<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST TWO WORLD TRADE CENTER, NEW YORK, NEW YORK
10048
LETTER TO THE SHAREHOLDERS JULY 31, 1996
DEAR SHAREHOLDER:
The twelve-month period ended July 31, 1996, has been very volatile for the
markets spilling over into the healthcare industry. After a tremendous rally
toward the end of 1995 and continuing into the first quarter of 1996, we saw
healthcare stocks cool off going into the spring and summer months. July brought
a long-awaited correction, and many healthcare names experienced sizable
declines as investors shifted to more economically sensitive areas. Sector
concerns and earnings disappointments in a few stocks contributed to the overall
weakness in the arena. Small-capitalization names and biotechnology stocks in
particular were negatively affected by fears of rising interest rates. However,
signs of a somewhat more moderate economy lifted the stock market and many
healthcare issues in early August.
On the political front, lack of action in Washington proved to be only a modest
benefit to healthcare stocks, and we do not expect any meaningful changes until
after the election and early in 1997. Investors' views that Medicare changes are
not in the near future are likely to strengthen the industry.
PERFORMANCE AND PORTFOLIO
Against this backdrop, Dean Witter Health Sciences Trust produced a total return
of 24.84 percent for the twelve-month period ended July 31, 1996, compared to a
return of 16.51 percent for the broad-based Standard & Poor's 500 Composite
Stock Price Index (S&P 500 Index). The accompanying chart illustrates the
performance of a $10,000 investment in the Fund from inception (October 30,
1992) through the fiscal year-ended July 31, 1996, versus the performance of a
similar hypothetical investment in the issues that comprise the S&P 500 Index.
On July 31, 1996, the Fund's net assets totaled $442 million. The Fund's
portfolio was well diversified among different sectors within the healthcare
industry, including medical products and supplies (24.5 percent of the Fund's
net assets), pharmaceuticals (17.1 percent),
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
LETTER TO THE SHAREHOLDERS JULY 31, 1996, CONTINUED
[GRAPHIC]
biotechnology (11.8 percent), hospital
management and health maintenance
organizations (8.4 percent) and health
equipment and services (5.4 percent).
[GRAPHIC]
Among the Fund's key holdings on July
31, 1996 were Dura-Pharmaceuticals,
Inc., ABR Information Services, Inc.,
Biovail Corporation International,
PhyCor, Inc. and Access Health, Inc.
LOOKING AHEAD
[GRAPHIC]
Consolidation is expected to remain the
key driver for the healthcare industry.
Currently, the industry remains highly
fragmented and we expect that mergers
and acquisitions will continue as
companies seek to further reduce costs
and grab market share. The Fund
continues to focus on companies that
offer a more complete range of
value-added products and technology
services that allow clinicians to
improve the cost and quality of
healthcare.
[GRAPHIC]
We appreciate your continued support of
Dean Witter Health Sciences Trust and
look forward to serving your investment
needs and objectives.
Very truly yours,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
PORTFOLIO OF INVESTMENTS JULY 31, 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (96.5%)
AEROSPACE & DEFENSE (0.0%)
10,000 BE Aerospace, Inc.*.................... $ 152,500
---------------
BIOTECHNOLOGY (11.8%)
40,000 Advanced Tissue Sciences, Inc.*........ 520,000
40,000 Affymetrix, Inc.*...................... 475,000
150,000 Agouron Pharmaceutical, Inc.*.......... 4,593,750
30,000 Aksys Ltd.*............................ 270,000
70,000 Alexion Pharmaceuticals, Inc.*......... 420,000
200,000 Alkermes, Inc.*........................ 2,450,000
30,000 Allelix Biopharmaceuticals, Inc.*
(Canada)............................... 414,817
7,000 Arthrocare Corp.*...................... 112,000
70,000 Avigen, Inc.*.......................... 350,000
140,000 Biochem Pharma, Inc.*.................. 4,147,500
50,000 Biofield Corp.*........................ 468,750
30,000 Biogen, Inc.*.......................... 1,822,500
140,000 Biomira, Inc.* (Canada)................ 760,295
2,100 Cardiac Pathways Corp.*................ 26,250
8,600 Cardiogenesis Corp.*................... 92,450
38,571 CardioTech International, Inc.*........ 65,089
40,000 Cardiovascular Dynamics, Inc.*......... 495,000
120,000 Cell Genesys, Inc.*.................... 780,000
60,000 Centocor, Inc.*........................ 1,500,000
120,000 Cephalon Inc.*......................... 1,875,000
90,000 Cytotherapeutics, Inc.*................ 720,000
40,100 Cytyc Corp.*........................... 551,375
160,000 Genzyme Corp.
General Division*...................... 3,960,000
70,000 Genzyme Corp.
Tissue Repair Division*................ 560,000
185,000 Gilead Sciences, Inc.*................. 3,422,500
120,000 Gliatech, Inc.*........................ 930,000
85,000 ID Biomedical Corp.*................... 499,375
212,000 IDEC Pharmaceuticals Corp.*............ 3,233,000
60,000 Integra Lifesciences Corp.*............ 277,500
125,000 La Jolla Pharmaceutical Co.*........... 554,687
130,000 Lifecore Biomedical, Inc.*............. 2,096,250
100,000 Ligand Pharmaceuticals, Inc. (Class
B)*.................................... 1,175,000
30,000 Liposome Co., Inc.*.................... 360,000
130,000 Matritech, Inc.*....................... 1,413,750
200,000 Medarex, Inc.*......................... 1,200,000
60,000 Medimmune, Inc.*....................... 825,000
78,000 Neurogen Corp.*........................ 1,345,500
105,000 Norland Medical Systems, Inc.*......... 1,417,500
25,000 Oravax, Inc.*.......................... 162,500
80,000 Pharmacopeia, Inc.*.................... 990,000
200,000 Scios, Inc.*........................... 1,087,500
120,000 Vertex Pharmaceuticals, Inc.*.......... 2,880,000
73,000 Virus Research Institute, Inc.*........ 474,500
60,000 Visible Genetics Inc.* (Canada)........ 585,000
---------------
52,359,338
---------------
COMMERCIAL SERVICES (5.0%)
157,500 ABR Information Services, Inc.*........ 7,835,625
71,000 Equity Corporation International*...... 2,014,625
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------
<C> <S> <C>
30,000 Interim Services, Inc.*................ $ 1,110,000
90,000 Mecon, Inc.*........................... 1,350,000
71,000 Medquist, Inc.*........................ 1,011,750
5,400 Pharmaceutical Product Development,
Inc.*.................................. 143,100
145,000 RTW, Inc.*............................. 4,186,875
80,000 STAT Healthcare, Inc.*................. 510,000
126,250 Stewart Enterprises, Inc. (Class A).... 3,282,500
4,100 The Registry, Inc.*.................... 109,675
30,000 Urocor, Inc.*.......................... 348,750
20,000 Walsh International Inc.*.............. 147,500
---------------
22,050,400
---------------
COMPUTER SOFTWARE (4.0%)
24,000 Apache Medical Systems, Inc.*.......... 264,000
180,000 Base Ten Systems Inc. (Class A)*....... 1,912,500
85,000 HCIA, Inc.*............................ 4,845,000
120,000 MDL Information Systems, Inc.*......... 3,510,000
180,000 Medic Computer Systems, Inc.*.......... 7,200,000
---------------
17,731,500
---------------
COMPUTER SOFTWARE & SERVICES (1.2%)
60,000 Dendrite International, Inc.*.......... 1,665,000
30,000 Health Systems Design Corp.*........... 315,000
30,000 ImageMatrix Corp. (Units)++*........... 127,500
9,500 Imnet Systems, Inc.*................... 244,625
40,000 Lanvision Systems, Inc.*............... 370,000
60,000 Lumisys, Inc.*......................... 607,500
60,000 Summit Medical Systems, Inc.*.......... 975,000
30,000 Sunquest Information Systems, Inc.*.... 356,250
25,000 Transition Systems, Inc.*.............. 475,000
---------------
5,135,875
---------------
COSMETICS (0.0%)
25,000 Electronic Hair Styling, Inc.*......... 100,000
---------------
DRUGS (4.1%)
100,000 Alza Corp.*............................ 2,475,000
30,000 Astra AB (ADR) (Sweden)................ 1,267,500
330,000 Dura-Pharmaceuticals, Inc.*............ 7,507,500
50,000 Elan Corp. PLC (ADR)* (Ireland)........ 2,937,500
16,400 Fusion Medical Technologies, Inc.*..... 118,900
120,000 Nexstar Pharmaceuticals, Inc.*......... 2,040,000
60,000 Teva Pharmaceutical Industries Ltd.
(ADR) (Israel)......................... 1,935,000
---------------
18,281,400
---------------
ELECTRONICS (0.2%)
41,200 Del Global Technologies Corp.*......... 329,600
30,000 Thermospectra Corp.*................... 435,000
---------------
764,600
---------------
HEALTH EQUIPMENT & SERVICES (5.4%)
110,000 ADAC Laboratories...................... 2,131,250
80,000 Compdent Corp.*........................ 2,960,000
30,000 Matria Healthcare, Inc.*............... 243,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
PORTFOLIO OF INVESTMENTS JULY 31, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------
<C> <S> <C>
197,400 Renal Treatment Centers, Inc.*......... $ 5,527,200
270,000 RoTech Medical Corp.*.................. 4,657,500
70,000 Shared Medical Systems Corp............ 3,832,500
30,000 Sybron International Corp.*............ 750,000
50,000 Ventritex, Inc.*....................... 625,000
112,700 Vivra, Inc.*........................... 3,282,387
---------------
24,009,587
---------------
HEALTHCARE - DIVERSIFIED (4.1%)
155,500 Access Health, Inc.*................... 6,569,875
40,000 Allergan, Inc.......................... 1,630,000
30,000 Envoy Corp.*........................... 705,000
80,000 Healthsouth Corp.*..................... 2,430,000
160,000 Mentor Corp............................ 4,440,000
100,000 Universal Health Services, Inc. (Class
B)*.................................... 2,562,500
---------------
18,337,375
---------------
HOSPITAL MANAGEMENT & HEALTH MAINTENANCE ORGANIZATIONS
(0.6%)
41,000 Collaborative Clinical Research,
Inc.*.................................. 430,500
35,500 NCS Healthcare, Inc. (Class A)*........ 949,625
110,000 Raytel Medical Corp.*.................. 1,155,000
---------------
2,535,125
---------------
HOSPITAL MANAGEMENT (7.8%)
180,750 American HomePatient, Inc.*............ 4,338,000
40,000 Caremark International, Inc............ 915,000
100,000 Emeritus Corp.*........................ 1,587,500
100,000 Enterprise Systems, Inc.*.............. 1,950,000
150,000 FPA Medical Management, Inc.*.......... 2,850,000
50,000 Genesis Health Ventures, Inc.*......... 1,256,250
50,000 Harborside Healthcare Corp.*........... 487,500
40,000 Impath, Inc.*.......................... 550,000
75,000 Mariner Health Group, Inc.*............ 1,340,625
140,000 Occusystems, Inc.*..................... 3,920,000
100,000 Pediatric Services of America, Inc.*... 1,987,500
195,000 PhyCor, Inc.*.......................... 5,898,750
100,000 Physician Reliance Network, Inc.*...... 1,325,000
80,000 Pro-Dex, Inc.*......................... 340,000
40,000 Renal Care Group, Inc.*................ 1,250,000
30,000 Retirement Care Associates, Inc.*...... 270,000
60,000 Sterling House Corp.*.................. 960,000
110,000 Theratx, Inc.*......................... 1,870,000
38,600 Total Renal Care Holdings, Inc.*....... 1,379,950
---------------
34,476,075
---------------
MANUFACTURING (0.7%)
67,500 Memtec Ltd. (ADR) (Australia).......... 1,999,687
45,000 Waters Corp.*.......................... 1,260,000
---------------
3,259,687
---------------
MEDICAL EQUIPMENT (2.9%)
40,000 Advanced Magnetics, Inc.*.............. 710,000
60,000 Endovascular Technologies, Inc.*....... 757,500
14,000 Innovasive Devices, Inc.*.............. 140,000
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------
<C> <S> <C>
30,000 Interpore International*............... $ 168,750
300,000 Orthologic Corp.*...................... 2,550,000
100,000 Sofamor Danek Group, Inc.*............. 2,637,500
100,000 Steris Corp.*.......................... 2,900,000
90,000 Thermo Cardiosystems, Inc.*............ 2,880,000
---------------
12,743,750
---------------
MEDICAL PRODUCTS & SUPPLIES (24.5%)
20,000 Advanced Technology Laboratories,
Inc.*.................................. 645,000
80,000 Aequitron Medical, Inc.*............... 560,000
255,000 Angeion Corp.*......................... 1,561,875
25,000 Aradigm Corp.*......................... 209,375
150,000 ATS Medical, Inc.*..................... 1,256,250
75,000 Autonomous Technologies Corp.*......... 300,000
55,000 Biosource International, Inc.*......... 340,313
50,000 Calypte Biomedical Corp.*.............. 312,500
160,000 Capstone Pharmacy Services, Inc.*...... 1,680,000
110,000 ClinTrials Research Inc.*.............. 4,015,000
100,000 Coherent, Inc.*........................ 3,875,000
50,000 Cohr, Inc.*............................ 1,087,500
12,000 Conceptus Inc.*........................ 102,000
82,500 Conmed Corp.*.......................... 1,402,500
200,000 Cryolife, Inc.*........................ 2,500,000
7,500 De Rigo SpA (ADR)* (Italy)............. 136,875
20,000 Electroscope, Inc.*.................... 160,000
100,000 EP MedSystems, Inc.*................... 550,000
25,000 General Surgical Innovations, Inc.*.... 303,125
120,000 Guidant Corp........................... 6,090,000
25,000 Gynecare, Inc.*........................ 115,625
80,000 Hanger Orthopedic Group, Inc.*......... 470,000
5,500 Heartport, Inc.*....................... 127,875
50,000 Hologic, Inc.*......................... 1,887,500
150,000 ICU Medical, Inc.*..................... 1,256,250
140,000 IDEXX Laboratories, Inc.*.............. 5,355,000
40,000 Imagyn Medical, Inc.*.................. 280,000
120,000 Immunomedics, Inc.*.................... 855,000
140,000 Innerdyne, Inc.*....................... 455,000
75,000 Intelligent Medical Imaging, Inc.*..... 1,275,000
50,000 Invacare Corp.......................... 1,450,000
90,000 IRIDEX Corp.*.......................... 675,000
140,000 Kensey Nash Corp.*..................... 1,645,000
120,000 Kinetic Concepts, Inc.................. 1,665,000
40,000 Laser Industries, Ltd.* (Israel)....... 500,000
111,000 Life Medical Sciences, Inc.*........... 721,500
100,000 Lincare Holdings, Inc.*................ 3,875,000
185,000 Lunar Corp.*........................... 6,428,750
170,000 Med-Design Corp.*...................... 2,167,500
100,000 Millipore Corp......................... 3,412,500
110,000 Minimed Inc.*.......................... 2,392,500
60,000 Minntech Corp.......................... 615,000
80,000 Neurobiological Technologies, Inc.*.... 350,000
120,000 Neuromedical Systems, Inc.*............ 1,710,000
40,000 Novoste Corp.*......................... 320,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
PORTFOLIO OF INVESTMENTS JULY 31, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------
<C> <S> <C>
220,000 Omnicare, Inc.......................... $ 5,142,500
100,000 Oncogene Science, Inc.*................ 737,500
10,000 Perclose, Inc.*........................ 190,000
170,000 Physician Sales & Service, Inc.*....... 2,911,250
25,000 Physiometrix, Inc.*.................... 137,500
150,000 PLC Systems, Inc.* (Canada)............ 2,437,500
80,000 Polymedica Industries, Inc.*........... 400,000
100,000 Possis Medical, Inc.*.................. 1,487,500
130,000 Protocol Systems, Inc.*................ 2,258,750
80,000 Quidel Corp.*.......................... 300,000
150,000 Sano Corp.*............................ 1,912,500
85,000 Serologicals Corp.*.................... 2,125,000
40,000 Sight Resource Corp. (Units)++*........ 312,500
70,400 Spine-Tech Inc.*....................... 1,777,600
160,000 Staar Surgical Co.*.................... 2,000,000
90,000 Target Therapeutics, Inc.*............. 2,835,000
170,000 Thermolase Corp.*...................... 3,782,500
30,000 Thoratec Laboratories Corp.*........... 315,000
40,000 Ultrafem, Inc.*........................ 620,000
60,000 United States Surgical Corp............ 2,055,000
36,000 Urologix, Inc.*........................ 513,000
140,000 Uromed Corp.*.......................... 1,785,000
40,000 Ventana Medical Systems, Inc.*......... 395,000
2,000 VISX, Inc.*............................ 36,500
130,000 Vivus, Inc.*........................... 4,680,000
---------------
108,239,413
---------------
MEDICAL SERVICES (4.6%)
135,000 Health Management Systems, Inc.*....... 4,083,750
40,000 Housecall Medical Resources, Inc.*..... 620,000
130,000 Medaphis Corp.*........................ 4,793,750
30,000 Medical Resources, Inc.*............... 213,750
90,000 NABI, Inc.*............................ 787,500
20,000 Phoenix International Life Sciences,
Inc.* (Canada)......................... 203,768
115,000 Prime Medical Services, Inc.*.......... 1,566,875
100,000 Quintiles Transnational Corp.*......... 6,950,000
80,000 Zoll Medical Corp.*.................... 1,180,000
---------------
20,399,393
---------------
MULTI-LINE INSURANCE (0.2%)
20,000 United Dental Care, Inc.*.............. 680,000
---------------
PERSONAL PRODUCTS (0.7%)
50,000 National Dentex Corp.*................. 1,087,500
100,000 Nature's Sunshine Products, Inc........ 2,200,000
---------------
3,287,500
---------------
PHARMACEUTICALS (17.1%)
160,000 Alliance Pharmaceutical Corp.*......... 2,280,000
80,000 Amrion, Inc.*.......................... 1,290,000
60,000 Andrx Corp.*........................... 795,000
60,000 Aronex Pharmaceuticals, Inc.*.......... 442,500
40,000 Arris Pharmaceutical Corp.*............ 445,000
50,000 Biotransplant, Inc.*................... 318,750
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------
<C> <S> <C>
248,968 Biovail Corporation International*..... $ 6,597,652
167,500 Bone Care International, Inc.*......... 1,130,625
25,000 Cima Labs, Inc.*....................... 162,500
60,000 Collagenex Pharmaceuticals, Inc.*...... 517,500
160,000 Curative Health Services, Inc.*........ 2,800,000
100,000 Cygnus, Inc.*.......................... 1,400,000
150,000 Cypros Pharmaceutical Corp.*........... 637,500
80,000 Cytel Corp.*........................... 290,000
100,000 Depotech Corp.*........................ 1,800,000
110,000 Ergo Science Corp.*.................... 1,540,000
20,000 Flamel Technologies (ADR)* (France).... 145,000
100,000 Fuisz Technologies Ltd.*............... 1,775,000
25,000 Geltex Pharmaceuticals, Inc.*.......... 293,750
56,000 Genset (ADR)* (France)................. 1,029,000
265,000 Guilford Pharmaceuticals, Inc.*........ 5,565,000
50,000 Houghten Pharmaceuticals, Inc.*........ 250,000
50,000 Hyal Pharmaceutical Corp.* (Canada).... 385,707
120,000 ICOS Corp.*............................ 795,000
130,000 Imclone Systems, Inc.*................. 845,000
100,000 Incyte Pharmaceuticals, Inc.*.......... 3,762,500
50,000 Inhale Therapeutic Systems*............ 768,750
40,000 Intercardia, Inc.*..................... 800,000
125,000 Interferon Sciences, Inc.*............. 171,875
165,100 Interneuron Pharmaceuticals, Inc.*..... 4,457,700
97,500 Jones Medical Industries, Inc.......... 3,339,375
100,000 Labopharm Inc.* (Canada)............... 473,037
80,000 Martek Biosciences Corp.*.............. 2,000,000
50,000 Matrix Pharmaceutical, Inc.*........... 537,500
150,000 Medicis Pharmaceutical Corp. (Class
A)*.................................... 6,975,000
50,000 Microcide Pharmaceuticals, Inc.*....... 500,000
20,000 Millennium Pharmaceuticals, Inc.*...... 300,000
50,000 Neose Technologies, Inc.*.............. 687,500
35,300 Neurocrine Bioscience, Inc.*........... 282,400
210,000 North American Vaccine, Inc.*.......... 3,333,750
75,000 NPS Pharmaceuticals, Inc.*............. 750,000
40,000 Onyx Pharmaceuticals, Inc.*............ 305,000
100,000 Orphan Medical, Inc.*.................. 712,500
70,000 Parexel International Corp.*........... 2,800,000
67,000 Pathogenesis Corp.*.................... 804,000
20,000 PDT, Inc.*............................. 665,000
25,000 Pharmacyclics, Inc.*................... 318,750
70,000 Regeneron Pharmaceuticals, Inc.*....... 1,085,000
75,000 Ribozyme Pharmaceuticals, Inc.*........ 881,250
100,000 Sangstat Medical Corp.*................ 1,537,500
50,000 Sciclone Pharmaceuticals, Inc.*........ 606,250
100,000 Sequus Pharmaceuticals, Inc.*.......... 1,450,000
5,000 SIBIA Neurosciences, Inc.*............. 36,250
90,000 SuperGen, Inc.*........................ 1,035,000
120,000 Zila, Inc.*............................ 900,000
---------------
75,806,371
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
PORTFOLIO OF INVESTMENTS JULY 31, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------
<C> <S> <C>
RETAIL - SPECIALTY (1.6%)
110,000 Cole National Corp. (Class A)*......... $ 1,842,500
180,000 Rexall Sundown, Inc.*.................. 5,175,000
---------------
7,017,500
---------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $339,052,652)......... 427,367,389
---------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
WARRANTS VALUE
- ---------------------------------------------------------------------
<C> <S> <C>
WARRANTS (0.0%)
MEDICAL PRODUCTS & SUPPLIES (0.0%)
70,000 ATS Medical, Inc.
(due 03/02/97)*........................ 39,375
---------------
PHARMACEUTICALS (0.0%)
30,000 SuperGen, Inc.
(due 03/12/01)*........................ 159,375
---------------
TOTAL WARRANTS
(IDENTIFIED COST $43,448).............. 198,750
---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ---------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (4.1%)
COMMERCIAL PAPER (a) (4.0%)
AUTOMOTIVE - FINANCE
$ 17,500 Ford Motor Credit Co.
5.63% due 08/01/96..................... 17,500,000
---------------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ---------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT (0.1%)
$ 292 The Bank of New York 5.75% due 08/01/96
(dated 07/31/96; proceeds $291,826;
collateralized by $347,946 Federal Home
Loan Mortgage Corp. 6.50% due 12/15/23
valued at $297,615) (Identified Cost
$291,779).............................. $ 291,779
---------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $17,791,779).......... 17,791,779
---------------
TOTAL INVESTMENTS
(IDENTIFIED COST $356,887,879)
(B)............................ 100.6% 445,357,918
LIABILITIES IN EXCESS OF OTHER
ASSETS......................... (0.6) (2,482,340)
----- ------------
NET ASSETS..................... 100.0% $442,875,578
----- ------------
----- ------------
<FN>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
++ Consists of more than one class of securities traded together as a unit;
generally stocks with attached warrants.
(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 is 357,356,015; the
aggregate gross unrealized appreciation is $117,721,053 and the aggregate
gross unrealized depreciation is $29,719,150, resulting in net unrealized
appreciation of $88,001,903.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $356,887,879)............................ $445,357,918
Receivable for:
Investments sold........................................ 3,503,629
Shares of beneficial interest sold...................... 1,820,941
Deferred organizational expenses............................ 40,256
Prepaid expenses and other assets........................... 116,116
------------
TOTAL ASSETS........................................... 450,838,860
------------
LIABILITIES:
Payable for:
Investments purchased................................... 6,708,939
Plan of distribution fee................................ 422,109
Investment management fee............................... 422,013
Shares of beneficial interest repurchased............... 215,916
Accrued expenses............................................ 194,305
------------
TOTAL LIABILITIES...................................... 7,963,282
------------
NET ASSETS:
Paid-in-capital............................................. 337,418,795
Net unrealized appreciation................................. 88,470,039
Accumulated net investment loss............................. (28,348)
Accumulated undistributed net realized gain................. 17,015,092
------------
NET ASSETS............................................. $442,875,578
------------
------------
NET ASSET VALUE PER SHARE,
29,593,202 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF
$.01 PAR VALUE)...........................................
$14.97
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1996
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest.................................................... $ 392,106
Dividends (net of $8,781 foreign withholding tax)........... 288,598
-----------
TOTAL INCOME........................................... 680,704
-----------
EXPENSES
Plan of distribution fee.................................... 3,864,860
Investment management fee................................... 3,862,384
Transfer agent fees and expenses............................ 500,280
Registration fees........................................... 69,849
Custodian fees.............................................. 62,139
Shareholder reports and notices............................. 54,864
Professional fees........................................... 37,201
Organizational expenses..................................... 32,310
Trustees' fees and expenses................................. 27,958
Other....................................................... 5,651
-----------
TOTAL EXPENSES......................................... 8,517,496
-----------
NET INVESTMENT LOSS.................................... (7,836,792)
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 38,104,756
Net change in unrealized appreciation....................... 16,813,336
-----------
NET GAIN............................................... 54,918,092
-----------
NET INCREASE................................................ $47,081,300
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
JULY 31, FOR THE YEAR ENDED
1996 JULY 31, 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss......................................... $ (7,836,792) $ (5,067,553)
Net realized gain........................................... 38,104,756 28,063,934
Net change in unrealized appreciation....................... 16,813,336 57,548,396
------------ --------------------
NET INCREASE........................................... 47,081,300 80,544,777
Distributions from net realized gain........................ (22,643,391) --
Net increase (decrease) from transactions in shares of
beneficial interest....................................... 144,702,568 (35,383,030)
------------ --------------------
TOTAL INCREASE......................................... 169,140,477 45,161,747
NET ASSETS:
Beginning of period......................................... 273,735,101 228,573,354
------------ --------------------
END OF PERIOD
(INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $28,348
AND $18,664, RESPECTIVELY).............................. $442,875,578 $ 273,735,101
------------ --------------------
------------ --------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
NOTES TO FINANCIAL STATEMENTS JULY 31, 1996
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Health Sciences Trust (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a non-diversified,
open-end management investment company. The Fund's investment objective is
capital appreciation. The Fund seeks to achieve its objective by investing in
securities of companies in the health sciences industry throughout the world.
The Fund was organized as a Massachusetts business trust on May 26, 1992 and
commenced operations on October 30, 1992.
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 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; (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 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) 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; and (5) the market value of foreign denominated portfolio
securities is translated at the exchange rate prevailing at the end of the
period.
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.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily.
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
NOTES TO FINANCIAL STATEMENTS JULY 31, 1996, 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 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.
E. ORGANIZATIONAL EXPENSES -- Dean Witter InterCapital Inc. (the "Investment
Manager") paid the organizational expenses of the Fund in the amount of
approximately $162,000 and was 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 the commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly. Prior to April 30,
1996, the Fund paid an annual rate of 1.0% of daily net assets determined at the
close of each business day. Effective May 1, 1996, the fee changed to the
following annual rates which are also applied to the net assets of the Fund
determined at the close of each business day: 1.0% to the portion of daily net
assets not exceeding $500 million and 0.95% 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.
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
NOTES TO FINANCIAL STATEMENTS JULY 31, 1996, 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, the
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 incurred 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.
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 $16,178,097
at July 31, 1996.
The Distributor has informed the Fund that for the year ended July 31, 1996, it
received approximately $610,000 in contingent deferred sales charges from
certain redemptions of the Fund's shares.
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
NOTES TO FINANCIAL STATEMENTS JULY 31, 1996, CONTINUED
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended July 31, 1996 aggregated $344,533,358
and $240,556,519, respectively.
For the year ended July 31, 1996, the Fund incurred brokerage commissions of
$9,000 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 July 31, 1996, the Fund had
transfer agent fees and expenses payable of approximately $52,000.
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 year ended July 31, 1996 included in
Trustees' fees and expenses in the Statement of Operations amounted to $10,608.
At July 31, 1996, the Fund had an accrued pension liability of $28,348 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 YEAR FOR THE YEAR
ENDED ENDED
JULY 31, 1996 JULY 31, 1995
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 26,005,478 $ 429,545,190 12,330,853 $136,338,116
Reinvestment of distributions.................................... 1,434,910 21,121,878 -- --
----------- -------------- ----------- ------------
27,440,388 450,667,068 12,330,853 136,338,116
Repurchased...................................................... (19,102,244) (305,964,500) (15,613,260) (171,721,146)
----------- -------------- ----------- ------------
Net increase (decrease).......................................... 8,338,144 $ 144,702,568 (3,282,407) $(35,383,030)
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
6. FEDERAL INCOME TAX STATUS
As of July 31, 1996, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales and permanent book/tax
differences attributable to a net operating loss. To reflect reclassifications
arising from permanent book/tax differences for the year ended July 31, 1996,
accumulated undistributed net realized gain was charged and accumulated net
investment loss was credited $7,827,108.
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE
PERIOD
OCTOBER
30, 1992*
FOR THE YEAR ENDED JULY 31 THROUGH
------------------------------- JULY 31,
1996 1995 1994 1993
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE
OPERATING
PERFORMANCE:
Net asset value,
beginning of
period.......... $ 12.88 $ 9.32 $ 9.22 $ 10.00
--------- --------- --------- ----------
Net investment
loss............ (0.26) (0.24) (0.22) (0.08)
Net realized and
unrealized gain
(loss).......... 3.44 3.80 0.32 (0.70)
--------- --------- --------- ----------
Total from
investment
operations...... 3.18 3.56 0.10 (0.78)
--------- --------- --------- ----------
Less
distributions
from net
realized gain... (1.09) -- -- --
--------- --------- --------- ----------
Net asset value,
end of period... $ 14.97 $ 12.88 $ 9.32 $ 9.22
--------- --------- --------- ----------
--------- --------- --------- ----------
TOTAL INVESTMENT
RETURN+.......... 24.84% 38.20% 1.08% (7.80)%(1)
RATIOS TO AVERAGE
NET ASSETS:
Expenses......... 2.20% 2.30% 2.30% 2.38%(2)
Net investment
loss............ (2.03)% (2.05)% (2.06)% (1.38)%(2)
SUPPLEMENTAL
DATA:
Net assets, end
of period, in
thousands....... $442,876 $273,735 $228,573 $231,646
Portfolio
turnover rate... 63% 145% 106% 55%(1)
Average
commission rate
paid............ $0.0562 -- -- --
<FN>
- ---------------------
* Commencement of operations.
+ 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.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER HEALTH SCIENCES TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dean Witter Health Sciences Trust
(the "Fund") at July 31, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the three years in the
period then ended and for the period October 30, 1992 (commencement of
operations) through July 31, 1993, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at July 31, 1996 by correspondence with the custodian
and brokers and the application of alternative auditing procedures where
confirmations from brokers were not received, provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
SEPTEMBER 13, 1996
- --------------------------------------------------------------------------------
1996 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended July 31, 1996, the Fund paid to its
shareholders $1.01 per share from long-term capital gains. For
such period, 15.8% of the income paid qualified for the dividends
received deduction available to corporations.
<PAGE>
TRUSTEES
Michael Bozic DEAN WITTER
Charles A. Fiumefreddo
Edwin J. Garn HEALTH SCIENCES
John R. Haire
Dr. Manuel H. Johnson TRUST
Michael E. Nugent
Phillip J. Purcell [GRAPHIC]
John L. Schroeder
ANNUAL REPORT
OFFICERS JULY 31, 1996
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Ronald J. Worobel
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
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.
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
GROWTH OF $10,000
DATE TOTAL S&P 500
-----------------------------------------------------
-----------------------------------------------------
October 30, 1992 $10,000 $10,000
-----------------------------------------------------
July 31, 1993 $9,220 $10,932
-----------------------------------------------------
July 31, 1994 $9,320 $11,496
-----------------------------------------------------
July 31, 1995 $12,880 $14,489
-----------------------------------------------------
July 31, 1996 $15,879(3) $16,881
-----------------------------------------------------
-----------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
ONE YEAR LIFE OF FUND
--------------------------------
--------------------------------
24.84 (1) 13.50 (1)
--------------------------------
19.84 (2) 13.12 (2)
--------------------------------
--------------------------------
--------------------------------
________Fund _______S&P 500(4)
--------------------------------
Past performance is not predictive of future returns.
________________________________________
(1) Figure shown assumes reinvestment of all distributions and does not
reflect any sales charges.
(2) Figure shown assumes the deduction of the maximum applicable contingent
deferred sales charge (CDSC) (1 year-5%, since inception-2%). See the
Fund's current prospectus for complete details on fees and sales charges.
(3) Closing value after the deduction of a 2% CDSC assuming a complete
redemption on July 31, 1996.
(4) The Standard and Poors 500 Composite Stock Price Index (S&P 500) is a
broad-based index, the performance of which is based on the average
performance of 500 widely held common stocks. The index does not include
any expenses, fees or charges. The index is unmanaged and should not be
considered an investment.
