<PAGE>
Two World Trade Center, New York, New York 10048
Morgan Stanley Dean Witter Balanced Growth Fund
Letter to the Shareholders January 31, 2000
DEAR SHAREHOLDER:
The economy continued its path of robust growth over the 12-month period ended
January 31, 2000. In fact, as the current expansion enters its ninth year it
will soon surpass the longest-running growth phase in history, the 106-month
expansion of the 1960s. With renewed strength in the world economy and the
threat of domestic inflation looming, the Federal Reserve Board raised the
federal funds rate in three steps, from 4.75 percent to 5.50 percent, between
June and November 1999, taking back all the 75 basis points it cut in 1998.
Subsequently, on February 2, 2000, the federal funds rate was raised an
additional 25 basis points.
The U.S. stock market reached new highs during the second half of
1999 before pulling back in late January and early February of 2000. Technology
stocks, particularly those related to information processing,
telecommunications and semiconductors, led the equity market during this
period. Consumer staples also performed well in the period, rising nearly 30
percent. Lagging the broad market were pollution control, auto parts, energy
and aerospace.
Interest rates on intermediate-term U.S. Treasuries were highly volatile during
the period. Yields on five-year Treasuries ranged from 4.64 percent to 6.68
percent. On January 31, 2000, the five-year Treasury note was yielding 6.68
percent compared to 4.64 percent one year earlier.
PERFORMANCE
For the twelve-month period ended January 31, 2000, Morgan Stanley Dean Witter
Balanced Growth Fund's Class C shares produced a total return of -2.14 percent,
compared to 10.35 percent for the Standard & Poor's 500 Composite Stock Price
Index (S&P 500) and -2.87 percent for the Lehman Brothers Government/Corporate
Bond Index. For the same period, the Fund's Class A, B and D shares produced a
total return of -1.35 percent, -2.15 percent and -1.20 percent, respectively.
The performance of the Fund's four share classes varies because of differing
expenses. The total return figures given assume the reinvestment of all
distributions and do
<PAGE>
Morgan Stanley Dean Witter Balanced Growth Fund
Letter to the Shareholders January 31, 2000, continued
not reflect the deduction of any applicable sales charges. The accompanying
chart compares the Fund's performance to that of the S&P 500 and Lehman
indexes.
We believe that the underperformance of the Fund's equity component was largely
the result of its limited exposure to high-technology stocks and its
underweighting in the financial sector. Technology stocks now constitute 30
percent of the market capitalization of the S&P 500, while financials represent
13 percent. The significance of the technology sector is further underscored by
the fact that it accounted for roughly 70 percent of the performance of the S&P
500 in 1999. High-technology stocks generally pay little if any dividends and
therefore are not included in the Fund's portfolio. While the Fund's tilt
toward yield may have dampened its relative performance, this same bias toward
income provided a degree of stability amid the market volatility that occurred
over the past year.
PORTFOLIO
At the end of the fiscal year, the Fund's net assets totaled more than $261
million. The Fund's portfolio mix is 64 percent equities and 36 percent
fixed-income securities. During the period the Fund initiated positions in
Keycorp, Minnesota Mining & Manufacturing, Phelps Dodge and United Technologies
and liquidated its holdings in Banc One, Raytheon, Tenneco and Timken.
Currently the Fund maintains investments in 27 equity securities.
As of January 31, the Fund's fixed-income portfolio was invested as follows: 70
percent in mortgage-backed securities, 16 percent in U.S. agency obligations, 8
percent in U.S. Treasuries, 3 percent in U.S. corporate obligations and the
balance in cash equivalents. The Fund's fixed-income component was overweighted
in mortgage-backed securities, which helped mitigate the negative effects of
1999's bear market in Treasuries. Narrower spreads, along with a diminished
supply of mortgage-backed securities, helped the mortgage-backed market
outperform both the Treasury and agency markets as strong sponsorship continued
for most of the year from banks and investors.
LOOKING AHEAD
Many in the financial community believe that the Fed will find it necessary to
raise interest rates as the year progresses if the economy continues to grow as
anticipated. If rate increases are implemented, this will be a precautionary
measure taken to help keep economic growth and inflation under control. Going
forward, we believe that the outlook for the financial markets and the economy
is favorable. Accordingly, adjustments to the maturity structure and
composition of the Fund will be made as conditions warrant and attractive
opportunities become available.
2
<PAGE>
Morgan Stanley Dean Witter Balanced Growth Fund
Letter to the Shareholders January 31, 2000, continued
We appreciate your ongoing support of Morgan Stanley Dean Witter Balanced
Growth Fund and look forward to continuing to serve your investment objectives.
Very truly yours,
/s/ Charles A. Fiumefreddo /s/ Mitchell M. Merin
- --------------------------- ----------------------
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
3
<PAGE>
Morgan Stanley Dean Witter Balanced Growth Fund
Fund Performance January 31, 2000
GROWTH OF $10,000 CLASS C
Date Total S&P 500 Lehman
==============================================================================
March 28, 1995 $10,000 $10,000 $10,000
==============================================================================
January 31, 1996 $12,213 $12,912 $11,429
==============================================================================
January 31, 1997 $13,854 $16,305 $11,702
==============================================================================
January 31, 1998 $16,600 $20,691 $13,009
==============================================================================
January 31, 1999 $19,294 $27,412 $14,144
==============================================================================
January 31, 2000 $18,881 (3) $30,248 $13,738
==============================================================================
==============================================================================
--- Fund --- S&P 500(4) --- Lehman Index (5)
==============================================================================
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
- --------------------------------------------------------------------------------
CLASS C SHARES*
- --------------------------------------------------------------
Period Ended 1/31/00
- ---------------------------
1 Year -2.14%(1) -3.02%(2)
Since Inception (3/28/95) 14.01%(1) 14.01%(2)
CLASS B SHARES++
- --------------------------------------------------------------
Period Ended 1/31/00
- ---------------------------
1 Year -2.15%(1) -6.51%(2)
Since Inception (7/28/97) 7.02%(1) 6.05%(2)
CLASS A SHARES+
- --------------------------------------------------------------
Period Ended 1/31/00
- ---------------------------
1 Year -1.35%(1) -6.53%(2)
Since Inception (7/28/97) 7.87%(1) 5.58%(2)
CLASS D SHARES#
- ---------------------------------------------
Period Ended 1/31/00
- ---------------------------
1 Year -1.20%(1)
Since Inception (7/28/97) 8.08%(1)
- ---------------
(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, 2000.
(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 maturities 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.
* The maximum 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.
4
<PAGE>
Morgan Stanley Dean Witter Balanced Growth Fund
Portfolio of Investments January 31, 2000
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (65.1%)
Aerospace (2.3%)
112,000 United Technologies Corp. ............... $ 5,929,000
------------
Aluminum (2.2%)
83,500 Alcoa, Inc. ............................. 5,818,906
------------
Auto Parts: O.E.M. (2.4%)
365,000 Delphi Automotive Systems Corp. 6,319,062
------------
Beverages - Non-Alcoholic (2.4%)
182,000 PepsiCo, Inc. ........................... 6,210,750
------------
Construction/Agricultural
Equipment/Trucks (2.4%)
145,000 Deere & Co. ............................. 6,334,687
------------
Department Stores (2.4%)
205,000 May Department Stores Co. ............... 6,380,625
------------
Discount Chains (2.4%)
94,500 Target Corp. ............................ 6,242,906
------------
Diversified Manufacturing (2.3%)
65,500 Minnesota Mining &
Manufacturing Co. ..................... 6,132,438
------------
Electric Utilities (5.0%)
217,000 GPU, Inc. ............................... 6,293,000
173,000 Unicom Corp. ............................ 6,768,625
------------
13,061,625
------------
Electronic Data Processing (2.4%)
56,000 International Business Machines
Corp. ................................. 6,282,500
------------
Finance Companies (2.2%)
280,000 Associates First Capital Corp.
(Class A) ............................. 5,600,000
------------
Forest Products (2.4%)
108,000 Weyerhaeuser Co. ........................ 6,196,500
------------
Major Banks (5.1%)
137,500 BankAmerica Corp. ....................... 6,660,156
315,000 KeyCorp ................................. 6,615,000
------------
13,275,156
------------
Major Chemicals (2.3%)
100,000 Du Pont (E.I.) de Nemours & Co.,
Inc. .................................. 5,900,000
------------
Major Pharmaceuticals (2.5%)
100,500 Bristol-Myers Squibb Co. ................ 6,633,000
------------
Major U.S. Telecommunications (2.5%)
123,000 AT&T Corp. .............................. 6,488,250
------------
Meat/Poultry/Fish (2.4%)
290,000 ConAgra, Inc. ........................... $ 6,198,750
------------
Motor Vehicles (5.0%)
128,000 Ford Motor Co. .......................... 6,368,000
84,000 General Motors Corp. .................... 6,756,750
------------
13,124,750
------------
Multi-Sector Companies (2.3%)
44,500 General Electric Co. .................... 5,935,188
------------
Oil/Gas Transmission (2.5%)
99,000 Enron Corp. ............................. 6,676,313
------------
Other Metals/Minerals (2.3%)
103,000 Phelps Dodge Corp. ...................... 5,986,875
------------
Package Goods/Cosmetics (2.5%)
65,000 Procter & Gamble Co. .................... 6,556,875
------------
Railroads (2.4%)
215,000 CSX Corp. ............................... 6,288,750
------------
Semiconductors (2.5%)
65,000 Intel Corp. ............................. 6,426,875
------------
TOTAL COMMON STOCKS
(Identified Cost $160,985,031) .......... 169,999,781
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- -----------
<S> <C> <C>
CORPORATE BONDS (1.1%)
Construction/Agricultural
Equipment/Trucks (0.1%)
$ 200 Caterpillar, Inc.
9.375% due 03/15/21 .......... 228,062
-----------
Discount Chains (0.1%)
200 Wal-Mart Stores, Inc.
7.50% due 05/15/04 ........... 201,196
-----------
Diversified Financial Services (0.1%)
300 Abbey National PLC
(United Kingdom)
6.69% due 10/17/05 ........... 285,870
-----------
Diversified Manufacturing (0.0%)
100 Minnesota Mining &
Manufacturing Co.
6.375% due 02/15/28 .......... 87,555
-----------
Electric Utilities (0.1%)
200 Florida Power & Light Co.
7.05% due 12/01/26 ........... 177,172
-----------
</TABLE>
See Notes to Financial Statements
5
<PAGE>
Morgan Stanley Dean Witter Balanced Growth Fund
Portfolio of Investments January 31, 2000, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Finance Companies (0.2%)
$ 500 Associates Corp. of North America
6.25% due 11/01/08 ................... $ 451,800
150 Ford Motor Credit Corp.
8.20% due 02/15/02 ................... 152,634
-----------
604,434
-----------
Major U.S. Telecommunications (0.3%)
200 MCI Communication Corp.
6.95% due 08/15/06 ................... 193,212
700 MCI WorldCom, Inc.
6.40% due 08/15/05 ................... 663,320
-----------
856,532
-----------
Motor Vehicles (0.1%)
200 General Motors Corp.
8.10% due 06/15/24 ................... 192,836
-----------
Multi-Sector Companies (0.1%)
150 General Electric Capital Corp.
8.85% due 04/01/05 ................... 159,156
-----------
TOTAL CORPORATE BONDS
(Identified Cost $3,026,852) ........... 2,792,813
-----------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS (8.7%)
Federal Farm Credit Banks
800 5.90% due 01/10/05 ................... 753,920
-----------
Federal Home Loan Banks
595 0.00% due 02/25/04 ................... 442,460
3,000 0.00% due 07/02/12 ................... 1,087,680
1,000 5.88% due 11/25/08 ................... 898,880
2,400 5.96% due 02/05/08 ................... 2,180,616
-----------
4,609,636
-----------
Federal National Mortgage Assoc.
183 0.00% due 02/01/04 ................... 137,587
875 6.34% due 02/04/08 ................... 812,910
100 6.48% due 06/28/04 ................... 97,099
1,000 6.55% due 11/21/07 ................... 941,290
1,100 6.74% due 05/13/04 ................... 1,077,593
500 6.75% due 07/30/07 ................... 476,285
575 7.40% due 07/01/04 ................... 577,978
-----------
4,120,742
-----------
Resolution Funding Corp.
(Coupon Strips)
1,500 0.00% due 10/15/04 ................... 1,086,720
3,000 0.00% due 04/15/05 ................... 2,070,990
$1,300 0.00% due 01/15/06 ................... $ 853,203
3,000 0.00% due 01/15/08 ................... 1,737,000
-----------
5,747,913
-----------
Tennessee Valley Authority
298 0.00% due 04/15/04 ................... 220,726
-----------
U.S. Treasury Bonds
1,405 7.50% due 11/15/24 + ................. 1,551,738
1,730 12.00% due 08/15/13 + ................ 2,292,665
-----------
3,844,403
-----------
U.S. Treasury Notes
800 6.125% due 08/15/07 .................. 771,320
1,500 6.25% due 02/15/07 ................... 1,459,455
-----------
2,230,775
-----------
U.S. Treasury Strips
2,000 0.00% due 11/15/06 ................... 1,271,900
-----------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Identified Cost $24,189,378) .......... 22,800,015
-----------
U.S. GOVERNMENT AGENCY MORTGAGE
PASS-THROUGH CERTIFICATES (25.2%)
Federal Home Loan Mortgage Corp.
1,964 7.00% due 03/01/17-02/01/28 .......... 1,890,171
950 7.50% due 06/01/11-08/01/11 .......... 945,888
-----------
2,836,059
-----------
771 Federal Housing Administration
Burbank Gardens Retirement
Center
7.50% due 02/01/32 ................... 740,281
-----------
Federal National Mortgage Assoc.
11,963 6.00% due 11/01/04-02/01/29 .......... 11,070,147
2,965 6.50% due 08/01/10-06/01/13 .......... 2,829,192
7,270 7.00% due 03/01/12-02/01/29 .......... 6,984,443
9 7.10% due 05/01/27 ................... 9,244
6,277 7.50% due 06/01/25-07/01/29 .......... 6,121,783
216 8.00% due 05/01/24-05/01/25 .......... 215,228
3,000 8.00% * .............................. 2,983,125
161 9.50% due 12/01/20 ................... 163,595
-----------
30,376,757
-----------
Government National Mortgage Assoc.
2,867 6.00% due 05/15/28-12/15/28 .......... 2,561,688
8,638 6.50% due 08/15/25-05/15/29 .......... 7,976,508
3,710 7.00% due 07/15/23-05/15/29 .......... 3,527,679
</TABLE>
See Notes to Financial Statements
6
<PAGE>
Morgan Stanley Dean Witter Balanced Growth Fund
Portfolio of Investments January 31, 2000, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
$ 6,503 7.50% due 06/15/24-07/15/29 .......... $ 6,336,029
1,633 8.00% due 04/15/26-08/15/26 .......... 1,627,857
------------
22,029,761
------------
Government National Mortgage
Assoc. II
8,251 6.50% due 05/20/28-02/20/29 .......... 7,598,382
2,257 7.00% due 02/20/26-06/20/29 .......... 2,138,862
------------
9,737,244
------------
TOTAL U.S. GOVERNMENT AGENCY
MORTGAGE PASS-THROUGH
CERTIFICATES
(Identified Cost $69,013,888) .......... 65,720,102
------------
SHORT-TERM INVESTMENT (1.2%)
REPURCHASE AGREEMENT
3,043 The Bank of New York 5.75%
due 02/01/00 (dated 01/31/00;
proceeds $3,043,046) (a)
(Identified Cost $3,042,560) ......... 3,042,560
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $260,257,709) (b) ..... 101.3 % 264,355,271
LIABILITIES IN EXCESS OF OTHER
ASSETS ................................. ( 1.3) (3,352,709)
----- ------------
NET ASSETS ............................. 100.0% $261,002,562
===== ------------
</TABLE>
- --------------------------------
* 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.
+ Some or all of these securities are segregated in connection with
securities purchased on a forward commitment basis.
(a) Collateralized by $2,803,456 Federal Home Loan Banks 6.50% due 01/28/04
valued at $2,720,314 and $380,506 U.S. Treasury Note 6.625% due 05/15/07
valued at $383,103.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $22,571,438 and the
aggregate gross unrealized depreciation is $18,473,876, resulting in net
unrealized appreciation of $4,097,562.
See Notes to Financial Statements
7
<PAGE>
Morgan Stanley Dean Witter Balanced Growth Fund
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
January 31, 2000
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments in securities, at value
(identified cost $260,257,709).................................. $264,355,271
Receivable for :
Interest ...................................................... 782,521
Investments sold .............................................. 701,519
Dividends ..................................................... 480,768
Shares of beneficial interest sold ............................ 334,160
Deferred organizational expenses ................................. 5,213
Prepaid expenses ................................................. 33,519
-------------
TOTAL ASSETS .................................................. 266,692,971
-------------
LIABILITIES :
Payable for:
Investments purchased ......................................... 4,410,385
Shares of beneficial interest repurchased ..................... 860,153
Plan of distribution fee ...................................... 209,882
Investment management fee ..................................... 137,644
Accrued expenses and other payables .............................. 72,345
-------------
TOTAL LIABILITIES ............................................. 5,690,409
-------------
NET ASSETS .................................................... $261,002,562
=============
COMPOSITION OF NET ASSETS:
Paid-in-capital .................................................. $246,264,091
Net unrealized appreciation ...................................... 4,097,562
Accumulated undistributed net investment income .................. 1,028,219
Accumulated undistributed net realized gain ...................... 9,612,690
-------------
NET ASSETS .................................................... $261,002,562
=============
CLASS A SHARES:
Net Assets ....................................................... $6,308,128
Shares Outstanding (unlimited authorized, $.01 par value)......... 481,285
NET ASSET VALUE PER SHARE ..................................... $13.11
=======
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ............... $13.84
=======
CLASS B SHARES:
Net Assets ....................................................... $87,553,566
Shares Outstanding (unlimited authorized, $.01 par value)......... 6,686,444
NET ASSET VALUE PER SHARE ..................................... $13.09
=======
CLASS C SHARES:
Net Assets ....................................................... $163,952,821
Shares Outstanding (unlimited authorized, $.01 par value)......... 12,524,765
NET ASSET VALUE PER SHARE ..................................... $13.09
=======
CLASS D SHARES:
Net Assets ....................................................... $3,188,047
Shares Outstanding (unlimited authorized, $.01 par value)......... 243,374
NET ASSET VALUE PER SHARE ..................................... $13.10
========
</TABLE>
See Notes to Financial Statements
8
<PAGE>
Morgan Stanley Dean Witter Balanced Growth Fund
Financial Statements, continued
STATEMENT OF OPERATIONS
For the year ended January 31, 2000
<TABLE>
<CAPTION>
NET INVESTMENT INCOME:
<S> <C>
INCOME
Interest .......................................... $ 7,315,851
Dividends ......................................... 4,552,105
-------------
TOTAL INCOME ................................... 11,867,956
-------------
EXPENSES
Plan of distribution fee (Class A shares) ......... 14,754
Plan of distribution fee (Class B shares) ......... 1,054,980
Plan of distribution fee (Class C shares) ......... 1,923,819
Investment management fee ......................... 1,850,448
Transfer agent fees and expenses .................. 283,299
Professional fees ................................. 98,101
Registration fees ................................. 80,264
Shareholder reports and notices ................... 66,795
Custodian fees .................................... 34,932
Organizational expenses ........................... 33,967
Trustees' fees and expenses ....................... 12,710
Other ............................................. 7,780
-------------
TOTAL EXPENSES ................................. 5,461,849
-------------
NET INVESTMENT INCOME .......................... 6,406,107
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain ................................. 29,579,104
Net change in unrealized appreciation ............. (42,371,654)
-------------
NET LOSS ....................................... (12,792,550)
-------------
NET DECREASE ...................................... $(6,386,443)
=============
</TABLE>
See Notes to Financial Statements
9
<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, 2000 JANUARY 31, 1999
------------------ -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................ $ 6,406,107 $ 5,261,263
Net realized gain .................................... 29,579,104 34,473,593
Net change in unrealized appreciation ................ (42,371,654) (2,381,940)
------------- -------------
NET INCREASE (DECREASE) ........................... (6,386,443) 37,352,916
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares .................................... (169,618) (47,853)
Class B shares .................................... (2,006,722) (1,598,472)
Class C shares .................................... (3,663,089) (3,567,970)
Class D shares .................................... (75,592) (476)
Net realized gain
Class A shares .................................... (584,845) (293,543)
Class B shares .................................... (9,188,841) (9,940,337)
Class C shares .................................... (16,779,533) (20,539,850)
Class D shares .................................... (263,468) (1,892)
------------- -------------
TOTAL DIVIDENDS AND DISTRIBUTIONS ................. (32,731,708) (35,990,393)
------------- -------------
Net increase (decrease) from transactions in shares of
beneficial interest ................................ (8,199,933) 123,790,091
------------- -------------
NET INCREASE (DECREASE) ........................... (47,318,084) 125,152,614
NET ASSETS:
Beginning of period .................................. 308,320,646 183,168,032
------------- -------------
END OF PERIOD
(Including undistributed net investment income of
$1,028,219 and $526,170, respectively)............. $261,002,562 $308,320,646
============= =============
</TABLE>
See Notes to Financial Statements
10
<PAGE>
Morgan Stanley Dean Witter Balanced Growth Fund
Notes to Financial Statements January 31, 2000
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley 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 commenced operations on March 28, 1995. On July 28, 1997,
the Fund converted to a multiple class share structure.
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 securities for
which over-the-counter market quotations are readily available are valued at
the latest available bid price prior to the time of valuation; (3) when market
quotations are not readily available, including circumstances under which it is
determined by Morgan Stanley Dean Witter Advisors Inc. (the "Investment
Manager") that sale or bid prices are not reflective of a security's market
value, portfolio securities are valued at their fair value as determined in
good faith under procedures established by and under the general supervision of
the Trustees (valuation of debt securities for which market quotations are not
readily available may be based upon current market prices of securities which
are comparable in coupon, rating and maturity or an appropriate matrix
utilizing similar factors); (4) certain portfolio
11
<PAGE>
Morgan Stanley Dean Witter Balanced Growth Fund
Notes to Financial Statements January 31, 2000, continued
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;
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. 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.
12
<PAGE>
Morgan Stanley Dean Witter Balanced Growth Fund
Notes to Financial Statements January 31, 2000, continued
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. Effective May 1, 1999, the Agreement was amended to
reduce the annual rate to 0.575% of the portion of daily net assets in excess
of $500 million.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services,
heat, light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A - up
to 0.25% of the average daily net assets of Class A; (ii) Class B - 1.0% of the
average daily net assets of Class B; and (iii) Class C - up to 1.0% of the
average daily net assets of Class C. In the case of Class A shares, amounts
paid under the Plan are paid to the Distributor for services provided. In the
case of Class B and Class C shares, amounts paid under the Plan are paid to the
Distributor for (1) services provided and the expenses borne by it and others
in the distribution of the shares of these Classes, including the payment of
commissions for sales of these Classes and incentive compensation to, and
expenses of, Morgan Stanley Dean Witter Financial Advisors and others who
engage in or support distribution of the shares or who service shareholder
accounts, including overhead and telephone expenses; (2) printing and
distribution of 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
13
<PAGE>
Morgan Stanley Dean Witter Balanced Growth Fund
Notes to Financial Statements January 31, 2000, continued
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 $1,851,326 at January 31, 2000.
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, 2000, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.24% and
0.99%, respectively.
The Distributor has informed the Fund that for the year ended January 31, 2000,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares and Class C shares of $164,476 and $31,894, respectively
and received $45,154 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,
2000 aggregated $144,335,515 and $176,080,324, respectively. Included in the
aforementioned are purchases and sales/prepayments of U.S. Government
securities in the amount of $24,230,698 and $11,860,869, respectively.
For the year ended January 31, 2000, the Fund incurred brokerage commissions of
$27,605 with Morgan Stanley & Co., Inc., an affiliate of the Investment Manager
and Distributor, for portfolio transactions executed on behalf of the Fund. At
January 31, 2000, the fund's receivable for investments sold included unsettled
trades with Morgan Stanley & Co., Inc. of $181,681.
For the year ended January 31, 2000, the Fund incurred brokerage commissions of
$72,878, with DWR for portfolio transactions executed on behalf of the Fund. At
January 31, 2000, the Fund's payable for investments purchased included
unsettled trades with DWR of $789,095.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent.
14
<PAGE>
Morgan Stanley Dean Witter Balanced Growth Fund
Notes to Financial Statements January 31, 2000, continued
5. 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, 2000 JANUARY 31, 1999
------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold ........................................ 457,031 $ 6,829,861 214,798 $ 3,288,029
Reinvestment of dividends and distributions . 48,583 659,711 20,830 297,931
Acquisition of TCW/DW Balanced Fund ......... - - 4,134 64,616
Redeemed .................................... (268,786) (3,857,460) (18,692) (283,157)
-------- ------------- ------- -------------
Net increase - Class A ...................... 236,828 3,632,112 221,070 3,367,419
-------- ------------- ------- -------------
CLASS B SHARES
Sold ........................................ 2,180,069 32,477,102 2,522,284 38,625,606
Reinvestment of dividends and distributions . 671,424 9,166,773 556,089 8,004,525
Acquisition of TCW/DW Balanced Fund ......... - - 714,438 11,141,706
Redeemed .................................... (2,811,691) (40,151,388) (2,048,564) (31,309,102)
---------- ------------- ---------- -------------
Net increase - Class B ...................... 39,802 1,492,487 1,744,247 26,462,735
---------- ------------- ---------- -------------
CLASS C SHARES
Sold ........................................ 1,064,467 15,862,750 1,731,430 26,748,214
Reinvestment of dividends and distributions . 1,405,960 19,192,025 1,566,246 22,586,918
Acquisition of TCW/DW Balanced Fund ......... - - 5,421,407 84,548,537
Redeemed .................................... (3,497,254) (50,162,074) (2,732,100) (41,716,243)
---------- ------------- ---------- -------------
Net increase (decrease) - Class C ........... (1,026,827) (15,107,299) 5,986,983 92,167,426
---------- ------------- ---------- -------------
CLASS D SHARES
Sold ........................................ 313,344 4,728,000 122,652 1,796,907
Reinvestment of dividends and distributions . 25,143 338,834 164 2,368
Redeemed .................................... (218,586) (3,284,067) (457) (6,764)
---------- ------------- ---------- -------------
Net increase - Class D ...................... 119,901 1,782,767 122,359 1,792,511
---------- ------------- ---------- -------------
Net increase (decrease) in Fund ............. (630,296) $ (8,199,933) 8,074,659 $123,790,091
========== ============= ========== =============
</TABLE>
6. FEDERAL INCOME TAX STATUS
As of January 31, 2000, 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 $33,967, accumulated undistributed net investment
income was credited $10,963 and accumulated undistributed net realized gain was
credited $23,004.
15
<PAGE>
Morgan Stanley Dean Witter Balanced Growth Fund
Notes to Financial Statements January 31, 2000, continued
7. 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.
16
<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 FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
JANUARY 31, 2000 JANUARY 31, 1999 JANUARY 31, 1998
------------------ ------------------ -----------------
<S> <C> <C> <C>
CLASS A SHARES#
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $ 15.01 $ 14.68 $ 14.69
------- -------- --------
Income (loss) from investment operations:
Net investment income ................................. 0.41 0.36 0.21
Net realized and unrealized gain (loss) ............... (0.59) 2.01 0.50
------- -------- --------
Total income (loss) from investment operations ......... (0.18) 2.37 0.71
------- -------- --------
Less dividends and distributions from:
Net investment income ................................. (0.40) (0.39) (0.21)
Net realized gain ..................................... (1.32) (1.65) (0.51)
------- --------- ---------
Total dividends and distributions ...................... (1.72) (2.04) (0.72)
------- --------- ---------
Net asset value, end of period ......................... $ 13.11 $ 15.01 $ 14.68
======= ========= =========
TOTAL RETURN+ .......................................... (1.35)% 17.02% 4.77%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 1.04 %(3) 1.06%(3) 1.12%(2)
Net investment income .................................. 2.81 %(3) 2.62%(3) 2.84%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $6,308 $3,670 $343
Portfolio turnover rate ................................ 48 % 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 FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
JANUARY 31, 2000 JANUARY 31, 1999 JANUARY 31, 1998
------------------ ------------------ -----------------
<S> <C> <C> <C>
CLASS B SHARES #
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $ 14.99 $ 14.67 $ 14.69
------- ------- --------
Income (loss) from investment operations:
Net investment income ................................. 0.30 0.21 0.16
Net realized and unrealized gain (loss) ............... (0.60) 2.03 0.49
------- ------- --------
Total income (loss) from investment operations ......... (0.30) 2.24 0.65
------- ------- --------
Less dividends and distributions from:
Net investment income ................................. (0.28) (0.27) (0.16)
Net realized gain ..................................... (1.32) (1.65) (0.51)
------- ------- --------
Total dividends and distributions ...................... (1.60) (1.92) (0.67)
------- ------- --------
Net asset value, end of period ......................... $ 13.09 $ 14.99 $ 14.67
======= ======= ========
TOTAL RETURN + ......................................... (2.15)% 16.09% 4.38%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 1.80 %(3) 1.81%(3) 1.86%(2)
Net investment income .................................. 2.05 %(3) 1.87%(3) 2.14%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $87,554 $99,666 $71,900
Portfolio turnover rate ................................ 48 % 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
18
<PAGE>
Morgan Stanley Dean Witter Balanced Growth Fund
Financial Highlights, continued
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JANUARY 31
-------------------------------------------------------------
2000# 1999# 1998***# 1997
-------------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C>
CLASS C SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $14.99 $14.66 $13.01 $11.92
------- ------- ------- ---------
Income (loss) from investment operations:
Net investment income ................................. 0.30 0.22 0.32 0.25
Net realized and unrealized gain (loss) ............... (0.60) 2.04 2.23 1.33
------- ------- ------- ---------
Total income (loss) from investment operations ......... (0.30) 2.26 2.55 1.58
------- ------- ------- ---------
Less dividends and distributions from:
Net investment income ................................. (0.28) (0.28) (0.30) (0.27)
Net realized gain. .................................... (1.32) (1.65) (0.60) (0.22)
------- ------- ------- ---------
Total dividends and distributions ...................... (1.60) (1.93) (0.90) (0.49)
------- ------- ------- ---------
Net asset value, end of period ......................... $13.09 $14.99 $14.66 $13.01
======= ======= ======= =========
TOTAL RETURN+ .......................................... (2.14)% 16.23% 19.82% 13.44%
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 1.79%(4) 1.80%(4) 1.87% 1.92%(3)
Net investment income .................................. 2.06%(4) 1.88%(4) 2.18% 2.31%(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $163,953 $203,132 $110,909 $119,416
Portfolio turnover rate ................................ 48% 49% 28% 16%
<CAPTION>
FOR THE PERIOD
MARCH 28, 1995*
THROUGH
JANUARY 31, 1996
----------------------
<S> <C>
CLASS C SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $10.00
-------
Income (loss) from investment operations:
Net investment income ................................. 0.31
Net realized and unrealized gain (loss) ............... 1.88
-------
Total income (loss) from investment operations ......... 2.19
-------
Less dividends and distributions from:
Net investment income ................................. (0.27)**
Net realized gain. .................................... -
-------
Total dividends and distributions ...................... (0.27)
-------
Net asset value, end of period ......................... $11.92
=======
TOTAL RETURN+. ......................................... 22.13%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... - (2)(3)
Net investment income .................................. 4.25%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $47,596
Portfolio turnover rate ................................ 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 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
19
<PAGE>
Morgan Stanley Dean Witter Balanced Growth Fund
Financial Highlights, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
JANUARY 31, 2000 JANUARY 31, 1999 JANUARY 31, 1998
------------------ ------------------ -----------------
<S> <C> <C> <C>
CLASS D SHARES #
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $15.01 $14.68 $14.69
-------- ------- -------
Income (loss) from investment operations:
Net investment income ................................. 0.44 0.37 0.24
Net realized and unrealized gain (loss) ............... (0.60) 2.03 0.48
-------- ------- -------
Total income (loss) from investment operations ......... (0.16) 2.40 0.72
-------- ------- -------
Less dividends and distributions from:
Net investment income ................................. (0.43) (0.42) (0.22)
Net realized gain ..................................... (1.32) (1.65) (0.51)
-------- ------- -------
Total dividends and distributions ...................... (1.75) (2.07) (0.73)
-------- ------- -------
Net asset value, end of period ......................... $13.10 $15.01 $14.68
======== ======= =======
TOTAL RETURN+ .......................................... (1.20)% 17.28% 4.88%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 0.80%(3) 0.81%(3) 0.86%(2)
Net investment income .................................. 3.05%(3) 2.87%(3) 3.08%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $3,188 $1,853 $16
Portfolio turnover rate ................................ 48% 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
20
<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") at January 31, 2000, 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 accounting principles generally
accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 2000 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 13, 2000
2000 FEDERAL TAX NOTICE (unaudited)
During the year ended January 31, 2000, the Fund paid to its shareholders
$1.28 per share from long-term capital gains. For such period, 50.03% of
the ordinary dividends paid qualified for the dividends received
deduction available to corporations.
21
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
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
Mitchell M. Merin
President
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 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. Read the
prospectus carefully before investing.
MORGAN STANLEY
DEAN WITTER
BALANCED
GROWTH FUND
[GRAPHIC OMITTED]
ANNUAL REPORT
JANUARY 31, 2000
