<PAGE> 1
DEAN WITTER HEALTH SCIENCES TRUST Two World Trade Center, New York, New York
10048
LETTER TO THE SHAREHOLDERS January 31, 1998
DEAR SHAREHOLDER:
Small- and mid-cap stocks were highly volatile during the six months ended
January 31, 1998, and, by the end of the period, large caps had once again come
out ahead. The underperformance of smaller companies was, unfortunately,
particularly evident in the health care industry. Meanwhile, large-cap
pharmaceuticals continued to set new highs, ending the period as the best
performing segment of the health care group.
PERFORMANCE AND PORTFOLIO STRATEGY
For the six-month period ended January 31, 1998, the Fund's Class B shares
posted a total return of 3.44 percent, versus 3.56 percent and 5.88 percent,
respectively, for the Standard & Poor's 500 Composite Stock Price Index (S&P
500) and the Lipper Health/Biotechnology Funds Index. Since their inception on
July 28, 1997 through January 31, 1998, the Fund's Class A, C and D shares had
total returns of 3.84 percent, 3.44 percent and 3.98 percent, respectively.
Performance of the Fund's four share classes varies because of differing charges
and expenses. The Fund's emphasis on small- and mid-cap health care companies
negatively affected the Fund's performance relative to its Lipper benchmark.
The Fund's holdings in biotechnology (18.90 percent of net assets as of January
31, 1998) produced disappointing returns, as investors in general shunned stocks
with high price-to-earnings multiples. However, we believe that this group is
positioned to outperform over the long term. Biotech companies continue to be
sought after by large pharmaceuticals seeking to create product portfolios as
joint ventures. In addition, during the coming year this group is looking
forward to positive clinical results, royalty agreements and milestone payments,
which should create investor interest. FDA reform and faster FDA approvals are
also encouraging.
During the period under review, the Fund's large-cap pharmaceutical holdings
continued to contribute positively to performance. Holdings in
<PAGE> 2
DEAN WITTER HEALTH SCIENCES TRUST
LETTER TO THE SHAREHOLDERS January 31, 1998, continued
the assisted living group within the long-term care sector, such as Sunrise
Assisted Living Inc., have also performed well. We expect that this group will
benefit from demographics: an estimated 30 percent of existing nursing homes are
due to be converted to assisted living facilities by the year 2000.
The Fund has had no exposure to either HMOs or hospitals for some time, which
will likely remain the case for the foreseeable future. Both of these sectors
have performed poorly and have had some fundamental business problems. Our
underweightings, in these areas have contributed positively to the Fund's
performance.
LOOKING AHEAD
While small- and mid-cap stocks, especially those in health care, have been out
of favor during the recent volatile market, a benign interest-rate environment,
a strong dollar, moderate economic growth and a favorable fiscal policy could
set a positive tone for the group. Over the long term we believe that the small-
and mid-cap health care names in the Fund's portfolio are positioned to
outperform their large-cap counterparts and are convinced that the fundamentals
of the health care industry bode well overall 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> 3
DEAN WITTER HEALTH SCIENCES TRUST
PORTFOLIO OF INVESTMENTS January 31, 1998 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<S> <C>
COMMON STOCKS (97.6%)
Biotechnology (18.9%)
50,000 Affymetrix, Inc.*............ $ 1,387,500
200,000 Alexion Pharmaceuticals,
Inc.*....................... 2,575,000
200,000 Alkermes, Inc.*.............. 4,837,500
60,000 Arterial Vascular
Engineering, Inc.*.......... 4,395,000
50,000 Aviron*...................... 1,271,875
50,000 Biogen, Inc.*................ 2,056,250
170,000 Biomatrix, Inc.*............. 5,078,750
50,000 Biomira, Inc. (Canada)*...... 106,814
100,000 Cell Therapeutics, Inc.*..... 1,350,000
110,000 Centocor, Inc.*.............. 4,406,875
50,000 Creative Biomolecules,
Inc.*....................... 406,250
100,000 ESC Medical Systems Ltd.
(Israel)*................... 3,687,500
170,000 Genzyme Corp. General
Division*................... 4,536,875
160,000 Gilead Sciences, Inc.*....... 6,480,000
200,000 IDEC Pharmaceuticals
Corp.*...................... 8,350,000
130,000 Immune Response Corp.*....... 1,267,500
130,000 Immunex Corp.*............... 7,141,875
130,000 Inhale Therapeutic
Systems*.................... 4,208,750
190,000 Interferon Sciences, Inc.*... 1,223,125
50,000 KV Pharmaceutical Co. (Class
A)*......................... 1,131,250
120,000 Ligand Pharmaceuticals, Inc.
(Class B)*.................. 1,320,000
160,000 Maxim Pharmaceuticals,
Inc. ....................... 2,360,000
80,000 OEC Medical Systems, Inc.*... 1,770,000
50,000 Ortec International, Inc.*... 693,750
40,000 Transcend Therapeutics,
Inc.*....................... 270,000
200,000 Vion Pharmaceuticals,
Inc.*....................... 600,000
------------
72,912,439
------------
Commercial Services (1.4%)
180,000 Medquist, Inc.*.............. 5,490,000
------------
Computer Software (2.6%)
200,000 QuadraMed Corp.*............. 4,225,000
90,000 Shared Medical Systems
Corp. ...................... 5,895,000
------------
10,120,000
------------
Computer Software & Services (1.7%)
100,000 A.L.I. Technologies Inc.
(Canada)*................... 1,099,052
50,000 Daou Systems, Inc.*.......... 1,100,000
130,000 Dendrite International,
Inc.*....................... 2,860,000
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<S> <C>
50,000 ImageMatrix Corp.
(Units)++................... $ 103,125
20,000 Sunquest Information Systems,
Inc.*....................... 190,000
60,000 Transition Systems, Inc.*.... 1,125,000
------------
6,477,177
------------
Containers -- Paper (0.3%)
50,000 Ivex Packaging Corp.*........ 1,050,000
------------
Drugs (9.8%)
38,000 DepoMed, Inc.*............... 377,625
100,000 Elan Corp. PLC (ADR)
(Ireland)*.................. 5,193,750
50,000 Forest Laboratories, Inc.*... 2,968,750
100,000 Glaxo Wellcome PLC (ADR)
(United Kingdom)............ 5,381,250
220,000 ICN Pharmaceuticals, Inc. ... 11,302,500
40,000 Intelligent Polymers Ltd.
(Units)++*.................. 850,000
100,000 Labopharm Inc. (Canada)*..... 206,072
85,000 Novo Nordisk A/S (ADR)
(Denmark)................... 6,098,750
80,000 Schering-Plough Corp. ....... 5,790,000
------------
38,168,697
------------
Finance (0.9%)
100,000 HealthCare Financial
Partners, Inc.*............. 3,550,000
------------
Health Equipment & Services (4.0%)
29,100 Diagnostic Health Services,
Inc.*....................... 309,187
120,000 Medtronic, Inc. ............. 6,127,500
105,000 Renal Treatment Centers,
Inc.*....................... 3,366,562
140,000 Sabratek Corp.*.............. 4,130,000
158,000 Vista Medical Technologies,
Inc.*....................... 1,560,250
------------
15,493,499
------------
Health Maintenance Organizations (0.2%)
40,000 Medirisk, Inc.*.............. 590,000
------------
Health Services (0.2%)
39,800 American Retirement Corp.*... 915,400
------------
Healthcare (0.9%)
110,000 Allegiance Corp. ............ 3,526,875
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 4
DEAN WITTER HEALTH SCIENCES TRUST
PORTFOLIO OF INVESTMENTS January 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<S> <C>
Healthcare -- Diversified (3.8%)
150,000 Healthsouth Corp.*........... $ 3,365,625
75,000 Healthworld Corp.*........... 956,250
170,000 Mentor Corp. ................ 4,335,000
100,000 NovaCare, Inc.*.............. 1,250,000
100,000 Universal Health Services,
Inc. (Class B)*............. 4,662,500
------------
14,569,375
------------
Healthcare -- Drugs (4.4%)
85,000 Merck & Co., Inc. ........... 9,966,250
85,000 Pfizer, Inc. ................ 6,964,688
------------
16,930,938
------------
Healthcare -- Miscellaneous (0.4%)
60,000 Trigon Healthcare, Inc.*..... 1,492,500
------------
Healthcare Facilities (2.0%)
130,000 Res-Care, Inc.*.............. 3,737,500
100,000 Sunrise Assisted Living,
Inc.*....................... 4,012,500
------------
7,750,000
------------
Healthcare Products & Services (1.3%)
155,020 Concentra Managed Care,
Inc.*....................... 4,941,263
------------
Hospital Management & Health Maintenance
Organizations (0.6%)
60,000 Healthcare Recoveries,
Inc.*....................... 1,267,500
80,000 Specialty Care Network,
Inc.*....................... 930,000
------------
2,197,500
------------
Hospital Management (3.3%)
50,000 Harborside Healthcare
Corp.*...................... 906,250
50,000 Impath, Inc.*................ 1,715,625
50,000 Mariner Health Group,
Inc.*....................... 768,750
50,000 Physician Reliance Network,
Inc.*....................... 493,750
180,000 Renal Care Group, Inc.*...... 6,097,500
116,666 Total Renal Care Holdings,
Inc.*....................... 2,836,442
------------
12,818,317
------------
Hospital Supply (0.7%)
70,000 Arrow International, Inc. ... 2,660,000
------------
Insurance (0.4%)
60,000 Summit Holding Southeast
Inc.*....................... 1,387,500
------------
Manufacturing (0.4%)
35,000 Axogen Ltd. (Units)++*....... 1,522,500
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<S> <C>
Medical Equipment (0.8%)
70,000 Cholestech Corp.*............ $ 840,000
70,000 Chromatics Color Science
International, Inc. *....... 1,155,000
50,000 IGEN International, Inc.*.... 906,250
------------
2,901,250
------------
Medical Products & Supplies (13.5%)
150,000 Abiomed, Inc.*............... 2,437,500
110,000 Baxter International,
Inc. ....................... 6,125,625
40,000 Becton, Dickinson & Co....... 2,525,000
60,000 Closure Medical Corp.*....... 1,672,500
130,000 Conmed Corp.*................ 2,827,500
110,000 Cooper Companies, Inc.*...... 5,458,750
120,000 Cryolife, Inc.*.............. 1,905,000
50,000 Focal, Inc.*................. 681,250
50,000 Guidant Corp. ............... 3,212,500
100,000 Hanger Orthopedic Group,
Inc.*....................... 1,387,500
40,000 Johnson & Johnson............ 2,677,500
100,000 Lincare Holdings, Inc.*...... 6,112,500
40,000 Maxxim Medical, Inc.*........ 910,000
100,000 McKesson Corp. .............. 4,787,500
100,000 Novoste Corp.*............... 2,525,000
60,000 Oncor Inc.*.................. 262,500
110,000 Osteotech, Inc.*............. 2,873,750
110,000 ResMed, Inc.*................ 3,465,000
40,000 Sight Resource Corp.
(Units)++*.................. 207,500
15,800 Somnus Medical Technologies,
Inc.*....................... 152,075
------------
52,206,450
------------
Medical Services (4.9%)
130,000 Alternative Living Services,
Inc.*....................... 3,802,500
121,580 HBO & Co..................... 6,360,154
150,000 Medical Resources, Inc.*..... 1,556,250
125,000 Sheridan Healthcare, Inc.*... 1,687,500
160,000 Transkaryotic Therapies,
Inc.*....................... 5,540,000
------------
18,946,404
------------
Medical Software/Services (1.1%)
70,000 Medical Manager Corp.*....... 1,662,500
100,000 Schick Technologies, Inc.*... 2,625,000
------------
4,287,500
------------
Miscellaneous (1.2%)
30,000 Advance Paradigm, Inc.*...... 937,500
150,000 Celgene Corp.*............... 1,275,000
80,000 Cyberonics Inc.*............. 1,595,000
50,000 Epix Medical, Inc.*.......... 687,500
35,000 Renex Corp.*................. 183,750
------------
4,678,750
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 5
DEAN WITTER HEALTH SCIENCES TRUST
PORTFOLIO OF INVESTMENTS January 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Pharmaceuticals (16.1%)
80,000 Algos Pharmaceutical
Corp.*...................... $ 2,510,000
100,000 Andrx Corp.*................. 3,400,000
100,000 Aronex Pharmaceuticals,
Inc.*....................... 375,000
352,000 Bone Care International,
Inc.*....................... 2,728,000
120,000 Coulter Pharmaceutical,
Inc.*....................... 2,430,000
220,000 Cypros Pharmaceutical
Corp.*...................... 907,500
210,000 DUSA Pharmaceuticals,
Inc.*....................... 2,625,000
70,000 GelTex Pharmaceuticals,
Inc.*....................... 1,828,750
100,000 Guilford Pharmaceuticals,
Inc.*....................... 1,850,000
50,000 Hyal Pharmaceutical Corp.
(Canada)*................... 10,647
150,000 ICOS Corp.*.................. 2,409,375
190,000 Incyte Pharmaceuticals,
Inc.*....................... 8,241,250
100,000 Medicis Pharmaceutical Corp.
(Class A)*.................. 4,650,000
120,000 MedImmune, Inc.*............. 5,490,000
50,000 Millennium Pharmaceuticals,
Inc.*....................... 937,500
50,000 North American Vaccine,
Inc.*....................... 981,250
100,000 Parexel International
Corp.*...................... 3,450,000
120,000 PathoGenesis Corp.*.......... 4,320,000
105,000 Pharmacyclics, Inc.*......... 2,598,750
42,500 Salix Holdings, Ltd.
(Canada)*................... 151,807
100,000 Sangstat Medical Corp.*...... 2,800,000
200,000 Watson Pharmaceuticals,
Inc.*....................... 7,350,000
------------
62,044,829
------------
Retail -- Drug Stores (0.5%)
60,000 Walgreen Co.................. 1,987,500
------------
Retail -- Specialty (1.3%)
40,368 CVS Corp. ................... 2,646,627
60,000 Wesley Jessen VisionCare,
Inc.*....................... 2,265,000
------------
4,911,627
------------
TOTAL COMMON STOCKS
(Identified Cost
$289,605,827) 376,528,290
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
WARRANTS VALUE
- -------------------------------------------------------
<S> <C>
WARRANTS (0.0%)
10,403 Medical Services (0.0%)
Coram Healthcare Corp.
(due 07/11/99)*............. $ 104
------------
Miscellaneous (0.0%)
50,000 Omega Orthodontics Inc.
(due 09/30/02)*............. 37,500
------------
Pharmaceuticals (0.0%)
30,000 SuperGen, Inc.
(due 03/12/01)*............. 193,125
------------
TOTAL WARRANTS
(Identified Cost $48,448).... 230,729
------------
PRINCIPAL
AMOUNT IN
THOUSANDS
-------
SHORT-TERM INVESTMENT(a) (2.4%)
U.S. GOVERNMENT AGENCY
$ 9,100 Federal Home Loan Mortgage
Corp. 5.57% due 02/02/98
(Amortized Cost $9,098,592) 9,098,592
------------
TOTAL INVESTMENTS
(Identified Cost $298,752,867)
(b).............................. 100.0% 385,857,611
LIABILITIES)IN EXCESS OF CASH AND
OTHER ASSETS..................... (0.0 (115,261)
---- ------------
NET ASSETS....................... 100.0% $385,742,350
====== ============
</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) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $93,913,146 and the
aggregate gross unrealized depreciation is $6,808,402, resulting in net
unrealized appreciation of $87,104,744.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
DEAN WITTER HEALTH SCIENCES TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1998 (unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $298,752,867)............................. $385,857,611
Cash........................................................ 86,043
Receivable for:
Investments sold........................................ 5,536,125
Shares of beneficial interest sold...................... 117,867
Dividends............................................... 8,691
Prepaid expenses and other assets........................... 80,690
------------
TOTAL ASSETS............................................ 391,687,027
------------
LIABILITIES:
Payable for:
Investments purchased................................... 4,406,115
Shares of beneficial interest repurchased............... 799,174
Investment management fee............................... 326,738
Plan of distribution fee................................ 325,801
Accrued expenses and other payables......................... 86,849
------------
TOTAL LIABILITIES....................................... 5,944,677
------------
NET ASSETS.............................................. $385,742,350
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $285,780,836
Net unrealized appreciation................................. 87,104,744
Accumulated net investment loss............................. (4,266,501)
Accumulated undistributed net realized gain................. 17,123,271
------------
NET ASSETS.............................................. $385,742,350
============
CLASS A SHARES:
Net Assets.................................................. $127,758
Shares Outstanding (unlimited authorized, $.01 par value)... 8,835
NET ASSET VALUE PER SHARE............................... $14.46
============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value)........ $15.26
============
CLASS B SHARES:
Net Assets.................................................. $384,234,624
Shares Outstanding (unlimited authorized, $.01 par value)... 26,693,401
NET ASSET VALUE PER SHARE............................... $14.39
============
CLASS C SHARES:
Net Assets.................................................. $200,577
Shares Outstanding (unlimited authorized, $.01 par value)... 13,928
NET ASSET VALUE PER SHARE............................... $14.40
============
CLASS D SHARES:
Net Assets.................................................. $1,179,391
Shares Outstanding (unlimited authorized, $.01 par value)... 81,468
NET ASSET VALUE PER SHARE............................... $14.48
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 7
DEAN WITTER HEALTH SCIENCES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the six months ended January 31, 1998 (unaudited)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $9,971 foreign withholding tax)........... $ 277,306
Interest.................................................... 227,512
-----------
TOTAL INCOME............................................ 504,818
-----------
EXPENSES
Plan of distribution fee (Class A shares)................... 108
Plan of distribution fee (Class B shares)................... 2,103,205
Plan of distribution fee (Class C shares)................... 665
Investment management fee................................... 2,105,312
Transfer agent fees and expenses............................ 366,438
Registration fees........................................... 51,861
Shareholder reports and notices............................. 37,963
Professional fees........................................... 30,488
Custodian fees.............................................. 22,860
Trustees' fees and expenses................................. 9,246
Organizational expenses..................................... 8,034
Other....................................................... 3,063
-----------
TOTAL EXPENSES.......................................... 4,739,243
-----------
NET INVESTMENT LOSS..................................... (4,234,425)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 43,476,450
Net change in unrealized appreciation....................... (24,700,237)
-----------
NET GAIN................................................ 18,776,213
-----------
NET INCREASE................................................ $14,541,788
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
DEAN WITTER HEALTH SCIENCES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR
FOR THE SIX ENDED
MONTHS ENDED JULY 31,
JANUARY 31, 1998 1997*
- ---------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss................................... $ (4,234,425) $ (9,365,663)
Net realized gain..................................... 43,476,450 14,671,544
Net change in unrealized appreciation................. (24,700,237) 23,334,942
------------ ------------
NET INCREASE...................................... 14,541,788 28,640,823
------------ ------------
DISTRIBUTIONS FROM NET REALIZED GAIN
Class A shares........................................ (7,674) --
Class B shares........................................ (29,731,527) (28,286,327)
Class C shares........................................ (13,129) --
Class D shares........................................ (1,158) --
------------ ------------
TOTAL DISTRIBUTIONS............................... (29,753,488) (28,286,327)
------------ ------------
Net decrease from transactions in shares of beneficial
interest............................................. (21,753,014) (20,523,010)
------------ ------------
NET DECREASE...................................... (36,964,714) (20,168,514)
NET ASSETS:
Beginning of period................................... 422,707,064 442,875,578
------------ ------------
END OF PERIOD
(Including net investment losses of $4,266,501 and
$32,076, respectively)............................ $385,742,350 $422,707,064
============ ============
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 9
DEAN WITTER HEALTH SCIENCES TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 1998 (unaudited)
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
<PAGE> 10
DEAN WITTER HEALTH SCIENCES TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 1998 (unaudited) continued
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.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
D. 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.
E. 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.
F. 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
<PAGE> 11
DEAN WITTER HEALTH SCIENCES TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 1998 (unaudited) continued
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, 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 book 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 -- up to 0.25% of the
average daily net assets of Class A; (ii) Class B -- 1.0% of the lesser of: (a)
the average daily aggregate gross sales of the Class B shares since the
inception of the Fund (not including reinvestment of dividend or capital gain
distributions) less the average daily aggregate net asset value of the Class B
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or waived; or (b) the average daily net assets of
Class B; and (iii) Class C -- up to 1.0% of the average daily net assets of
Class C. In the case of Class A shares, amounts paid under the Plan are paid to
the Distributor for services provided. In the case of Class B and Class C
shares, amounts paid under the Plan are paid to the Distributor for 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
<PAGE> 12
DEAN WITTER HEALTH SCIENCES TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 1998 (unaudited) continued
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 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 $15,110,144 at January 31, 1998.
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 six months ended January 31, 1998, the distribution fee
was accrued for Class A shares and Class C shares at the annual rate of 0.25%
and 1.0%, respectively.
The Distributor has informed the Fund that for the six months ended January 31,
1998, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $534,458 and $19, respectively
and received $3,680 in front-end sales charges from sales of the Fund's Class A
shares. The respective shareholders pay such charges which are not an expense of
the Fund.
<PAGE> 13
DEAN WITTER HEALTH SCIENCES TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 1998 (unaudited) 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 six months ended January 31, 1998, aggregated
$212,217,993 and $270,396,894, respectively.
For the six months ended January 31, 1998, the Fund incurred brokerage
commissions of $24,075 with DWR for portfolio transactions executed on behalf of
the Fund.
For the six months ended January 31, 1998, the Fund incurred brokerage
commissions of $5,000 with Morgan Stanley & Co., Inc., an affiliate of the
Investment Manager, for portfolio transactions executed on behalf of the Fund.
Dean Witter Trust FSB, an affiliate of the Investment Manager and Distributor,
is the Fund's transfer agent. At January 31, 1998, the Fund had transfer agent
fees and expenses payable of approximately $1,500.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the six months ended January 31, 1998
included in Trustees' fees and expenses in the Statement of Operations amounted
to $2,497. At January 31, 1998, the Fund had an accrued pension liability of
$33,825 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. 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.
<PAGE> 14
DEAN WITTER HEALTH SCIENCES TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 1998 (unaudited) continued
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JANUARY 31, 1998 JULY 31, 1997*
-------------------------- --------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold........................................................ 9,398 $ 143,856 667 $ 10,018
Reinvestment of distributions............................... 558 7,674 -- --
Redeemed.................................................... (1,788) (25,974) -- --
---------- ------------- ----------- ------------
Net increase -- Class A..................................... 8,168 125,556 667 10,018
---------- ------------- ----------- ------------
CLASS B SHARES
Sold........................................................ 4,206,784 65,611,511 12,042,815 183,250,429
Reinvestment of distributions............................... 2,032,580 27,866,668 1,860,102 26,655,267
Redeemed.................................................... (7,540,342) (116,697,089) (15,501,740) (230,468,760)
---------- ------------- ----------- ------------
Net decrease - Class B...................................... (1,300,978) (23,218,910) (1,598,823) (20,563,064)
---------- ------------- ----------- ------------
CLASS C SHARES
Sold........................................................ 12,131 196,716 1,329 20,018
Reinvestment of distributions............................... 941 12,903 -- --
Redeemed.................................................... (473) (7,372) -- --
---------- ------------- ----------- ------------
Net increase - Class C...................................... 12,599 202,247 1,329 20,018
---------- ------------- ----------- ------------
CLASS D SHARES
Sold........................................................ 80,995 1,141,256 667 10,018
Reinvestment of distributions............................... 83 1,142 -- --
Redeemed.................................................... (277) (4,305) -- --
---------- ------------- ----------- ------------
Net increase - Class D...................................... 80,801 1,138,093 667 10,018
---------- ------------- ----------- ------------
Net decrease in Fund........................................ (1,199,410) $ (21,753,014) (1,596,160) $(20,523,010)
========== ============= =========== ============
</TABLE>
- ---------------------
* For Class A, C and D shares, for the period July 28, 1997 (issue date) through
July 31, 1997.
<PAGE> 15
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
FOR THE SIX FOR THE YEAR ENDED JULY 31, OCTOBER 30, 1992*
MONTHS ENDED ----------------------------------------- THROUGH
JANUARY 31, 1998++ 1997** 1996 1995 1994 JULY 31, 1993
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...... $15.10 $ 14.97 $ 12.88 $ 9.32 $ 9.22 $10.00
------ -------- -------- -------- -------- ------
Net investment loss....................... (0.16) (0.31) (0.26) (0.24) (0.22) (0.08)
Net realized and unrealized gain (loss)... 0.61 1.39 3.44 3.80 0.32 (0.70)
------ -------- -------- -------- -------- ------
Total from investment operations.......... 0.45 1.08 3.18 3.56 0.10 (0.78)
------ -------- -------- -------- -------- ------
Less distributions from net realized
gain..................................... (1.16) (0.95) (1.09) -- -- --
------ -------- -------- -------- -------- ------
Net asset value, end of period............ $14.39 $ 15.10 $ 14.97 $ 12.88 $ 9.32 $ 9.22
====== ======== ======== ======== ======== ======
TOTAL INVESTMENT RETURN+.................. 3.44% (1) 7.55% 24.84% 38.20% 1.08% (7.80)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................. 2.25% (2) 2.25% 2.20% 2.30% 2.30% 2.38% (2)
Net investment loss....................... (2.01)%(2) (2.08)% (2.03)% (2.05)% (2.06)% (1.38)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands... $384,235 $422,667 $442,876 $273,735 $228,573 $231,646
Portfolio turnover rate................... 52% (1) 85% 63% 145% 106% 55% (1)
Average commission rate paid.............. $0.0570 $0.0566 $0.0562 -- -- --
</TABLE>
- ---------------------
* Commencement of operations.
** Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 16
DEAN WITTER HEALTH SCIENCES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 28, 1997*
MONTHS ENDED THROUGH
JANUARY 31, 1998++ JULY 31, 1997++
- --------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $15.10 $15.03
------ ------
Net investment loss......................................... (0.10) --
Net realized and unrealized gain............................ 0.62 0.07
------ ------
Total from investment operations............................ 0.52 0.07
------ ------
Less distributions from net realized gain................... (1.16) --
------ ------
Net asset value, end of period.............................. $14.46 $15.10
====== ======
TOTAL INVESTMENT RETURN+.................................... 3.84% (1) 0.47% (1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.54% (2) 1.57% (2)
Net investment loss......................................... (1.30)%(2) (0.55)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $128 $10
Portfolio turnover rate..................................... 52% (1) 85%
Average commission rate paid................................ $0.0570 $0.0566
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $15.10 $15.03
------ ------
Net investment loss......................................... (0.16) --
Net realized and unrealized gain............................ 0.62 0.07
------ ------
Total from investment operations............................ 0.46 0.07
------ ------
Less distributions from net realized gain................... (1.16) --
------ ------
Net asset value, end of period.............................. $14.40 $15.10
====== ======
TOTAL INVESTMENT RETURN+.................................... 3.44% (1) 0.47% (1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 2.28% (2) 2.31% (2)
Net investment loss......................................... (2.05)%(2) (1.28)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $201 $20
Portfolio turnover rate..................................... 52% (1) 85%
Average commission rate paid................................ $0.0570 $0.0566
</TABLE>
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 17
DEAN WITTER HEALTH SCIENCES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 28, 1997*
MONTHS ENDED THROUGH
JANUARY 31, 1998++ JULY 31, 1997++
- --------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $15.10 $15.03
------ ------
Net investment loss......................................... (0.07) --
Net realized and unrealized gain............................ 0.61 0.07
------ ------
Total from investment operations............................ 0.54 0.07
------ ------
Less distributions from net realized gain................... (1.16) --
------ ------
Net asset value, end of period.............................. $14.48 $15.10
====== ======
TOTAL INVESTMENT RETURN+.................................... 3.98% (1) 0.47% (1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.34% (2) 1.31% (2)
Net investment loss......................................... (1.01)%(2) (0.29)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $1,179 $10
Portfolio turnover rate..................................... 52% (1) 85%
Average commission rate paid................................ $0.0570 $0.0566
</TABLE>
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 18
(This Page Intentionally Left Blank)
<PAGE> 19
(This Page Intentionally Left Blank)
<PAGE> 20
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
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
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and
trustees, fees, expenses and other pertinent information, please see the
prospectus of the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
DEAN WITTER
HEALTH SCIENCES
TRUST
[GRAPHIC]
SEMIANNUAL REPORT
JANUARY 31, 1998
