTER BALANCED GROWTH FUND
Two World Trade Center, New York, New York 10048
LETTER TO THE SHAREHOLDERS January 31, 1999
DEAR SHAREHOLDER:
We are pleased to present the annual report on the operations of Morgan Stanley
Dean Witter Balanced Growth Fund for the fiscal year ending January 31, 1999.
At the end of the period under review, the Fund's net assets totaled more than
$308 million, up from $183 million at the start
of the period. The asset mix of the Fund is 64 percent equities and
36 percent fixed-income securities.
MARKET OVERVIEW
The economy maintained a healthy expansion over the course of the past 12
months as employment grew, income climbed and consumer confidence soared.
Despite strong economic growth, however, inflation did not materialize, due
largely to the continued turmoil in the Asian and emerging market economies.
Accordingly, the Federal Reserve left interest rates unchanged until late
September. At that time, in order to ensure continued U.S. economic growth,
members of the Federal Open Market Committee voted to reduce short-term rates
and did so again in mid- October and mid-November.
The continued worldwide economic turmoil in the less developed countries caused
interest-rate spreads to widen between U.S. government securities and corporate
obligations, in some cases to levels not seen in recent memory. This
development provided an opportunity for the Fund to make advantageous
investments in U.S. government agency obligations as maturing investments and
new cash inflows permitted.
PERFORMANCE AND PORTFOLIO
For the period under review, Morgan Stanley Dean Witter Balanced Growth Fund's
Class C shares produced a total return of 16.23 percent, compared to 16.10
percent for the Lipper Balanced Funds Index, 32.49 percent for the Standard &
Poor's 500 Composite Stock Price Index (S&P 500) and 8.72 percent for the
Lehman Brothers Government/Corporate Bond Index. For the same period the Fund's
Class A, B and D shares
<PAGE>
MORGAN STANLEY DEAN WITTER BALANCED GROWTH FUND
LETTER TO THE SHAREHOLDERS January 31, 1999, continued
earned 17.02 percent, 16.09 percent and 17.28 percent, respectively. The
performance of the Fund's four share classes varies because of differing
expenses. Since its inception on March 28, 1995, the Fund's
Class C shares have produced a cumulative total return of 92.94 percent and an
average annual total return of 18.63 percent. The accompanying chart compares
the performance of the Fund's Class C shares versus the Lipper, S&P 500 and
Lehman indexes.
In March 1998 another balanced fund, TCW/DW Balanced Fund, was merged into this
fund. A number of the TCW/DW Fund holdings were liquidated; however, 19 of the
portfolio's equity positions were retained. Two new common stock positions were
added to the equity portion of the portfolio during the period: Procter &
Gamble and AT&T. Additionally, Associates First Capital, which was originally a
spin-off from Ford Motor Co., was built into a full position. During the same
period the Fund liquidated the following holdings: Sprint, Fortune Brands,
Gallaher Group plc ADRs and Tricon Global Restaurants.
As of January 31, 1999, the fixed-income assets of Balanced Growth were
invested as follows: 60.1 percent in mortgage-backed securities, 21.7 percent
in U.S. agency obligations, and 10.6 percent in U.S. Treasuries and 7.6 percent
in corporate obligations.
LOOKING AHEAD
We believe that the deflationary trend of Asian and emerging-market economies
is likely to help keep inflation in check in the United States well into 1999.
It is possible that the central bank will lower interest rates again in 1999 as
continued world economic turmoil curtails the economic growth of our Latin
American neighbors. However, should our economy show signs of inordinately
strong growth coupled with an unacceptably high level of inflation, the Federal
Reserve might feel the need to reassess its stance on monetary policy.
Accordingly, adjustments to the maturity structure and composition of the Fund
will be made as conditions warrant and attractive opportunities become
available.
We appreciate your ongoing support of Morgan Stanley 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
2
<PAGE>
MORGAN STANLEY DEAN WITTER BALANCED GROWTH FUND
FUND PERFORMANCE January 31, 1999
[GRAPHIC OMITTED]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. PERFORMANCE FOR CLASS A,
CLASS B, AND CLASS D SHARES WILL VARY FROM THE PERFORMANCE OF CLASS C SHARES
SHOWN ABOVE DUE TO DIFFERENCES IN SALES CHARGES AND EXPENSES.
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C SHARES*
- --------------------------------------------------------
PERIOD ENDED 1/31/99
- ----------------------
<S> <C> <C>
1 Year 16.23%(1) 15.23%(2)
Since Inception 18.63%(1) 18.63%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES++
- -------------------------------------------------------
PERIOD ENDED 1/31/99
- ---------------------
<S> <C> <C>
1 Year 16.09%(1) 11.09%(2)
Since Inception 13.55%(1) 11.05%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS A SHARES+
- --------------------------------------------------------
PERIOD ENDED 1/31/99
- ---------------------
<S> <C> <C>
1 Year 17.02%(1) 10.88%(2)
Since Inception 14.44%(1) 10.43%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARES++
- ---------------------------------------
PERIOD ENDED 1/31/99
- ---------------------
<S> <C>
1 Year 17.28%(1)
Since Inception 14.68%(1)
</TABLE>
---------------
(1) Figure shown assumes reinvestment of all distributions and does not
reflect the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction
of the maximum applicable sales charge. See the Fund's current
prospectus for complete details on fees and sales charges.
(3) Closing value assuming a complete redemption on January 31, 1999.
(4) The Standard and Poor's 500 Stock Index (S&P 500) is a broad-based index,
the performance of which is based on the average performance of 500
widely held common stocks. The Index does not include any expenses, fees or
charges. The Index is unmanaged and should not be considered an investment.
(5) The Lehman Brothers Government/Corporate Bond Index tracks the performance
of government and corporate obligations, including U.S.
government agency and U.S. treasury securities and corporate and yankee
bonds with maturates of one to ten years. The performance of the Index
does not include any expenses, fees or charges. The Index is unmanaged and
should not be considered an investment.
(6) The Lipper Balanced Funds Index is an equally-weighted performance index
of the largest qualifying funds (based on net assets) in the Lipper
Balanced Funds objective. The Index, which is adjusted for capital gains
distributions and income dividends, is unmanaged and should not be
considered an investment. There are currently 30 funds represented in this
index.
<PAGE>
* The maximum contingent deferred sales charge (CDSC) for Class C shares is
1% for shares redeemed within one year of purchase.
+ The maximum front-end sales charge for Class A is 5.25%.
++ The maximum CDSC for Class B is 5.0%. The CDSC declines to 0% after six
years.
++ Class D shares have no sales charge.
3
<PAGE>
MORGAN STANLEY DEAN WITTER BALANCED GROWTH FUND
PORTFOLIO OF INVESTMENTS January 31, 1999
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -----------
<S> <C> <C>
COMMON STOCKS (64.4%)
Aerospace (0.4%)
38,800 Boeing Co. .............................. $ 1,341,025
------------
Airlines (0.7%)
39,800 Delta Air Lines, Inc. ................... 2,171,587
------------
Aluminum (2.1%)
76,000 Alcoa Inc. .............................. 6,355,500
------------
Auto Parts: O.E.M. (0.4%)
20,400 Magna International Inc. (Class A)
(Canada) ................................ 1,211,250
------------
Banking (4.4%)
112,000 Bank One Corp. .......................... 5,866,000
93,000 BankAmerica Corp. ....................... 6,219,375
40,000 Wells Fargo & Co. ....................... 1,397,500
------------
13,482,875
------------
Beverages -- Non-Alcoholic (1.9%)
149,000 PepsiCo, Inc. ........................... 5,820,312
------------
Clothing/Shoe/Accessory Stores (4.0%)
100,000 Dayton Hudson Corp. ..................... 6,375,000
100,000 May Department Stores Co. ............... 6,037,500
------------
12,412,500
------------
Computer Hardware (1.9%)
32,000 International Business Machines
Corp. ................................... 5,864,000
------------
Construction/Agricultural
Equipment/Trucks (1.8%)
173,000 Deere & Co. ............................. 5,633,312
------------
Diversified Financial Services (2.0%)
143,000 Associates First Capital Corp.
(Class A) ............................... 5,800,437
6,500 Citigroup Inc. .......................... 364,406
------------
6,164,843
------------
Diversified Manufacturing (2.1%)
305,000 Timken Co. .............................. 6,614,688
------------
Electric Utilities (3.7%)
136,000 GPU, Inc. ............................... 5,797,000
160,000 Unicom Corp. ............................ 5,700,000
------------
11,497,000
------------
Electrical Products (0.3%)
16,000 Honeywell, Inc. ......................... 1,043,000
------------
Electronics (2.9%)
111,000 Raytheon Co. (Class B) .................. 6,209,063
52,700 Tandy Corp. ............................. 2,845,800
------------
9,054,863
------------
Finance Companies (0.7%)
31,400 Fannie Mae .............................. 2,288,275
------------
Financial Services (0.6%)
24,100 Merrill Lynch & Co., Inc. ............... 1,831,600
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- -----------
<S> <C> <C>
Forest Products (2.0%)
113,000 Weyerhaeuser Co. ........................ $ 6,116,125
------------
Insurance Brokers/Services (0.6%)
29,100 Marsh & McLennan Companies,
Inc. .................................... 1,829,663
------------
Integrated Oil Companies (1.9%)
102,000 Atlantic Richfield Co. .................. 5,852,250
------------
Major Chemicals (1.9%)
111,500 Du Pont (E.I.) de Nemours & Co.,
Inc. .................................... 5,707,406
------------
Major Pharmaceuticals (4.4%)
47,500 Bristol-Myers Squibb Co. ................ 6,088,906
15,100 Johnson & Johnson ....................... 1,283,500
31,800 Lilly (Eli) & Co. ....................... 2,979,263
44,100 Warner-Lambert Co. ...................... 3,183,469
------------
13,535,138
------------
Motor Vehicles (4.0%)
96,000 Ford Motor Co. .......................... 5,898,000
71,000 General Motors Corp. .................... 6,372,250
------------
12,270,250
------------
Multi-Sector Companies (4.0%)
61,000 General Electric Co. .................... 6,397,375
190,000 Tenneco, Inc. ........................... 5,866,250
------------
12,263,625
------------
Oil/Gas Transmission (2.1%)
97,000 Enron Corp. ............................. 6,402,000
------------
Packaged Goods/Cosmetics (2.0%)
67,000 Procter & Gamble Co. .................... 6,088,625
------------
Railroads (2.5%)
49,200 Burlington Northern Santa Fe
Corp. ................................... 1,703,550
150,000 CSX Corp. ............................... 6,037,500
------------
7,741,050
------------
Retail (1.7%)
88,200 Home Depot, Inc. (The) .................. 5,325,075
------------
Semiconductors (2.0%)
43,300 Intel Corp. ............................. 6,097,181
------------
Specialty Foods/Candy (1.9%)
184,000 ConAgra, Inc. ........................... 5,980,000
------------
Telecommunications (2.9%)
68,000 AT&T Corp. .............................. 6,171,000
23,400 Lucent Technologies Inc. ................ 2,633,963
------------
8,804,963
------------
Tobacco (0.6%)
40,000 Philip Morris Companies, Inc. ........... 1,880,000
------------
TOTAL COMMON STOCKS
(Identified Cost $155,969,847) .......... 198,679,981
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
MORGAN STANLEY DEAN WITTER BALANCED GROWTH FUND
PORTFOLIO OF INVESTMENTS January 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- --------------- ------------
<S> <C> <C>
CORPORATE BONDS (2.6%)
Airlines (0.1%)
$ 230 Northwest Corp.
7.625% due 10/15/99 ............. $ 233,613
------------
Banking (0.2%)
200 Ahmanson (H.F.) & Co.
8.25% due 10/01/02 .............. 215,786
300 Bank One Corp.
7.60% due 05/01/07 .............. 335,811
200 Citicorp
7.125% due 03/15/04 ............. 212,632
------------
764,229
------------
Beverages -- Non-Alcoholic (0.1%)
150 Coca-Cola Enterprises, Inc.
6.375% due 08/01/01 ............. 153,736
100 Coca-Cola Enterprises, Inc.
7.875% due 02/01/02 ............. 106,863
------------
260,599
------------
Diversified Financial Services (0.2%)
500 Associates Corp. NA
6.25% due 11/01/08 .............. 518,065
------------
Electric Utilities (0.2%)
200 Florida Power & Light Co.
7.05% due 12/01/26 .............. 205,192
200 Texas Utilities Electric Co.
7.875% due 04/01/24 ............. 216,058
200 Union Electric Co.
6.75% due 05/01/08 .............. 219,290
------------
640,540
------------
Electronics (0.1%)
250 Raytheon Co.
6.45% due 08/15/02 .............. 257,055
------------
Finance Companies (0.2%)
300 Abbey National PLC
(United Kingdom)
6.69% due 10/17/05 .............. 314,643
200 CIT Group, Inc.
6.125% due 12/15/00 ............. 202,216
150 Ford Motor Credit Corp.
8.20% due 02/15/02 .............. 161,361
------------
678,220
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- --------------- ------------
<S> <C> <C>
Financial Services (0.1%)
$ 200 Bear Stearns Companies, Inc.
5.75% due 02/15/01 .............. $ 200,104
100 Bear Stearns Companies, Inc.
6.75% due 12/15/07 .............. 102,951
------------
303,055
------------
Industrial Specialties (0.2%)
200 Caterpillar, Inc.
9.375% due 03/15/21 ............. 273,446
200 General American Transportation
Corp.
6.75% due 03/01/06 .............. 202,290
100 Lockheed Martin Corp.
7.25% due 05/15/06 .............. 108,230
100 Minnesota Mining &
Manufacturing Co.
6.375% due 02/15/28 ............. 105,130
100 Praxair, Inc.
6.75% due 03/01/03 .............. 102,189
------------
791,285
------------
Life Insurance (0.0%)
100 Hartford Life, Inc.
7.65% due 06/15/27 .............. 114,374
------------
Major Chemicals (0.2%)
500 Monsanto Co. -- 144A*
5.875% due 12/01/08 ............. 508,030
------------
Motor Vehicles (0.1%)
200 General Motors Corp.
8.10% due 06/15/24 .............. 228,280
------------
Multi-Sector Companies (0.1%)
150 General Electric Capital Corp.
8.85% due 04/01/05 .............. 176,850
------------
Oil/Gas Transmission (0.1%)
250 Sonat, Inc.
6.75% due 10/01/07 .............. 259,778
------------
Packaged Foods (0.1%)
150 Campbell Soup Co.
6.15% due 12/01/02 .............. 154,998
------------
Railroads (0.0%)
100 Norfolk Southern Corp.
7.35% due 05/15/07 .............. 110,921
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER BALANCED GROWTH FUND
PORTFOLIO OF INVESTMENTS January 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ---------------- -------------
<S> <C> <C>
Rental/Leasing Companies (0.1%)
$ 200 Comdisco, Inc.
6.50% due 04/30/99 ..................... $ 200,422
200 International Lease Finance Corp.
6.375% due 01/18/00 .................... 201,716
------------
402,138
------------
Retail (0.1%)
200 Wal-Mart Stores, Inc.
7.50% due 05/15/04 ..................... 220,552
------------
Telecommunications (0.4%)
200 MCI Communication Corp.
6.95% due 08/15/06 ..................... 215,402
700 MCI Worldcom Inc.
6.40% due 08/15/05 ..................... 730,926
500 U.S. West Capital Funding, Inc.
6.25% due 07/15/05 ..................... 521,130
------------
1,467,458
------------
TOTAL CORPORATE BONDS
(Identified Cost $7,803,278) ........... 8,090,040
------------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS (11.2%)
Fannie Mae
840 6.30% due 09/25/02 .................... 860,773
875 6.34% due 02/04/08 .................... 898,529
100 6.48% due 06/28/04 .................... 106,284
1,000 6.55% due 11/21/07 .................... 1,030,070
1,100 6.74% due 05/13/04 .................... 1,180,773
575 7.40% due 07/01/04 .................... 636,491
------------
4,712,920
------------
Federal Farm Credit Banks
3,000 5.90% due 01/10/05 .................... 3,105,420
1,000 5.92% due 12/29/04 .................... 1,039,620
------------
4,145,040
------------
Federal Home Loan Banks
595 0.00% due 02/25/04 .................... 459,959
3,000 0.00% due 07/02/12 .................... 1,051,170
1,000 5.88% due 11/25/08 .................... 1,008,710
2,400 5.96% due 02/05/08 .................... 2,502,048
------------
5,021,887
------------
Federal National Mortgage Assoc.
183 0.00% due 02/01/04 .................... 142,833
880 6.40% due 09/27/05 .................... 938,485
500 6.75% due 07/30/07 .................... 517,850
------------
1,599,168
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ---------------- ------------
<S> <C> <C>
Resolution Funding Corp.
(Coupon Strips)
$ 2,500 0.00% due 04/15/04 .................... $ 1,944,500
1,500 0.00% due 10/15/04 .................... 1,136,955
2,000 0.00% due 04/15/05 .................... 1,473,040
1,300 0.00% due 01/15/06 .................... 920,803
3,000 0.00% due 01/15/08 .................... 1,903,590
------------
7,378,888
------------
Tennessee Valley Authority
298 0.00% due 04/15/04 .................... 228,837
------------
U.S. Treasury Bonds
1,405 7.50% due 11/15/24 .................... 1,829,956
1,730 12.00% due 08/15/13 ................... 2,636,901
------------
4,466,857
------------
U.S. Treasury Coupon Strips
1,500 0.00% due 11/15/04 .................... 1,146,015
------------
U.S. Treasury Strips
2,000 0.00% due 11/15/06 .................... 1,383,800
1,000 0.00% due 02/15/07 .................... 678,970
------------
2,062,770
------------
U.S. Treasury Notes
1,000 5.50% due 05/31/03 .................... 1,033,000
500 5.625% due 02/15/06 ................... 524,975
870 5.875% due 11/15/05 ................... 928,255
1,000 6.25% due 02/15/07 .................... 1,097,290
------------
3,583,520
------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Identified Cost $32,361,363) .......... 34,345,902
------------
U.S. GOVERNMENT AGENCY
MORTGAGE PASS-THROUGH
CERTIFICATES (20.8%)
Federal Home Loan Mortgage Corp.
2,472 7.00% due 03/01/17-02/01/28 ........... 2,533,453
1,321 7.50% due 06/01/11-08/01/11 ........... 1,359,690
------------
3,893,143
------------
776 Federal Housing Administration
Burbank Gardens Retirement
Center 7.50% due 02/01/32 .............. 812,488
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER BALANCED GROWTH FUND
PORTFOLIO OF INVESTMENTS January 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------- ------------
<S> <C> <C>
Federal National Mortgage Assoc.
$11,128 6.00% due 10/01/00-01/01/29 ........... $ 11,081,175
1,000 6.00%** ............................... 988,750
5,797 6.50% due 08/01/10-06/01/13 ........... 5,889,147
8,720 7.00% due 03/01/12-08/01/27 ........... 8,918,548
6,243 7.50% due 06/01/25-09/01/27 ........... 6,428,314
28 7.683% due 05/01/27 ................... 27,829
295 8.00% due 05/01/24-05/01/25 ........... 306,764
205 9.50% due 12/01/20 .................... 213,374
------------
33,853,901
------------
Government National Mortgage
Assoc.
2,982 6.00% due 05/15/28-12/15/28 ........... 2,959,195
2,127 7.00% due 07/15/23-01/15/27 ........... 2,179,875
7,036 7.50% due 06/15/24-06/15/27 ........... 7,273,804
2,360 8.00% due 04/15/26-08/15/26 ........... 2,458,535
------------
14,871,409
------------
Government National Mortgage
Assoc. II
6,835 6.50% due 04/20/28-12/20/28 ........... 6,877,354
2,000 6.50%** ............................... 2,012,500
1,578 7.00% due 02/20/26-07/20/27 ........... 1,609,198
------------
10,499,052
------------
TOTAL U.S. GOVERNMENT AGENCY
MORTGAGE PASS-THROUGH
CERTIFICATES
(Identified Cost $62,442,212) .......... 63,929,993
------------
SHORT-TERM INVESTMENTS (1.9%)
U.S. GOVERNMENT AGENCY
OBLIGATION (a) (1.6%)
5,000 Federal Home Loan Banks
4.62% due 02/01/99
(Identified Cost $5,000,000) ........... 5,000,000
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------- ------------------
<S> <C> <C>
REPURCHASE AGREEMENT (0.3%)
$ 906 The Bank of New York 4.688%
due 02/01/99 (dated 01/29/99;
proceeds $906,576) (b)
(Identified Cost $906,222) ............. $ 906,222
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $5,906,222) ........... 5,906,222
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $264,482,922) (c) 100.9 % 310,952,138
LIABILITIES IN EXCESS OF OTHER
ASSETS ........................... (0.9) (2,631,492)
---- -----------
NET ASSETS ....................... 100.0 % $308,320,646
======= ============
</TABLE>
- --------------------------------
* Resale is restricted to qualified institutional investors.
** 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) Security was purchased on a discount basis. The interest rate
shown has been adjusted to reflect a money market equivalent
yield.
(b) Collateralized by $911,367 U.S. Treasury Note 4.75% due 11/15/08
valued at $924,346.
(c) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$54,528,889 and the aggregate gross unrealized depreciation is
$8,059,673, resulting in net unrealized appreciation of
$46,469,216.
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER BALANCED GROWTH FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $264,482,922) ............... $310,952,138
Receivable for:
Interest ................................... 900,144
Investments sold ........................... 772,549
Shares of beneficial interest sold ......... 538,455
Dividends .................................. 404,173
Deferred organizational expenses ................ 39,180
Prepaid expenses and other assets ............... 61,022
------------
TOTAL ASSETS ............................... 313,667,661
------------
LIABILITIES:
Payable for:
Investments purchased ...................... 4,536,405
Shares of beneficial interest
repurchased ............................. 306,915
Plan of distribution fee ................... 255,279
Investment management fee .................. 155,289
Accrued expenses and other payables ............. 93,127
------------
TOTAL LIABILITIES .......................... 5,347,015
------------
NET ASSETS ................................. $308,320,646
============
COMPOSITION OF NET ASSETS:
Paid-in-capital ................................. $254,497,991
Net unrealized appreciation ..................... 46,469,216
Accumulated undistributed net investment
income ....................................... 526,170
Accumulated undistributed net realized gain 6,827,269
------------
NET ASSETS ................................. $308,320,646
============
CLASS A SHARES:
Net Assets ...................................... $ 3,670,015
Shares Outstanding (unlimited authorized,
$.01 par value) .............................. 244,457
NET ASSET VALUE PER SHARE .................. $ 15.01
============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net
asset value) ............................ $ 15.84
============
CLASS B SHARES:
Net Assets ...................................... $ 99,665,528
Shares Outstanding (unlimited authorized,
$.01 par value) .............................. 6,646,642
NET ASSET VALUE PER SHARE .................. $ 14.99
============
CLASS C SHARES:
Net Assets ...................................... $203,132,197
Shares Outstanding (unlimited authorized,
$.01 par value) .............................. 13,551,592
NET ASSET VALUE PER SHARE .................. $ 14.99
============
CLASS D SHARES:
Net Assets ...................................... $ 1,852,906
Shares Outstanding (unlimited authorized,
$.01 par value) .............................. 123,473
NET ASSET VALUE PER SHARE .................. $ 15.01
============
</TABLE>
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the year ended January 31, 1999
NET INVESTMENT INCOME:
INCOME
Interest .......................................... $ 6,588,629
Dividends (net of $2,696 foreign withholding
tax) ........................................... 3,709,300
------------
TOTAL INCOME ................................. 10,297,929
------------
EXPENSES
Plan of distribution fee (Class A shares) ......... 4,803
Plan of distribution fee (Class B shares) ......... 900,432
Plan of distribution fee (Class C shares) ......... 1,865,083
Investment management fee ......................... 1,680,621
Transfer agent fees and expenses .................. 252,536
Registration fees ................................. 126,158
Shareholder reports and notices ................... 60,499
Professional fees ................................. 51,638
Custodian fees .................................... 34,711
Organizational expenses ........................... 33,969
Trustees' fees and expenses ....................... 13,273
Other ............................................. 12,943
------------
TOTAL EXPENSES ............................... 5,036,666
------------
NET INVESTMENT INCOME ........................ 5,261,263
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ................................. 34,473,593
Net change in unrealized appreciation ............. (2,381,940)
------------
NET GAIN ..................................... 32,091,653
------------
NET INCREASE ...................................... $37,352,916
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER BALANCED GROWTH FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JANUARY 31, 1999 JANUARY 31, 1998*
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................ $ 5,261,263 $ 3,418,094
Net realized gain .................................... 34,473,593 9,339,981
Net change in unrealized appreciation ................ (2,381,940) 15,015,576
------------- -------------
NET INCREASE ...................................... 37,352,916 27,773,651
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares .................................... (47,853) (5,489)
Class B shares .................................... (1,598,472) (718,055)
Class C shares .................................... (3,567,970) (2,548,813)
Class D shares .................................... (476) (235)
Net realized gain
Class A shares .................................... (293,543) (10,635)
Class B shares .................................... (9,940,337) (2,320,188)
Class C shares .................................... (20,539,850) (4,770,925)
Class D shares .................................... (1,892) (540)
------------- -------------
TOTAL DIVIDENDS AND DISTRIBUTIONS ................. (35,990,393) (10,374,880)
------------- -------------
Net increase from transactions in shares of beneficial
interest ........................................... 123,790,091 46,353,274
------------- -------------
NET INCREASE ...................................... 125,152,614 63,752,045
NET ASSETS:
Beginning of period .................................. 183,168,032 119,415,987
------------- -------------
END OF PERIOD
(Including undistributed net investment income of
$526,170 and $448,903, respectively) .............. $ 308,320,646 $ 183,168,032
============= =============
</TABLE>
- ---------------------
* Class A, Class B and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER BALANCED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1999
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Balanced Growth Fund (the "Fund"), formerly Dean
Witter Balanced Growth 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 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 Morgan Stanley Dean Witter
Advisors Inc. serves as Investment Manager ("Morgan Stanley 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, designated as Class C shares. Shares held prior to July
28, 1997 which were acquired in exchange for shares of a Morgan Stanley 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 Morgan Stanley
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 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 securities
are valued on the exchange designated as the primary market pursuant to
procedures adopted by the Trustees); (2) all other portfolio
10
<PAGE>
MORGAN STANLEY DEAN WITTER BALANCED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1999, continued
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"), formerly Dean Witter InterCapital, Inc., 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.
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;
11
<PAGE>
MORGAN STANLEY DEAN WITTER BALANCED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1999, continued
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 $171,000 of which
approximately $141,000 have been reimbursed. The balance was absorbed by the
Investment Manager. 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 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 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
12
<PAGE>
MORGAN STANLEY DEAN WITTER BALANCED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1999, continued
accounts, including overhead and telephone expenses; (2) printing and
distribution of 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 $1,226,986 at January 31, 1999.
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 year ended January 31, 1999, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
0.99%, respectively.
The Distributor has informed the Fund that for the year ended January 31, 1999,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares and Class C shares of $72,842 and $38,617, respectively
and received $35,193 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. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/prepayments of portfolio
securities, excluding short-term investments, for the year ended January 31,
1999 aggregated $132,983,301 and $133,598,943, respectively. Included in the
aforementioned are purchases and sales of U.S. Government securities in the
amount of $38,382,215 and $26,065,622, respectively.
13
<PAGE>
MORGAN STANLEY DEAN WITTER BALANCED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1999, continued
For the year ended January 31, 1999, the Fund incurred brokerage commissions of
$19,552 with Morgan Stanley & Co., Inc., an affiliate of the Investment Manager
and Distributor, for portfolio transactions executed on behalf of the Fund.
For the year ended January 31, 1999, the Fund incurred brokerage commissions of
$63,052, with DWR for portfolio transactions executed on behalf of the Fund. At
January 31, 1999, the Fund's payable for investments purchased and receivable
for investments sold included unsettled trades with DWR of $1,539,967 and
$270,966, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent.
5. FEDERAL INCOME TAX STATUS
As of January 31, 1999, the Fund had temporary book/tax differences
attributable to capital loss deferrals on wash sales and permanent book/tax
differences primarily attributable to nondeductible organizational expenses. To
reflect reclassifications arising from the permanent differences,
paid-in-capital was charged $37,990, accumulated undistributed net investment
income was credited $34,772 and accumulated undistributed net realized gain was
credited $3,218.
6. ACQUISITION OF TCW/DW BALANCED FUND
As of the close of business on March 13, 1998, the Fund acquired all the net
assets of TCW/DW Balanced Fund ("Balanced") pursuant to a plan of
reorganization approved by the shareholders of Balanced on February 26, 1998.
The acquisition was accomplished by a tax-free exchange of 4,134 Class A shares
of the Fund at a net asset value of $15.63 per share for 4,970 Class A shares
of Balanced; 714,438 Class B shares of the Fund at a net asset value of $15.60
per share for 857,985 Class B shares of Balanced; and 5,421,407 Class C shares
of the Fund at a net asset value of $15.60 per share for 6,505,688 Class C
shares of Balanced. The net assets of the Fund and Balanced immediately before
the acquisition were $195,384,041 and $95,754,859, respectively, including
unrealized appreciation of $23,251,296 for Balanced. Immediately after the
acquisition, the combined net assets of the Fund amounted to $291,138,900.
14
<PAGE>
MORGAN STANLEY DEAN WITTER BALANCED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1999, continued
7. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JANUARY 31, 1999 JANUARY 31, 1998*+
-------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold ................................................ 214,798 $ 3,288,029 46,655 $ 683,770
Reinvestment of dividends and distributions ......... 20,830 297,931 786 11,607
Acquisition of TCW/DW Balanced Fund ................. 4,134 64,616 -- --
Redeemed ............................................ (18,692) (283,157) (36,416) (550,341)
------- ------------- ------- -------------
Net increase -- Class A ............................. 221,070 3,367,419 11,025 145,036
------- ------------- ------- -------------
CLASS B SHARES
Sold ................................................ 2,522,284 38,625,606 1,248,350 18,499,860
Reinvestment of dividends and distributions ......... 556,089 8,004,525 128,246 1,890,315
Acquisition of TCW/DW Balanced Fund ................. 714,438 11,141,706 -- --
Redeemed ............................................ (2,048,564) (31,309,102) (804,817) (11,954,345)
---------- ------------- --------- -------------
Net increase -- Class B ............................. 1,744,247 26,462,735 571,779 8,435,830
---------- ------------- --------- -------------
CLASS C SHARES
Sold ................................................ 1,731,430 26,748,214 4,677,752 64,189,834
Reinvestment of dividends and distributions ......... 1,566,246 22,586,918 469,682 6,767,943
Acquisition of TCW/DW Balanced Fund ................. 5,421,407 84,548,537 -- --
Redeemed ............................................ (2,732,100) (41,716,243) (2,419,792) (33,201,717)
---------- ------------- ---------- -------------
Net increase -- Class C ............................. 5,986,983 92,167,426 2,727,642 37,756,060
---------- ------------- ---------- -------------
CLASS D SHARES
Sold ................................................ 122,652 1,796,907 1,061 15,573
Reinvestment of dividends and distributions ......... 164 2,368 53 775
Redeemed ............................................ (457) (6,764) -- --
---------- ------------- ---------- -------------
Net increase -- Class D ............................. 122,359 1,792,511 1,114 16,348
---------- ------------- ---------- -------------
Net increase in Fund ................................ 8,074,659 $ 123,790,091 3,311,560 $ 46,353,274
========== ============= ========== =============
</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 Class A, B and D shares, for the period July 28, 1997 (issue date)
through January 31, 1998.
15
<PAGE>
MORGAN STANLEY 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 PERIOD
FOR THE YEAR ENDED JANUARY 31 MARCH 28, 1995*
-------------------------------------------------- THROUGH
1999++ 1998***++ 1997 JANUARY 31, 1996
----------------- -------------- ----------------- ----------------------
<S> <C> <C> <C> <C>
CLASS C SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period ......... $ 14.66 $ 13.01 $ 11.92 $ 10.00
---------- --------- ---------- --------
Income from investment operations:
Net investment income ....................... 0.22 0.32 0.25 0.31
Net realized and unrealized gain ............ 2.04 2.23 1.33 1.88
---------- --------- ---------- --------
Total income from investment operations ...... 2.26 2.55 1.58 2.19
---------- --------- ---------- --------
Less dividends and distributions from:
Net investment income ....................... (0.28) (0.30) (0.27) (0.27)**
Net realized gain ........................... (1.65) (0.60) (0.22) --
---------- ---------- ---------- --------
Total dividends and distributions ............ (1.93) (0.90) (0.49) (0.27)
---------- ---------- ---------- --------
Net asset value, end of period ............... $ 14.99 $ 14.66 $ 13.01 $11.92
========== ========== ========== ========
TOTAL RETURN+ ................................ 16.23% 19.82% 13.44% 22.13%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ..................................... 1.80%(4) 1.87% 1.92%(3) -- (2)(3)
Net investment income ........................ 1.88%(4) 2.18% 2.31%(3) 4.25%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ...... $203,132 $110,909 $119,416 $47,596
Portfolio turnover rate ...................... 49% 28% 16% 2%(1)
</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 Morgan Stanley Dean
Witter Advisors Inc. serves as Investment Manager ("Morgan Stanley 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 Morgan Stanley 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 Morgan Stanley Dean Witter Fund sold with a CDSC,
including shares acquired through reinvestment of dividends and
distributions thereon, 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) If the Investment Manager had not reimbursed expenses and waived the
management fee, the annualized expense and net investment income ratios
would have been 1.95% and 2.28%, respectively, for the year ended January
31, 1997, and 2.42% and 1.83%, respectively, for the period ended January
31, 1996.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
MORGAN STANLEY DEAN WITTER BALANCED GROWTH FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
JANUARY 31, 1999 JANUARY 31, 1998
------------------ -----------------
<S> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............ $ 14.68 $ 14.69
--------- ---------
Income from investment operations:
Net investment income .......................... 0.36 0.21
Net realized and unrealized gain ............... 2.01 0.50
--------- ---------
Total income from investment operations ......... 2.37 0.71
--------- ---------
Less dividends and distributions from:
Net investment income .......................... (0.39) (0.21)
Net realized gain .............................. (1.65) (0.51)
--------- ---------
Total dividends and distributions ............... (2.04) (0.72)
--------- ---------
Net asset value, end of period .................. $ 15.01 $ 14.68
========= =========
TOTAL RETURN+ ................................... 17.02% 4.77%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 1.06%(3) 1.12%(2)
Net investment income ........................... 2.62%(3) 2.84%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $ 3,670 $ 343
Portfolio turnover rate ......................... 49% 28%
CLASS B SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............ $ 14.67 $14.69
---------- -----------
Income from investment operations:
Net investment income .......................... 0.21 0.16
Net realized and unrealized gain ............... 2.03 0.49
----------- -----------
Total income from investment operations ......... 2.24 0.65
----------- -----------
Less dividends and distributions from:
Net investment income .......................... (0.27) (0.16)
Net realized gain .............................. (1.65) (0.51)
----------- -----------
Total dividends and distributions ............... (1.92) (0.67)
----------- -----------
Net asset value, end of period .................. $ 14.99 $ 14.67
=========== ===========
TOTAL RETURN+ ................................... 16.09% 4.38%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 1.81%(3) 1.86%(2)
Net investment income ........................... 1.87%(3) 2.14%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $99,666 $71,900
Portfolio turnover rate ......................... 49% 28%
</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.
++ 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
17
<PAGE>
MORGAN STANLEY DEAN WITTER BALANCED GROWTH FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
JANUARY 31, 1999 JANUARY 31, 1998
------------------ -----------------
<S> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............ $ 14.68 $ 14.69
-------- --------
Income from investment operations:
Net investment income .......................... 0.37 0.24
Net realized and unrealized gain ............... 2.03 0.48
-------- --------
Total income from investment operations ......... 2.40 0.72
-------- --------
Less dividends and distributions from:
Net investment income .......................... (0.42) (0.22)
Net realized gain .............................. (1.65) (0.51)
-------- --------
Total dividends and distributions ............... (2.07) (0.73)
-------- --------
Net asset value, end of period .................. $ 15.01 $ 14.68
======== ========
TOTAL RETURN+ ................................... 17.28% 4.88%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 0.81%(3) 0.86%(2)
Net investment income ........................... 2.87%(3) 3.08%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $ 1,853 $ 16
Portfolio turnover rate ......................... 49% 28%
</TABLE>
- --------------
* The date the 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
18
<PAGE>
MORGAN STANLEY DEAN WITTER BALANCED GROWTH FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER BALANCED GROWTH FUND
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter
Balanced Growth Fund (the "Fund"), formerly Dean Witter Balanced Growth Fund,
at January 31, 1999, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended
and the financial highlights for each of the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at
January 31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
March 10, 1999
- -------------------------------------------------------------------------------
1999 FEDERAL TAX NOTICE (unaudited)
During the year ended January 31, 1999, the Fund paid to its shareholders
$1.51 per share from long-term capital gains. For such period, 44.34% of the
income paid qualified for the dividends received deduction available to
corporations.
- -------------------------------------------------------------------------------
19
<PAGE>
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
OFFICES
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
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
This report is submitted for the general informagion 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
BALANCED
GROWTH FUND
ANNUAL REPORT
JANUARY 31, 1999
