<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
Two World Trade Center, New York, New York 10048
LETTER TO THE SHAREHOLDERS July 31, 1997
DEAR SHAREHOLDER:
During the fiscal year ended July 31, 1997, the stock market continued to
soar with the Dow Jones Industrial Average gaining 51.75 percent. Large-cap
stocks continued to lead the market; however, in May, the Russell 2000 Index
began showing signs of strength. For the period under review, the Russell
2000 gained 33.39 percent.
PERFORMANCE AND PORTFOLIO STRATEGY
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE PURPOSE OF EDGAR
FILING.]
GROWTH OF $10,000
- --------------------------------------------------------------------------
($ IN THOUSANDS)
DATE FUND S&P 500(4) LIPPER(5)
October 30, 1992 $10,000 $10,000 $10,000
July 31, 1993 $ 9,220 $10,932 $ 9,437
July 31, 1994 $ 9,320 $11,496 $10,253
July 31, 1995 $12,880 $14,489 $13,881
July 31, 1996 $16,079 $16,881 $16,456
July 31, 1997 $17,093(3) $25,674 $21,972
AVERAGE ANNUAL TOTAL RETURNS (FUND)
ONE YEAR LIFE OF FUND
7.55 (1) 12.22 (1)
2.55 (2) 11.95 (2)
Past performance is not predictive of future returns.
(1) Figure shown 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, 1997.
(4) The Standard & Poor's 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.
(5) The Lipper Health/Biotechnology Funds Index is an equally-weighted
performance index of the largest qualifying funds (based on net assets)
in the Lipper Health/Biotechnology Funds objective. The index, which is
adjusted for capital gains distributions and income dividends, is
unmanaged and should not be considered for investment. There are
currently 10 funds represented in this index.
As of July 28, 1997, the Fund began offering four classes of shares: A, B, C
and D, each with its own sales charge and distribution fee structure. Fund
shares held prior to July 28 were designated Class B shares. A revised
prospectus, which includes complete details regarding the Fund's conversion
to multiple classes of shares, was mailed to shareholders in mid-summer.
For the fiscal year ended July 31, 1997, Dean Witter Health Sciences Trust
(Class B) produced a total return of 7.55 percent compared to 52.08 percent
for the broad-based Standard & Poor's 500 Composite Stock Index (S&P 500) and
33.52 percent for the Lipper Health/Biotechnology Funds Index. The accompanying
chart illustrates the performance of Class B shares of the Fund versus the
performance of similar hypothetical investments in the S&P 500 and the Lipper
Index.
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
LETTER TO THE SHAREHOLDERS July 31, 1997, continued
The Fund's small-cap healthcare holdings negatively impacted the Fund's
performance. These stocks were hindered during the first half of the fiscal
year by concerns over rising interest rates and an inflationary environment
following the release of some controversial economic data and the Federal
Reserve Board's 25 basis point rate hike in March. However, investor
sentiment has recently warmed considerably toward these smaller companies in
healthcare, mirroring an apparent trend in the broader market.
The Fund's large-cap holdings, such as Warner Lambert Co., Baxter
International Inc. and Pharmacia Upjohn Inc., contributed positively to the
Fund's performance. A few of these large companies are on the brink of
developing a new class of cholesterol-reducing drugs. This good news has led
to a favorable earnings outlook for the group and increasingly high investor
sentiment.
During the period under review, the Fund remained well diversified among
different sectors within the healthcare industry. On July 31, 1997,
pharmaceuticals made up 16.9 percent of the Fund's portfolio, biotechnology
made up 18.9 percent, and medical products and supplies made up 15.5 percent.
The Fund's five largest sectors on July 31, 1997, were biotechnology,
pharmaceuticals, medical products and supplies, diversified healthcare and
drugs. At the end of the period under review, the Fund's net assets totaled
$422.7 million.
LOOKING AHEAD
Over the near term, we expect that large-cap pharmaceutical stocks will
continue to perform well and will continue to attract investor attention and
support. Over the longer term, however, we believe that the small-and mid-cap
names in healthcare that the Fund focuses on are positioned to outperform
their large-cap counterparts. Overall, the fundamentals of the healthcare
industry bode well for the Fund's future performance.
We appreciate your support of Dean Witter Health Sciences Trust and look
forward to continuing to serve your financial needs and objectives.
Very truly yours,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
RESULTS OF SPECIAL MEETING (unaudited)
* * *
On May 21, 1997, a special meeting of shareholders of Dean Witter Health
Sciences Trust 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 ....... 15,245,200
Against .. 468,085
Abstain .. 1,286,925
</TABLE>
(2) ELECTION OF TRUSTEES:
<TABLE>
<CAPTION>
<S> <C>
Michael Bozic
For ................... 16,002,890
Withheld .............. 997,320
Charles A. Fiumefreddo
For ................... 15,997,443
Withheld .............. 1,002,767
Edwin J. Garn
For ................... 16,009,570
Withheld .............. 990,640
John R. Haire
For .................. 15,967,947
Withheld ............. 1,032,263
Wayne E. Hedien
For .................. 15,988,706
Withheld ............. 1,011,504
Dr. Manuel H. Johnson
For .................. 16,001,709
Withheld ............. 998,501
Michael E. Nugent
For .................. 16,021,959
Withheld ............. 978,251
Philip J. Purcell
For .................. 16,016,109
Withheld ............. 984,101
John L. Schroeder
For .................. 15,989,962
Withheld ............. 1,010,248
</TABLE>
(3) APPROVAL OF A NEW INVESTMENT POLICY WITH RESPECT TO INVESTMENTS IN
CERTAIN OTHER INVESTMENT COMPANIES:
<TABLE>
<CAPTION>
<S> <C>
For ...... 14,586,239
Against . 822,025
Abstain . 1,591,946
</TABLE>
(4) RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP AS THE FUND'S
INDEPENDENT ACCOUNTANTS:
<TABLE>
<CAPTION>
<S> <C>
For ..... 15,637,752
Against 272,099
Abstain 1,090,359
</TABLE>
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------- ---------------
<S> <C> <C>
COMMON STOCKS (98.5%)
Biotechnology (18.9%)
100,000 Affymetrix, Inc.* ............................................... $ 3,237,500
120,000 Agouron Pharmaceutical, Inc.* ................................... 11,490,000
150,000 Alexion Pharmaceuticals, Inc.* .................................. 1,556,250
200,000 Alkermes, Inc.* ................................................. 3,125,000
100,000 Arterial Vascular Engineering, Inc.* ............................ 3,825,000
30,000 Aviron* ......................................................... 810,000
100,000 Biochem Pharma, Inc. (Canada)* .................................. 2,875,000
170,000 Biomatrix, Inc. ................................................. 3,825,000
50,000 Biomira, Inc (Canada)* .......................................... 219,457
100,000 Cell Therapeutics, Inc.* ........................................ 1,337,500
100,000 Centocor, Inc.* ................................................. 3,843,750
170,000 Genzyme Corp. General Division* ................................. 4,632,500
5,100 Genzyme Corp. Tissue Repair Division* ........................... 54,825
150,000 Gilead Sciences, Inc.* .......................................... 4,218,750
200,000 IDEC Pharmaceuticals Corp.* ..................................... 5,462,500
150,000 Immunex Corp.* .................................................. 5,718,750
100,000 Interferon Sciences, Inc.* ...................................... 631,250
100,000 Ligand Pharmaceuticals, Inc. (Class B)* ......................... 1,262,500
100,000 Matritech, Inc.* ................................................ 568,750
76,000 Maxim Pharmaceuticals, Inc. ..................................... 722,000
80,000 Neurex Corp.* ................................................... 990,000
100,000 Neurogen Corp.* ................................................. 2,175,000
30,000 OEC Medical Systems, Inc.* ...................................... 513,750
140,000 Protein Design Labs, Inc.* ...................................... 3,902,500
25,000 Ribi ImmunoChem Research, Inc.* ................................. 96,875
150,000 Sepracor, Inc. ................................................. 3,768,750
40,000 Transcend Therapeutics, Inc.* ................................... 360,000
150,000 Vertex Pharmaceuticals, Inc.* ................................... 5,231,250
200,000 Vion Pharmaceuticals, Inc.* ..................................... 812,500
200,000 Virus Research Institute, Inc. ................................. 1,250,000
40,000 Zonagen, Inc.* .................................................. 1,170,000
---------------
79,686,907
---------------
Commercial Services (3.4%)
140,000 Advanced Health Corp. .......................................... 2,590,000
40,000 Complete Management, Inc. ...................................... 597,500
150,000 Equity Corporation International* ............................... 3,609,375
100,000 Medquist, Inc.* ................................................. 3,250,000
100,000 Stewart Enterprises, Inc. (Class A) ............................. 4,325,000
---------------
14,371,875
---------------
Computer Software (1.6%)
130,000 Cerner Corp.* ................................................... 3,900,000
100,000 Medic Computer Systems, Inc.* ................................... 2,700,000
---------------
6,600,000
---------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------- ---------------
Computer Software & Services (1.3%)
100,000 A.L.I. Technologies Inc. (Canada)* .............................. $ 805,281
50,000 Daou Systems, Inc.* ............................................. 987,500
60,000 HPR Inc.* ....................................................... 945,000
50,000 ImageMatrix Corp. (Units)++* .................................... 114,062
50,000 Imnet Systems, Inc. ............................................. 1,737,500
100,000 Sunquest Information Systems, Inc.* ............................. 1,087,500
---------------
5,676,843
---------------
Consumer Products (0.5%)
20,000 Chattem, Inc.* .................................................. 345,000
100,000 Perrigo Co.* .................................................... 1,300,000
50,000 Selfcare, Inc.* ................................................. 600,000
---------------
2,245,000
---------------
Drugs (7.6%)
35,000 Ascent Pediatrics, Inc.* ........................................ 253,750
160,000 Columbia Laboratories, Inc. .................................... 3,150,000
220,000 Dura-Pharmaceuticals, Inc.* ..................................... 8,538,750
150,000 Elan Corp. PLC (ADR)(Ireland)* .................................. 7,125,000
110,000 Glaxo Wellcome PLC (ADR)(United Kingdom) ........................ 4,675,000
180,000 ICN Pharmaceuticals, Inc. ....................................... 6,153,750
100,000 Labopharm Inc. (Canada)* ........................................ 272,055
50,000 Pharmacia & Upjohn, Inc. ....................................... 1,887,500
---------------
32,055,805
---------------
Finance (0.3%)
55,000 HealthCare Financial Partners, Inc. ............................ 1,168,750
---------------
Health Equipment & Services (5.2%)
100,000 Diagnostic Health Services, Inc.* ............................... 1,100,000
60,000 Medtronic, Inc. ................................................ 5,235,000
197,400 Renal Treatment Centers, Inc.* .................................. 5,823,300
270,000 RoTech Medical Corp.* ........................................... 5,028,750
120,000 Sabratek Corp.* ................................................. 3,225,000
158,000 Vista Medical Technologies, Inc.* ............................... 1,422,000
---------------
21,834,050
---------------
Healthcare (0.8%)
110,000 Allegiance Corp. ................................................ 3,437,500
---------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------- ---------------
Healthcare -Diversified (8.2%)
280,000 Healthsouth Corp.* .............................................. $ 7,420,000
50,000 Humana, Inc.* ................................................... 1,218,750
100,000 Integrated Health Services, Inc. ............................... 3,412,500
150,000 Mentor Corp. ................................................... 4,603,125
150,000 NovaCare, Inc.* ................................................. 1,940,625
34,200 Simione Center Holdings, Inc.* .................................. 342,000
150,000 Universal Health Services, Inc. (Class B)* ...................... 6,093,750
70,000 Warner-Lambert Co. ............................................. 9,778,125
---------------
34,808,875
---------------
Hospital Management & Health
Maintenance Organizations (0.8%)
100,000 American Oncology Resources, Inc.* .............................. 1,525,000
40,000 Healthcare Recoveries, Inc.* .................................... 730,000
80,000 Specialty Care Network, Inc.* ................................... 970,000
---------------
3,225,000
---------------
Hospital Management (6.1%)
100,000 American HomePatient, Inc.* ..................................... 1,975,000
170,000 FPA Medical Management, Inc. ................................... 4,505,000
100,000 Genesis Health Ventures, Inc.* .................................. 3,387,500
50,000 Harborside Healthcare Corp. .................................... 806,250
50,000 Impath, Inc.* ................................................... 1,312,500
25,000 Pediatric Services of America, Inc.* ............................ 562,500
60,000 Quorum Health Group, Inc.* ...................................... 2,137,500
180,000 Renal Care Group, Inc.* ......................................... 5,152,500
120,000 Tenet Healthcare Corp.* ......................................... 3,592,500
60,000 Total Renal Care Holdings, Inc.* ................................ 2,475,000
---------------
25,906,250
---------------
Hospital Supply (0.2%)
98,800 Boston Biomedica, Inc. ......................................... 679,250
---------------
Insurance (0.5%)
50,000 Guaranty National Corp. ........................................ 1,331,250
47,300 Summit Holding Southeast Inc.* .................................. 886,875
---------------
2,218,125
---------------
Life Insurance (0.9%)
70,000 CRA Managed Care, Inc.* ......................................... 3,587,500
---------------
Manufacturing (0.3%)
35,000 Axogen Ltd. (Units)++ ........................................... 1,150,625
---------------
Medical Products & Supplies (15.5%)
20,000 Abiomed, Inc.* .................................................. 325,000
100,000 ArQule, Inc.* ................................................... 1,650,000
100,000 Bard (C.R.), Inc. .............................................. 3,762,500
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------- ---------------
110,000 Baxter International, Inc. ..................................... $ 6,359,375
60,000 Closure Medical Corp.* .......................................... 1,605,000
40,000 Cooper Companies, Inc.* ......................................... 1,120,000
90,000 Cryolife, Inc.* ................................................. 1,119,375
83,100 EP MedSystems, Inc. ............................................ 228,525
70,000 Guidant Corp. .................................................. 6,387,500
100,000 Hanger Orthopedic Group, Inc.* .................................. 1,275,000
30,000 Health Care & Retirement Corp.* ................................. 1,072,500
25,000 Healthdyne Technologies, Inc.* .................................. 421,875
50,000 Intelligent Medical Imaging, Inc.* .............................. 331,250
50,000 IRIDEX Corp.* ................................................... 493,750
150,000 Kinetic Concepts, Inc. .......................................... 2,812,500
80,000 Laser Industries, Ltd. .......................................... 1,380,000
100,000 Lincare Holdings, Inc.* ......................................... 4,900,000
100,000 Molecular Dynamics, Inc.* ....................................... 2,050,000
40,000 Sight Resource Corp. (Units)++* ................................. 215,000
100,000 Novoste Corp. .................................................. 1,575,000
100,000 Osteotech, Inc.* ................................................ 1,275,000
20,000 Penederm, Inc.* ................................................. 232,500
110,000 Perclose, Inc.* ................................................. 2,530,000
110,000 PLC Systems, Inc. (Canada)* ..................................... 1,436,875
100,000 ResMed, Inc. ................................................... 2,400,000
100,000 Spine-Tech, Inc* ................................................ 5,900,000
40,000 Sterile Recoveries, Inc.* ....................................... 615,000
60,000 TECNOL Medical Products, Inc.* .................................. 1,320,000
100,000 Urologix, Inc. ................................................. 1,762,500
120,000 Ventana Medical Systems, Inc.* .................................. 1,995,000
240,000 Vivus, Inc.* .................................................... 7,170,000
---------------
65,721,025
---------------
Medical Services (6.5%)
110,000 Alternative Living Services, Inc. .............................. 2,371,875
30,000 Coventry Corp.* ................................................. 530,625
70,000 EndoSonics Corp.* ............................................... 927,500
45,790 HBO & Co. ...................................................... 3,537,278
140,000 Medical Resources, Inc.* ........................................ 2,240,000
100,000 Quintiles Transnational Corp.* .................................. 7,500,000
50,000 Sheridan Healthcare, Inc.* ...................................... 618,750
160,000 Transkaryotic Therapies, Inc. .................................. 5,600,000
100,000 Vencor, Inc.* ................................................... 4,031,250
---------------
27,357,278
---------------
Miscellaneous (0.0%)
5,600 Corsair Communications, Inc.* ................................... 109,900
5,000 Monarch Dental Corp.* ........................................... 87,500
---------------
197,400
---------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------- ---------------
Pharmaceuticals (16.9%)
120,000 Andrx Corp. .................................................... $ 3,960,000
100,000 Aronex Pharmaceuticals, Inc.* ................................... 437,500
70,000 Biovail Corporation International* .............................. 1,872,500
180,000 Bone Care International, Inc.* .................................. 2,790,000
60,000 Cadus Pharmaceutical Corp. ..................................... 817,500
50,000 ChiRex, Inc.* ................................................... 856,250
100,000 Coulter Pharmaceutical, Inc. ................................... 812,500
100,000 Curative Health Services, Inc.* ................................. 3,137,500
220,000 Cypros Pharmaceutical Corp.* .................................... 893,750
70,000 DUSA Pharmaceuticals, Inc.* ..................................... 358,750
150,000 Emisphere Technologies, Inc.* ................................... 2,906,250
80,000 Genset (ADR)(France)* ........................................... 2,000,000
350,000 Guilford Pharmaceuticals, Inc.* ................................. 7,743,750
50,000 Hyal Pharmaceutical Corp. (Canada) .............................. 139,655
120,000 ICOS Corp.* ..................................................... 1,035,000
120,000 Incyte Pharmaceuticals, Inc.* ................................... 8,115,000
120,000 Inhale Therapeutic Systems* ..................................... 2,925,000
90,000 Kos Pharmaceuticals, Inc.* ...................................... 3,487,500
140,000 Medicis Pharmaceutical Corp. (Class A)* ......................... 6,300,000
100,000 OrthoLogic Corp.* ............................................... 631,250
220,000 Parexel International Corp. ..................................... 8,470,000
120,000 PathoGenesis Corp.* ............................................. 3,480,000
50,000 Salix Holdings, Ltd. (Canada)* .................................. 304,701
180,000 Sangstat Medical Corp.* ......................................... 4,342,500
70,000 Watson Pharmaceuticals, Inc.* ................................... 3,465,000
---------------
71,281,856
---------------
Retail--Specialty (1.7%)
120,000 Cole National Corp. (Class A)* .................................. 5,182,500
35,368 CVS Corp. ....................................................... 2,011,555
---------------
7,194,055
---------------
Specialized Services (0.3%)
40,000 Service Corp. International ..................................... 1,360,000
---------------
Wholesale Distributor (1.0%)
50,000 McKesson Corp. ................................................. 4,334,375
---------------
TOTAL COMMON STOCKS
(Identified Cost $304,444,915) .................................. 416,098,344
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
<TABLE>
<CAPTION>
NUMBER OF
WARRANTS VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
WARRANTS (0.0%)
Pharmaceuticals
30,000 SuperGen, Inc. (due 03/12/01)*
(Identified Cost $43,448) ....................................... $ 195,000
----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- -----------
<S> <C> <C>
SHORT-TERM INVESTMENT (1.0%)
REPURCHASE AGREEMENT
The Bank of New York 5.75% due 08/01/97 (dated 07/31/97;
proceeds $4,393,616)(a)
$4,393 (Identified Cost $4,392,915) ................................... 4,392,915
------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $308,881,278)(b) . 99.5% 420,686,259
OTHER ASSETS IN EXCESS OF
LIABILITIES........................ 0.5 2,020,805
--------- -------------
NET ASSETS......................... 100.0% $422,707,064
========= =============
</TABLE>
- ------------
ADR American Depository Receipt.
* Non-income producing security.
++ Consists of more than one class of securities traded together as a
unit; stocks with attached warrants.
(a) Collateralized by $1,117,580 Federal Home Loan Banks 6.10% due
11/27/98 valued at $1,130,080, $1,341,872 Federal National Mortgage
Assoc. 6.15% due 12/14/01 valued at $1,339,470 and $2,000,000 Federal
National Mortgage Assoc. 8.13% due 07/08/11 valued at $2,011,223.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$119,250,992 and the aggregate gross unrealized depreciation is
$7,446,011, resulting in net unrealized appreciation of $111,804,981.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value (identified cost
$308,881,278).................................................... $420,686,259
Receivable for:
Investments sold................................................ 5,813,979
Shares of beneficial interest sold.............................. 437,522
Dividends....................................................... 74,215
Deferred organizational expenses.................................. 8,034
Prepaid expenses and other assets................................. 16,656
--------------
TOTAL ASSETS ................................................... 427,036,665
--------------
LIABILITIES:
Payable for:
Investments purchased........................................... 2,886,868
Shares of beneficial interest repurchased....................... 624,067
Investment management fee....................................... 357,582
Plan of distribution fee........................................ 357,581
Accrued expenses and other payables .............................. 103,503
---------------
TOTAL LIABILITIES............................................... 4,329,601
---------------
NET ASSETS...................................................... $422,707,064
===============
COMPOSITION OF NET ASSETS:
Paid-in-capital................................................... 307,533,850
Net unrealized appreciation ...................................... 111,804,981
Accumulated net investment loss................................... (32,076)
Accumulated undistributed net realized gain....................... 3,400,309
---------------
NET ASSETS ..................................................... $422,707,064
===============
CLASS A SHARES:
Net Assets........................................................ $10,069
Shares Outstanding (unlimited authorized, $.01 par value) ........ 667
NET ASSET VALUE PER SHARE....................................... $15.10
===============
MAXIMUM OFFERING PRICE PER SHARE
(net asset value plus 5.54% of net asset value)................ $15.94
===============
CLASS B SHARES:
Net Assets........................................................ $422,666,859
Shares Outstanding (unlimited authorized, $.01 par value) ........ 27,994,379
NET ASSET VALUE PER SHARE ...................................... $15.10
===============
CLASS C SHARES:
Net Assets........................................................ $20,067
Shares Outstanding (unlimited authorized, $.01 par value) ........ 1,329
NET ASSET VALUE PER SHARE ...................................... $15.10
===============
CLASS D SHARES:
Net Assets........................................................ $10,069
Shares Outstanding (unlimited authorized, $.01 par value) ........ 667
NET ASSET VALUE PER SHARE ...................................... $15.10
===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended July 31, 1997*
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest ......................................... $ 384,111
Dividends (net of $5,458 foreign withholding
tax)............................................. 361,779
--------------
TOTAL INCOME.................................... 745,890
--------------
EXPENSES
Plan of distribution fee (Class B shares) ........ 4,492,291
Investment management fee......................... 4,491,688
Transfer agent fees and expenses.................. 730,898
Registration fees................................. 145,533
Shareholder reports and notices................... 77,955
Professional fees ................................ 62,407
Custodian fees.................................... 48,301
Organizational expenses .......................... 32,222
Trustees' fees and expenses....................... 20,771
Other............................................. 9,487
--------------
TOTAL EXPENSES.................................. 10,111,553
--------------
NET INVESTMENT LOSS............................. (9,365,663)
--------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ................................ 14,671,544
Net change in unrealized appreciation ............ 23,334,942
--------------
NET GAIN ....................................... 38,006,486
--------------
NET INCREASE ..................................... $28,640,823
==============
</TABLE>
- ------------
* Class A, Class C and Class D shares were issued July 28, 1997.
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 FOR THE YEAR
ENDED ENDED
JULY 31, 1997* JULY 31, 1996
-------------------------------------------------------------- ------------ -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss.............................................. $ (9,365,663) $ (7,836,792)
Net realized gain ............................................... 14,671,544 38,104,756
Net change in unrealized appreciation ........................... 23,334,942 16,813,336
-------------- ----------------
NET INCREASE .................................................. 28,640,823 47,081,300
DISTRIBUTIONS TO SHAREHOLDERS FROM NET
REALIZED GAIN
Class B shares................................................. (28,286,327) (22,643,391)
Net increase (decrease) from transactions in shares of
beneficial interest............................................. (20,523,010) 144,702,568
-------------- ----------------
TOTAL INCREASE (DECREASE)...................................... (20,168,514) 169,140,477
NET ASSETS:
Beginning of period.............................................. 442,875,578 273,735,101
-------------- ----------------
END OF PERIOD
(Including accumulated net investment losses of $32,076 and
$28,348, respectively)......................................... $422,707,064 $442,875,578
============== ================
</TABLE>
- ------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1997
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. On July 28, 1997, the Fund
commenced offering three additional classes of shares, with the then current
shares designated as Class B shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase, some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year,
six years and one year, respectively. Class D shares are not subject to a
sales charge. Additionally, Class A shares, Class B shares and Class C shares
incur distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York or 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 a security is traded on more than one exchange, the
security is valued on the exchange designated as the primary market pursuant
to procedures adopted by the Trustees); (2) all other portfolio securities
for which over-the-counter market quotations are readily available are valued
at the latest available bid price prior to the time of valuation; (3) when
market quotations are not readily available, including circumstances under
which it is determined by 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) 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
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1997, continued
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.
Investment income, expenses (other than distribution fees), and realized and
unrealized gains and losses are allocated to each class of shares based upon
the relative net asset value on the date the income is earned or expenses and
realized and unrealized gains and losses are incurred. Distribution fees are
charged directly to the respective class.
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 -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $162,000 which have been
reimbursed for the full amount thereof. Such expenses have been deferred and
are being amortized on the straight-line method over a period not to exceed
five years from the commencement of operations.
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1997, continued
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
following annual rates 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.
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. The
plan provides that the Fund will pay the Distributor a fee which is accrued
daily and paid monthly at the following annual rates: (i) Class A -0.25% of
the average daily net assets of Class A; (ii) Class B -1.0% of the lesser of:
(a) the average daily aggregate gross sales of the Class B shares since the
inception of the Fund (not including reinvestment of dividend or capital gain
distributions) less the average daily aggregate net asset value of the Class
B shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or waived; or (b) the average daily net assets
of Class B; and (iii) Class C -1.0% of the average daily net assets of Class
C. In the case of Class A shares, amounts paid under the Plan are paid to the
Distributor for services provided. In the case of Class B and Class C shares,
amounts paid under the Plan are paid to the Distributor for services provided
and the expenses borne by it and others in the distribution of the shares of
these Classes, including the payment of commissions for sales of these
Classes and incentive compensation to, and expenses of, the 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 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 these 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, in the case of Class B shares, to
compensate DWR
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1997, continued
and other selected broker-dealers for their opportunity costs in advancing
such amounts, which compensation would be in the form of a carrying charge on
any unreimbursed expenses.
In the case of Class B shares, provided that the Plan continues in effect,
any cumulative expenses incurred by the Distributor but not yet recovered may
be recovered through the payment of future distribution fees from the Fund
pursuant to the Plan and contingent deferred sales charges paid by investors
upon redemption of Class B shares. Although there is no legal obligation for
the Fund to pay expenses incurred in excess of payments made to the
Distributor under the Plan and the proceeds of contingent deferred sales
charges paid by investors upon redemption of shares, if for any reason the
Plan is terminated, the Trustees will consider at that time the manner in
which to treat such expenses. The Distributor has advised the Fund that such
excess amounts, including carrying charges, totaled $16,338,844 at July 31,
1997.
In the case of Class A shares and Class C shares, expenses incurred pursuant
to the Plan in any calendar year in excess of 0.25% or 1.0% of the average
daily net assets of Class A or Class C, respectively, will not be reimbursed
by the Fund through payments in any subsequent year, except that expenses
representing a gross sales credit to account executives may be reimbursed in
the subsequent calendar year. For the period ended July 31, 1997, the
distribution fee was accrued for Class A shares and Class C shares at the
annual rate of 0.25% and 1.0%, respectively.
The Distributor has informed the Fund that for the year ended July 31, 1997,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares of approximately $1,142,000. The shareholders pay such
charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended July 31, 1997 aggregated
$369,644,528 and $418,622,260, respectively.
For the year ended July 31, 1997, the Fund incurred brokerage commissions of
$10,330 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, 1997, the Fund had
transfer agent fees and expenses payable of approximately $2,800.
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, 1997 included in Trustees' fees and
<PAGE>
DEAN WITTER HEALTH SCIENCES TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1997, continued
expenses in the Statement of Operations amounted to $5,225. At July 31, 1997,
the Fund had an accrued pension liability of $32,076 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, 1997 JULY 31, 1996
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
CLASS A SHARES*
Sold ........................................ 667 $ 10,018 -- --
-------------- --------------- -------------- ---------------
CLASS B SHARES
Sold......................................... 12,042,815 183,250,429 26,005,478 $ 429,545,190
Reinvestment of dividends and distributions 1,860,102 26,655,267 1,434,910 21,121,878
Redeemed..................................... (15,501,740) (230,468,760) (19,102,244) (305,964,500)
------------- --------------- ------------- ---------------
Net increase (decrease) -Class B............. (1,598,823) (20,563,064) 8,338,144 144,702,568
------------- --------------- ------------- ---------------
CLASS C SHARES*
Sold......................................... 1,329 20,018 -- --
------------- --------------- ------------- ---------------
CLASS D SHARES*
Sold......................................... 667 10,018 -- --
------------- --------------- ------------- ---------------
Net increase (decrease) in Fund.............. (1,596,160) $ (20,523,010) 8,338,144 $ 144,702,568
============= =============== ============= ===============
</TABLE>
- ------------
* For the period July 28, 1997 (issue date) through July 31, 1997.
6. FEDERAL INCOME TAX STATUS
As of July 31, 1997, 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 the permanent differences, paid-in-capital was
charged and accumulated net investment loss was credited $9,361,935.
<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 YEAR ENDED JULY 31,
---------------------------------------------
FOR THE PERIOD
OCTOBER 30, 1992*
THROUGH
1997** 1996 1995 1994 JULY 31, 1993
- ------------------------------------------ ---------- ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ...... $14.97 $12.88 $ 9.32 $ 9.22 $10.00
--------- --------- -------- --------- ------------
Net investment loss........................ (0.31) (0.26) (0.24) (0.22) (0.08)
Net realized and unrealized gain (loss) ... 1.39 3.44 3.80 0.32 (0.70)
--------- --------- -------- --------- ------------
Total from investment operations........... 1.08 3.18 3.56 0.10 (0.78)
--------- --------- -------- --------- ------------
Less distributions from net realized gain (0.95) (1.09) -- -- --
--------- --------- -------- --------- ------------
Net asset value, end of period ............ $15.10 $14.97 $12.88 $ 9.32 $ 9.22
========= ========= ======== ========= ============
TOTAL INVESTMENT RETURN+ .................. 7.55% 24.84% 38.20% 1.08% (7.80)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses................................... 2.25% 2.20% 2.30% 2.30% 2.38%(2)
Net investment loss........................ (2.08)% (2.03)% (2.05)% (2.06)% (1.38)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ... $422,667 $ 442,876 $273,735 $228,573 $231,646
Portfolio turnover rate.................... 85% 63% 145% 106% 55%(1)
Average commission rate paid............... $ 0.0566 $ 0.0562 -- -- --
</TABLE>
- ------------
* Commencement of operations.
** Class B shares were issued July 28, 1997. All shares of the Fund held
prior to that date have been designated Class B shares.
+ 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>
DEAN WITTER HEALTH SCIENCES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
JULY 31, 1997
- ---------------------------------------- --------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .... $ 15.03
Net realized and unrealized gain ....... 0.07
-----------
Net asset value, end of period .......... $ 15.10
===========
TOTAL INVESTMENT RETURN+ ............... 0.47%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 1.57%(2)
Net investment loss ..................... (0.55)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 10
Portfolio turnover rate ................. 85%
Average commission rate paid ............ $0.0566
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .... $ 15.03
Net realized and unrealized gain ....... 0.07
-----------
Net asset value, end of period .......... $ 15.10
===========
TOTAL INVESTMENT RETURN+ ............... 0.47%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 2.31%(2)
Net investment loss ..................... (1.28)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 20
Portfolio turnover rate ................. 85%
Average commission rate paid ............ $0.0566
</TABLE>
- ------------
* The date shares were first issued.
+ 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>
DEAN WITTER HEALTH SCIENCES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
JULY 31, 1997
- ---------------------------------------- --------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .... $ 15.03
Net realized and unrealized gain ....... 0.07
-----------
Net asset value, end of period .......... $ 15.10
===========
TOTAL INVESTMENT RETURN+ ................ 0.47%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 1.31%(2)
Net investment loss ..................... (0.29)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 10
Portfolio turnover rate ................. 85%
Average commission rate paid ............ $0.0566
</TABLE>
- ------------
* The date shares were first issued.
+ 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>
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, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each
of the periods presented, 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, 1997 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 12, 1997
1997 FEDERAL TAX NOTICE (unaudited)
During the year ended July 31, 1997, the Fund paid to its shareholders $0.95
per share from long-term capital gains.
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
Ronald J. Worobel
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust FSB
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
ADVISER
TCW Funds Management, Inc.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its offices 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
Health Sciences
Trust
ANNUAL REPORT
JULY 31, 1997
