<PAGE> 1
DEAN WITTER UTILITIES FUND Two World Trade Center, New York, New York 10048
LETTER TO THE SHAREHOLDERS June 30, 1996
DEAR SHAREHOLDER:
The constant pressure on interest rates throughout the first half of 1996,
combined with the general uncertainty that continues to prevail surrounding the
deregulation and forthcoming competition within various industry sectors of
utilities were the dominant factors impacting the performance of Dean Witter
Utilities Fund.
AN OVERVIEW OF THE UTILITIES SECTOR
Over the first half of 1996, the overall strength of the economy, the threat of
inflation and the prevailing uncertainty surrounding the transition from
monopoly to open competition tempered the attraction of utilities to investors.
While the electric utility industry continued to receive favorable directives by
government regulators regarding their "financial formula" to competition, the
degree of generalities and lack of detail has kept investors at bay and
generally insecure with regard to dividend growth and safety. Over the second
half of the year, we expect more state regulatory agencies to formally announce
their plans to introduce electric power competition within their respective
borders. These plans should entail few surprises regarding the timing and
operating market structure.
Meanwhile within the telecommunications industry, new legislation has been
passed that should prompt widespread competition domestically and globally.
However, the market has been in a quandary due to mixed interpretation of the
legislation, particularly as to how it affects the relative competitive posture
of the local and long-distance companies. During the third quarter of 1996, some
clarification and direction is expected to be provided by the Federal
Communications Commission. This should relieve much of the impasse that has
confronted telecom investors.
Natural gas stocks, specifically the integrated pipelines and selective
producers, benefitted from strong commodity prices during the first six months
of 1996. As the fundamental outlook for the industry strengthens
<PAGE> 2
DEAN WITTER UTILITIES FUND
LETTER TO THE SHAREHOLDERS June 30, 1996, continued
and becomes more visible, we expect additional enthusiasm for the pipeline,
producers and gatherer sectors of the natural gas industry to develop.
PERFORMANCE AND PORTFOLIO
Against this mixed backdrop, Dean Witter Utilities Fund produced a total return
of 0.64 percent for the six month period ended June 30, 1996. During the period,
the Fund paid income distributions totaling $0.29 per share. The future level of
quarterly income distributions will be based primarily on the level of interest
rates and the portfolio's overall asset allocation strategy.
On June 30, 1996, the Fund was near fully-invested, with approximately 80
percent of the portfolio's net assets allocated to equities. While the major
portion of the Fund's equity holdings were within the electric utility sector
(52 percent), its overall allocation within the Fund continued to be reduced in
favor of selective telecommunications investments. A diverse portfolio of
foreign securities accounted for 9 percent of the Fund's net assets with a focus
on telecommunications.
Fixed-income investments accounted for 19 percent of the Fund's net assets, with
the remainder held in cash equivalents. The Fund's fixed-income holdings, which
have been negatively impacted by higher interest rates, had a weighted average
rating of "A3" and "A-", as measured by Moody's Investors Services Inc. and
Standard & Poor's Corporation, respectively.
Among the Fund's largest holdings on June 30, 1996 were AT&T Corp., Ameritech
Corp. and GTE Corp. (telecommunications); CINergy Corp., Southern Co. and Texas
Utilities Co. (electric utilities); and Enron Corp. and the Williams Companies,
Inc. (natural gas). Included among the Fund's major foreign holdings are Telecom
Corporation of New Zealand Ltd., Telefonica Espana S.A. and Empresa Nacional de
Electricidad S.A.
LOOKING AHEAD
For the balance of 1996, we anticipate maintaining an overall asset allocation
at or near current levels, while continuing to further emphasize the telecom
sector within the Fund's equity component. Given the Fund's 20 percent net asset
cap on foreign investments, it is expected that the non-U.S. equity allocation
will continue to grow over time. We believe the Fund is well positioned to take
advantage of the opportunities created as worldwide restructuring, alliances,
broad-based competition and deregulation progress throughout the utilities and
related industries. In addition, through selective domestic-based and foreign
investments, the Fund should also benefit as foreign markets move toward greater
privatization and accompanying infrastructure expansion.
<PAGE> 3
DEAN WITTER UTILITIES FUND
LETTER TO THE SHAREHOLDERS June 30, 1996, continued
We appreciate your support of Dean Witter Utilities Fund and look forward to
serving your future investment needs and objectives.
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO
- --------------------------
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE> 4
DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (79.7%)
Natural Gas (10.3%)
680,000 AGL Resources, Inc. .................................... $ 12,835,000
390,000 Burlington Resources, Inc. ............................. 16,770,000
500,000 Coastal Corp. .......................................... 20,875,000
350,000 Consolidated Natural Gas Co. ........................... 18,287,500
590,000 El Paso Natural Gas Co. ................................ 22,715,000
940,000 Enron Corp. ............................................ 38,422,500
530,000 ENSERCH Corp. .......................................... 11,527,500
250,000 Louisiana Land & Exploration Co. (The).................. 14,406,250
235,000 New Jersey Resources Corp. ............................. 6,756,250
695,000 PanEnergy Corp. ........................................ 22,848,125
450,000 Sonat, Inc. ............................................ 20,250,000
750,000 Tenneco, Inc. .......................................... 38,343,750
285,000 Washington Gas Light Co. ............................... 6,270,000
1,130,000 Williams Companies, Inc. ............................... 55,935,000
-----------
306,241,875
-----------
Telecommunications (28.2%)
305,000 360 Communications Co.*................................. 7,320,000
765,000 Airtouch Communications, Inc.*.......................... 21,611,250
1,195,000 Alltel Corp. ........................................... 36,746,250
1,035,000 Ameritech Corp. ........................................ 61,453,125
1,000,000 AT&T Corp. ............................................. 62,000,000
660,000 BCE, Inc. (Canada)...................................... 26,070,000
515,000 Bell Atlantic Corp. .................................... 32,831,250
920,000 BellSouth Corp. ........................................ 38,985,000
305,000 British Telecommunications PLC (ADR) (United Kingdom)... 16,393,750
225,000 Cable & Wireless PLC (ADR) (United Kingdom)............. 4,443,750
590,000 Century Telephone Enterprises, Inc. .................... 18,806,250
100,000 Compania de Telefonos de Chile S.A. (ADR) (Chile)....... 9,812,500
800,000 Comsat Corp. ........................................... 20,800,000
770,000 Ericsson (L.M.) Telephone Co. AB (ADR) (Sweden)......... 16,458,750
960,000 Frontier Corp. ......................................... 29,400,000
1,050,000 GTE Corp. .............................................. 46,987,500
1,070,000 Hong Kong Telecommunications, Ltd. (ADR) (Hong Kong).... 19,260,000
1,555,000 MCI Communications Corp. ............................... 39,652,500
130,000 Motorola, Inc. ......................................... 8,173,750
1,165,000 NYNEX Corp. ............................................ 55,337,500
475,000 Pacific Telesis Group................................... 16,031,250
230,000 Philippine Long Distance Telephone Co. (ADR)
(Philippines)........................................... 13,368,750
965,000 SBC Communications, Inc. ............................... 47,526,250
895,000 Sprint Corp. ........................................... 37,590,000
370,000 Telecom Corporation of New Zealand Ltd. (ADR)
(New Zealand)........................................... 24,697,500
380,000 Telefonica de Argentina S.A. (ADR) (Argentina).......... 11,257,500
665,000 Telefonica Espana S.A. (ADR) (Spain).................... 36,658,125
505,000 Telefonos de Mexico S.A. de C.V. (Series L) (ADR)
(Mexico)................................................ 16,917,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 5
DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------
<C> <S> <C>
825,000 U.S. West Communications Group.......................... $ 26,296,875
755,000 U.S. West Media Group*.................................. 13,778,750
285,000 Vodafone Group PLC (ADR) (United Kingdom)............... 10,509,375
186,000 WorldCom, Inc.*......................................... 10,276,500
-----------
837,451,500
-----------
Utilities - Electric (41.2%)
1,255,000 Allegheny Power Systems, Inc. .......................... 38,748,125
670,000 American Electric Power Co. ............................ 28,558,750
220,000 Atlantic Energy, Inc. .................................. 4,015,000
790,000 Baltimore Gas & Electric Co. ........................... 22,416,250
610,000 Boston Edison Co. ...................................... 15,555,000
245,000 Carolina Power & Light Co. ............................. 9,310,000
860,000 Central & South West Corp. ............................. 24,940,000
1,370,470 CINergy Corp. .......................................... 43,855,040
640,000 CMS Energy Corp. ....................................... 19,760,000
685,000 Consolidated Edison Co. of New York, Inc. .............. 20,036,250
190,000 Delmarva Power & Light Co. ............................. 3,990,000
885,000 Dominion Resources, Inc. ............................... 35,400,000
1,135,000 DPL, Inc. .............................................. 27,665,625
550,000 DQE, Inc. .............................................. 15,125,000
1,090,000 DTE Energy Co. ......................................... 33,653,750
500,000 Duke Power Co. ......................................... 25,625,000
1,585,000 Edison International.................................... 27,935,625
400,000 Empresa Nacional de Electricidad S.A. (ADR) (Spain)..... 25,050,000
210,000 Enersis S.A. (ADR) (Chile).............................. 6,510,000
1,010,000 Enova Corp. ............................................ 23,356,250
735,000 Entergy Corp. .......................................... 20,855,625
620,000 Florida Progress Corp. ................................. 21,545,000
735,000 FPL Group, Inc. ........................................ 33,810,000
1,045,000 General Public Utilities Corp. ......................... 36,836,250
1,270,000 Houston Industries, Inc. ............................... 31,273,750
930,000 Illinova Corp. ......................................... 26,737,500
930,000 Kansas City Power & Light Co. .......................... 25,575,000
645,000 Long Island Lighting Co. ............................... 10,803,750
525,000 Montana Power Co. ...................................... 11,681,250
830,000 New England Electric System............................. 30,191,250
595,000 New York State Electric & Gas Corp. .................... 14,503,125
860,000 NIPSCO Industries, Inc. ................................ 34,615,000
655,000 Northeast Utilities..................................... 8,760,625
290,000 Northern States Power Co. .............................. 14,318,750
1,015,000 Ohio Edison Co. ........................................ 22,203,125
115,000 Oklahoma Gas & Electric Co. ............................ 4,556,875
565,000 Pacific Gas & Electric Co. ............................. 13,136,250
990,000 PacifiCorp.............................................. 22,027,500
975,000 Peco Energy Co. ........................................ 25,350,000
925,000 Pinnacle West Capital Corp. ............................ 28,096,875
560,000 Portland General Corp. ................................. 17,290,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------
<C> <S> <C>
470,000 Potomac Electric Power Co. ............................. $ 12,455,000
765,000 PP&L Resources, Inc. ................................... 18,073,125
855,000 Public Service Company of Colorado...................... 31,421,250
1,030,000 Public Service Enterprise Group, Inc. .................. 28,196,250
265,000 Puget Sound Power & Light Co. .......................... 6,426,250
425,000 Rochester Gas & Electric Corp. ......................... 9,137,500
770,000 SCANA Corp. ............................................ 21,656,250
1,550,000 Southern Co. ........................................... 38,168,750
345,000 Southwestern Public Service Co. ........................ 11,255,625
425,000 Teco Energy, Inc. ...................................... 10,731,250
945,000 Texas Utilities Co. .................................... 40,398,750
955,000 Unicom Corp. ........................................... 26,620,625
920,000 Union Electric Co. ..................................... 37,030,000
525,000 Utilicorp United, Inc. ................................. 14,503,125
755,000 Washington Water Power Co. ............................. 14,061,875
-------------
1,225,808,790
-------------
TOTAL COMMON STOCKS
(Identified Cost $1,754,527,335)........................ 2,369,502,165
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (18.2%)
Natural Gas (3.4%)
$ 5,000 ANR Pipeline Co. .................. 9.625% 11/01/21 5,948,600
7,000 Arkla, Inc. ....................... 10.00 11/15/19 7,663,110
10,000 Coastal Corp. ..................... 9.625 05/15/12 11,590,900
5,000 Coastal Corp. ..................... 7.75 10/15/35 4,848,850
5,000 Colorado Interstate Gas Co. ....... 10.00 06/15/05 5,840,150
5,000 Mitchell Energy/Development
Corp. ........................... 9.25 01/15/02 5,240,000
5,100 Mitchell Energy/Development
Corp. ........................... 6.75 02/15/04 4,666,143
2,000 Norsk Hydro AS (Norway)............ 7.15 11/15/25 1,874,180
5,000 Northern Illinois Gas Co. ......... 9.00 07/01/19 5,296,400
5,000 Northwest Pipeline Corp. .......... 10.65 11/15/18 5,358,100
2,000 Northwest Pipeline Corp. .......... 9.00 08/01/22 2,114,460
9,000 Panhandle Eastern Pipeline
Corp. ........................... 7.95 03/15/23 8,706,870
3,000 Southwest Gas Corp. ............... 9.375 02/01/17 3,117,180
5,000 Tenneco, Inc. ..................... 7.25 12/15/25 4,683,050
10,000 Tennessee Gas Pipeline Co. ........ 6.00 12/15/11 8,680,200
5,000 Transco Energy Co. ................ 9.875 06/15/20 6,021,900
1,550 Transcontinental Gas Pipeline
Corp. ........................... 9.125 02/01/17 1,632,026
8,000 Williams Companies, Inc. .......... 9.375 11/15/21 9,222,400
-----------
102,504,519
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 7
DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Telecommunications (4.3%)
$ 5,000 AT&T Corp. ........................ 8.625% 12/01/31 $ 5,272,350
5,000 BellSouth Telecommunications,
Inc. ............................ 7.625 05/15/35 4,891,650
5,000 BellSouth Telecommunications,
Inc. ............................ 7.00 12/01/95 4,605,050
10,000 Century Telephone Enterprises,
Inc. ............................ 8.25 05/01/24 10,050,400
7,500 Century Telephone Enterprises,
Inc. ............................ 7.20 12/01/25 6,997,725
6,000 General Telephone & Electric
Corp. ........................... 8.50 04/01/17 6,027,240
5,000 General Telephone & Electric
Corp. ........................... 10.25 11/01/20 5,614,000
10,300 General Telephone & Electric
Corp. ........................... 7.83 05/01/23 10,070,516
5,000 GTE South Inc. .................... 7.50 03/15/26 4,803,300
3,000 MCI Communications Corp. .......... 8.25 01/20/23 3,064,500
5,000 MCI Communications Corp. .......... 7.75 03/15/24 4,897,650
5,000 Pacific Bell....................... 6.625 10/15/34 4,311,850
20,000 Southwestern Bell Telephone Co. ... 7.20 10/15/26 18,803,200
10,000 Sprint Corp. ...................... 9.25 04/15/22 11,734,000
5,000 TCI Communications, Inc. .......... 8.75 08/01/15 4,912,250
3,000 Tele-Communications, Inc. ......... 8.75 02/15/23 2,837,280
5,000 Telephone & Data Systems, Inc. .... 10.00 01/15/21 5,681,150
5,000 Telephone & Data Systems, Inc. .... 9.58 11/19/21 5,419,050
5,000 U.S. West Communications, Inc. .... 7.20 11/10/26 4,624,200
5,000 U.S. West Communications, Inc. .... 7.25 10/15/35 4,668,600
-----------
129,285,961
-----------
Utilities - Electric (10.5%)
1,499 AEP Generating Co. ................ 9.81 12/07/22 1,776,116
5,000 Arizona Public Service Co. ........ 8.00 02/01/25 4,888,700
6,000 Chugach Electric Co. .............. 9.14 03/15/22 6,499,500
5,000 Cincinnati Gas & Electric Co. ..... 7.20 10/01/23 4,608,700
5,000 Citizens Utilities Co. ............ 7.45 07/01/35 4,875,050
10,000 Commonwealth Edison Co. ........... 8.50 07/15/22 9,924,900
12,000 Consumer Power Co. ................ 7.375 09/15/23 10,996,440
4,985 CTC Mansfield Funding Corp. ....... 10.25 03/30/03 4,972,537
5,000 CTC Mansfield Funding Corp. ....... 11.125 09/30/16 5,037,500
7,000 Dayton Power & Light Co. .......... 8.15 01/15/26 7,124,390
19,783 DQU II Funding Corp. .............. 8.70 06/01/16 19,599,018
10,000 Duke Power Co. .................... 8.75 03/01/21 10,269,300
5,000 Duke Power Co. .................... 8.625 03/01/22 5,134,500
5,000 Duke Power Co. .................... 7.50 08/01/25 4,777,350
5,000 Florida Power & Light Co. ......... 7.625 06/01/24 4,817,150
10,000 Gulf States Utilities Co. ......... 8.94 01/01/22 9,791,900
5,000 Houston Light & Power Co. ......... 7.75 03/15/23 4,834,350
7,000 Indiantown Cogeneration LP......... 9.26 12/15/10 7,491,750
5,000 Long Island Lighting Co. .......... 8.90 07/15/19 4,527,550
5,100 Long Island Lighting Co. .......... 8.20 03/15/23 4,525,383
5,000 Mobile Energy SVC LLC.............. 8.665 01/01/17 4,980,550
10,100 National Cooperative Services
Corp. ........................... 9.375 01/02/11 10,459,560
5,250 National Rural Utilities
Cooperative Finance Corp......... 9.00 09/01/21 5,576,182
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,984 New York State Electric & Gas
Corp. ........................... 9.875% 02/01/20 $ 2,092,168
8,912 Niagara Mohawk Power Corp. ........ 8.77 01/01/18 8,195,297
5,000 Niagara Mohawk Power Corp. ........ 9.50 03/01/21 4,786,700
7,000 Pacific Gas & Electric Co. ........ 7.25 08/01/26 6,411,020
10,000 Pacific Gas Transmission Co. ...... 7.80 06/01/25 9,609,900
3,000 Pennsylvania Power & Light Co. .... 9.25 10/01/19 3,196,500
3,000 Philadelphia Electric Co. ......... 8.625 06/01/22 3,028,560
10,250 Public Service Company of
Colorado......................... 8.75 03/01/22 10,632,223
10,000 Selkirk Cogen Funding
Corp. - 144A**................... 8.98 06/26/12 10,008,900
4,000 South Carolina Electric Co. ....... 8.875 08/15/21 4,196,040
5,000 South Carolina Electric Co. ....... 7.50 06/15/23 4,803,650
5,000 Southern California Edison Co. .... 8.875 05/01/23 5,178,250
2,000 Systems Energy Resources, Inc. .... 11.375 09/01/16 2,148,100
10,000 Texas Utilities Electric Co. ...... 8.875 02/01/22 10,406,800
5,000 Texas Utilities Electric Co. ...... 7.875 03/01/23 4,844,150
5,000 Texas Utilities Electric Co. ...... 7.375 10/01/25 4,615,250
12,000 Union Electric Co. ................ 8.75 12/01/21 12,564,000
8,000 United Illuminating Co. ........... 10.24 01/02/20 8,130,560
8,000 Utilicorp United, Inc. ............ 9.00 11/15/21 8,158,240
10,000 Utilicorp United, Inc. ............ 8.00 03/01/23 9,624,300
5,000 Virginia Electric Power Co. ....... 8.625 10/01/24 5,275,900
10,000 Wisconsin Electric Power Co. ...... 7.70 12/15/27 9,766,000
5,000 Wisconsin Power & Light Co. ....... 8.60 03/15/27 5,221,000
-----------
310,381,884
-----------
TOTAL CORPORATE BONDS
(Identified Cost $536,639,620).............................. 542,172,364
-----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------
<C> <S> <C>
PREFERRED STOCKS (0.6%)
Telecommunications (0.2%)
200,000 GTE Delaware Corp. (Series A) $2.3125................... 5,350,000
-----------
Utilities - Electric (0.4%)
52,000 Alabama Power Capital Trust I (Series Q) $1.39.......... 1,196,000
27,965 Entergy Gulf States Utilities $9.96..................... 2,769,318
200,000 Georgia Power Capital LP (Series A) $2.25............... 5,375,000
160,000 Long Island Lighting Co. (Series AA) $1.99.............. 3,820,000
-----------
13,160,318
-----------
TOTAL PREFERRED STOCKS
(Identified Cost $18,279,444)........................... 18,510,318
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 9
DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCIES (0.2%)
$25,000 Federal National Mortgage Assoc.
(Principal Strip).................. 0.00 % 10/09/19 $ 4,539,063
769 Government National Mortgage
Assoc. ............................ 9.50 06/15/20 821,896
--------------
TOTAL U.S. GOVERNMENT AGENCIES
(Identified Cost $4,202,845)................................ 5,360,959
--------------
SHORT-TERM INVESTMENTS (0.3%)
U.S. GOVERNMENT AGENCY (a) (0.2%)
6,400 Federal Home Loan Mortgage
Corp. ............................. 5.52 07/01/96 6,399,346
--------------
REPURCHASE AGREEMENT (0.1%)
1,728 The Bank of New York (dated
06/28/96; proceeds $1,728,483;
collateralized by $1,727,689 U.S.
Treasury Note 6.00% due 08/31/97
valued at $1,762,293)
(Identified Cost $1,727,745)....... 5.125 07/01/96 1,727,745
--------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $8,127,091)................................ 8,127,091
--------------
TOTAL INVESTMENTS
(Identified Cost $2,321,776,335) (b)............... 99.0% 2,943,672,897
OTHER ASSETS IN EXCESS OF LIABILITIES................ 1.0 30,061,577
------ --------------
NET ASSETS.......................................... 100.0% $2,973,734,474
====== ==============
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(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 was
$676,564,939 and the aggregate gross unrealized depreciation was
$54,668,377, resulting in net unrealized appreciation of $621,896,562.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 10
DEAN WITTER UTILITIES FUND
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $2,321,776,335)................................... $2,943,672,897
Receivable for:
Investments sold................................................ 24,076,732
Interest........................................................ 11,571,746
Dividends....................................................... 7,980,776
Shares of beneficial interest sold.............................. 1,865,927
Prepaid expenses and other assets................................... 112,931
--------------
TOTAL ASSETS.................................................... 2,989,281,009
--------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased....................... 9,797,493
Plan of distribution fee........................................ 2,432,098
Dividends to shareholders....................................... 1,643,944
Investment management fee....................................... 1,283,269
Accrued expenses.................................................... 389,731
--------------
TOTAL LIABILITIES............................................... 15,546,535
--------------
NET ASSETS:
Paid-in-capital..................................................... 2,344,216,220
Net unrealized appreciation......................................... 621,896,562
Accumulated undistributed net investment income..................... 5,058,514
Accumulated undistributed net realized gain......................... 2,563,178
--------------
NET ASSETS...................................................... $2,973,734,474
==============
NET ASSET VALUE PER SHARE
198,914,968 shares outstanding
(unlimited shares authorized of $.01 par value).................... $14.95
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 11
DEAN WITTER UTILITIES FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1996 (unaudited)
NET INVESTMENT INCOME:
INCOME
Dividends (net of $844,825 foreign withholding tax)................... $ 55,137,466
Interest.............................................................. 28,708,835
------------
TOTAL INCOME...................................................... 83,846,301
------------
EXPENSES
Plan of distribution fee.............................................. 15,117,298
Investment management fee............................................. 8,290,496
Transfer agent fees and expenses...................................... 1,407,454
Custodian fees........................................................ 99,568
Shareholder reports and notices....................................... 87,297
Professional fees..................................................... 23,665
Registration fees..................................................... 23,481
Trustees' fees and expenses........................................... 8,075
Other................................................................. 42,456
------------
TOTAL EXPENSES.................................................... 25,099,790
------------
NET INVESTMENT INCOME............................................. 58,746,511
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain..................................................... 10,787,395
Net change in unrealized appreciation................................. (56,391,905)
------------
NET LOSS.......................................................... (45,604,510)
------------
NET INCREASE.......................................................... $ 13,142,001
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 12
DEAN WITTER UTILITIES FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 1996 DECEMBER 31, 1995
- -------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.............................. $ 58,746,511 $ 126,947,362
Net realized gain.................................. 10,787,395 23,150,960
Net change in unrealized appreciation.............. (56,391,905) 608,846,502
-------------- --------------
NET INCREASE................................... 13,142,001 758,944,824
Dividends from net investment income............... (59,596,912) (127,913,235)
Net decrease from transactions in shares of
beneficial interest............................... (300,681,863) (137,151,642)
-------------- --------------
TOTAL INCREASE (DECREASE)...................... (347,136,774) 493,879,947
NET ASSETS:
Beginning of period................................ 3,320,871,248 2,826,991,301
-------------- --------------
END OF PERIOD
(Including undistributed net investment income
of $5,058,514 and $5,908,915, respectively).... $2,973,734,474 $3,320,871,248
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 13
DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1996 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Utilities Fund (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a diversified, open-end
management investment company. The Fund's investment objective is to provide
current income and long-term growth of income and capital. The Fund seeks to
achieve its objective by investing primarily in equity and fixed income
securities of companies engaged in the public utilities industry. The Fund was
organized as a Massachusetts business trust on December 8, 1987 and commenced
operations on April 29, 1988.
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 or American 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; (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, 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; (4) certain of
the Fund's portfolio securities may be valued by an outside pricing service
approved by the Trustees. The pricing service utilizes 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 portfolio 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 amortized over the life of the respective securities. Dividend
income and other distributions are recorded on the ex-dividend date. Interest
income is accrued daily.
<PAGE> 14
DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1996 (unaudited) continued
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the record 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.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Fund pays the Investment Manager a
management fee, accrued daily and payable monthly, by applying the annual rate
of 0.65% to the portion of daily net assets not exceeding $500 million; 0.55% to
the portion of daily net assets exceeding $500 million but not exceeding $1
billion; 0.525% to the portion of daily net assets exceeding $1 billion but not
exceeding $1.5 billion; 0.50% to the portion of daily net assets exceeding $1.5
billion but not exceeding $2.5 billion; 0.475% to the portion of daily net
assets exceeding $2.5 billion but not exceeding $3.5 billion; 0.45% to the
portion of daily net assets exceeding $3.5 billion but not exceeding $5 billion;
and 0.425% to the portion of daily net assets exceeding $5 billion.
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.
<PAGE> 15
DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1996 (unaudited) continued
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act pursuant
to which the Fund pays the Distributor compensation, accrued daily and payable
monthly, at an annual rate of 1.0% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's shares since the Fund's inception (not
including reinvestment of dividend or capital gain distributions) less the
average daily aggregate net asset value of the Fund's shares redeemed since the
Fund's inception upon which a contingent deferred sales charge has been imposed
or upon which such charge has been waived; or (b) the Fund's average daily net
assets. Amounts paid under the Plan are paid to the Distributor to compensate it
for the services provided and the expenses borne by it and others in the
distribution of the Fund's shares, including the payment of commissions for
sales of the Fund's shares and incentive compensation to, and expenses of,
account executives of Dean Witter Reynolds Inc. ("DWR"), an affiliate of the
Investment Manager and Distributor, and other employees or selected
broker-dealers, who engage in or support distribution of the Fund's shares or
who service shareholder accounts, including overhead and telephone expenses,
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may be compensated under the Plan for
its opportunity costs in advancing such amounts which compensation would be in
the form of a carrying charge on any unreimbursed expenses by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred but
not yet recovered may be recovered through future distribution fees from the
Fund and contingent deferred sales charges from the Fund's shareholders.
The Distributor has informed the Fund that for the six months ended June 30,
1996, it received approximately $2,851,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares.
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 June 30, 1996 aggregated
$139,939,387 and $411,831,824, respectively. Included in the aforementioned are
purchases and sales of U.S. Government securities of $31,334,729 and
$51,080,967, respectively.
<PAGE> 16
DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1996 (unaudited) continued
For the six months ended June 30, 1996, the Fund incurred approximately $76,000
in brokerage commissions with DWR for portfolio transactions executed on behalf
of the Fund.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At June 30, 1996, the Fund had
transfer agent fees and expenses payable of approximately $206,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the six months ended June 30, 1996
included in Trustees' fees and expenses in the Statement of Operations amounted
to $81. At June 30, 1996, the Fund had an accrued pension liability of $49,641
which is included in accrued expenses in the Statement of Assets and
Liabilities.
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
JUNE 30, 1996 DECEMBER 31, 1995
----------------------------- -----------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold...................................................... 12,371,544 $ 186,013,616 35,158,052 $ 482,155,919
Reinvestment of dividends................................. 3,234,950 47,450,259 7,381,506 101,941,449
----------- ------------- ----------- -------------
15,606,494 233,463,875 42,539,558 584,097,368
Repurchased............................................... (35,927,692) (534,145,738) (53,056,841) (721,249,010)
----------- ------------- ----------- -------------
Net decrease.............................................. (20,321,198) $(300,681,863) (10,517,283) $(137,151,642)
=========== ============= =========== =============
</TABLE>
6. FEDERAL INCOME TAX STATUS
At December 31, 1995, the Fund had a net capital loss carryover of approximately
$6,042,000 which will be available through December 31, 2002 to offset future
capital gains to the extent provided by regulations. During the year ended
December 31, 1995, the Fund utilized approximately $8,513,000 of its net capital
loss carryover. As of December 31, 1995, the Fund had temporary book/tax
differences primarily attributable to capital loss deferrals on wash sales.
<PAGE> 17
DEAN WITTER UTILITIES FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31
JUNE 30, -------------------------------------------------
1996 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...................... $15.15 $12.30 $14.34 $13.37 $12.93 $11.48
------- ------ ------ ------ ------- ------
Net investment income..................................... 0.29 0.58 0.63 0.61 0.63 0.65
Net realized and unrealized gain (loss)................... (0.20) 2.85 (2.04) 1.09 0.47 1.45
------- ------ ------ ------ ------- ------
Total from investment operations.......................... 0.09 3.43 (1.41) 1.70 1.10 2.10
------- ------ ------ ------ ------- ------
Less dividends and distributions from:
Net investment income.................................. (0.29) (0.58) (0.61) (0.61) (0.63) (0.65)
Net realized gain...................................... -- -- (0.02) (0.12) (0.03) --
------- ------ ------ ------ ------- ------
Total dividends and distributions......................... (0.29) (0.58) (0.63) (0.73) (0.66) (0.65)
------- ------ ------ ------ ------- ------
Net asset value, end of period............................ $14.95 $15.15 $12.30 $14.34 $13.37 $12.93
======= ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN+.................................. 0.64%(1) 28.42% (9.90)% 12.79% 8.75% 18.89%
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................. 1.61%(2) 1.65% 1.64% 1.46% 1.59% 1.59%
Net investment income..................................... 3.76%(2) 4.19% 4.67% 4.32% 5.05% 5.58%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions.................... $2,974 $3,321 $2,827 $3,881 $2,926 $1,959
Portfolio turnover rate................................... 5%(1) 9% 11% 16% 14% 13%
Average commission rate paid.............................. $0.0544 -- -- -- -- --
</TABLE>
- ---------------------
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 18
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<PAGE> 19
(This page has been left blank intentionally.)
<PAGE> 20
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice-President, Secretary and General Counsel
Edward F. Gaylor
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center--Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, 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 preceeded or accompanied by an effective prospectus.
DEAN WITTER
UTILITIES FUND
[LOGO]
SEMIANNUAL REPORT
JUNE 30, 1996
