<PAGE>
DEAN WITTER UTILITIES FUND
LETTER TO THE SHAREHOLDERS June 30, 1997
Two World Trade Center, New York, New York 10048
Dear Shareholder:
During the first six months of 1997, the economy remained on a path of robust
growth with little inflationary pressure. This positive economic backdrop
provided the support for a favorable investment environment.
While the electric utility sector remained focused on making a balanced
transition from monopoly to a deregulated environment, mergers and
acquisitions continued. This trend was highlighted by the recent merger
announcements of Allegheny Power with DQE Energy and PacifiCorp with the
Energy Group of the United Kingdom. Upon completion of these mergers, the
combined companies are expected to be well positioned to capitalize on growth
opportunities within a deregulated and competitive environment.
The first half of 1997 saw marked improvement in both the domestic and
foreign telecommunications sectors. Within these sectors, investors continued
to drive valuations upward in anticipation of further industry consolidation
and the potential for attractive earnings prospects. During this period,
natural gas commodity prices and stock performance benefited from favorable
weather and demand patterns.
PERFORMANCE AND PORTFOLIO STRATEGY
Against this backdrop, Dean Witter Utilities Fund provided a total return of
6.08 percent for the six-month period ended June 30, 1997. This compares to a
return of 7.80 percent for the Lipper Utility Funds Index and a return of
20.62 percent for the broad-based Standard & Poor's 500 Composite Stock Price
Index. During the period under review, the Fund paid income distributions
totaling $0.38 per share, including a long-term capital gain distribution of
$0.13 per share, paid on June 30, 1997. The future level of quarterly income
distributions will fluctuate, based primarily on the level of interest rates
and the portfolio's overall investment allocation strategy.
The utilities industry continues to react to the uncertainty and confusion
surrounding its deregulation and restructuring. This response was evident
<PAGE>
DEAN WITTER UTILITIES FUND
LETTER TO THE SHAREHOLDERS June 30, 1997, continued
during the past six months as the industry underperformed the general market
despite strong earnings and low inflation. More recently, however, it appears
that investor confidence is improving as the form and direction of a
competitive utilities industry takes shape.
The Fund remained fully invested during the first half of 1997, with 88
percent of its net assets allocated to utility and utility-related equities,
11 percent in high-quality, fixed-income securities and 1 percent in cash and
cash equivalents.
The Fund's equity portfolio reflected improved investor confidence,
particularly in the electric utilities and telecommunications sectors, given
their favorable growth outlook and the potential investment opportunities
resulting from a competitive environment. Within this component, 53 percent
was allocated to electric utilities, 35 percent to telecommunications and 12
percent to natural gas. Further diversifying the Fund's portfolio are
selective foreign securities, primarily in the global telecommunications
sector, which account for 9 percent of net assets.
The Fund continues to invest selectively within the electric utility sector
and remains committed to companies characterized by low cost with good
earnings growth opportunities. Within the natural gas sector, the Fund
continues to focus on the high-quality, well-diversified pipeline companies,
given the favorable long-term outlook for the industry. The globalization of
the Telecommunications Industry combined with expanded usage and product
introduction gives this sector strong earnings growth prospects going
forward. The Fund's largest equity holdings include Ameritech, SBC
Communications and Nynex (telecommunications), CINergy Corporation, Edison
International and GPU Inc. (electric utilities) and The Williams Companies
and Enron Corporation (natural gas). Among the Fund's major foreign holdings
are Telecommunications Corp. of New Zealand, Ltd., and Telefonica Espana,
S.A.
The Fund's fixed-income portion remains well diversified with a weighted
average credit rating of Baa and BBB+, as measured by Moody's Investors
Service, Inc., and Standard & Poor's Corporation, respectively.
LOOKING AHEAD
In the second half of 1997, the Fund anticipates a fixed-income allocation
near current levels, with a modest reduction of its equity allocation to
electric utilities in favor of selective telecommunications and natural gas
companies. The Fund anticipates increasing its foreign exposure to capitalize
on and participate in worldwide telecommunications infrastructure growth.
Going forward, we believe the Fund is well positioned to take advantage of
the growth opportunities across all the utility sectors and remains
structured to meet its long-term investment objective.
<PAGE>
DEAN WITTER UTILITIES FUND
LETTER TO THE SHAREHOLDERS June 30, 1997, continued
On June 30, 1997, the Fund's Board of Trustees approved a proposal to adopt a
multiple class share structure. Through this arrangement the Fund will offer
four classes of shares with various sales charges, ongoing fees and other
features. This conversion occurred on July 28, 1997. A revised prospectus,
which includes complete details regarding this change, was mailed with your
June 1997 statement.
We appreciate your support of Dean Witter Utilities Fund and look forward to
serving your future needs and investment objectives.
Very truly yours,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE>
DEAN WITTER UTILITIES FUND
RESULTS OF SPECIAL MEETING (unaudited)
On May 21, 1997, a special meeting of the Fund's shareholders was held for
the purpose of voting on four separate matters, the results of which are as
follows:
(1) APPROVAL OF A NEW INVESTMENT MANAGEMENT AGREEMENT BETWEEN THE FUND AND
DEAN WITTER INTERCAPITAL INC. IN CONNECTION WITH THE MERGER OF MORGAN
STANLEY GROUP INC. WITH DEAN WITTER, DISCOVER & CO.:
<TABLE>
<CAPTION>
<S> <C>
For ........................................................... 84,259,298
Against ....................................................... 2,433,964
Abstain ....................................................... 8,540,983
</TABLE>
(2) ELECTION OF TRUSTEES:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Michael Bozic John R. Haire Michael E. Nugent
For ............ 89,158,825 For ............ 89,144,761 For .............. 89,452,454
Withheld ....... 6,075,420 Withheld ....... 6,089,484 Withheld ......... 5,781,791
Charles A. Fiumefreddo Wayne E. Hedien Philip J. Purcell
For ............ 89,342,430 For ............ 89,361,719 For .............. 89,409,902
Withheld ....... 5,891,815 Withheld ....... 5,872,526 Withheld ......... 5,824,343
Edwin J. Garn Dr. Manuel H. Johnson John L. Schroeder
For ............ 89,350,183 For ............ 89,377,118 For .............. 89,313,775
Withheld ....... 5,884,062 Withheld ....... 5,857,127 Withheld ......... 5,920,470
</TABLE>
(3) APPROVAL OF A NEW INVESTMENT POLICY WITH RESPECT TO INVESTMENTS IN
CERTAIN OTHER INVESTMENT COMPANIES:
<TABLE>
<CAPTION>
<S> <C>
For .......................................................... 79,910,152
Against ...................................................... 5,307,652
Abstain ...................................................... 10,016,441
</TABLE>
(4) RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP AS THE FUND'S
INDEPENDENT ACCOUNTANTS:
<TABLE>
<CAPTION>
<S> <C>
For .......................................................... 86,924,009
Against ...................................................... 1,283,876
Abstain ...................................................... 7,026,360
</TABLE>
<PAGE>
DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (88.5%)
Natural Gas (10.3%)
680,000 AGL Resources, Inc. ............................................ $ 14,025,000
345,000 Burlington Resources, Inc. ..................................... 15,223,125
420,000 Coastal Corp. .................................................. 22,338,750
340,000 Consolidated Natural Gas Co. ................................... 18,296,250
575,335 El Paso Natural Gas Co. ........................................ 31,643,425
930,000 Enron Corp. .................................................... 37,955,625
360,000 ENSERCH Corp. .................................................. 8,010,000
230,000 New Jersey Resources Corp. ..................................... 7,216,250
385,000 Sonat, Inc. .................................................... 19,731,250
285,000 Washington Gas Light Co. ....................................... 7,160,625
1,315,000 Williams Companies, Inc. ....................................... 57,531,250
------------
239,131,550
------------
Telecommunications (31.3%)
235,000 360|SD Communications Co.* ..................................... 4,024,375
680,000 Airtouch Communications, Inc.* ................................. 18,615,000
1,025,000 Alltel Corp. ................................................... 34,273,437
835,000 Ameritech Corp. ................................................ 56,727,812
430,000 AT&T Corp. ..................................................... 15,076,875
1,060,000 BCE, Inc. (Canada) ............................................. 29,680,000
310,000 Bell Atlantic Corp. ............................................ 23,521,250
865,000 BellSouth Corp. ................................................ 40,114,375
200,000 British Telecommunications PLC (ADR)(United Kingdom) ........... 14,850,000
235,000 Cable & Wireless PLC (ADR)(United Kingdom) ..................... 6,565,312
580,000 Century Telephone Enterprises, Inc. ............................ 19,538,750
348,750 Compania de Telefonos de Chile S.A. (ADR)(Chile) ............... 11,508,750
375,000 Ericsson (L.M.) Telephone Co. (Class B)(ADR)(Sweden) ........... 14,765,625
620,000 Frontier Corp. ................................................. 12,361,250
840,000 GTE Corp. ...................................................... 36,855,000
830,000 Hong Kong Telecommunications, Ltd. (ADR)(Hong Kong) ............ 19,401,250
184,405 Lucent Technologies Inc. ....................................... 13,288,685
1,150,000 MCI Communications Corp. ....................................... 43,987,500
800,000 NYNEX Corp. .................................................... 46,100,000
145,000 Philippine Long Distance Telephone Co. (ADR)(Philippines) ...... 9,316,250
1,059,806 SBC Communications, Inc. ....................................... 65,575,496
735,000 Sprint Corp. ................................................... 38,679,375
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited) continued
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------
Telecommunications Corp. New Zealand, Ltd. (ADR)
590,000 (New Zealand) .................................................. $ 24,042,500
340,000 Telefonica de Argentina S.A. (ADR)(Argentina) .................. 11,772,500
480,000 Telefonica Espana S.A. (ADR)(Spain) ............................ 41,400,000
400,000 Telefonos de Mexico S.A. de C.V. (Series L)(ADR)(Mexico) ....... 19,100,000
685,000 U.S. West Communications Group* ................................ 25,815,937
565,000 U.S. West Media Group* ......................................... 11,441,250
210,000 Vodafone Group PLC (ADR)(United Kingdom) ....................... 10,171,875
367,000 WorldCom, Inc. ................................................. 11,721,062
------------
730,291,491
------------
Utilities - Electric (46.9%)
1,235,000 Allegheny Power Systems, Inc. .................................. 32,959,062
670,000 American Electric Power Co. .................................... 28,140,000
795,000 Baltimore Gas & Electric Co. ................................... 21,216,563
550,000 Boston Edison Co. .............................................. 14,506,250
240,000 Carolina Power & Light Co. ..................................... 8,610,000
650,000 Central & South West Corp. ..................................... 13,812,500
1,175,470 CINergy Corp. .................................................. 40,921,049
620,000 CMS Energy Corp. ............................................... 21,855,000
670,000 Consolidated Edison Co. of New York, Inc. ...................... 19,723,125
900,000 Dominion Resources, Inc. ....................................... 32,962,500
1,015,000 DPL, Inc. ...................................................... 24,994,375
540,000 DQE, Inc. ...................................................... 15,255,000
890,000 DTE Energy Co. ................................................. 24,586,250
1,131,862 Duke Power Co. ................................................. 54,258,635
1,475,000 Edison International ........................................... 36,690,625
310,000 Empresa Nacional de Electricidad S.A. (ADR)(Spain) ............. 26,369,375
135,000 Enersis S.A. (ADR)(Chile) ...................................... 4,800,938
970,000 Enova Corp. .................................................... 23,340,625
685,000 Entergy Corp. .................................................. 18,751,875
560,000 Florida Progress Corp. ......................................... 17,535,000
735,000 FPL Group, Inc. ................................................ 33,855,938
1,050,000 General Public Utilities Corp. ................................. 37,668,750
1,220,000 Houston Industries, Inc. ....................................... 26,153,750
785,000 Illinova Corp. ................................................. 17,270,000
905,000 Kansas City Power & Light Co. .................................. 25,849,063
550,000 Long Island Lighting Co. ....................................... 12,650,000
180,000 Montana Power Co. .............................................. 4,173,750
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited) continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
765,000 New England Electric System ....................................$ 28,305,000
545,000 New York State Electric & Gas Corp. ............................ 11,376,875
820,000 NIPSCO Industries, Inc. ........................................ 33,876,250
310,000 Northern States Power Co. ...................................... 16,042,500
800,000 Ohio Edison Co. ................................................ 17,450,000
955,000 PacifiCorp ..................................................... 21,010,000
685,000 Peco Energy Co. ................................................ 14,385,000
455,000 PG & E Corp. ................................................... 11,033,750
900,000 Pinnacle West Capital Corp. .................................... 27,056,250
335,000 Portland General Corp. ......................................... 13,295,313
460,000 Potomac Electric Power Co. ..................................... 10,637,500
720,000 PP&L Resources, Inc. ........................................... 14,355,000
845,000 Public Service Company of Colorado ............................. 35,067,500
795,000 Public Service Enterprise Group, Inc. .......................... 19,875,000
135,000 Puget Sound Power & Light Co. .................................. 3,577,500
375,000 Rochester Gas & Electric Corp. ................................. 7,898,438
780,000 SCANA Corp. .................................................... 19,353,750
1,430,000 Southern Co. ................................................... 31,281,250
260,000 Southwestern Public Service Co. ................................ 10,221,250
435,000 Teco Energy, Inc. .............................................. 11,119,688
770,000 Texas Utilities Co. ............................................ 26,516,875
500,000 Unicom Corp. ................................................... 11,125,000
870,000 Union Electric Co. ............................................. 32,788,125
500,000 Utilicorp United, Inc. ......................................... 14,562,500
680,000 Washington Water Power Co. ..................................... 13,345,000
--------------
1,094,465,312
--------------
TOTAL COMMON STOCKS
(Identified Cost $1,422,028,739) ............................... 2,063,888,353
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- ----------- ---------- ----------
<S> <C> <C> <C> <C>
CORPORATE BONDS (10.9%)
Natural Gas (2.3%)
$2,000 AGL Capital Trust - 144A** ..................................... 8.17 % 06/01/37 1,986,980
5,000 ANR Pipeline Co. ............................................... 9.625 11/01/21 6,078,650
5,000 Arkla, Inc. .................................................... 10.00 11/15/19 5,523,000
10,000 Coastal Corp. .................................................. 9.625 05/15/12 11,959,900
5,000 Colorado Interstate Gas Co. .................................... 10.00 06/15/05 5,872,850
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$5,000 Northwest Pipeline Corp. ....................................... 10.65 % 11/15/18 $ 5,335,800
4,750 Southwest Gas Corp. ............................................ 8.00 08/01/26 4,928,030
5,000 Transco Energy Co. ............................................. 9.875 06/15/20 6,178,200
5,000 Williams Companies, Inc. ....................................... 9.375 11/15/21 5,911,000
-----------
53,774,410
-----------
Telecommunications (1.5%)
5,000 BellSouth Telecommunications, Inc. .............................. 7.625 05/15/35 4,956,300
5,000 BellSouth Telecommunications, Inc. .............................. 7.00 12/01/95 4,745,500
3,000 GTE Corp. ...................................................... 7.90 02/01/27 3,025,410
5,000 Southwestern Bell Telephone Co. ................................ 7.20 10/15/26 4,740,350
5,000 Sprint Corp. ................................................... 9.25 04/15/22 5,955,450
5,000 Telephone & Data Systems, Inc. ................................. 10.00 01/15/21 5,654,250
5,000 Telephone & Data Systems, Inc. ................................. 9.58 11/19/21 5,313,850
-----------
34,391,110
-----------
Utilities - Electric (7.1%)
1,499 AEP Generating Co. ............................................. 9.81 12/07/22 1,787,134
5,000 Arizona Public Service Co. ..................................... 7.25 08/01/23 4,713,300
6,000 Chugach Electric Co. ........................................... 9.14 03/15/22 6,753,420
5,000 Cincinnati Gas & Electric Co. .................................. 7.20 10/01/23 4,684,500
5,000 Consumers Energy Co. ........................................... 7.375 09/15/23 4,671,350
5,000 CTC Mansfield Funding Corp. .................................... 11.125 09/30/16 5,312,500
14,783 DQU II Funding Corp. ........................................... 8.70 06/01/16 16,041,329
10,000 Duke Power Co. ................................................. 8.75 03/01/21 10,519,800
5,000 Gulf States Utilities Co. ...................................... 8.94 01/01/22 5,149,000
5,000 Gulf States Utilities Co. ...................................... 8.70 04/01/24 5,117,100
7,000 Indiantown Cogeneration LP ..................................... 9.26 12/15/10 7,782,250
3,000 Long Island Lighting Co. ....................................... 8.90 07/15/19 3,156,990
5,100 Long Island Lighting Co. ....................................... 8.20 03/15/23 5,229,132
5,250 National Rural Utilities Cooperative Finance Corp. ............. 9.00 09/01/21 5,593,140
5,326 Niagara Mohawk Power Corp. ..................................... 8.77 01/01/18 5,421,389
5,000 Niagara Mohawk Power Corp. ..................................... 9.50 03/01/21 5,254,700
5,000 PacifiCorp ..................................................... 6.71 01/15/26 4,470,650
10,250 Public Service Company of Colorado ............................. 8.75 03/01/22 10,914,302
5,000 Public Service Electric & Gas Co. .............................. 7.00 09/01/24 4,616,300
5,000 Selkirk Cogen Funding Corp. .................................... 8.98 06/26/12 5,410,650
4,000 South Carolina Electric Co. .................................... 8.875 08/15/21 4,248,240
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
$2,000 Southern Co. Capital Trust - 144A** ............................ 8.19 % 02/01/37 $ 2,005,640
442 Systems Energy Resources, Inc. ................................. 11.375 09/01/16 473,550
10,000 Texas Utilities Electric Co. ................................... 8.875 02/01/22 10,602,900
5,000 Texas Utilities Electric Co. ................................... 7.375 10/01/25 4,760,700
5,000 TU Electric Capital Ventures ................................... 8.175 01/30/37 4,970,200
5,000 Utilicorp United, Inc. ......................................... 9.00 11/15/21 5,267,750
5,000 Virginia Electric Power Co. .................................... 8.625 10/01/24 5,352,100
5,000 Wisconsin Power & Light Co. .................................... 8.60 03/15/27 5,322,500
--------------
165,602,516
--------------
TOTAL CORPORATE BONDS
(Identified Cost $239,189,405) ....................................................... 253,768,036
U.S. GOVERNMENT OBLIGATION (0.1%)
10,000 Federal Home Loan Banks (Identified Cost $3,083,190) ........... 0.00 07/02/12 3,050,000
--------------
SHORT-TERM INVESTMENT (a)(0.4%)
U.S. GOVERNMENT AGENCY
7,700 Federal Home Loan Mortgage Corp. (Amortized Cost $7,700,000) ... 6.00 07/01/97 7,700,000
--------------
TOTAL INVESTMENTS
(Identified Cost $1,672,001,334)(b) ....................................... 99.9% 2,328,406,389
OTHER ASSETS IN EXCESS OF LIABILITIES ..................................... 0.1 3,249,381
--------------
NET ASSETS ................................................................ 100.0% $2,331,655,770
==============
</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 is
$685,610,126 and the aggregate gross unrealized depreciation is
$29,205,071, resulting in net unrealized appreciation of $656,405,055.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER UTILITIES FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,672,001,334)...................................... $2,328,406,389
Receivable for:
Investments sold..................................................... 6,615,599
Dividends............................................................ 6,313,058
Interest............................................................. 5,325,674
Shares of beneficial interest sold................................... 997,275
Foreign withholding taxes reclaimed ................................... 158,628
Prepaid expenses and other assets...................................... 78,065
--------------
TOTAL ASSETS ........................................................ 2,347,894,688
--------------
LIABILITIES:
Payable for:
Investments purchased................................................ 3,083,190
Shares of beneficial interest repurchased............................ 2,780,297
Plan of distribution fee............................................. 1,991,498
Dividends to shareholders............................................ 1,879,092
Investment management fee............................................ 1,091,297
Payable to bank........................................................ 5,080,273
Accrued expenses and other payables.................................... 333,271
--------------
TOTAL LIABILITIES.................................................... 16,238,918
--------------
NET ASSETS:
Paid-in-capital ....................................................... 1,577,277,064
Net unrealized appreciation ........................................... 656,405,055
Accumulated undistributed net investment income........................ 1,577,933
Accumulated undistributed net realized gain............................ 96,395,718
--------------
NET ASSETS........................................................... $2,331,655,770
==============
NET ASSET VALUE PER SHARE,
147,968,182 shares outstanding (unlimited shares authorized of $.01
par value)............................................................ $ 15.76
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER UTILITIES FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $579,113 foreign withholding
tax)............................................... $ 46,622,870
Interest ........................................... 13,074,999
------------
TOTAL INCOME...................................... 59,697,869
------------
EXPENSES
Plan of distribution fee............................ 12,201,569
Investment management fee........................... 6,652,796
Transfer agent fees and expenses.................... 1,207,147
Shareholder reports and notices..................... 119,203
Custodian fees...................................... 71,415
Professional fees .................................. 28,967
Trustees' fees and expenses......................... 7,634
Other............................................... 17,379
------------
TOTAL EXPENSES ................................... 20,306,110
------------
NET INVESTMENT INCOME............................. 39,391,759
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain................................... 98,193,413
Net change in unrealized appreciation............... (83,411)
------------
NET GAIN.......................................... 98,110,002
------------
NET INCREASE........................................ $137,501,761
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER UTILITIES FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 1997 DECEMBER 31, 1996
- ----------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................. $ 39,391,759 $ 107,181,452
Net realized gain...................................... 98,193,413 38,088,040
Net change in unrealized appreciation ................. (83,411) (21,800,001)
-------------- --------------
NET INCREASE......................................... 137,501,761 123,469,491
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income ................................. (38,578,167) (112,326,026)
Net realized gain...................................... (18,661,483) (13,000,035)
-------------- --------------
TOTAL................................................ (57,239,650) (125,326,061)
-------------- --------------
Net decrease from transactions in shares of beneficial
interest.............................................. (425,551,322) (642,069,697)
-------------- --------------
NET DECREASE......................................... (345,289,211) (643,926,267)
NET ASSETS:
Beginning of period.................................... 2,676,944,981 3,320,871,248
-------------- --------------
END OF PERIOD
(Including undistributed net investment income of
$1,577,933 and $764,341, respectively) .............. $2,331,655,770 $2,676,944,981
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (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, 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 the procedures adopted by the Trustees); (2) all other portfolio
securities for which over-the-counter market quotations are readily available
are valued at the latest available bid price prior to the time of valuation;
(3) when market quotations are not readily available, including circumstances
under which it is determined by Dean Witter InterCapital Inc. (the
"Investment Manager") that sale or bid prices are not reflective of a
security's market value, portfolio securities are valued at their fair value
as determined in good faith under procedures established by and under the
general supervision of the Trustees (valuation of debt securities for which
market quotations are not readily available may be based upon current market
prices of securities which are comparable in coupon, rating and maturity or
an appropriate matrix utilizing similar factors); (4) certain of the Fund's
portfolio securities may be valued by an outside pricing service approved by
the Trustees. The pricing service may utilize a matrix system incorporating
security quality, maturity and coupon as the evaluation model parameters,
and/or research and evaluations by its staff, including review of
broker-dealer market price quotations, if available, in determining what it
believes is the fair valuation of the 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.
<PAGE>
DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (unaudited) continued
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.
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 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
<PAGE>
DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (unaudited) continued
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services,
heat, light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted
a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act
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 others 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 utilize fees paid
pursuant to the Plan to compensate DWR and other selected broker-dealers for
their opportunity costs in advancing such amounts which compensation would be
in the form of a carrying charge on any unreimbursed distribution expenses.
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.
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 $71,161,589 at June 30, 1997.
<PAGE>
DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (unaudited) continued
The Distributor has informed the Fund that for the six months ended June 30,
1997, it received approximately $2,446,000 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, 1997
aggregated $66,534,865 and $493,163,556, respectively. Included in the
aforementioned are purchases of U.S. Government securities of $3,083,190 and
sales of Citizens Utilities Co., an affiliate of the Fund by virtue of common
Trustee, in the amount of $4,937,000, as well as a realized loss of $161,650.
For the six months ended June 30, 1997, the Fund incurred approximately
$170,000 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, 1997, the Fund had
transfer agent fees and expenses payable of approximately $209,000.
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, 1997 included in Trustees' fees and expenses in the
Statement of Operations amounted to $1,281. At June 30, 1997, the Fund had an
accrued pension liability of $48,387 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, 1997 DECEMBER 31, 1996
-------------------------- ----------------------------
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ---------------
<S> <C> <C> <C> <C>
Sold ........................................ 4,593,477 $ 70,823,546 20,469,306 $ 305,649,321
Reinvestment of dividends and distributions 2,984,322 46,119,991 6,797,078 100,198,592
---------- ------------- ---------- ---------------
7,577,799 116,943,537 27,266,384 405,847,913
Repurchased ................................. (35,454,301) (542,494,859) (70,657,866) (1,047,917,610)
---------- ------------- ---------- ---------------
Net decrease ................................ (27,876,502) $(425,551,322) (43,391,482) $ (642,069,697)
========== ============= ========== ===============
</TABLE>
<PAGE>
DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1997 (unaudited) continued
6. FEDERAL INCOME TAX STATUS
As of December 31, 1996, the Fund had temporary book/tax differences
primarily attributable to capital loss deferrals on wash sales.
7. SUBSEQUENT EVENT
On June 30, 1997, the Fund's Board of Trustees approved a proposal to adopt a
multiple class share structure. Through this arrangement, the Fund will offer
four classes of shares with various sales charges, ongoing fees and other
features. This conversion occurred on July 28, 1997.
<PAGE>
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 FOR THE YEAR ENDED DECEMBER 31,
MONTHS ENDED ------------------------------------------------
JUNE 30, 1997 1996 1995 1994 1993 1992
--------------- ----------- -------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $15.22 $15.15 $12.30 $14.34 $13.37 $12.93
------ ------ ------ ------ ------ ------
Net investment income................... 0.26 0.56 0.58 0.63 0.61 0.63
Net realized and unrealized gain
(loss)................................. 0.66 0.16 2.85 (2.04) 1.09 0.47
------ ------ ------ ------ ------ ------
Total from investment operations ....... 0.92 0.72 3.43 (1.41) 1.70 1.10
------ ------ ------ ------ ------ ------
Less dividends and distributions from:
Net investment income.................. (0.25) (0.58) (0.58) (0.61) (0.61) (0.63)
Net realized gain...................... (0.13) (0.07) -- (0.02) (0.12) (0.03)
------ ------ ------ ------ ------ ------
Total dividends and distributions ...... (0.38) (0.65) (0.58) (0.63) (0.73) (0.66)
------ ------ ------ ------ ------ ------
Net asset value, end of period.......... $15.76 $15.22 $15.15 $12.30 $14.34 $13.37
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN+ .............. 6.08%(1) 4.99% 28.42% (9.90)% 12.79% 8.75%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................ 1.67%(2) 1.64% 1.65% 1.64% 1.46% 1.59%
Net investment income .................. 3.24%(2) 3.63% 4.19% 4.67% 4.32% 5.05%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions . $2,332 $2,677 $3,321 $2,827 $3,881 $2,926
Portfolio turnover rate................. 3%(1) 7% 9% 11% 16% 14%
Average commission rate paid ........... $0.0557 $0.0547 -- -- -- --
</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>
(This page has been left blank intentionally.)
<PAGE>
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
Barry Fink
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, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of
the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
DEAN WITTER
UTILITIES FUND
SEMIANNUAL REPORT
JUNE 30, 1997
