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MORGAN STANLEY DEAN WITTER INFORMATION FUND Two World Trade Center, New York, New York 10048
</TABLE>
LETTER TO THE SHAREHOLDERS September 30, 1998
DEAR SHAREHOLDER:
The six-month period ended September 30, 1998, was characterized by record
levels of volatility in U.S. and global financial markets. Throughout the
period, investors were concerned over global currency devaluations and economic
crisis that began in Asia and then spread to Russia and Latin America. Investors
wondered if the United States itself would be drawn into a recession and market
participants began to anticipate an easing of monetary policy, which was soon
delivered by the Federal Reserve Board. The Fed's moves to lower rates are
encouraging for U.S. and global markets and should help the United States to
keep recession at bay during the coming year.
PERFORMANCE
During the six months ended September 30, 1998, Morgan Stanley Dean Witter
Information Fund Class A shares returned -5.09 percent, Class B returned -5.42
percent, Class C returned -5.42 percent and Class D returned -4.94 percent. The
performance of the Fund's four share classes varies because each class has
different expenses. During the same period, the Standard & Poor's 500 Stock
Index (S&P 500) returned -6.96 percent and the Lipper Science and Technology
Funds Index returned -7.96 percent. The Fund's outperformance relative to the
broad market and to its Lipper peer group can be attributed to its exposure to
sectors such as Internet-related stocks, radio broadcasters and large-cap
technology stocks.
PORTFOLIO
Morgan Stanley Dean Witter Information Fund continues to invest in all aspects
of the communications and information industries, choosing companies with solid
demand for products and services, proven management, proprietary technology or
barriers limiting competitor entry into their markets, and strategic
relationships or alliances.
As of September 30, 1998, the Fund's net assets were approximately $256 million.
At period end, the Fund held 48 percent of its assets in
<PAGE> 2
MORGAN STANLEY DEAN WITTER INFORMATION FUND
LETTER TO THE SHAREHOLDERS September 30, 1998, continued
information technology (semiconductors, equipment and software), 31 percent in
information services (World Wide Web firms, consulting, wireline/wireless
telephone companies and business services) and 17 percent in information
distribution and content (media, broadcasters and cable), with cash equivalents
making up the remaining 4 percent. Foreign stocks and American Depository
Receipts (ADRs) represented 9 percent of net assets. On-line and Web-related
stocks, which are spread among the above categories, totaled nearly 15 percent
of the portfolio. Significant holdings included America Online (AOL), Microsoft,
Cisco, Worldcom, BMC Software and TCI Group. We continue to favor
U.S.-based media and services firms (especially Web-based) over technology and
within technology, high value-added firms (such as software) over commodity
vendors (such as many semiconductors and PC-related companies).
GOING FORWARD
The fundamentals underpinning Morgan Stanley Dean Witter Information Fund remain
robust. Corporations continue to spend heavily on equipment and information
systems as they prepare for new and increased competition. This has long been
the case in the United States and the same pattern seems to be intensifying in
Europe as deregulation accelerates there. Demand for technology in Asia has
slowed with their economic crisis but, unlike many other U.S. sectors,
technology has not seen drastic increases in competition from low-cost Asian
exports.
We believe that the stocks in which the Fund invests should perform well over
the long term as technology grows increasingly important as a component of
worldwide spending and the World Wide Web captures a growing portion of
consumers' imaginations and time. Evidence of this ranges from AOL's total
immersion community to Yahoo's compendium of useful and/or fun information to
eBay's Web-based garage sale to Broadcast.com's Web-based radio stations. We
plan to participate in these opportunities through investments in companies with
solid business plans.
We appreciate your support and look forward to continuing to serve your
investment needs.
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO
CHARLES A. FIUMEFREDDO
Chairman of the Board
2
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MORGAN STANLEY DEAN WITTER INFORMATION FUND
PORTFOLIO OF INVESTMENTS September 30, 1998 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (93.0%)
Advertising (3.6%)
150,000 Lamar Advertising Co.*....... $ 4,143,750
180,000 Outdoor Systems, Inc.*....... 3,510,000
50,000 TMP Worldwide, Inc.*......... 1,637,500
------------
9,291,250
------------
Broadcasting (6.6%)
90,000 Clear Channel Communications,
Inc.*....................... 4,275,000
85,200 Cox Radio, Inc. (Class A)*... 2,992,650
30,000 Cumulus Media Inc. (Class
A)*......................... 243,750
130,000 Jacor Communications,
Inc.*....................... 6,573,125
65,000 Univision Communications,
Inc. (Class A)*............. 1,933,750
50,000 USA Networks, Inc.*.......... 968,750
------------
16,987,025
------------
Cable Television (6.8%)
140,000 Cablevision Systems Corp.
(Class A)*.................. 6,046,250
160,000 Tele-Communications, Inc.
(Class A)*.................. 6,260,000
140,000 Tele-Communications Liberty
Media Group (Class A)*...... 5,127,500
------------
17,433,750
------------
Cellular Telephone (0.9%)
80,000 Nextel Communications, Inc.
(Class A)*.................. 1,615,000
50,000 Powertel, Inc.*.............. 678,125
------------
2,293,125
------------
Computer Software (13.8%)
81,000 Aspect Development, Inc.*.... 3,184,313
110,000 BMC Software, Inc.*.......... 6,599,999
100,000 CBT Group PLC (ADR)
(Ireland)*.................. 1,350,000
70,000 Citrix Systems, Inc.*........ 4,970,000
90,000 Computer Associates
International, Inc. ........ 3,330,000
48,800 Entrust Technologies Inc.*... 719,800
50,000 FlexiInternational Software,
Inc.*....................... 157,813
55,000 Intuit, Inc.*................ 2,557,500
70,000 Micromuse, Inc.*............. 1,242,500
80,000 Microsoft Corp.*............. 8,804,999
30,000 Peerless Systems Corp.*...... 109,688
40,000 PeopleSoft, Inc.*............ 1,305,000
70,000 Remedy Corp.*................ 616,875
80,000 Softworks, Inc.*............. 400,000
------------
35,348,487
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
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<C> <S> <C>
Computer Software & Services (3.7%)
75,000 BroadVision, Inc.*........... $ 782,813
80,000 Lycos, Inc.*................. 2,700,000
150,000 Sterling Commerce, Inc.*..... 5,193,750
100,000 Viasoft, Inc.*............... 743,750
------------
9,420,313
------------
Computer/Video Chains (4.0%)
80,000 Dell Computer Corp.*......... 5,260,000
90,000 Tandy Corp. ................. 4,815,000
------------
10,075,000
------------
Computers - Equipment (0.1%)
15,000 Splash Technology Holdings,
Inc.*....................... 212,813
------------
Computers Communications (5.1%)
120,000 Apple Computer, Inc.*........ 4,575,000
130,000 Cisco Systems, Inc.*......... 8,035,625
60,000 Pairgain Technologies,
Inc.*....................... 483,750
------------
13,094,375
------------
Computers - Services (1.7%)
80,000 Computer Sciences Corp.*..... 4,360,000
------------
Diversified Commercial Services (0.4%)
50,000 Cambridge Technology
Partners, Inc.*............. 1,112,500
------------
E.D.P. Peripherals (1.2%)
20,000 EMC Corp.*................... 1,143,750
80,000 Storage Technology Corp.*.... 2,035,000
------------
3,178,750
------------
E.D.P. Services (3.8%)
120,000 4Front Technologies, Inc.*... 1,020,000
40,000 ISS Group, Inc.*............. 1,255,000
177,000 Keane, Inc.*................. 6,217,125
30,000 The BISYS Group, Inc.*....... 1,306,875
------------
9,799,000
------------
Electrical & Electronics (0.7%)
100,000 Teradyne, Inc.*.............. 1,825,000
------------
Electrical Products (0.7%)
40,000 Micrel, Inc.*................ 1,060,000
25,000 Oak Industries, Inc.*........ 675,000
------------
1,735,000
------------
Electronic Components (0.6%)
144,500 Anaren Microwave, Inc.*...... 1,652,719
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
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MORGAN STANLEY DEAN WITTER INFORMATION FUND
PORTFOLIO OF INVESTMENTS September 30, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
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<C> <S> <C>
Electronic Data Processing (2.6%)
185,000 Compaq Computer Corp. ....... $ 5,850,625
30,000 Unisys Corp.*................ 682,500
------------
6,533,125
------------
Electronic Production Equipment (0.0%)
10,000 Semitool, Inc.*.............. 57,500
------------
Electronics - Semiconductors (0.3%)
50,000 TranSwitch Corp.*............ 731,250
------------
Electronics - Semiconductors/
Components (2.1%)
70,000 Linear Technology Corp. ..... 3,500,000
60,000 Micron Technology, Inc.*..... 1,826,250
------------
5,326,250
------------
Engineering & Construction (0.3%)
25,000 Metromedia Fiber Network,
Inc. (Class A)*............. 812,500
------------
Health Care - Drugs (1.5%)
30,000 Merck & Co., Inc. ........... 3,886,875
------------
Internet (7.3%)
120,000 America Online, Inc.*........ 13,349,999
60,000 Verio, Inc.*................. 1,470,000
30,000 Yahoo! Inc.*................. 3,883,125
------------
18,703,124
------------
Major Pharmaceuticals (0.3%)
40,000 Incyte Pharmaceuticals,
Inc.*....................... 840,000
------------
Major U.S. Telecommunications (6.1%)
100,000 Lucent Technologies, Inc. ... 6,906,250
130,000 MCI Worldcom, Inc.*.......... 6,353,750
100,000 Omnipoint Corp.*............. 743,750
60,000 WinStar Communications,
Inc.*....................... 1,425,000
------------
15,428,750
------------
Office/Plant Automation (0.4%)
120,000 Manugistics Group, Inc.*..... 1,140,000
------------
Oil Related (0.7%)
100,000 Veritas DGC Inc.*............ 1,668,750
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Other Telecommunications (4.2%)
100,000 COLT Telecom Group PLC (ADR)
(United Kingdom)*........... $ 3,350,000
135,000 Hyperion Telecommunications,
Inc.*....................... 784,688
110,000 Intermedia Communications,
Inc.*....................... 2,695,000
110,000 Premiere Technologies,
Inc.*....................... 515,625
70,000 Qwest Communications
International, Inc.*........ 2,178,750
50,000 RSL Communications, Ltd.
(Class A)*.................. 1,328,125
------------
10,852,188
------------
Precision Instruments (0.5%)
95,000 Newport Corp. ............... 1,318,125
------------
Recreational Products/Toys (2.6%)
150,000 Electronic Arts, Inc.*....... 6,590,625
------------
Semiconductor Capital (0.6%)
40,000 Uniphase Corp.*.............. 1,630,000
------------
Semiconductors (5.9%)
40,000 Broadcom Corp. (Class A)*.... 2,830,000
70,000 Intel Corp. ................. 6,002,500
60,000 Microchip Technology,
Inc.*....................... 1,305,000
50,000 PMC-Sierra, Inc. (Canada)*... 1,575,000
140,000 Vitesse Semiconductor
Corp.*...................... 3,290,000
------------
15,002,500
------------
Services to the Health Industry (0.9%)
60,000 HBO & Co. ................... 1,732,500
70,000 Mecon, Inc.*................. 525,000
------------
2,257,500
------------
Telecommunication Equipment (3.0%)
320,000 Advanced Fibre
Communications, Inc.*....... 2,180,000
70,000 ANTEC Corp.*................. 1,076,250
80,000 Digital Microwave Corp.*..... 240,000
30,000 General Instrument Corp.*.... 648,750
10,000 Natural Microsystems
Corp.*...................... 103,750
60,000 Tekelec*..................... 907,500
90,000 Visual Networks, Inc.*....... 2,430,000
------------
7,586,250
------------
TOTAL COMMON STOCKS
(Identified Cost
$223,653,817)................ 238,184,419
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
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MORGAN STANLEY DEAN WITTER INFORMATION FUND
PORTFOLIO OF INVESTMENTS September 30, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
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<C> <S> <C>
SHORT-TERM INVESTMENT (a) (3.8%)
U.S. GOVERNMENT AGENCY
$ 9,600 Federal Home Loan Mortgage
Corp. 5.38% due 10/01/98
(Amortized Cost
$9,600,000)................. $ 9,600,000
------------
TOTAL INVESTMENTS
(Identified Cost $233,253,817) (b).. 96.8% 247,784,419
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES.............. 3.2 8,252,032
----- ------------
NET ASSETS....................... 100.0% $256,036,451
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ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The
interest rate shown has been adjusted to reflect
a money market equivalent yield.
(b) The aggregate cost for federal income tax
purposes approximates identified cost. The
aggregate gross unrealized appreciation is
$29,249,674 and the aggregate gross unrealized
depreciation is $14,719,072, resulting in net
unrealized appreciation of $14,530,602.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER INFORMATION FUND
FINANCIAL STATEMENTS
<TABLE>
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STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $233,253,817)............................. $247,784,419
Cash........................................................ 288,450
Receivable for:
Investments sold........................................ 20,444,940
Shares of beneficial interest sold...................... 486,378
Dividends............................................... 29,175
Interest................................................ 8,725
Deferred organizational expenses............................ 77,469
Prepaid expenses and other assets........................... 163,528
------------
TOTAL ASSETS............................................ 269,283,084
------------
LIABILITIES:
Payable for:
Investments purchased................................... 12,667,187
Plan of distribution fee................................ 227,063
Investment management fee............................... 152,674
Shares of beneficial interest repurchased............... 144,702
Accrued expenses............................................ 55,007
------------
TOTAL LIABILITIES....................................... 13,246,633
------------
NET ASSETS.............................................. $256,036,451
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $211,010,978
Net unrealized appreciation................................. 14,530,602
Accumulated net investment loss............................. (2,028,535)
Accumulated undistributed net realized gain................. 32,523,406
------------
NET ASSETS.............................................. $256,036,451
============
CLASS A SHARES:
Net Assets.................................................. $388,125
Shares Outstanding (unlimited authorized, $.01 par value)... 30,744
NET ASSET VALUE PER SHARE............................... $12.62
======
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value)........ $13.32
======
CLASS B SHARES:
Net Assets.................................................. $253,523,720
Shares Outstanding (unlimited authorized, $.01 par value)... 20,270,078
NET ASSET VALUE PER SHARE............................... $12.51
======
CLASS C SHARES:
Net Assets.................................................. $947,064
Shares Outstanding (unlimited authorized, $.01 par value)... 75,706
NET ASSET VALUE PER SHARE............................... $12.51
======
CLASS D SHARES:
Net Assets.................................................. $1,177,542
Shares Outstanding (unlimited authorized, $.01 par value)... 93,005
NET ASSET VALUE PER SHARE............................... $12.66
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER INFORMATION FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended September 30, 1998 (unaudited)
NET INVESTMENT INCOME:
INCOME
Interest.................................................... $ 490,117
Dividends (net of $14,037 foreign withholding tax).......... 160,895
------------
TOTAL INCOME............................................ 651,012
------------
EXPENSES
Plan of distribution fee (Class A shares)................... 371
Plan of distribution fee (Class B shares)................... 1,293,583
Plan of distribution fee (Class C shares)................... 3,498
Investment management fee................................... 1,006,138
Transfer agent fees and expenses............................ 235,291
Registration fees........................................... 34,482
Shareholder reports and notices............................. 30,404
Professional fees........................................... 26,287
Custodian fees.............................................. 18,626
Organizational expenses..................................... 17,969
Trustees' fees and expenses................................. 6,392
Other....................................................... 6,413
------------
TOTAL EXPENSES.......................................... 2,679,454
------------
NET INVESTMENT LOSS..................................... (2,028,442)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 34,130,897
Net change in unrealized appreciation....................... (47,305,127)
------------
NET LOSS................................................ (13,174,230)
------------
NET DECREASE................................................ $(15,202,672)
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER INFORMATION FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, 1998 MARCH 31, 1998*
- ------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss................................. $ (2,028,442) $ (3,690,258)
Net realized gain................................... 34,130,897 47,488,489
Net change in unrealized
appreciation/depreciation.......................... (47,305,127) 61,837,292
------------ ------------
NET INCREASE (DECREASE)......................... (15,202,672) 105,635,523
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED
GAIN:
Class A shares...................................... (13,614) --
Class B shares...................................... (13,911,735) --
Class C shares...................................... (36,815) --
Class D shares...................................... (2,446) --
------------ ------------
TOTAL DISTRIBUTIONS............................. (13,964,610) --
------------ ------------
Net increase (decrease) from transactions in shares
of beneficial interest............................. 15,901,119 (50,059,140)
------------ ------------
NET INCREASE (DECREASE)......................... (13,266,163) 55,576,383
NET ASSETS:
Beginning of period................................. 269,302,614 213,726,231
------------ ------------
END OF PERIOD
(Including net investment losses of $2,028,535
and $93, respectively).......................... $256,036,451 $269,302,614
============ ============
</TABLE>
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* Class A, Class C and Class D shares were issued July, 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER INFORMATION FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1998 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Information Fund (the "Fund"), formerly Dean Witter
Information 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 long-term capital appreciation. The Fund
seeks to achieve its investment objective by investing primarily in common
stocks and securities convertible into common stocks of domestic and foreign
companies which are involved in the communications and information industry. The
Fund was organized as a Massachusetts business trust on December 8, 1994 and
commenced operations on November 28, 1995. On July 28, 1997, the Fund commenced
offering three additional classes of shares, with the then current shares
designated as, Class B shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price (in
cases where securities are traded on more than one exchange; the 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"), 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; and (4) short-term debt
securities having a maturity date of more than sixty days at time of
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER INFORMATION FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1998 (unaudited) continued
purchase are valued on a mark-to-market basis until sixty days prior to maturity
and thereafter at amortized cost based on their value on the 61st day.
Short-term debt securities having a maturity date of sixty days or less at the
time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date
except for certain dividends on foreign securities which are recorded as soon as
the Fund is informed after the ex-dividend date. Discounts are accreted over the
life of the respective securities. Interest income is accrued daily.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
D. FOREIGN CURRENCY TRANSLATION -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value of
investment securities, other assets and liabilities and forward foreign currency
contracts are translated at the exchange rates prevailing at the end of the
period; and (2) purchases, sales, income and expenses are translated at the
exchange rates prevailing on the respective dates of such transactions. The
resultant exchange gains and losses are included in the Statement of Operations
as realized and unrealized gain/loss on foreign exchange transactions. Pursuant
to U.S. Federal income tax regulations, certain foreign exchange gains/losses
included in realized and unrealized gain/loss are included in or are a reduction
of ordinary income for federal income tax purposes. The Fund does not isolate
that portion of the results of operations arising as a result of changes in the
foreign exchange rates from the changes in the market prices of the securities.
E. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund may enter into forward foreign
currency contracts which are valued daily at the appropriate exchange rates. The
resultant unrealized exchange gains and losses are included in the Statement of
Operations as unrealized foreign currency gain or loss and in the Statement of
Assets and Liabilities as part of the related foreign currency denominated asset
or liability. The Fund records realized gains or losses on delivery of the
currency or at the time the forward contract is extinguished (compensated) by
entering into a closing transaction prior to delivery.
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER INFORMATION FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1998 (unaudited) continued
F. 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.
G. 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.
H. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $179,000 which have been
reimbursed for the full amount thereof. Such expenses have been deferred and are
being amortized on the straight-line method over a period not to exceed five
years from commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
following annual rates to the net assets of the Fund determined as of the close
of each business day: 0.75% to the portion of daily net assets not exceeding
$500 million; and 0.725% to the portion of daily net assets exceeding $500
million.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
11
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MORGAN STANLEY DEAN WITTER INFORMATION FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1998 (unaudited) continued
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A -- up
to 0.25% of the average daily net assets of Class A; (ii) Class B -- 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Class B shares
since the inception of the Fund (not including reinvestment of dividend or
capital gain distributions) less the average daily aggregate net asset value of
the Class B shares redeemed since the Fund's inception upon which a contingent
deferred sales charge has been imposed or waived; or (b) the average daily net
assets of Class B; and (iii) Class C -- up to 1.0% of the average daily net
assets of Class C. In the case of Class A shares, amounts paid under the Plan
are paid to the Distributor for services provided. In the case of Class B and
Class C shares, amounts paid under the Plan are paid to the Distributor for (1)
services provided and the expenses borne by it and others in the distribution of
the shares of these Classes, including the payment of commissions for sales of
these Classes and incentive compensation to, and expenses of, Morgan Stanley
Dean Witter Financial Advisors and others who engage in or support distribution
of the shares or who service shareholder accounts, including overhead and
telephone expenses; (2) printing and distribution of 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 $11,920,908 at September 30, 1998.
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER INFORMATION FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1998 (unaudited) continued
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the six months ended September 30, 1998, the distribution fee
was accrued for Class A shares and Class C shares at the annual rate of 0.25%
and 1.0%, respectively.
The Distributor has informed the Fund that for the six months ended September
30, 1998, it received contingent deferred sales charges from certain redemptions
of the Fund's Class B shares and Class C shares of $292,215 and $821,
respectively and received $7,110 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 of portfolio securities, excluding
short-term investments, for the six months ended September 30, 1998 aggregated
$548,485,733, and $561,788,759, respectively.
For the six months ended September 30, 1998, the Fund incurred brokerage
commissions of $29,685 with DWR for portfolio transactions executed on behalf of
the Fund. At September 30, 1998, the Fund's receivable for investments sold
included unsettled trades with DWR of $481,984.
For the six months ended September 30, 1998, the Fund incurred brokerage
commissions of $38,527 with Morgan Stanley & Co., Inc., an affiliate of the
Investment Manager and Distributor, for portfolio transactions executed on
behalf of the Fund. At September 30, 1998, the Fund's receivable for investments
sold and payable for investments purchased included unsettled trades with Morgan
Stanley & Co., Inc. of $2,197,271 and $4,534,000, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At September 30, 1998, the Fund had
transfer agent fees and expenses payable of approximately $7,800.
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER INFORMATION FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1998 (unaudited) continued
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, 1998 MARCH 31, 1998*
------------------------- -------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold........................................................ 15,190 $ 204,689 15,349 $ 178,877
Reinvestment of distributions............................... 962 12,987 -- --
Redeemed.................................................... (89) (1,231) (667) (8,097)
---------- ------------ ---------- ------------
Net increase -- Class A..................................... 16,063 216,445 14,682 170,780
---------- ------------ ---------- ------------
CLASS B SHARES
Sold........................................................ 4,731,522 64,882,962 3,649,152 42,792,430
Reinvestment of distributions............................... 980,810 13,152,680 -- --
Redeemed.................................................... (4,622,563) (63,008,217) (8,387,989) (94,589,565)
---------- ------------ ---------- ------------
Net increase (decrease) -- Class B.......................... 1,089,769 15,027,425 (4,738,837) (51,797,135)
---------- ------------ ---------- ------------
CLASS C SHARES
Sold........................................................ 70,714 968,500 19,252 242,097
Reinvestment of distributions............................... 2,628 35,238 -- --
Redeemed.................................................... (15,475) (199,856) (1,413) (17,311)
---------- ------------ ---------- ------------
Net increase -- Class C..................................... 57,867 803,882 17,839 224,786
---------- ------------ ---------- ------------
CLASS D SHARES
Sold........................................................ 110,064 1,499,715 104,357 1,342,429
Reinvestment of distributions............................... 168 2,274 -- --
Redeemed.................................................... (121,585) (1,648,622) -- --
---------- ------------ ---------- ------------
Net increase (decrease) -- Class D.......................... (11,353) (146,633) 104,357 1,342,429
---------- ------------ ---------- ------------
Net increase (decrease) in Fund............................. 1,152,346 $ 15,901,119 (4,601,959) $(50,059,140)
========== ============ ========== ============
</TABLE>
- ---------------------
* For Class A, C and D shares, for the period July 28, 1997 (issue date) through
March 31, 1998.
6. FEDERAL INCOME TAX STATUS
As of March 31, 1998, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales.
14
<PAGE> 15
MORGAN STANLEY DEAN WITTER INFORMATION FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1998 (unaudited) continued
7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into forward foreign currency contracts ("forward contracts")
to facilitate settlement of foreign currency denominated portfolio transactions
or to manage foreign currency exposure associated with foreign currency
denominated securities.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Fund bears the risk of
an unfavorable change in the foreign exchange rates underlying the forward
contracts. Risks may also arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their contracts.
At September 30, 1998, there were no outstanding forward foreign currency
contracts.
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER INFORMATION FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR FOR THE YEAR NOVEMBER 28, 1995*
MONTHS ENDED ENDED ENDED THROUGH
SEPTEMBER 30, 1998++ MARCH 31, 1998**++ MARCH 31, 1997 MARCH 31, 1996
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........ $13.94 $ 8.94 $10.67 $10.00
------ ------ ------ ------
Net investment loss......................... (0.10) (0.18) (0.13) (0.01)
Net realized and unrealized gain (loss)..... (0.61) 5.18 (1.60) 0.69
------ ------ ------ ------
Total from investment operations............ (0.71) 5.00 (1.73) 0.68
------ ------ ------ ------
Less dividends and distributions:
In excess of net investment income......... -- -- -- (0.01)
From net realized gain..................... (0.72) -- -- --
------ ------ ------ ------
Total dividends and distributions........... (0.72) -- -- (0.01)
------ ------ ------ ------
Net asset value, end of period.............. $12.51 $13.94 $ 8.94 $10.67
====== ====== ====== ======
TOTAL INVESTMENT RETURN+.................... (5.42)%(1) 56.10 % (16.31)% 6.77 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................... 2.00 %(2)(3) 2.05 % 2.01 % 2.31 %(2)
Net investment loss......................... (1.51)%(2)(3) (1.54)% (1.16)% (0.51)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..... $253,524 $267,384 $213,726 $207,321
Portfolio turnover rate..................... 225 %(1) 218 % 132 % 8 %(1)
</TABLE>
- ---------------------
* Commencement of operations.
** Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE> 17
MORGAN STANLEY DEAN WITTER INFORMATION FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 28, 1997*
MONTHS ENDED THROUGH
SEPTEMBER 30, 1998++ MARCH 31, 1998++
- -----------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $14.02 $11.43
------ ------
Net investment loss......................................... (0.05) (0.08)
Net realized and unrealized gain (loss)..................... (0.63) 2.67
------ ------
Total from investment operations............................ (0.68) 2.59
------ ------
Less distributions from net realized gain................... (0.72) --
------ ------
Net asset value, end of period.............................. $12.62 $14.02
====== ======
TOTAL INVESTMENT RETURN+.................................... (5.09)%(1) 22.66 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.28 %(2)(3) 1.27 %(2)
Net investment loss......................................... (0.79)%(2)(3) (0.93)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $388 $206
Portfolio turnover rate..................................... 225 %(1) 218 %
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $13.94 $11.43
------ ------
Net investment loss......................................... (0.10) (0.14)
Net realized and unrealized gain (loss)..................... (0.61) 2.65
------ ------
Total from investment operations............................ (0.71) 2.51
------ ------
Less distributions from net realized gain................... (0.72) --
------ ------
Net asset value, end of period.............................. $12.51 $13.94
====== ======
TOTAL INVESTMENT RETURN+.................................... (5.42)%(1) 21.96 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 2.03 %(2)(3) 2.05 %(2)
Net investment loss......................................... (1.54)%(2)(3) (1.72)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $947 $249
Portfolio turnover rate..................................... 225 %(1) 218 %
</TABLE>
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE> 18
MORGAN STANLEY DEAN WITTER INFORMATION FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 28, 1997*
MONTHS ENDED THROUGH
SEPTEMBER 30, 1998++ MARCH 31, 1998++
- ---------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $14.03 $11.43
------ ------
Net investment loss......................................... (0.03) (0.07)
Net realized and unrealized gain (loss)..................... (0.62) 2.67
------ ------
Total from investment operations............................ (0.65) 2.60
------ ------
Less distributions from net realized gain................... (0.72) --
------ ------
Net asset value, end of period.............................. $12.66 $14.03
====== ======
TOTAL INVESTMENT RETURN+.................................... (4.94)%(1) 22.75 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.03 %(2)(3) 1.04 %(2)
Net investment loss......................................... (0.54)%(2)(3) (0.82)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $1,178 $1,464
Portfolio turnover rate..................................... 225 %(1) 218 %
</TABLE>
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE> 19
(This Page Intentionally Left Blank)
<PAGE> 20
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
George Paoletti
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the records of the
Fund without examination by the independent accountants and accordingly they do
not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of the
Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
MORGAN STANLEY
DEAN WITTER
INFORMATION FUND
[GRAPHIC]
SEMIANNUAL REPORT
SEPTEMBER 30, 1998
