AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 29, 1996
REGISTRATION NOS: 33-48172
811-6682
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 5 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 6 [X]
---------
DEAN WITTER RETIREMENT SERIES
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
SHELDON CURTIS, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
---------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the post-effective amendment becomes effective.
---------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
X immediately upon filing pursuant to paragraph (b)
---
on pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (b)
---
on (date) pursuant to paragraph (a) of rule 485.
---
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO SECTION (A)(1) OF RULE 24F-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940. THE REGISTRANT HAS FILED A RULE 24F-2 NOTICE
FOR ITS FISCAL YEAR ENDING JULY 31, 1996 WITH THE SECURITIES AND EXCHANGE
COMMISSION ON SEPTEMBER 9, 1996.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
===============================================================================
<PAGE>
DEAN WITTER RETIREMENT SERIES
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A
PART A
ITEM CAPTION PROSPECTUS
- ---------- ----------------------------------------------------------
<C> <S>
1. ...... Cover Page
2. ...... Summary of Fund Expenses; Prospectus Summary
3. ...... Performance Information; Financial Highlights
4. ...... Investment Objectives and Policies; The Fund and its
Management; Cover Page; Investment Restrictions;
Prospectus Summary; Financial Highlights
5. ...... The Fund and Its Management; Back Cover;
Investment Objectives and Policies
6. ...... Dividends, Distributions and Taxes; Additional Information
7. ...... Purchase of Fund Shares; Shareholder
Services; Repurchases and Redemptions;
Determination of Net Asset Value; Prospectus Summary
8. ...... Repurchases and Redemptions; Shareholder Services
9. ...... Not Applicable
</TABLE>
<TABLE>
<CAPTION>
PART B
ITEM STATEMENT OF ADDITIONAL INFORMATION
- ---------- -----------------------------------------------------------
<C> <S>
10. ...... Cover Page
11. ...... Table of Contents
12. ...... The Fund and Its Management
13. ...... Investment Practices and Policies; Investment
Restrictions; Portfolio Transactions and Brokerage
14. ...... The Fund and Its Management; Trustees and
Officers
15. ...... The Fund and Its Management; Trustees and Officers
16. ...... The Fund and Its Management; Custodian and Transfer Agent;
Independent Accountants
17. ...... Portfolio Transactions and Brokerage
18. ...... Description of Shares; Principal Securities Holders
19. ...... Repurchases and Redemptions; Shareholder Services;
Determination of Net Asset Value; Financial Statements
20. ...... Dividends, Distributions and Taxes; Financial Statements
21. ...... Purchase of Fund Shares
22. ...... Performance Information
23. ...... Experts; Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
[INSERT LOGO]
D E A N W I T T E R
------------------------------------
R E T I R E M E N T S E R I E S
------------------------------------
N O V E M B E R 2 9, 1 9 9 6
------------------------------------
P R O S P E C T U S E N C L O S E D
------------------------------------
<PAGE>
PROSPECTUS DATED NOVEMBER 29, 1996
DEAN WITTER RETIREMENT SERIES
TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048 (212) 392-2550 OR
(800) 869-NEWS (TOLL-FREE)
DEAN WITTER RETIREMENT SERIES (the "Fund") is an open-end, no-load,
management investment company which provides a selection of investment
portfolios for institutional and individual investors participating in
various employee benefit plans and Individual Retirement Account rollover
plans. Each Series has its own investment objective and policies. Shares of
the Fund are sold and redeemed at net asset value without the imposition of a
sales charge. Dean Witter Distributors Inc., the Fund's Distributor (the
"Distributor"), and any of its affiliates are authorized, in accordance with
a Plan of Distribution pursuant to Rule 12b-1 under the Investment Company
Act of 1940, as amended, entered into by the Fund with the Distributor and
Dean Witter Reynolds Inc., to make payments, out of their own resources, for
expenses incurred in connection with the promotion of distribution of shares
of the Fund.
The LIQUID ASSET SERIES seeks high current income, preservation of capital
and liquidity by investing in corporate and government money market
instruments.
The U.S. GOVERNMENT MONEY MARKET SERIES seeks security of principal, high
current income and liquidity by investing primarily in money market
instruments which are issued and/or guaranteed, as to principal and interest,
by the U.S. Government, its agencies or instrumentalities.
The U.S. GOVERNMENT SECURITIES SERIES seeks high current income consistent
with safety of principal by investing in a diversified portfolio of
obligations issued and/or guaranteed by the U.S. Government or its
instrumentalities.
The INTERMEDIATE INCOME SECURITIES SERIES seeks high current income
consistent with safety of principal by investing primarily in intermediate
term, investment grade fixed-income securities.
The AMERICAN VALUE SERIES seeks long-term growth consistent with an effort
to reduce volatility by investing principally in common stock of companies in
industries which, at the time of the investment, are believed to be
attractively valued given their above average relative earnings growth
potential at that time.
The CAPITAL GROWTH SERIES seeks long-term capital growth by investing
primarily in common stocks selected through utilization of a computerized
screening process.
The DIVIDEND GROWTH SERIES seeks to provide reasonable current income and
long-term growth of income and capital by investing primarily in the common
stock of companies with a record of paying dividends and the potential for
increasing dividends.
The STRATEGIST SERIES seeks to maximize its total return by actively
allocating its assets among the major asset categories of equity securities,
fixed-income securities and money market instruments.
The UTILITIES SERIES seeks to provide current income and long-term growth
of income and capital by investing in equity and fixed-income securities of
companies in the public utilities industry.
The VALUE-ADDED MARKET SERIES' investment objective is to achieve a high
level of total return on its assets through a combination of capital
appreciation and current income. It seeks to achieve this objective by
investing, on an equally-weighted basis, in a diversified portfolio of common
stocks of the companies which are represented in the Standard & Poor's 500
Composite Stock Price Index.
The GLOBAL EQUITY SERIES' investment objective is to achieve a high level of
total return on its assets, primarily through long-term capital growth and, to
a lesser extent, from income. It seeks to achieve this objective through
investments in all types of common stocks and equivalents, preferred stocks
and bonds and other debt obligations of domestic and foreign companies and
governments and international organizations.
AN INVESTMENT IN THE LIQUID ASSET, U.S. GOVERNMENT MONEY MARKET AND/OR
U.S. GOVERNMENT SECURITIES SERIES IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT THE LIQUID ASSET OR U.S.
GOVERNMENT MONEY MARKET SERIES WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
SHARES OF SERIES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR
ANY OTHER AGENCY.
The availability of the various methods of purchase and redemption of
shares of the Fund and other shareholder services will be governed by the
parameters set forth in the investor's employee benefit plan.
This Prospectus sets forth concisely the information you should know
before investing in the Fund. It should be read and retained for future
reference. Additional information about the Fund is contained in the
Statement of Additional Information, dated November 29, 1996, which has been
filed with the Securities and Exchange Commission, and which is available at
no charge upon request of the Fund at the address or telephone numbers listed
above. The Statement of Additional Information is incorporated herein by
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Prospectus Summary/2
Summary of Fund Expenses/6
Financial Highlights/8
The Fund and its Management/10
Investment Objectives and Policies/11
Liquid Asset Series/11
U.S. Government Money Market Series/13
U.S. Government Securities Series/14
Intermediate Income Securities Series/17
American Value Series/18
Capital Growth Series/19
Dividend Growth Series/20
Strategist Series/21
Utilities Series/22
Value-Added Market Series/24
Global Equity Series/25
General Investment Techniques/26
Investment Restrictions/35
Determination of Net Asset Value/36
Purchase of Fund Shares/38
Shareholder Services/39
Redemptions and Repurchases/41
Dividends, Distributions and Taxes/43
Performance Information/44
Additional Information/45
<TABLE>
<CAPTION>
PROSPECTUS SUMMARY
- ---------------------------------------------------------------------------------------------------------------------
<C> <S>
The The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is an
Fund open-end management investment company. The Fund is comprised of eleven separate Series: the
Liquid Asset Series, the U.S. Government Money Market Series, the U.S. Government Securities Series,
the Intermediate Income Securities Series, the American Value Series, the Capital Growth Series, the
Dividend Growth Series, the Strategist Series, the Utilities Series, the Value-Added Market Series,
and the Global Equity Series (see page 10). The Trustees of the Fund may establish additional Series
at any time.
- -----------------------------------------------------------------------------------------------------------------
Shares Each Series is managed for investment purposes as if it were a separate fund issuing a separate
Offered class of shares of beneficial interest, with $0.01 par value. The assets of each Series are
segregated, so that an interest in the Fund is limited to the assets of the Series in which shares
are held and shareholders are each entitled to a pro rata share of all dividends and distributions
arising from the net income and capital gains, if any, on the investments of such Series (see page
45).
- -----------------------------------------------------------------------------------------------------------------
Offering The price of the shares of each Series of the Fund offered by this Prospectus is determined once
Price daily as of 4:00 p.m., New York time (or, on days when the New York Stock Exchange closes prior to
4:00 p.m., at such earlier time), on each day that the New York Stock Exchange is open, and is
equal to the net asset value per share without a sales charge (see page 36). Purchases are limited
to institutional and individual investors participating in various employee benefit plans and
Individual Retirement Account ("IRA") rollover plans; there is no minimum initial or subsequent
purchase. The Fund and/or the Distributor reserve the right to permit purchases by non-employee
benefit plan investors.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
- -----------------------------------------------------------------------------------------------------------------
Investment Each Series has distinct investment objectives and policies, and is subject to various investment
Objectives and restrictions, some of which apply to all Series. The Liquid Asset Series seeks high current
Policies income, preservation of capital and liquidity by investing in the following money market
instruments: U.S. Government securities, obligations of U.S. regulated banks and savings
institutions having total assets of more than $1 billion, or less than $1 billion if such are
fully federally insured as to principal (the interest may not be insured) and high grade corporate
debt obligations maturing in thirteen months or less (see pages 11-13). The U.S. Government Money
Market Series seeks security of principal, high current income and liquidity by investing
primarily in money market instruments maturing in thirteen months or less which are issued and/or
guaranteed, as to principal and interest, by the U.S. Government, its agencies or
instrumentalities (see pages 13-14). The U.S. Government Securities Series seeks high current
income consistent with safety of principal by investing in a diversified portfolio of obligations
issued and/or guaranteed by the U.S. Government or its instrumentalities (see pages 14-17). The
Intermediate Income Securities Series seeks high current income consistent with safety of
principal by investing primarily in intermediate term, investment grade fixed-income securities
(see pages 17-18). The American Value Series seeks long-term growth consistent with an effort to
reduce volatility by investing primarily in common stock of companies in industries which, at the
time of the investment, are believed to be attractively valued given their above average relative
earnings growth potential at that time (see pages 18-19). The Capital Growth Series seeks
long-term capital growth by investing primarily in common stocks selected through utilization of a
computerized screening process (see pages 19-20). The Dividend Growth Series seeks to provide
reasonable current income and long-term growth of income and capital by investing primarily in the
common stock of companies with a record of paying dividends and the potential for increasing
dividends (see pages 20-21). The Strategist Series seeks to maximize its total return by actively
allocating its assets among the major asset categories of equity securities, fixed-income
securities and money market instruments (see pages 21-22). The Utilities Series seeks to provide
current income and long-term growth of income and capital by investing in equity and fixed-income
securities of companies in the public utilities industry. The Utilities Series will concentrate
its investments in the electric utilities industry (see pages 22-24). The Value-Added Market
Series' investment objective is to achieve a high level of total return on its assets through a
combination of capital appreciation and current income. It seeks to achieve this objective by
investing, on an equally-weighted basis, in a diversified portfolio of common stocks of the
companies which are represented in the Standard & Poor's 500 Composite Stock Price Index (see
pages 24-25). The Global Equity Series' investment objective is a high level of total return on
its assets primarily through long-term capital growth and, to a lesser extent, from income. It
seeks to achieve this objective through investments in all types of common stocks and equivalents
(such as convertible securities and warrants), preferred stocks and bonds and other debt
obligations of domestic and foreign companies and governments and international organizations
(see pages 25-26).
- -----------------------------------------------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc. ("InterCapital" or the "Investment Manager"), the Investment Manager
Manager of the Fund, and its wholly-owned subsidiary, Dean Witter Services Company Inc., serve in various
investment management, advisory, management and administrative capacities to one hundred
investment companies and other portfolios with assets of approximately $86.5 billion at September
30, 1996 (see page 10).
- -----------------------------------------------------------------------------------------------------------------
Management The Investment Manager receives monthly fees at the following annual rates of the daily net assets
Fees of the respective Series of the Fund: Liquid Asset Series--0.50%; U.S. Government Money Market
Series--0.50%; U.S. Government Securities Series--0.65%; Intermediate Income Securities
Series--0.65%; American Value Series--0.85%; Capital Growth Series--0.85%; Dividend Growth
Series--0.75%; Strategist Series--0.85%; Utilities Series--0.75%; Value-Added Market
Series--0.50%; and Global Equity Series--1.0%. The management fees for the American Value, Capital
Growth, Dividend Growth, Strategist, Utilities and Global Equity Series are higher than those paid
by most investment companies.
3
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<C> <S>
Dividends and The Liquid Asset Series and the U.S. Government Money Market Series declare and reinvest all
Capital Gains dividends daily and pay cash dividends monthly; the U.S. Government Securities Series and the
Distributions Intermediate Income Securities Series declare dividends from net investment income daily and pay
such dividends monthly; the Dividend Growth Series and the Utilities Series declare and pay
dividends from net investment income quarterly; the American Value Series, the Capital Growth
Series, the Strategist Series, the Value-Added Market Series and the Global Equity Series declare
and pay dividends from net investment income at least once each year. Each Series of the Fund
makes capital gains distributions, if any, at least annually. All dividends and distributions are
automatically reinvested in additional shares at net asset value unless the shareholder elects to
receive cash (see pages 43-44).
- -----------------------------------------------------------------------------------------------------------------
Distributor Dean Witter Distributors Inc. is the distributor of the Fund's shares. The Distributor and Dean
Witter Reynolds Inc. have entered into a Plan of Distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "Act"), with the Fund, authorizing the Distributor
and any of its affiliates to make payments, out of their resources, for expenses incurred in
connection with the promotion of distribution of the Fund's shares (see pages 38-39).
- -----------------------------------------------------------------------------------------------------------------
Redemption Shares of the Fund may be redeemed at their net asset value (see pages 41-43).
- -----------------------------------------------------------------------------------------------------------------
Shareholder Automatic Investment of Dividends and Distributions (unless otherwise requested); Systematic
Services Payroll Deduction Plan; Exchange Privilege; Systematic Withdrawal Plan (see pages 39-41).
- -----------------------------------------------------------------------------------------------------------------
Risks The Liquid Asset Series invests solely in U.S. Government securities, high quality corporate debt
obligations and obligations of banks and savings and loan associations having assets of $1 billion
or more and certificates of deposit which are fully insured as to principal; consequently, the
portfolio securities of the Series are subject to minimal risk of loss of income and principal.
However, the investor is directed to the discussions of "repurchase agreements" (page 26) and
"reverse repurchase agreements" (page 26) concerning any risks associated with these investment
techniques. The U.S. Government Money Market Series invests principally in high quality,
short-term fixed-income securities issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities. Such securities are subject to minimal risk of loss
of income and principal. However, shareholders should also refer to the discussions of "repurchase
agreements" (page 26), "when-issued and delayed delivery securities and forward commitments" (page
26) and "reverse repurchase agreements" (page 26). The U.S. Government Securities Series invests
only in obligations issued or guaranteed by the U.S. Government which are subject to minimal risk
of loss of income and principal. The value of the securities holdings of the U.S. Government
Securities Series and, thereby, the net asset value of its shares, may increase or decrease due to
various factors, principally changes in prevailing interest rates. Generally, a rise in interest
rates will result in a decrease in the net asset value per share. In addition, the average life of
certain of the securities held in the U.S. Government Securities Series (e.g., GNMA Certificates)
may be shortened by prepayments or refinancings of the mortgage pools underlying such securities
(pages 14-17). Such prepayments may have an impact on dividends paid by the U.S. Government
Securities Series. Shareholders should also refer to the discussions of "repurchase agreements,"
when-issued and delayed delivery securities and forward commitments" and "zero coupon securities"
(pages 26-27). The net asset value of the shares of the Intermediate Income Securities Series will
fluctuate with changes in the market value of its securities holdings. The Series may invest in
securities rated "BBB" by Standard & Poor's Corporation or "Baa" by Moody's Investors Service,
Inc., which securities have speculative characteristics. Shareholders should also refer to the
discussions of "when-issued and delayed delivery securities and forward commitments" (page 26),
"when, as and if issued securities" (page 27), "zero coupon securities" (page 27) and "reverse
repurchase agreements" (page 26). The American Value Series' emphasis on attractive industries may
run contrary to general market assessments and may involve risks associated with departure from
typical S&P 500 industry weightings. It should be recognized that the American Value Series'
investments in small and medium-capitalization companies involves greater risk than is customarily
associated with
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
<C> <S>
investing in larger, more established companies. Shareholders should also refer to the discussions
of "repurchase agreements" (page 26), "when, as and if issued securities" (page 27) and "warrants"
(page 27). The net asset value of the shares of the Capital Growth Series will fluctuate with
changes in the market value of its portfolio securities. The Capital Growth Series may purchase
foreign, when-issued and delayed delivery, and when, as and if issued securities, and futures and
options, which may be considered speculative in nature and may involve greater risks than those
customarily assumed by other investment companies which do not invest in such instruments (pages
26-32). The net asset value of the shares of the Dividend Growth Series will fluctuate with
changes in the market value of its securities holdings. Dividends payable by the Dividend Growth
Series will vary in relation to the amounts of dividends and interest paid by its securities
holdings. Shareholders should also refer to the discussions of "repurchase agreements" (page 26),
"when, as and if issued securities" (page 27) and "warrants" (page 27). The net asset value of the
shares of Strategist Series will fluctuate with changes in the market value of its portfolio
securities. The level of income payable to the investor will vary depending upon the market
allocation determined by the Investment Manager and with various market determinants such as
interest rates. The Series may make various investments and may engage in various investment
strategies including options and futures transactions (pages 28-32), when-issued and delayed
delivery securities and forward commitments (page 26), when, as and if issued securities (page 26)
and repurchase agreements (page 26). The Strategist Series is "non-diversified" and is therefore
not subject to the diversification requirements of the Act. This non-diversified status allows the
Strategist Series to increase its investment in the securities of an individual issuer, and,
thereby, subjects the Series to greater exposure to any risks pertaining to investment in the
issuer's securities (page 21). The net asset value of the shares of the Utilities Series
fluctuates with changes in the market value of its securities holdings. The public utilities
industry has certain characteristics and risks, and developments within that industry will have an
impact on the Utilities Series. The value of public utility debt securities (and, to a lesser
extent, equity securities) tends to have an inverse relationship to the movement of interest
rates. Shareholders should also refer to the discussions of "repurchase agreements" (page 26),
"when-issued and delayed delivery securities and forward commitments" (page 26), "when, as and if
issued securities" (page 26), "zero coupon securities" (page 27), and "foreign securities" (pages
29-30). The net asset value of the shares of the Value-Added Market Series will fluctuate with
changes in the market value of its securities holdings. Dividends payable by the Value-Added
Market Series will vary in relation to the amounts of income paid by its securities holdings.
Shareholders should also refer to the discussion of "repurchase agreements" (page 26) and "options
and futures transactions" (pages 31-34). The Global Equity Series is intended for long-term
investors who can accept the risks involved in investments in the securities of companies and
countries located throughout the world. It should be recognized that investing in such securities
involves different and perhaps greater risks than are customarily associated with securities of
domestic companies or trading in domestic markets. In addition, shareholders should consider risks
inherent in an international portfolio, including exchange fluctuations and exchange controls, and
certain of the investment policies which the Global Equity Series may employ, including
transactions in forward foreign currency exchange contracts (see pages 29-31). Moreover, the
expenses of the Global Equity Series are likely to be greater than those incurred by other Series
in the Fund and other investment companies which invest primarily in securities of domestic
issuers. The Intermediate Income Securities, American Value, Capital Growth, Strategist,
Utilities, Value-Added Market and Global Equity Series may write call options on securities held
in their portfolios without limit (see pages 31-32). Certain of the Series of the Fund may
experience high portfolio turnover rates with corresponding higher transaction expenses and
potentially adverse tax consequences. See "Portfolio Trading" (pages 34-35).
</TABLE>
5
<PAGE>
SUMMARY OF FUND EXPENSES
- -----------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are for the
fiscal year ended July 31, 1997.
Shareholder Transaction Expenses (for each Series)
- --------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge Imposed on Purchases ............... None
Maximum Sales Charge Imposed on Reinvested Dividends ... None
Deferred Sales Charge ................................... None
Redemption Fees ......................................... None
Exchange Fee ............................................ None
</TABLE>
Annual Operating Expenses (as a Percentage of Average Net Assets for the year
- ------------------------------------------------------------------------------
ended July 31, 1996)*
- ---------------------
<TABLE>
<CAPTION>
INTERMEDIATE
U.S. GOVERNMENT U.S. GOVERNMENT INCOME AMERICAN CAPITAL
LIQUID ASSET MONEY MARKET SECURITIES SECURITIES VALUE GROWTH
SERIES SERIES SERIES SERIES SERIES SERIES
-------------- --------------- --------------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Management Fees*
(after fee waiver) .. 0.50% 0.50% 0.17% 0.07% 0.67% 0.0%
12b-1 Fees ............ 0.0 0.0 0.0 0.0 0.0 0.0
Other Expenses*
(after expense
assumption) .......... 0.15 0.32 0.83 0.93 0.33 1.00
Total Series Operating
Expenses ............. 0.65 0.82 1.00 1.00 1.00 1.00
</TABLE>
<TABLE>
<CAPTION>
DIVIDEND
GROWTH STRATEGIST UTILITIES VALUE-ADDED GLOBAL EQUITY
SERIES SERIES SERIES MARKET SERIES SERIES
---------- ------------ ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Management Fees*
(after fee waiver) .. 0.75% 0.24% 0.23% 0.50% 0.27%
12b-1 Fees ............ 0.0 0.0 0.0 0.0 0.0
Other Expenses*
(after expense
assumption) .......... 0.25 0.76 0.77 0.28 0.73
Total Series Operating
Expenses ............. 1.00 1.00 1.00 0.78 1.00
</TABLE>
Example
- -------
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
INTERMEDIATE
U.S. GOVERNMENT U.S. GOVERNMENT INCOME AMERICAN CAPITAL
LIQUID ASSET MONEY MARKET SECURITIES SECURITIES VALUE GROWTH
SERIES SERIES SERIES SERIES SERIES SERIES
-------------- --------------- --------------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
1 year .... $ 7 $ 8 $ 10 $ 10 $ 10 $ 10
3 years .. 21 26 32 32 32 32
5 years .. 36 46 55 55 55 55
10 years . 81 101 122 122 122 122
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
DIVIDEND
GROWTH STRATEGIST UTILITIES VALUE-ADDED GLOBAL EQUITY
SERIES SERIES SERIES MARKET SERIES SERIES
---------- ------------ ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
1 year .... $ 10 $ 10 $ 10 $ 8 $ 10
3 years .. 32 32 32 25 32
5 years .. 55 55 55 43 55
10 years . 122 122 122 96 122
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR LESS
THAN THOSE SHOWN.
"Management Fees" (after fee waiver) and "Other Expenses" (after expense
assumption) have been restated to reflect current fees and expenses.
If administrative services are performed by Dean Witter Trust Company
("DWTC"), the Fund's Transfer and Dividend Disbursing Agent and an affiliate
of the Investment Manager, on behalf of an employee benefit plan, it may
charge fees for such services which are negotiated between each employee
benefit plan and DWTC.
*Pursuant to an undertaking, the Investment Manager assumed all expenses
relating to each Series' operations (except for any brokerage fees and a portion
of organizational expenses) and waived the compensation provided for in its
Management Agreement with respect to each Series until December 31, 1995. The
Investment Manager has undertaken to continue to assume, until July 31, 1997,
such expenses and to waive the compensation provided for in its Management
Agreement with respect to each Series to the extent that such expenses and
compensation on an annualized basis exceed 1.00% of the daily net assets of the
Series.
It is estimated that total operating expenses for each Series for the
fiscal year ending July 31, 1997, assuming no waiver of management fees or
assumption of expenses, and calculated using average net assets for the year
ended July 31, 1996, would be:
<TABLE>
<CAPTION>
INTERMEDIATE
U.S. GOVERNMENT U.S. GOVERNMENT INCOME AMERICAN CAPITAL
LIQUID ASSET MONEY MARKET SECURITIES SECURITIES VALUE GROWTH
SERIES SERIES SERIES SERIES SERIES SERIES
-------------- --------------- --------------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Management Fees ....... 0.50% 0.50% 0.65% 0.65% 0.85% 1.99%
12b-1 Fees ............ 0.0 0.0 0.0 0.0 0.0 0.0
Other Expenses ........ 0.15 0.32 0.83 0.93 0.33 1.99
Total Series Operating
Expenses ............. 0.65 0.82 1.48 1.58 1.18 2.84
</TABLE>
<TABLE>
<CAPTION>
DIVIDEND
GROWTH STRATEGIST UTILITIES VALUE-ADDED GLOBAL EQUITY
SERIES SERIES SERIES MARKET SERIES SERIES
---------- ------------ ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Management Fees ....... 0.75% 0.85% 0.75% 0.50% 1.00%
12b-1 Fees ............ 0.0 0.0 0.0 0.0 0.0
Other Expenses ........ 0.25 0.76 0.77 0.28 0.73
Total Series Operating
Expenses ............. 1.00 1.61 1.52 0.78 1.73
</TABLE>
The purpose of these tables is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management."
7
<PAGE>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in
conjunction with the financial statements, notes thereto, and the unqualified
report of independent accountants which are contained in the Statement of
Additional Information. Further information about the performance of the
Fund's Series is contained in the Fund's Annual Report to Shareholders, which
may be obtained without charge upon request to the Fund.
<TABLE>
<CAPTION>
NET ASSET
YEAR VALUE NET NET REALIZED TOTAL FROM TOTAL DIVIDENDS
ENDED BEGINNING INVESTMENT AND UNREALIZED INVESTMENT DIVIDENDS TO DISTRIBUTIONS AND
JULY 31 OF PERIOD INCOME GAIN (LOSS) OPERATIONS SHAREHOLDERS TO SHAREHOLDERS DISTRIBUTIONS
- ---------- ----------- ------------ -------------- ------------ -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
LIQUID ASSET
1993 (1) $ 1.00 $ 0.02 $ -- $ 0.02 $(0.02) $ -- $(0.02)
1994 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1995 1.00 0.06 -- 0.06 (0.06) -- (0.06)
1996 1.00 0.05 -- 0.05 (0.05) -- (0.05)
U.S. GOVERNMENT MONEY MARKET
1993 (2) 1.00 --++ -- -- -- -- --
1994 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1995 1.00 0.06 -- 0.06 (0.06) -- (0.06)
1996 1.00 0.05 -- 0.05 (0.05) -- (0.05)
U.S. GOVERNMENT SECURITIES
1993 (3) 10.00 0.19 0.07 0.26 (0.20) -- (0.20)
1994 10.06 0.44 (0.50) (0.06) (0.44) -- (0.44)
1995 9.56 0.56 0.15 0.71 (0.56) -- (0.56)
1996 9.71 0.55 (0.12) 0.43 (0.55) -- (0.55)
INTERMEDIATE INCOME SECURITIES
1993 (5) 10.00 0.19 (0.02) 0.17 (0.19) -- (0.19)
1994 9.98 0.60 (0.57) 0.03 (0.60) -- (0.60)
1995 9.41 0.61 0.22 0.83 (0.61) -- (0.61)
1996 9.63 0.59 (0.21) 0.38 (0.59) (0.01) (0.60)
AMERICAN VALUE
1993 (6) 10.00 0.06 (0.01) 0.05 -- -- --
1994 10.05 0.03 (0.09) (0.06) (0.02) (0.04) (0.06)
1995 9.93 0.14 3.15 3.29 (0.12) -- (0.12)
1996 13.10 0.09 1.17 1.26 (0.15) (1.13) (1.28)
CAPITAL GROWTH
1993 (7) 10.00 (0.02) (1.10) (1.12) -- -- --
1994 8.88 0.13 0.45 0.58 (0.04) -- (0.04)
1995 9.42 0.10 1.77 1.87 (0.12) -- (0.12)
1996 11.17 0.07 1.55 1.62 (0.11) (0.07) (0.18)
DIVIDEND GROWTH
1993 (4) 10.00 0.13 0.58 0.71 (0.10) -- (0.10)
1994 10.61 0.28 0.37 0.65 (0.23) (0.01) (0.24)
1995 11.02 0.34 2.13 2.47 (0.31) (0.10) (0.41)
1996 13.08 0.32 1.76 2.08 (0.36) (0.19) (0.55)
UTILITIES
1993 (3) 10.00 0.19 1.30 1.49 (0.14) -- (0.14)
1994 11.35 0.37 (0.95) (0.58) (0.34) (0.01) (0.35)
1995 10.42 0.42 0.80 1.22 (0.37) (0.02) (0.39)
1996 11.25 0.38 0.61 0.99 (0.45) -- (0.45)
VALUE-ADDED MARKET
1993 (6) 10.00 0.05 0.02 0.07 (0.04) -- (0.04)
1994 10.03 0.24 0.65 0.89 (0.11) -- (0.11)
1995 10.81 0.21 2.16 2.37 (0.26) (0.12) (0.38)
1996 12.80 0.25 1.17 1.42 (0.22) (0.07) (0.29)
GLOBAL EQUITY
1993 (3) 10.00 0.07 (0.03) 0.04 -- -- --
1994 10.04 0.08 0.58 0.66 (0.05) -- (0.05)
1995 10.65 0.14 0.49 0.63 (0.11) -- (0.11)
1996 11.17 0.09 0.71 0.80 (0.18) -- (0.18)
STRATEGIST
1993 (4) 10.00 0.06 (0.23) (0.17) -- -- --
1994 9.83 0.23 (0.20) 0.03 (0.13) -- (0.13)
1995 9.73 0.24 1.49 1.73 (0.18) -- (0.18)
1996 11.28 0.25 1.63 1.88 (0.34) (0.22) (0.56)
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET RATIOS TO AVERAGE NET
ASSETS (BEFORE EXPENSES ASSETS (AFTER EXPENSES
WERE ASSUMED)* WERE ASSUMED)
------------------------- -------------------------
NET ASSET NET ASSETS
VALUE TOTAL END OF NET NET PORTFOLIO AVERAGE
END OF INVESTMENT PERIOD INVESTMENT INVESTMENT TURNOVER COMMISSION
PERIOD RETURN+ (000'S) EXPENSES INCOME (LOSS) EXPENSES INCOME (LOSS) RATE RATE PAID
- ---------- ------------- ------------ ---------- ------------- ---------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1.00 1.77%(a) $ 1,081 1.30%(b) 0.53%(b) 0.14%(b) 3.02%(b) N/A N/A
1.00 3.48 1,524 2.50 0.99 -- 3.49 N/A N/A
1.00 5.90 35,631 1.16 4.96 -- 6.12 N/A N/A
1.00 5.44 42,753 0.65 5.05 0.33 5.37 N/A N/A
1.00 0.42 (a) 125 2.50 (b) (0.95) (b) 2.13 (b) 0.83 (b) N/A N/A
1.00 3.52 555 2.50 0.82 -- 3.32 N/A N/A
1.00 5.86 10,695 2.50 3.62 -- 6.12 N/A N/A
1.00 5.23 6,628 0.82 4.75 0.37 5.21 N/A N/A
10.06 2.60 (a) 1,756 1.81 (b) 0.33 (b) 0.18 (b) 3.66 (b) -- N/A
9.56 (0.69) 2,954 2.50 1.96 -- 4.46 (c) 29% N/A
9.71 7.72 4,209 2.36 3.49 -- 5.85 14 N/A
9.59 4.49 8,651 1.48 4.70 0.63 5.55 47 N/A
9.98 1.67 (a) 182 2.50 (b) 1.00 (b) 1.62 (b) 3.50 (b) -- N/A
9.41 0.26 460 2.50 3.64 -- 6.14 40 N/A
9.63 9.22 994 2.50 4.08 -- 6.58 37 N/A
9.41 3.95 4,172 1.58 5.01 0.72 5.87 142 N/A
10.05 0.50 (a) 308 2.50 (b) (0.66) (b) 0.74 (b) 1.10 (b) 121 (a) --
9.93 (0.59) 6,841 2.50 (0.81) -- 1.69 136 --
13.10 33.48 22,581 1.42 0.39 -- 1.81 234 --
13.08 9.83 40,321 1.18 0.23 0.65 0.76 301 $0.0543
8.88 (11.20)(a) 135 2.50(b) (1.01)(b) 1.97(b) (0.47)(b) 2 (a) --
9.42 6.57 215 2.50 (0.98) -- 1.52 11 --
11.17 20.08 678 2.50 (1.07) -- 1.43 20 --
12.61 14.58 1,988 2.50 (1.24) 0.76 0.50 68 $0.0536
10.61 7.11 (a) 2,417 2.50 (b) 0.61 (b) 0.16 (b) 2.89 (b) 7 (a) --
11.02 6.13 12,821 1.51 1.78 -- 3.29 13 --
13.08 23.07 35,404 1.14 2.34 -- 3.48 29 --
14.61 16.09 69,763 1.00 2.07 0.63 2.44 18 0.0526
11.35 14.98 (a) 1,334 2.50 (b) 1.59 (b) 0.30 (b) 3.79 (b) 8 (a) --
10.42 (5.23) 3,860 2.50 1.62 -- 4.14 5 --
11.25 12.16 5,380 1.91 2.41 -- 4.32 24 --
11.79 8.76 7,593 1.52 2.31 0.62 3.20 17 0.0508
10.03 0.71 (a) 640 2.50 (b) (0.16) (b) 0.92 (b) 1.42 (b) 1 (a) --
10.81 8.89 5,133 1.82 0.70 -- 2.53 8 --
12.80 22.65 14,080 1.22 1.33 -- 2.55 7 --
13.93 11.19 20,379 0.78 1.58 0.47 1.89 8 0.0300
10.04 0.40 (a) 322 2.50 (b) (0.90) (b) 1.00 (b) 1.77 (b) -- --
10.65 6.54 2,020 2.50 0.09 -- 2.41 8 --
11.17 6.08 7,286 2.25 0.48 -- 2.73 55 --
11.79 7.26 11,685 1.73 (0.15) 0.66 0.92 95 0.0500
9.83 (1.70) (a) 551 2.50 (b) (0.19) (b) 0.64 (b) 1.67 (b) 26 (a) --
9.73 0.12 1,276 2.50 0.70 -- 3.20 57 --
11.28 18.21 6,759 2.14 1.97 -- 4.11 115 --
12.60 16.97 17,496 1.61 1.92 0.66 2.86 113 0.0525
</TABLE>
- ------------
* After application of the Fund's expense limitation.
+ Calculated based on the net asset value as of the last business day
of the period.
++ Includes dividends from net investment income of $0.004 per share.
Commencement of operations:
(1) December 30, 1992.
(2) January 20, 1993.
(3) January 8, 1993.
(4) January 7, 1993.
(5) January 12, 1993.
(6) February 1, 1993.
(7) February 2, 1993
(a) Not annualized.
(b) Annualized.
(c) Restated.
9
<PAGE>
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
Dean Witter Retirement Series (the "Fund") is an open-end, no-load,
management investment company consisting of eleven separate Series: the
Liquid Asset Series, the U.S. Government Money Market Series, the U.S.
Government Securities Series, the Intermediate Income Securities Series, the
American Value Series, the Capital Growth Series, the Dividend Growth Series,
the Strategist Series, the Utilities Series, the Value-Added Market Series,
and the Global Equity Series. All of the Series, with the exception of the
Strategist Series, are diversified. The Fund is a trust of the type commonly
known as a "Massachusetts business trust" and was organized under the laws of
Massachusetts on May 14, 1992. The Distributor and any of its affiliates are
authorized, pursuant to a Plan of Distribution entered into by the Fund with
the Distributor and Dean Witter Reynolds Inc. ("DWR") in accordance with Rule
12b-1 of the Investment Company Act of 1940, as amended (the "Act"), to make
payments for expenses, out of their own resources, incurred in connection
with the promotion of distribution of shares of the Fund.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment
Manager"), whose address is Two World Trade Center, New York, New York 10048,
is the Fund's Investment Manager. The Investment Manager, which was
incorporated in July, 1992, is a wholly-owned subsidiary of Dean Witter,
Discover & Co. ("DWDC"), a balanced financial services organization providing
a broad range of nationally marketed credit and investment products.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to a total of one hundred investment companies (the
"Dean Witter Funds"), thirty of which are listed on the New York Stock
Exchange, with combined assets of approximately $83.6 billion as of September
30, 1996. The Investment Manager also manages portfolios of pension plans,
other institutions and individuals which aggregated approximately $2.9
billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of
portfolio securities. InterCapital has retained Dean Witter Services Company
Inc. to perform the aforementioned administrative services for the Fund.
The Fund's Trustees review the various services provided by or under the
direction of the Investment Manager to ensure that the Fund's general
investment policies and programs are being properly carried out and that
administrative services are being provided to the Fund in a satisfactory
manner.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily by applying the
annual rate of 0.50% to the net assets of the Liquid Asset Series; 0.50% to
the net assets of the U.S. Government Money Market Series; 0.65% to the net
assets of the U.S. Government Securities Series; 0.65% to the net assets of
the Intermediate Income Securities Series; 0.85% to the net assets of the
American Value Series; 0.85% to the net assets of the Capital Growth Series;
0.75% to the net assets of the Dividend Growth Series; 0.85% to the net
assets of the Strategist Series; 0.75% to the net assets of the Utilities
Series; 0.50% to the net assets of the Value-Added Market Series; and 1.0% to
the Global Equity Series, each business day. The management fees set forth
above for the American Value, Capital Growth, Dividend Growth, Strategist,
Utilities and Global Equity Series are higher than those paid by most
investment companies. Until December 31, 1995, the Investment Manager assumed
all expenses relating to each Series' operations (except for any brokerage
fees and a portion of organizational expenses) and waived the compensation
provided for in its Management Agreement with respect to each Series. The
Investment Manager has undertaken to continue to assume, until July 31, 1997,
such expenses and to waive the compensation provided for in its Management
Agreement with respect to each Series to the extent that such expenses and
compensation on an annualized basis exceed 1.00% of the daily net assets of the
Series.
For the fiscal year ended July 31, 1996, the Series accrued total
compensation to the Investment Manager and incurred total expenses, each as a
percentage of average daily net assets, as follows:
<TABLE>
<CAPTION>
COMPENSATION TO TOTAL
INVESTMENT MANAGER EXPENSES
------------------ ----------
<S> <C> <C>
Liquid Asset .............. 0.25 0.33%
U.S. Government Money
Market ................... 0.26 0.37
U.S. Government Securities 0.11 0.63
Intermediate Income ....... 0.19 0.72
American Value ............ 0.44 0.65
Capital Growth ............ 0.0 0.76
Dividend Growth ........... 0.46 0.63
Strategist ................ 0.18 0.66
Utilities ................. 0.20 0.62
Value-Added Market ........ 0.19 0.47
Global Equity ............. 0.23 0.66
</TABLE>
10
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
- -----------------------------------------------------------------------------
LIQUID ASSET SERIES
- -------------------
The investment objectives of the Liquid Asset Series are high current
income, preservation of capital and liquidity. The investment objectives may
not be changed without approval of the Series' shareholders. The Series seeks
to achieve its objectives by investing in the following money market
instruments:
U.S. Government Securities. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration, and
Government National Mortgage Association) or its instrumentalities (such as
the Federal Home Loan Bank, Federal Intermediate Credit Banks and Federal
Land Bank), including Treasury bills, notes and bonds;
Bank Obligations. Obligations (including certificates of deposit, bank
notes and bankers' acceptances) of banks subject to regulation by the U.S.
Government and having total assets of $1 billion or more, and instruments
secured by such obligations, not including obligations of foreign branches of
domestic banks;
Obligations of Savings Institutions. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more;
Fully Insured Certificates of Deposit. Certificates of deposit of banks
and savings institutions having total assets of less than $1 billion, if the
principal amount of the obligation is federally insured by the Bank Insurance
Fund or the Savings Association Insurance Fund (each of which is administered
by the Federal Deposit Insurance Corporation), limited to $100,000 principal
amount per certificate and to 10% or less of the Series' total assets in all
such obligations and in all illiquid assets, in the aggregate;
Commercial Paper and Corporate Obligations. Commercial paper and corporate
debt obligations maturing in thirteen months or less which are rated in one
of the two highest rating categories for short-term debt obligations or, if
not rated, have been issued by issuers which have another short-term debt
obligation that is comparable in priority and security to such non-rated
securities and is so rated, by at least two nationally recognized statistical
rating organizations ("NRSROs") (or one NRSRO if the instrument was rated by
only one such organization) or which, if unrated, are of comparable quality
as determined in accordance with procedures established by the Trustees. The
NRSROs currently rating instruments of the type the Series may purchase are
Moody's Investors Service, Inc., Standard & Poor's Corporation, Duff and
Phelps, Inc., Fitch Investors Service, Inc., IBCA Limited and IBCA Inc., and
Thomson BankWatch, Inc. Their rating criteria are described in the Appendix
to the Fund's Statement of Additional Information.
The foregoing rating limitations apply at the time of acquisition of a
security. Any subsequent change in any rating by a rating service will not
require elimination of any security from the Series' portfolio. However, in
accordance with procedures adopted by the Fund's Trustees pursuant to federal
securities regulations governing money market funds, if the Investment
Manager becomes aware that a portfolio security has received a new rating
from an NRSRO that is below the second highest rating, then, unless the
security is disposed of within five days, the Investment Manager will perform
a creditworthiness analysis of any such downgraded securities, which analysis
will be reported to the Trustees who will, in turn, determine whether the
securities continue to present minimal credit risks to the Liquid Asset
Series.
The ratings assigned by the NRSROs represent their opinions as to the
quality of the securities they undertake to rate. It should be emphasized,
however, that the ratings are general and not absolute standards of quality.
Subject to the foregoing requirements, the Liquid Asset Series may invest
in commercial paper which has been issued pursuant to the "private placement"
exemption afforded by Section 4(2) of the Securities Act of 1933 (the
"Securities Act") and which may be sold to institutional investors pursuant
to Rule 144A under the Securities Act. Management considers such legally
restricted, but readily marketable, commercial paper to be liquid. However,
pursuant to procedures approved by the Trustees of the Fund, if a particular
investment in such commercial paper is determined to be illiquid, that
investment will be included within the 10% limitation on illiquid investments
(see "Investment Restrictions"). If at any time the Liquid Asset Series'
investments in
11
<PAGE>
illiquid securities exceed 10% of the Series' total assets, the Series will
dispose of illiquid securities in an orderly fashion to reduce the Series'
holdings in such securities to less than 10% of its total assets.
Variable Rate and Floating Rate Obligations. Certain of the types of
investments described above may be variable rate or floating rate
obligations. The interest rates payable on variable rate or floating rate
obligations are not fixed and may fluctuate based upon changes in market
rates. The interest rate payable on a variable rate obligation may be
adjusted at pre-designated periodic intervals and on a floating rate
obligation whenever there is a change in the market rate of interest on which
the interest rate payable is based.
Although the Liquid Asset Series will generally not seek profits through
short-term trading, it may dispose of any portfolio security prior to its
maturity if, on the basis of a revised credit evaluation of the issuer or
other circumstances or considerations, it believes such disposition
advisable.
The Liquid Asset Series will attempt to balance its objectives of high
income, capital preservation and liquidity by investing in securities of
varying maturities and risks. The Liquid Asset Series will not, however,
invest in securities that mature in more than thirteen months from the date
of purchase. The amounts invested in obligations of various maturities of
thirteen months or less will depend on management's evaluation of the risks
involved. Longer-term issues, while generally paying higher interest rates,
are subject, as a result of general changes in interest rates, to greater
fluctuations in value than shorter-term issues. Thus, when rates on new debt
securities increase, the value of outstanding securities may decline, and
vice versa. Such changes may also occur, but to a lesser degree, with
short-term issues. These changes, if realized, may cause fluctuations in the
amount of daily dividends and, in extreme cases, could cause the net asset
value per share to decline (see "Determination of Net Asset Value").
Longer-term issues also increase the risk that the issuer may be unable to
pay an installment of interest or principal at maturity. Also, in the event
of unusually large redemption demands, such securities may have to be sold at
a loss prior to maturity, or the Liquid Asset Series might have to borrow
money and incur interest expense. Either occurrence would adversely impact
the amount of daily dividend and could result in a decline in the daily net
asset value per share. The Liquid Asset Series will attempt to minimize these
risks by investing in longer-term securities when it appears to management
that interest rates on such securities are not likely to increase
substantially during the period of expected holding, and then only in
securities of high quality which are readily marketable. However, there can
be no assurance that the Series will be successful in achieving this or its
other objectives.
Private Placements. As stated above, the Liquid Asset Series may invest in
commercial paper issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act of
1933 (the "Securities Act") and which may be sold to other institutional
investors pursuant to Rule 144A under the Securities Act. The adoption by the
Securities and Exchange Commission of Rule 144A, which permits the resale of
certain restricted securities to institutional investors, had the effect of
broadening and increasing the liquidity of the institutional trading market
for securities subject to restrictions on resale to the general public.
Section 4(2) commercial paper sold pursuant to Rule 144A is restricted in
that it can be resold only to qualified institutional investors. However,
since institutions constitute virtually the entire market for such commercial
paper, the market for such Section 4(2) commercial paper is, in reality, as
liquid as that for other commercial paper. While the Liquid Asset Series
generally holds to maturity commercial paper in its portfolio, the advent of
Rule 144A has greatly simplified the ability to sell Section 4(2) commercial
paper to other institutional investors.
Under procedures adopted by the Trustees of the Fund, the Liquid Asset
Series may purchase Section 4(2) commercial paper without being subject to
its limitation on illiquid investments and will be able to utilize Rule 144A
to sell that paper to other institutional investors. The procedures require
that the Investment Manager consider the following factors in determining
that any restricted security eligible for sale pursuant to Rule 144A be
considered liquid: (1) the frequency of trades and quotes for the security,
(2) the number of dealers willing to purchase or sell the security and the
number of other potential purchasers, (3) dealer undertakings to make a
market in the security, and (4) the nature of the security and the nature of
the marketplace trades (i.e., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer). The Investment
Manager will report to the Trustees on a quarterly basis on all restricted
securities held by the Liquid Asset Series
12
<PAGE>
with regard to their ongoing liquidity. In the event any Section 4(2)
commercial paper or restricted security held by the Liquid Asset Series is
determined to be illiquid by the Trustees and the Investment Manager, that
investment would be included as an illiquid security subject to the
limitation on illiquid investments referred to above.
The foregoing investment policies are not fund amental and may be changed
by the Trustees without shareholder vote.
U.S. GOVERNMENT MONEY MARKET SERIES
- -----------------------------------
The investment objectives of the U.S. Government Money Market Series are
security of principal, high current income and liquidity. There is no
assurance that the investment objectives will be achieved. These investment
objectives may not be changed without the approval of the shareholders of the
U.S. Government Money Market Series. The investment policies discussed below
may be changed without shareholder approval.
The U.S. Government Money Market Series seeks to achieve its objectives by
investing in U.S. Government securities, including a variety of securities
which are issued and/or guaranteed, as to principal and interest, by the
United States Treasury, by various agencies of the United States Government,
and by various instrumentalities which have been established or sponsored by
the United States Government, and in certain interests in the foregoing
securities. Except for U.S. Treasury securities, these obligations, even
those which are guaranteed by Federal agencies or instrumentalities, may or
may not be backed by the "full faith and credit" of the United States. In the
case of securities not backed by the full faith and credit of the United
States, they may be backed, in part, by a line of credit with the U.S.
Treasury (such as the Federal National Mortgage Association), or the U.S.
Government Money Market Series must look to the agency issuing or
guaranteeing the obligation for ultimate repayment (such as securities of the
Federal Farm Credit System), in which case the U.S. Government Money Market
Series may not be able to assert a claim against the United States itself in
the event the agency or instrumentality does not meet its commitments. The
assumption of the liabilities of these agencies or instrumentalities by the
U.S. Government is discretionary and is not a lawful obligation.
Treasury securities include Treasury bills, Treasury notes, and Treasury
bonds. Some of the government agencies and instrumentalities which issue or
guarantee securities include the Federal Farm Credit System, the Federal Home
Loan Banks, the Federal Home Loan Mortgage Corporation, the Government
National Mortgage Association, the Federal National Mortgage Association, the
Farmers Home Administration, the Federal Land Banks, the Small Business
Administration, the Student Loan Marketing Association, the Export-Import
Bank, the Federal Intermediate Credit Banks and the Banks for Cooperatives.
The U.S. Government Money Market Series may invest in securities issued or
guaranteed, as to principal and interest, by any of the foregoing entities or
by any other agency or instrumentality established or sponsored by the United
States Government. Such investments may take the form of participation
interests in, and may be evidenced by deposit or safekeeping receipts for,
any of the foregoing. Participation interests are pro rata interests in U.S.
Government securities such as interests in pools of mortgages sold by the
Government National Mortgage Association; instruments evidencing deposit or
safekeeping are documentary receipts for such original securities held in
custody by others.
The Federal Deposit Insurance Corporation is the administrative authority
over the Bank Insurance Fund and the Savings Association Insurance Fund,
which are the agencies of the U.S. Government which insure (including both
principal and interest) the deposits of certain banks and savings and loan
associations up to $100,000 per deposit. Current federal regulations also
permit such institutions to issue insured negotiable certificates of deposit
("CDs") in principal amounts of $100,000 or more without regard to the
interest rate ceilings on other deposits. To remain fully insured as to
principal, these investments must currently be limited to $100,000 per bank
or savings and loan association. The interest on such investments is not
insured. The U.S. Government Money Market Series may invest in such CDs of
banks and savings and loan institutions limited to the insured amount of
principal ($100,000) in each case and limited with regard to all such CDs and
all illiquid assets, in the aggregate, to 10% of the U.S. Government Money
Market Series' total assets.
The U.S. Government Money Market Series intends normally to hold its
portfolio securities to maturity. Historically, securities issued or
guaranteed by the U.S. Government or its agencies and instrumentalities have
involved minimal risk of loss of principal or interest, if held to maturity.
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The U.S. Government Money Market Series will generally not seek profits
through short-term trading, although it may dispose of any portfolio security
prior to maturity if, on the basis of a revised evaluation or other
circumstance or consideration, the Investment Manager deems such disposition
advisable.
The U.S. Government Money Market Series will attempt to balance its
objectives of security of principal, high current income and liquidity by
investing in securities of varying maturities and risks. The U.S. Government
Money Market Series will not, however, invest in securities with an effective
maturity of more than thirteen months from the date of purchase. The amounts
invested in obligations of various maturities of thirteen months or less will
depend on management's evaluation of the risks involved. Longer-term U.S.
Government issues, while generally paying higher interest rates, are subject
to greater fluctuations in value resulting from general changes in interest
rates than shorter-term issues. Thus, when rates on new securities increase,
the value of outstanding securities may decline, and vice versa. Such changes
may also occur, to a lesser degree, with short-term issues.
These changes, if realized, may cause fluctuations in the amount of daily
dividends and, in extreme cases, could cause the net asset value per share to
decline (see "Determination of Net Asset Value"). In the event of unusually
large redemption demands, such securities may have to be sold at a loss prior
to maturity, or the U.S. Government Money Market Series might have to borrow
money and incur interest expenses. Either occurrence would adversely impact
upon the amount of daily dividend and could result in a decline in daily net
asset value per share or the redemption by the U.S. Government Money Market
Series of shares held in a shareholder's account. The U.S. Government Money
Market Series will attempt to minimize these risks by investing in relatively
longer-term securities when it appears to management that yields on such
securities are not likely to increase substantially during the period of
expected holding, and then only in securities which are readily marketable.
However, there can be no assurance that the U.S. Government Money Market
Series will be successful in achieving this objective.
U.S. GOVERNMENT SECURITIES SERIES
- ---------------------------------
The investment objective of the U.S. Government Securities Series is high
current income consistent with safety of principal. There is no assurance
that the investment objective will be achieved. The investment objective may
not be changed without approval of the U.S. Government Securities Series'
shareholders. The investment policies discussed below may be changed without
shareholder approval.
The U.S. Government Securities Series seeks to achieve its objective by
investing in obligations issued and/or guaranteed by the U.S. Government or
its instrumentalities ("U.S. Government Securities"). All such obligations
are backed by the "full faith and credit" of the United States. Investments
may be made in obligations of instrumentalities of the U.S. Government only
where such obligations are guaranteed by the U.S. Government.
U.S. Government securities include U.S. Treasury securities consisting of
Treasury bills, Treasury notes and Treasury bonds. Some of the other U.S.
Government securities in which the U.S. Government Securities Series may
invest include securities of the Federal Housing Administration, the
Government National Mortgage Association, the Department of Housing and Urban
Development, the Export-Import Bank, the Farmers Home Administration, the
General Services Administration, the Maritime Administration, Resolution
Funding Corporation and the Small Business Administration. The maturities of
such securities usually range from three months to thirty years.
The Series is not limited as to the maturities of the U.S. Government
securities in which it may invest, except that the Series will not purchase
zero coupon securities with remaining maturities of longer than ten years.
For a discussion of the risks of investing in U.S. Government securities
(including such securities purchased on a when-issued, delayed delivery or
forward commitment basis and zero coupon securities), see "General Investment
Techniques" below.
While the U.S. Government Securities Series has the ability to invest in
any securities backed by the full faith and credit of the United States, it
is currently anticipated that a substantial portion of the U.S. Government
Securities Series' assets will be invested in Certificates of the Government
National Mortgage Association ("GNMA"). Should market or economic conditions
warrant, this policy is subject to change at any time at the discretion of
the Investment Manager.
GNMA Certificates. GNMA Certificates are mortgage-backed securities. Each
Certificate evi-
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dences an interest in a specific pool of mortgages insured by the Federal
Housing Administration or the Farmers Home Administration (FHA) or guaranteed
by the Veterans Administration (VA). Scheduled payments of principal and
interest are made to the registered holders of GNMA Certificates. The GNMA
Certificates that the U.S. Government Securities Series will invest in are of
the modified pass-through type. GNMA guarantees the timely payment of monthly
installments of principal and interest on modified pass-through certificates
at the time such payments are due, whether or not such amounts are collected
by the issuer on the underlying mortgages. The National Housing Act provides
that the full faith and credit of the United States is pledged to the timely
payment of principal and interest by GNMA of amounts due on these GNMA
Certificates.
The average life of GNMA Certificates varies with the maturities of the
underlying mortgage instruments with maximum maturities of 30 years. The
average life is likely to be substantially less than the original maturity of
the mortgage pools underlying the securities as a result of prepayments or
refinancing of such mortgages or foreclosure. Any prepayments are passed
through to the registered holder with the regular monthly payments of
principal and interest, which has the effect of reducing future payments. Due
to the GNMA guarantee, foreclosures impose no risk to investment principal.
The occurrence of mortgage prepayments is affected by factors including the
level of interest rates, general economic conditions, the location and age of
the mortgage and other social and demographic conditions. As prepayment rates
vary widely, it is not possible to accurately predict the average life of a
particular pool. However, statistics indicate that the average life of the
type of mortgages backing the majority of GNMA Certificates is approximately
twelve years. For this reason, it is standard practice to treat GNMA
Certificates as 30-year mortgage-backed securities which prepay fully in the
twelfth year. Pools of mortgages with other maturities or different
characteristics will have varying assumptions for average life. The assumed
average life of pools of mortgages having terms of less than 30 years is less
than twelve years, but typically not less than five years.
The coupon rate of interest of GNMA Certificates is lower than the
interest rate paid on the VA-guaranteed or FHA-insured mortgages underlying
the Certificates, but only by the amount of the fees paid to GNMA and the
issuer.
The U.S. Government Securities Series will invest in mortgage pass-through
securities representing participation interests in pools of residential
mortgage loans originated by United States governmental or private lenders
such as banks, broker-dealers and financing corporations and guaranteed, to
the extent provided in such securities, by the United States Government or
one of its agencies or instrumentalities. Such securities, which are
ownership interests in the underlying mortgage loans, differ from
conventional debt securities, which provide for periodic payment of interest
in fixed amounts (usually semi-annually) and principal payments at maturity
or on specified call dates. Mortgage pass-through securities provide for
monthly payments that are a "pass-through" of the monthly interest and
principal payments (including any prepayments) made by the individual
borrowers on the pooled mortgage loans, net of any fees paid to the guarantor
of such securities and the servicer of the underlying mortgage loans. The
guaranteed mortgage pass-through securities in which the U.S. Government
Securities Series may invest include those issued or guaranteed by GNMA or
other entities which securities are backed by the full faith and credit of
the United States.
Certificates for mortgage-backed securities evidence an interest in a
specific pool of mortgages. These certificates are, in most cases, "modified
pass-through" instruments, wherein the issuing agency guarantees the payment
of principal and interest on mortgages underlying the certificates, whether
or not such amounts are collected by the issuer on the underlying mortgages.
Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and
the associated average life assumption. In periods of falling interest rates
the rate of prepayment tends to increase, thereby shortening the actual
average life of a pool of mortgage-related securities. Conversely, in periods
of rising rates the rate of prepayment tends to decrease, thereby lengthening
the actual average life of the pool. Reinvestment by the U.S. Government
Securities Series of prepayments may occur at higher or lower interest rates
than the original investment. Historically, actual average life has been
consistent with the twelve-year assumption referred to above. The actual
yield of each GNMA Certificate is influenced by the prepayment experience of
the mortgage pool underlying the Certificates. Interest on GNMA Certificates
is paid monthly rather than semi-annually as for traditional bonds.
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Adjustable Rate Mortgage Securities. The U.S. Government Securities Series
may also invest in adjustable rate mortgage securities ("ARMs"), which are
pass-through mortgage securities collateralized by mortgages with adjustable
rather than fixed rates. ARMs eligible for inclusion in a mortgage pool
generally provide for a fixed initial mortgage interest rate for either the
first three, six, twelve or thirteen scheduled monthly payments. Thereafter,
the interest rates are subject to periodic adjustment based on changes to a
designated benchmark index.
ARMs contain maximum and minimum rates beyond which the mortgage interest
rate may not vary over the lifetime of the security. In addition, certain
ARMs provide for additional limitations on the maximum amount by which the
mortgage interest rate may adjust for any single adjustment period.
Alternatively, certain ARMs contain limitations on changes in the required
monthly payment. In the event that a monthly payment is not sufficient to pay
the interest accruing on an ARM, any such excess interest is added to the
principal balance of the mortgage loan, which is repaid through future
monthly payments. If the monthly payment for such an instrument exceeds the
sum of the interest accrued at the applicable mortgage interest rate and the
principal payment required at such point to amortize the outstanding
principal balance over the remaining term of the loan, the excess is utilized
to reduce the then outstanding principal balance of the ARM.
Collateralized Mortgage Obligations and Multiclass Pass-Through
Securities. The U.S. Government Securities Series may also invest in
collateralized mortgage obligations or "CMOs," which are debt obligations
collateralized by mortgage loans or mortgage pass-through securities.
Typically, CMOs are collateralized by GNMA, FNMA or FHLMC Certificates, but
also may be collateralized by whole loans or private mortgage pass-through
securities (such collateral collectively hereinafter referred to as "Mortgage
Assets"). Multiclass pass-through securities are equity interests in a trust
composed of Mortgage Assets. Payments of principal of and interest on the
Mortgage Assets, and any reinvestment income thereon, provide the funds to
pay debt service on the CMOs or make scheduled distributions on the
multiclass pass-through securities. CMOs may be issued by agencies or
instrumentalities of the United States Government, or by private originators
of, or investors in, mortgage loans, including savings and loan associations,
mortgage banks, commercial banks, investment banks and special purpose
subsidiaries of the foregoing. However, the U.S. Government Securities Series
will only invest in CMOs which are backed by the full faith and credit of the
United States.
The issuer of a series of CMOs may elect to be treated as a Real Estate
Mortgage Investment Conduit ("REMIC"). REMICs include governmental and/or
private entities that issue a fixed pool of mortgages secured by an interest
in real property. REMICs are similar to CMOs in that they issue multiple
classes of securities, but unlike CMOs, which are required to be structured
as debt securities, REMICs may be structured as indirect ownership interests
in the underlying assets of the REMICs themselves. However, there are no
effects on the Series from investing in CMOs issued by entities that have
elected to be treated as REMICs, and all future references to CMOs shall also
be deemed to include REMICs. The Fund may invest without limitation in CMOs.
In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche", is issued at a specific
fixed or floating coupon rate and has a stated maturity or final distribution
date. Principal prepayments on the Mortgage Assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final
distribution dates. Interest is paid or accrues on all classes of the CMOs on
a monthly, quarterly or semi-annual basis. Certain CMOs may have variable or
floating interest rates and others may be stripped (securities which provide
only the principal or interest feature of the underlying security).
The principal of and interest on the Mortgage Assets may be allocated
among the several classes of a CMO series in a number of different ways.
Generally, the purpose of the allocation of the cash flow of a CMO to the
various classes is to obtain a more predictable cash flow to the individual
tranches than exists with the underlying collateral of the CMO. As a general
rule, the more predictable the cash flow is on a CMO tranche, the lower the
anticipated yield will be on the tranche at the time of issuance relative to
prevailing market yields on mortgage-backed securities. As part of the
process of creating more predictable cash flows on most of the tranches in a
series of CMOs, one or more tranches generally must be created that absorb
most of the volatility in the cash flows on the underlying mortgage loans.
The yields on these
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tranches are generally higher than prevailing market yields on
mortgage-backed securities with similar maturities. As a result of the
uncertainty of the cash flows of these tranches, the market prices of and
yield on these tranches generally are more volatile.
The U.S. Government Securities Series also may invest in, among other
things, parallel pay CMOs and Planned Amortization Class CMOs ("PAC Bond").
Parallel pay CMOs are structured to provide payments of principal on each
payment date to more than one class. These simultaneous payments are taken
into account in calculating the stated maturity date or final distribution
date of each class, which, as with other CMO structures, must be retired by
its stated maturity date or final distribution date, but may be retired
earlier. PAC Bonds generally require payments of a specified amount of
principal on each payment date. PAC Bonds always are parallel pay CMOs with
the required principal payment on such securities having the highest priority
after interest has been paid to all classes.
INTERMEDIATE INCOME SECURITIES SERIES
- -------------------------------------
The investment objective of the Intermediate Income Securities Series is
high current income consistent with safety of principal. This investment
objective may not be changed without approval of the Intermediate Income
Securities Series' shareholders. There is no assurance that the investment
objective will be achieved. The investment policies discussed below may be
changed without shareholder approval.
The Intermediate Income Securities Series seeks to achieve its objective
by investing at least 65% of its total assets in intermediate term,
investment grade fixed-income securities. Such securities have a minimum
remaining maturity of three years and a maximum remaining maturity of ten
years. The Intermediate Income Securities Series will maintain an average
dollar-weighted maturity of approximately seven years or less and may not
invest in securities with remaining maturities greater than twelve years.
Under normal conditions, the Intermediate Income Securities Series' average
weighted maturity will not be less than three years.
Under normal circumstances, the Intermediate Income Securities Series will
invest primarily in corporate debt securities and preferred stock of
investment grade, which consists of securities which are rated at the time of
purchase Baa or better by Moody's Investors Service, Inc. ("Moody's") or BBB
or better by Standard & Poor's Corporation ("S&P"), or which, if unrated, are
determined to be of comparable quality by the Fund's Trustees. While
fixed-income securities rated Baa by Moody's and BBB by S&P are considered
investment grade, they have speculative characteristics. (A more detailed
description of bond ratings is contained in the Appendix to the Statement of
Additional Information.) The Intermediate Income Securities Series may also
purchase U.S. Government securities (securities guaranteed as to principal
and interest by the United States or its agencies or instrumentalities) and
investment grade securities, denominated in U.S. dollars, issued by foreign
governments or issuers. U.S. Government securities in which the Intermediate
Income Securities Series may invest include zero coupon securities and
mortgage backed securities, such as securities issued by the Government
National Mortgage Association, the Federal National Mortgage Association and
the Federal Home Loan Mortgage Corporation. There can be no assurance that
the investment objective of the Intermediate Income Securities Series will be
achieved.
The Investment Manager believes that the Intermediate Income Securities
Series' policies of purchasing intermediate term securities will reduce the
volatility of the Intermediate Income Securities Series' net asset value over
the long term. Although the values of fixed-income securities generally
increase during periods of declining interest rates and decrease during
periods of increasing interest rates, the extent of these fluctuations has
historically generally been smaller for intermediate term securities than for
securities with longer maturities. Conversely, the yield available on
intermediate term securities has also historically been lower than those
available from long term securities.
Investment by the Intermediate Income Securities Series in U.S. dollar
denominated fixed-income securities issued by foreign governments and other
foreign issuers may involve certain risks not associated with U.S. issued
securities (see "Foreign Securities" under "General Portfolio Techniques"
below). The Investment Manager believes that those risks are substantially
lessened because the foreign securities in which the Intermediate Income
Securities Series may invest are investment grade.
While the Intermediate Income Securities Series will invest primarily in
investment grade fixed-income securities, under ordinary circumstances it may
invest up to 35% of its total assets in money market instruments and
repurchase agreements, as well as, with respect to up to 5% of its net
assets,
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lower-rated fixed-income securities. No more than 5% of the Intermediate
Income Securities Series' net assets may be invested in lower-rated
fixed-income securities.
Lower-rated fixed-income securities, which are those rated from Ba or BB
to C by Moody's or S&P, respectively, are considered to be speculative
investments. Such lower-rated securities, while producing a higher yield than
investment grade securities, are subject to credit risk to a greater extent
than investment grade securities. The Intermediate Income Securities Series
does not have any minimum quality rating standard with respect to the portion
(up to 5%) of its net assets which may be invested in lower-rated securities.
See the Statement of Additional Information for a description of the special
risks and characteristics of lower-rated fixed-income securities.
There may be periods during which, in the opinion of the Investment
Manager, market conditions warrant reduction of some or all of the
Intermediate Income Securities Series' securities holdings. During such
periods, the Intermediate Income Securities Series may adopt a temporary
"defensive" posture in which greater than 35% of its total assets are
invested in cash or money market instruments. Money market instruments in
which the Intermediate Income Securities Series may invest are securities
issued or guaranteed by the U.S. Government (Treasury bills, notes and bonds,
including zero coupon securities); bank obligations; Eurodollar certificates
of deposit; obligations of savings institutions; fully insured certificates
of deposit; and commercial paper rated within the two highest grades by
Moody's or Standard & Poor's or, if not rated, are issued by a company having
an outstanding debt issue rated at least AA by S&P or Aa by Moody's.
AMERICAN VALUE SERIES
- ---------------------
The investment objective of the American Value Series is long-term capital
growth consistent with an effort to reduce volatility. There is no assurance
that the American Value Series' objective will be achieved. The investment
objective may not be changed without the approval of the shareholders of the
American Value Series. The investment policies discussed below may be changed
without shareholder approval.
The American Value Series seeks to achieve its investment objective by
investing in a diversified portfolio of securities consisting principally of
common stocks. The American Value Series utilizes an investment process that
places primary emphasis on seeking to identify industries, rather than
individual companies, as prospects for capital appreciation. The Investment
Manager seeks to invest the assets of the Series in those industries that, at
the time of investment, are attractively valued given their above average
relative earnings growth potential at that time. Therefore, the Series is
typically over-weighted in those sectors deemed to be attractive given their
potential for above average earnings growth.
After selection of the American Value Series' target industries, specific
company investments are selected. In this process, the Investment Manager
seeks to identify companies whose prospects are deemed attractive on the
basis of an evaluation of valuation screens and prospective company
fundamentals.
The Investment Manager seeks to identify what stage of the business cycle
the economy is in and which industry groups have historically outperformed
the overall market during that stage of the cycle, i.e., typically, groups
that tend to have the highest relative earnings growth at that point in the
cycle. The Investment Manager also analyzes secular trends such as
demographics, international trade, etc., that could cause the current cycle
to differ from prior cycles and attempts to weight the portfolio
appropriately, given those factors.
Following selection of the American Value Series' specific investments,
the Investment Manager will attempt to allocate the assets of the American
Value Series so as to reduce the volatility of its portfolio. In doing so,
the American Value Series may hold a portion of its portfolio in fixed-income
securities in an effort to moderate extremes of price fluctuations. The
American Value Series may invest up to 35% of its total assets in common
stocks of non-U.S. companies, including American Depository Receipts (which
are custody receipts with respect to foreign securities) (see "Foreign
Securities" under "General Portfolio Techniques" below), in companies in
industries which have not been determined to be attractively valued or
moderately attractively valued by the Investment Manager, and in convertible
debt securities and warrants, convertible preferred securities, U.S.
Government securities (securities issued or guaranteed as to principal and
interest by the United States or its agencies and instrumentalities) and
investment grade corporate debt securities when, in the opinion of the
Invest-
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ment Manager, the projected total return on such securities is equal to or
greater than the expected total return on common stocks, or when such
holdings might be expected to reduce the volatility of the portfolio, and in
money market instruments under any one or more of the following
circumstances: (i) pending investment of proceeds of sale of shares of the
American Value Series or of portfolio securities; (ii) pending settlement of
purchases of portfolio securities; or (iii) to maintain liquidity for the
purpose of meeting anticipated redemptions. Greater than 35% of the American
Value Series' total assets may be invested in money market instruments to
maintain, temporarily, a "defensive" posture when, in the opinion of the
Investment Manager, it is advisable to do so because of economic or market
conditions. The term investment grade consists of fixed-income securities
rated Baa or higher by Moody's Investors Service Inc. or BBB or higher by
Standard and Poor's Corporation, or, if not rated, determined to be of
comparable quality by the Investment Manager.
Because prices of stocks fluctuate from day to day, the value of an
investment in the American Value Series will vary based upon the Series'
investment performance. The American Value Series is intended for long-term
investors who can accept the risks involved in seeking long-term growth of
capital through investment in the securities of large, medium and
small-capitalization companies. Emphasis on attractive industries may run
contrary to general market assessments and may involve risks associated with
departure from typical S&P 500 industry weightings. It should be recognized
that investing in small and medium-capitalization companies involves greater
risk than is customarily associated with investing in more established
companies.
Under normal circumstances, at least 65% of the American Value Series'
total assets will be invested in common stocks of U.S. companies in
industries which, at the time of purchase, were determined to be attractively
valued or moderately attractively valued given their above average relative
earnings growth potential.
The American Value Series may enter into repurchase agreements, invest in
zero coupon securities, invest in real estate investment trusts, lend its
portfolio securities, engage in futures contracts and options transactions,
purchase securities which are issued in private placements or are otherwise
not readily marketable, and purchase securities on a when-issued or delayed
delivery basis or a "when, as and if issued" basis, and purchase or sell
securities on a forward commitment basis, in each case in accordance with the
description of these investments and techniques (and subject to the risks)
set forth under "General Portfolio Techniques" below and in the Statement of
Additional Information.
The foregoing limitations apply at the time of acquisition based on the
last determined market value of the American Value Series' assets, and any
subsequent change in any applicable percentage resulting from market
fluctuations or other changes in total assets will not require elimination of
any security from the portfolio.
CAPITAL GROWTH SERIES
- ---------------------
The investment objective of the Capital Growth Series is long-term capital
growth. There is no assurance that the objective will be achieved. The
investment objective may not be changed without the approval of the majority
of the shareholders of the Capital Growth Series. The following policies may
be changed by the Trustees without approval by the shareholders of the
Capital Growth Series.
The Capital Growth Series seeks to achieve its investment objective by
investing, under normal circumstances, at least 65% of its total assets in
common stocks. As part of its management of the Capital Growth Series, the
Investment Manager utilizes a screening process designed to find companies which
have demonstrated a history of consistent growth in earnings and revenues for
the past several years. Additionally, several companies will have solid future
earnings growth characteristics and attractive valuations. Companies meeting
these requirements will be potential candidates for investment within the
Capital Growth portfolio. Subject to the Capital Growth Series' investment
objective, the Investment Manager, without notice, may modify the foregoing
screening process and/or may utilize additional or different screening
processes in connection with the investment of the Series' assets. Dividend
income will not be a consideration in the selection of stocks for purchase.
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Although the Capital Growth Series invests primarily in common stocks, the
Series may invest up to 35% of its total assets (taken at current value and
subject to any restrictions appearing elsewhere in this Prospectus), in any
combination of the following: (a) U.S. Government securities (securities
issued or guaranteed as to principal and interest by the U.S. Government or
its agencies or instrumentalities) and investment grade fixed-income
securities; (b) convertible securities; (c) money market instruments; (d)
options on equity and debt securities; and (e) futures contracts and related
options thereon, as described below. The Capital Growth Series may also
purchase unit offerings (where corporate debt securities are offered as a
unit with convertible securities, preferred or common stocks, warrants, or
any combination thereof). U.S. Government securities in which the Capital
Growth Series may invest include zero coupon securities. Convertible
securities in which the Capital Growth Series may invest include bonds,
debentures, corporate notes, preferred stock and other securities. The
Capital Growth Series may also purchase securities on a when-issued or
delayed delivery basis, may purchase or sell securities on a forward
commitment basis, and may purchase securities on a "when, as and if issued"
basis.
There may be periods during which, in the opinion of the Investment
Manager, market conditions warrant reduction of some or all of the Capital
Growth Series' securities holdings. During such periods, the Series may adopt
a temporary "defensive" posture in which greater than 35% of its total assets
are invested in cash or money market instruments. Money market instruments in
which the Capital Growth Series may invest are securities issued or
guaranteed by the U.S. Government (Treasury bills, notes and bonds, including
zero coupon securities); obligations of banks (such as certificates of
deposit and banker's acceptances) subject to regulation by the U.S.
Government and having total assets of $1 billion or more; Eurodollar
certificates of deposit; obligations of savings banks and savings and loan
associations having total assets of $1 billion or more; fully insured
certificates of deposit; and commercial paper rated within the two highest
grades by Moody's or S&P or, if not rated, are issued by a company having an
outstanding debt issue rated at least AA by S&P or Aa by Moody's.
DIVIDEND GROWTH SERIES
- ----------------------
The investment objective of the Dividend Growth Series is to provide
reasonable current income and long-term growth of income and capital. There
is no assurance that the objective will be achieved. The investment objective
may not be changed without the approval of the shareholders of the Dividend
Growth Series.
The Dividend Growth Series seeks to achieve its investment objective
primarily by investing at least 65% of its total assets in common stock of
companies with a record of paying dividends and the potential for increasing
dividends. The net asset value of the Dividend Growth Series' shares will
fluctuate with changes in market values of portfolio securities. The Dividend
Growth Series will attempt to avoid investing in securities with speculative
characteristics.
The following investment policies may be changed without the approval of
the Dividend Growth Series' shareholders:
(1) Up to 35% of the value of the Dividend Growth Series' total assets
may be invested in: (a) convertible debt securities, convertible pre
ferred securities, U.S. Government securities (securities issued or
guaranteed as to principal and interest by the United States or its
agencies and instrumentalities), investment grade corporate debt
securities and/or money market instruments when, in the opinion of the
Investment Manager, the projected total return on such securities is equal
to or greater than the expected total return on equity securities or when
such holdings might be expected to reduce the volatility of the portfolio
(for purposes of this provision, the term "total return" means the
difference between the cost of a security and the aggregate of its market
value and dividends received); or (b) in money market instruments under
any one or more of the following circumstances: (i) pending investment of
proceeds of sale of Dividend Growth Series' shares or of portfolio
securities; (ii) pending settlement of purchases of portfolio securities;
or (iii) to maintain liquidity for the purpose of meeting anticipated
redemptions.
(2) Notwithstanding any of the foregoing limitations, the Dividend Growth
Series may invest more than 35% in money market in struments to maintain,
temporarily, a "defensive" posture when, in the opinion of the Investment
Manager, it is advisable to do so because of economic or market
conditions.
The foregoing limitations will apply at the time of acquisition based on
the last determined value of
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the Dividend Growth Series' assets. Any subsequent change in any applicable
percentage resulting from fluctuations in value or other changes in total
assets will not require elimination of any security from the portfolio. The
Dividend Growth Series may purchase securities on a when-issued or delayed
delivery basis, may purchase or sell securities on a forward commitment basis
and may purchase securities on a "when, as and if issued" basis.
STRATEGIST SERIES
- -----------------
The investment objective of the Strategist Series is to maximize the total
return on its investments. This is a fundamental policy and cannot be changed
without the approval of the Strategist Series' shareholders. In seeking to
achieve its objective, the Series will actively allocate assets among the
major asset categories of equity securities, fixed-income securities and
money market instruments. Total return consists of current income (including
dividends, interest and, in the case of discounted instruments, discount
accruals) and capital appreciation (including realized and unrealized capital
gains and losses). There can be no assurance that the investment objective of
the Strategist Series will be achieved.
The achievement of the Strategist Series' investment objective depends
upon the ability of the Investment Manager to correctly assess the effects of
economic and market trends on different sectors of the market. The Investment
Manager believes that superior investment returns at lower risk are
achievable by actively allocating resources to the equity, debt and money
market sectors of the market as opposed to relying solely on just one market.
At times, the equity market may hold a higher potential return than the debt
market and would warrant a higher asset allocation. The reverse would be true
when the bond market's potential return is higher. Investments in the money
market sector can be used to soften market declines when both bonds and
equities are fully priced. Conserving capital during declining markets can
contribute to maximizing total return over a longer period of time. In
addition, the securities of companies within various economic sectors may at
times offer higher returns than other sectors and can thus contribute to
superior returns. Finally, the Investment Manager believes that superior
stock selection can also contribute to superior total return.
To facilitate reallocation of the Strategist Series' assets in accordance
with the Investment Manager's views as to shifts in the marketplace, the
Investment Manager will employ transactions in futures contracts and options
thereon. For example, if the Investment Manager believes that a ten percent
increase in that portion of the Strategist Series' assets invested in fixed
income securities and a concomitant decrease in that portion of the
Strategist Series' assets invested in equity securities is timely, the
Strategist Series might purchase interest rate futures, such as Treasury bond
futures, and sell stock index futures, such as the Standard & Poor's 500
Stock Index futures, in equivalent amounts. The utilization of futures
transactions, rather than the purchase and sale of equity and fixed-income
securities, increases the speed and efficacy of the Strategist Series' asset
reallocations.
Within the equity sector, the Investment Manager will actively allocate
funds to those economic sectors expected to benefit from major trends and to
individual stocks which are deemed to have superior investment potential. The
Strategist Series may purchase equity securities (including convertible debt
obligations and convertible preferred stock) sold on the New York, American
and other stock exchanges and in the over-the-counter market. In addition,
the Strategist Series may purchase and sell warrants and purchase and write
listed and over-the-counter options on individual stocks and stock indexes to
hedge against adverse price movements in its equity portfolio and to increase
its total return through the receipt of premium income. The Strategist Series
may also purchase and sell stock index futures and options thereon to hedge
against adverse price movements in its equity portfolio and to facilitate
asset reallocations into and out of the equity area.
Within the fixed-income sector of the market, the Investment Manager will
seek to maximize the return on its investments by adjusting maturities and
coupon rates as well as by exploiting yield differentials among different
types of investment grade bonds. Fixed-income securities in which the
Strategist Series may invest may have maturities ranging from one year to
greater than five years and may include debt securities, including U.S.
Government securities (securities issued or guaranteed as to principal and
interest by the United States or its agencies and instrumentalities) and
corporate securities which are rated at the time of purchase Baa or better by
Moody's Investors Service, Inc. ("Moody's") or BBB or better by Standard &
Poor's Corporation ("S&P"), or which, if unrated, are deemed to be of
comparable quality by the Fund's Trustees (a description of corporate bond
ratings is contained in the Appendix to the Statement of Additional Infor-
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mation). While bonds rated Baa by Moody's or BBB by S&P are considered
investment grade, they have speculative characteristics as well. U.S.
Government securities which may be purchased include zero coupon securities.
In addition, the Strategist Series may purchase and write listed and
over-the-counter options on fixed-income securities to hedge against adverse
price movements in its fixed-income portfolio and to increase its total
return through the receipt of premium income. The Strategist Series may also
purchase and sell interest rate futures and options thereon to hedge against
adverse price movements in its fixed-income portfolio and to facilitate asset
reallocations into and out of the fixed-income area.
Within the money market sector of the market, the Investment Manager will
seek to maximize returns by seeking out those short-term instruments with the
highest yields. The money market portion of the Strategist Series will
contain short-term (maturities of up to one year) fixed-income securities,
issued by private and governmental institutions. Such securities may include:
U.S. Government securities; bank obligations (such as certificates of deposit
and banker's acceptances); Eurodollar certificates of deposit issued by
foreign branches of domestic banks; obligations of savings institutions;
fully insured certificates of deposit; and commercial paper rated within the
two highest grades by S&P or the highest grade by Moody's or, if not rated,
issued by a company having an outstanding debt issue rated at least AA by S&P
or Aa by Moody's. To the extent the Strategist Series purchases Eurodollar
certificates of deposit issued by foreign branches of domestic banks,
consideration will be given to any risks attendant to their domestic
marketability, the lower reserve requirements normally mandated for overseas
banking operations, the possible impact of interruptions in the flow of
international currency transactions, and future international political and
economic developments which might adversely affect the payment of principal
or interest.
Non-Diversified Status. The Strategist Series is a non-diversified
investment company and, as such, is not subject to the diversification
requirements of the Act. As a non-diversified investment company, the
Strategist Series may invest a greater portion of its assets in the
securities of a single issuer and thus is subject to greater exposure to
risks such as a decline in the credit rating of that issuer. However, the
Strategist Series has qualified and expects to continue to qualify as a
regulated investment company under the federal income tax laws and, as such,
is subject to the applicable diversification requirements of the Internal
Revenue Code, as amended (the "Code"). As a regulated investment company
under the Code, the Strategist Series may not, as of the end of any of its
fiscal quarters, have invested more than 25% of its total assets in the
securities of any one issuer (including a foreign government), or as to 50%
of its total assets, have invested more than 5% of its total assets in the
securities of a single issuer.
UTILITIES SERIES
- ----------------
The investment objective of the Utilities Series is to provide current
income and long-term growth of income and capital. There can be no assurance
that the investment objective will be achieved. This objective is fundamental
and may not be changed without shareholder approval. The investment policies
discussed below may be changed without shareholder approval.
The Utilities Series seeks to achieve its invest ment objective by
investing in equity and fixed-income securities of companies engaged in the
public utilities industry. The term "public utilities industry" consists of
companies engaged in the manufacture, production, generation, transmission,
sale and distribution of gas and electric energy, as well as companies
engaged in the communications field, including telephone, telegraph,
satellite, microwave and other companies providing communication facilities
for the public, but excluding public broadcasting companies. For purposes of
the Utilities Series, a company will be considered to be in the public
utilities industry if, during the most recent twelve month period, at least
50% of the company's gross revenues, on a consolidated basis, are derived
from the public utilities industry. Under ordinary circumstances, at least
65% of the Utilities Series' total assets will be invested in securities of
companies in the public utilities industry.
The Investment Manager believes the Utilities Series' investment policies
are suited to benefit from certain characteristics and historical performance
of the securities of public utility companies. Many of these companies have
historically set a pattern of paying regular dividends and increasing their
common stock dividends over time, and the average common stock dividend yield
of utilities historically has substantially exceeded that of industrial
stocks. The Investment Manager believes that these factors may not only
provide current income but also generally tend to moderate risk and thus may
enhance the opportunity for appreciation of securities owned
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by the Utilities Series, although the potential for capital appreciation has
historically been lower for many utility stocks compared with most industrial
stocks. There can be no assurance that the historical investment performance
of the public utilities industry will be indicative of future events and
performance.
The Utilities Series invests in both equity securities (common stocks and
securities convertible into common stock) and fixed-income securities (bonds
and preferred stock) in the public utilities industry. The Utilities Series
will shift its asset allocation without restriction between types of
utilities and between equity and fixed-income securities based upon the
Investment Manager's determination of how to achieve the Utilities Series'
investment objective in light of prevailing market, economic and financial
conditions.
Criteria utilized by the Investment Manager in the selection of equity
securities include the following screens: earnings and dividend growth; book
value; dividend discount; and price/earnings relationships. In addition, the
Investment Manager makes continuing assessments of management, the prevailing
regulatory framework and industry trends. The Investment Manager may also
utilize computer-based equity selection models. In keeping with the Utilities
Series' objective, if in the opinion of the Investment Manager favorable
conditions for capital growth of equity securities are not prevalent at a
particular time, the Utilities Series may allocate its assets predominantly
or exclusively in debt securities with the aim of obtaining current income as
well as preserving capital and thus benefiting long term growth of capital.
The Utilities Series may purchase equity securities sold on the New York,
American and other stock exchanges and in the over-the-counter market.
Fixed-income securities in which the Utilities Series may invest are debt
securities and preferred stocks, which are rated at the time of purchase Baa
or better by Moody's Investors Service, Inc. ("Moody's") or BBB or better by
Standard & Poor's Corporation ("S&P"), or which, if unrated, are deemed to be
of comparable quality by the Fund's Trustees. The Utilities Series may also
purchase equity and fixed-income securities issued by foreign issuers
(including American Depository Receipts, European Depositary Receipts or
other similar securities convertible into securities of foreign issuers).
Under normal circumstances the average weighted maturity of the fixed-income
securities held by the Utilities Series is expected to be in excess of seven
years. A description of corporate bond ratings is contained in the Appendix
to the Statement of Additional Information.
Investments in fixed-income securities rated either BBB by S&P or Baa by
Moody's (the lowest credit ratings designated "investment grade") have
speculative characteristics and, therefore, changes in economic conditions or
other circumstances are more likely to weaken their capacity to make
principal and interest payments than would be the case with investments in
securities with higher credit ratings. If a fixed-income security held by the
Utilities Series is rated BBB or Baa and is subsequently downgraded by a
rating agency, the Utilities Series will retain such security in its
portfolio until the Investment Manager determines that it is practicable to
sell the security without undue market or tax consequences to the Utilities
Series. In the event that such downgraded securities constitute 5% or more of
the Series' total assets, the Investment Manager will immediately sell
securities sufficient to reduce the total to below 5%.
While the Utilities Series will invest primarily in the securities of
public utility companies, under ordinary circumstances it may invest up to
35% of its total assets in U.S. Government securities (securities issued or
guaranteed as to principal and interest by the United States or its agencies
and instrumentalities), money market instruments, repurchase agreements, and
options and futures, as described below. U.S. Government securities in which
the Utilities Series may invest include zero coupon securities.
There may be periods during which, in the opinion of the Investment
Manager, market conditions warrant reduction of some or all of the Utilities
Series' securities holdings. During such periods, the Utilities Series may
adopt a temporary "defensive" posture in which greater than 35% of its net
assets are invested in cash or money market instruments. Money market
instruments in which the Utilities Series may invest are securities issued or
guaranteed by the U.S. Government (Treasury bills, notes and bonds, including
zero coupon securities); bank obligations (such as certificates of deposit
and bankers' acceptances); Eurodollar certificates of deposit; obligations of
savings institutions; fully insured certificates of deposit; and commercial
paper rated within the two highest grades by Moody's or S&P or, if not rated,
are issued by a company having an outstanding debt issue rated at least AA by
S&P or Aa by Moody's.
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Electric Utilities Industry. Under normal circumstances, the Utilities
Series will invest at least 25% of its total assets in debt and equity
securities issued by companies in the electric utilities industry. For
temporary defensive purposes, however, the Series may reduce its investments
in the electric utilities industry to less than 25% of its total assets. The
Utilities Series' policy of concentrating its investments in the electric
utilities industry is fundamental and may not be changed without the approval
of a majority of the Utilities Series' voting securities.
The electric utilities industry as a whole has certain characteristics and
risks particular to that industry. Unlike industrial companies, the rates
which utility companies may charge their customers generally are subject to
review and limitation by governmental regulatory commissions. Although rate
changes of a utility usually fluctuate in approximate correlation with
financing costs, due to political and regulatory factors, rate changes
ordinarily occur only following a delay after the changes in financing costs.
This factor will tend to favorably affect a utility company's earnings and
dividends in times of decreasing costs, but conversely will tend to adversely
affect earnings and dividends when costs are rising. In addition, the value
of electric utility debt securities (and, to a lesser extent, equity
securities) tends to have an inverse relationship to the movement of interest
rates.
Among the risks affecting the utilities industry are the following: risks
of increases in fuel and other operating costs; the high cost of borrowing to
finance capital construction during inflationary periods; restrictions on
operations and increased costs and delays associated with compliance with
environmental and nuclear safety regulations; the difficulties involved in
obtaining natural gas for resale or fuel for generating electricity at
reasonable prices; the risks in connection with the construction and
operation of nuclear power plants; the effects of energy conservation,
non-regulated competition, open access to transmission, and the effects of
regulatory changes, such as linking future rate increases to inflation or
other factors not directly related to the actual operating profits of the
enterprise.
VALUE-ADDED MARKET SERIES
- -------------------------
The investment objective of the Value-Added Market Series is to achieve a
high level of total return on its assets through a combination of capital
appreciation and current income. This is a fundamental policy and cannot be
changed without the approval of the shareholders of the Value-Added Market
Series. There can be no assurance that the Value-Added Market Series'
investment objective will be achieved. The investment policies discussed
below may be changed without shareholder approval.
The Value-Added Market Series will seek to attain its investment objective
by investing, on an equally-weighted basis, in a diversified portfolio of
common stocks of the companies which are included in the Standard & Poor's
500 Composite Stock Price Index (the "S&P Index"). Standard & Poor's 500 is a
trademark of Standard & Poor's Corporation ("S&P") and has been licensed for
use by the Fund. The Value-Added Market Series is not sponsored, endorsed,
sold or promoted by S&P and S&P makes no representation regarding the
advisability of investing in the Value-Added Market Series. The S&P Index
consists of 500 common stocks selected by S&P, most of which are listed on
the New York Stock Exchange. Inclusion of a stock in the S&P Index implies no
opinion by S&P as to the quality of the stock as an investment. The S&P Index
is determined, composed and calculated by S&P without regard to the
Value-Added Market Series. S&P is neither a sponsor of, nor in any way
affiliated with, the Value-Added Market Series, and S&P makes no
representation or warranty, express or implied, on the advisability of
investing in the Value-Added Market Series or as to the ability of the S&P
Index to track general stock market performance, and S&P disclaims all
warranties of merchantability or fitness for a particular purpose or use with
respect to the S&P Index or any data included therein. S&P has no connection
with the Value-Added Market Series other than the licensing to the Investment
Manager of the use of the S&P Index in connection with the Value-Added Market
Series.
The Value-Added Market Series invests in the stocks included in the S&P
Index on an equally-weighted basis; that is, to the extent practicable and
subject to the specific investment policies and restrictions described below,
an equal portion of the Value-Added Market Series' assets is invested in each
of the 500 securities in the S&P Index. This differs from the S&P Index and
nearly all other major indexes, which generally are weighted on a
market-capitalization basis. For example, the 50 largest capitalization
issuers in the S&P Index represent approximately 45% of the S&P Index.
However, in accordance with its investment policies, the Value-Added Market
Series will strive to maintain each stockholding equally, so that, subject to
the specific
24
<PAGE>
investment policies and investment restrictions described below,
approximately 0.20 of 1% of the Value-Added Market Series' total invested
assets will be invested in each of the 500 companies included in the S&P
Index. The equal weighting technique is based on the Investment Manager's
statistical analysis that most portfolio performance is usually generated by
only one-quarter to one-third of the portfolio. Since there is no certainty
that any specific company or industry selection, even within a broad-based
index such as the S&P Index, will achieve superior performance, the
Investment Manager believes equal-weighting may benefit the Value-Added
Market Series in seeking to attain its investment objective.
The holdings of the Value-Added Market Series will be adjusted by the
Investment Manager not less than quarterly to reflect changes in the
Value-Added Market Series' asset levels and in the relative values of the
common stocks held by the Value-Added Market Series so that following each
adjustment the value of the Value-Added Market Series' investment in each
security will be equal to the extent practicable. In addition, whenever a
company is eliminated from or added to the S&P Index, the Value-Added Market
Series will sell or purchase the stock of such company, as the case may be,
as soon as practicable. Accordingly, securities may be purchased and sold by
the Value-Added Market Series when such purchases and sales would not be made
under traditional investment criteria.
In addition, while the Investment Manager will not actively manage the
portfolio other than to follow the guidelines set forth above for following
an equally-weighted S&P Index, it may eliminate one or more securities (or
elect not to increase the Value-Added Market Series' position in such
securities), notwithstanding the continued listing of such securities in the
S&P Index, in the following circumstances: (a) the stock is no longer
publicly traded, such as in the case of a leveraged buyout or merger; (b) an
unexpected adverse development with respect to a company, such as bankruptcy
or insolvency; (c) in the view of the Investment Manager, there is a high
degree of risk with respect to a company that bankruptcy or insolvency will
occur; or (d) in the view of the Investment Manager, based on its
consideration of the price of a company's securities, the depth of the market
in those securities and the amount of those securities held or to be held by
the Value-Added Market Series, retaining shares of a company or making any
additional purchases would be inadvisable because of liquidity risks. The
Investment Manager will monitor on an ongoing basis all companies falling
within any of the circumstances described in this paragraph, and will return
such company's shares to the Value-Added Market Series' holdings, or
recommence purchases, when and if those conditions cease to exist.
The Value-Added Market Series may purchase futures contracts on stock
indexes at a time when it is not fully invested on account of additional cash
invested in the Series or income received by the Series. Purchase of a
futures contract in those circumstances serves as a temporary substitute for
the purchase of individual stocks which may then be purchased in orderly
fashion.
A portion of the Value-Added Market Series' assets, not exceeding 25% of
its total assets, may be invested temporarily in money market instruments
under any one or more of the following circumstances: (a) pending investment
of proceeds of sale of shares of the Value-Added Market Series; (b) pending
settlement of purchases of portfolio securities; or (c) to maintain liquidity
for the purposes of meeting anticipated redemptions. The money market
instruments in which the Value-Added Market Series may invest are
certificates of deposit of U.S. domestic banks with assets of $1 billion or
more; bankers' acceptances; time deposits; U.S. Government and U.S.
Government agency securities; or commercial paper rated within the two
highest grades by S&P or Moody's Investors Service, Inc., or, if not rated,
are of comparable quality as determined by the Fund's Trustees, and which
mature within one year from the date of purchase.
GLOBAL EQUITY SERIES
- --------------------
The investment objective of the Global Equity Series is to seek to obtain
total return on its assets primarily through long-term capital growth and to
a lesser extent from income. There can be no assurance that the Global Equity
Series will achieve its objective. The investment objective is a fundamental
policy and cannot be changed without the approval of the shareholders of the
Global Equity Series. The investment policies discussed below may be changed
without shareholder approval.
The Global Equity Series will invest at least 65% of its total assets in
equity securities issued by issuers located in various countries around the
world. The Series' investment portfolio will, thereby, be invested in at
least three separate countries.
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The Global Equity Series will seek to achieve such objective through
investments in all types of common stocks and equivalents (such as
convertible debt securities and warrants), preferred stocks and bonds and
other debt obligations of domestic and foreign companies and governments and
international organizations. There is no limitation on the percent or amount
of the Global Equity Series' assets which may be invested for growth or
income.
The Global Equity Series will maintain a flexible investment policy and,
based on a worldwide investment strategy, will invest in a diversified
portfolio of securities of companies and governments located throughout the
world. Such securities will generally be those with a record of paying
dividends and the potential for increasing dividends. The percentage of the
Global Equity Series' assets invested in particular geographic sectors will
shift from time to time in accordance with the judgment of the Investment
Manager.
Notwithstanding the Global Equity Series' investment objective of seeking
total return, the Global Equity Series may, for defensive purposes, without
limitation, invest in: obligations of the United States Government, its
agencies or instrumentalities; cash and cash equivalents in major currencies;
repurchase agreements; money market instruments; and commercial paper.
The Global Equity Series may also invest in securities of foreign issuers
in the form of American Depository Receipts (ADRs), European Depository
Receipts (EDRs) or other similar securities convertible into securities of
foreign issuers. These securities may not necessarily be denominated in the
same currency as the securities into which they may be converted. ADRs are
receipts typically issued by a United States bank or trust company evidencing
ownership of the underlying securities. EDRs are European receipts evidencing
a similar arrangement. Generally, ADRs, in registered form, are designed for
use in the United States securities markets and EDRs, in bearer form, are
designed for use in European securities markets.
The Global Equity Series may purchase securities on a when-issued or
delayed delivery basis, may purchase or sell securities on a forward
commitment basis and may purchase securities on a "when, as and if issued"
basis.
GENERAL INVESTMENT TECHNIQUES
- -----------------------------
Repurchase Agreements. Each Series of the Fund may enter into repurchase
agreements, which may be viewed as a type of secured lending by the Series,
and which typically involve the acquisition by a Series of debt securities
from a selling financial institution such as a bank, savings and loan
association or broker-dealer. The agreement provides that the Series will
sell back to the institution, and that the institution will repurchase, the
underlying security at a specified price and at a fixed time in the future,
usually not more than seven days from the date of purchase. While repurchase
agreements involve certain risks not associated with direct investments in
debt securities, including the risks of default or bankruptcy of the selling
financial institution, the Fund follows procedures designed to minimize those
risks. These procedures include effecting repurchase transactions only with
large, well-capitalized and well-established financial institutions and
maintaining adequate collateralization.
Reverse Repurchase Agreements. The Liquid Asset, U.S. Government Money
Market and Intermediate Income Securities Series may also use reverse
repurchase agreements as part of their investment strategy. Reverse
repurchase agreements involve sales by the Series of assets concurrently with
an agreement by the Series to repurchase the same assets at a later date at a
fixed price. Such transactions are only advantageous if the interest cost to
the Series of the reverse repurchase transaction is less than the cost of
otherwise obtaining the cash. Opportunities to achieve this advantage may not
always be available, and the Series intend to use the reverse repurchase
technique only when it will be to their advantage to do so. Reverse
repurchase agreements are considered borrowings by the Series and for
purposes other than meeting redemptions may not exceed 5% of the Series'
total assets.
When-Issued and Delayed Delivery Securities and Forward Commitments. From
time to time, in the ordinary course of business, each Series of the Fund may
purchase securities on a when-issued or delayed delivery basis or may
purchase or sell securities on a forward commitment basis. When such
transactions are negotiated, the price is fixed at the time of the
commitment, but delivery and payment can take place a month or more after the
date of the commitment. While a Series will only purchase securities on a
when-issued, delayed delivery or forward commitment basis with the intention
of acquiring the securities, a Series may sell the securities before the
settlement date, if it is deemed advisable. The securities so purchased or
sold are subject to market fluctuation and no interest accrues
26
<PAGE>
to the purchaser during this period. At the time a Series makes the
commitment to purchase or sell securities on a when-issued, delayed delivery
or forward commitment basis, it will record the transaction and thereafter
reflect the value, each day, of such security purchased or, if a sale, the
proceeds to be received in determining its net asset value. At the time of
delivery of the securities, their value may be more or less than the purchase
or sale price. A Series will also establish a segregated account with its
custodian bank in which it will continually maintain cash or cash equivalents
or other high grade portfolio securities equal in value to commitments to
purchase securities on a when-issued, delayed delivery or forward commitment
basis. An increase in the percentage of a Series' assets committed to the
purchase of securities on a when-issued, delayed delivery or forward
commitment basis may increase the volatility of a Series' net asset value.
When, As and If Issued Securities. Each Series (other than the U.S.
Government Money Market Series) may purchase securities on a "when, as and if
issued" basis under which the issuance of the security depends upon the
occurrence of a subsequent event, such as approval of a merger, corporate
reorganization or debt restructuring. The commitment for the purchase of any
such security will not be recognized in the portfolio until the Investment
Manager determines that the issuance of the security is probable, whereupon
the accounting treatment for such commitment will be the same as for a
commitment to purchase a security on a when-issued, delayed delivery or
forward commitment basis, described above and in the Statement of Additional
Information. An increase in the percentage of a Series' assets committed to
the purchase of securities on a "when, as and if issued" basis may increase
the volatility of its net asset value.
Zero Coupon Securities. A portion of the fixed-income securities purchased
by each Series may be zero coupon securities. Such securities are purchased
at a discount from their face amount, giving the purchaser the right to
receive their full value at maturity. The interest earned on such securities
is, implicitly, automatically compounded and paid out at maturity. While such
compounding at a constant rate eliminates the risk of receiving lower yields
upon reinvestment of interest if prevailing interest rates decline, the owner
of a zero coupon security will be unable to participate in higher yields upon
reinvestment of interest received on interest-paying securities if prevailing
interest rates rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent a Series invests in zero coupon securities, it will
not receive current cash available for distribution to shareholders. In
addition, zero coupon securities are subject to substantially greater price
fluctuations during periods of changing prevailing interest rates than are
comparable securities which pay interest on a current basis. Current federal
tax law requires that a holder (such as a Series) of a zero coupon security
accrue a portion of the discount at which the security was purchased as
income each year even though the Series receives no interest payments in cash
on the security during the year.
Warrants. Each Series (other than the Liquid Asset Series, the U.S.
Government Money Market Series and the U.S. Government Securities Series) may
acquire warrants attached to other securities and, in addition, each of the
Dividend Growth Series, the American Value Series, Strategist Series,
Utilities Series and Global Equity Series may invest up to 5% of the value of
its total assets in warrants not attached to other securities, including up
to 2% of such assets in warrants not listed on either the New York or
American Stock Exchange. Warrants are, in effect, an option to purchase
equity securities at a specific price, generally valid for a specific period
of time, and have no voting rights, pay no dividends and have no rights with
respect to the corporation issuing them. If warrants remain unexercised at
the end of the exercise period, they will lapse and the Series' investment in
them will be lost. The prices of warrants do not necessarily move parallel to
the prices of the underlying securities.
Private Placements. The Liquid Asset, Intermediate Income Securities,
American Value, Capital Growth, Dividend Growth, Strategist, Utilities,
Value-Added Market and Global Equity Series may invest up to 15% (10% with
respect to the Liquid Asset Series) of their net assets in securities which
are subject to restrictions on resale because they have not been registered
under the Securities Act or which are otherwise not readily marketable
("illiquid securities"). These securities are generally referred to as
private placements or restricted securities. Limitations on the resale of
such securities may have an adverse effect on their marketability, and may
prevent the Series from disposing of them promptly at reasonable prices. The
Series may have to bear the expense of registering such securities for resale
and the risk of substantial delays in effecting such registration. The above
policy on purchase of illiquid securities may be changed by the Fund's
Trustees.
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<PAGE>
Rule 144A under the Securities Act permits the Series to sell restricted
securities to qualified institutional buyers without limitation. The Trustees
of the Fund have adopted procedures for the Investment Manager to utilize in
determining the liquidity of securities which may be sold pursuant to Rule
144A. In addition, the Trustees have determined that, where such securities
are determined to be liquid under these procedures, investment in such
securities by the Series shall not be subject to the limitation on
investments in illiquid securities referred to above. Investing in Rule 144A
securities could have the effect of increasing the level of illiquidity to
the extent a Series, at a particular point in time, may be unable to find
qualified institutional buyers interested in purchasing such securities.
Investments in Securities Rated Baa by Moody's or BBB by S&P. The
Intermediate Income Securities Series, American Value Series, Capital Growth
Series, Dividend Growth Series, Strategist Series and Utilities Series may
invest a portion of their assets in fixed-income securities rated at the time
of purchase Baa or better by Moody's Investors Service, Inc. ("Moody's") or
BBB or better by Standard & Poor's Corporation ("S&P"). Investments in
fixed-income securities rated either Baa by Moody's or BBB by S&P (the lowest
credit ratings designated "investment grade") may have speculative
characteristics and, therefore, changes in economic conditions or other
circumstances are more likely to weaken their capacity to make principal and
interest payments than would be the case with investments in securities with
higher credit ratings. If a bond held by a Series is downgraded by a rating
agency to a rating of below Baa or BBB, the Series will retain such security
in its portfolio until the Investment Manager determines that it is
practicable to sell the security without undue market or tax consequences to
the Series.
Convertible Securities. The American Value Series, Capital Growth Series,
Dividend Growth Series, Strategist Series, Utilities Series and Global Equity
Series may invest a portion of their assets in convertible securities. A
convertible security is a bond, debenture, note, preferred stock or other
security that may be converted into or exchanged for a prescribed amount of
common stock of the same or a different issuer within a particular period of
time at a specified price or formula. Convertible securities rank senior to
common stocks in a corporation's capital structure and, therefore, entail
less risk than the corporation's common stock. The value of a convertible
security is a function of its "investment value" (its value as if it did not
have a conversion privilege), and its "conversion value" (the security's
worth if it were to be exchanged for the underlying security, at market
value, pursuant to its conversion privilege).
To the extent that a convertible security's investment value is greater
than its conversion value, its price will be primarily a reflection of such
investment value and its price will be likely to increase when interest rates
fall and decrease when interest rates rise, as with a fixed-income security
(the credit standing of the issuer and other factors may also have an effect
on the convertible security's value). If the conversion value exceeds the
investment value, the price of the convertible security will rise above its
investment value and, in addition, will sell at some premium over its
conversion value. (This premium represents the price investors are willing to
pay for the privilege of purchasing a fixed-income security with a
possibility of capital appreciation due to the conversion privilege.) At such
times the price of the convertible security will tend to fluctuate directly
with the price of the underlying equity security.
Because of the special nature of certain of the Series' permitted
investments in lower rated convertible securities, the Investment Manager
must take account of certain special considerations in assessing the risks
associated with such investments. The prices of lower rated securities have
been found to be less sensitive to changes in prevailing interest rates than
higher rated investments, but are likely to be more sensitive to adverse
economic changes or individual corporate developments. During an economic
downturn or substantial period of rising interest rates, highly leveraged
issuers may experience financial stress which would adversely affect their
ability to service their principal and interest payment obligations, to meet
their projected business goals or to obtain additional financing. If the
issuer of a lower rated convertible security owned by a Series defaults, such
Series may incur additional expenses to seek recovery. In addition, periods
of economic uncertainty and change can be expected to result in an increased
volatility of market prices of lower rated securities and a corresponding
volatility in the net asset value of a share of the Series.
Real Estate Investment Trusts. Each Series, except the Liquid Asset
Series, U.S. Government Money Market Series, U.S. Government Securities
Series and Intermediate Income Securities Series may invest in real estate
investment trusts, which pool investors' funds for investments primarily in
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commercial real estate properties. Investment in real estate investment
trusts may be the most practical available means for the Series to invest in
the real estate industry (the Series are prohibited from investing in real
estate directly). As a shareholder in a real estate investment trust, a
Series would bear its ratable share of the real estate investment trust's
expenses, including its advisory and administration fees. At the same time
the Series would continue to pay its own investment management fees and other
expenses, as a result of which the Series and its shareholders in effect will
be absorbing duplicate levels of fees with respect to investments in real
estate investment trusts. Real estate investment trusts are not diversified
and are subject to the risk of financing projects. They are also subject to
heavy cash flow dependency, defaults by borrowers or tenants,
self-liquidation, and the possibility of failing to qualify for tax-free
status under the Internal Revenue Code and failing to maintain exemption from
the Investment Company Act of 1940, as amended.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, each Series of the Fund may lend its portfolio securities to
brokers, dealers and other financial institutions, provided that such loans
are callable at any time by the Series (subject to certain notice provisions
described in the Statement of Additional Information), and are at all times
secured by cash or money market instruments, which are maintained in a
segregated account pursuant to applicable regulations and that are equal to
at least the market value, determined daily, of the loaned securities. As
with any extensions of credit, there are risks of delay in recovery and in
some cases even loss of rights in the collateral should the borrower of the
securities fail financially. However, loans of portfolio securities will only
be made to firms deemed by the Investment Manager to be creditworthy and when
the income which can be earned from such loans justifies the attendant risks.
Foreign Securities. The Global Equity Series will invest extensively in
foreign securities. In addition, the American Value, Capital Growth,
Strategist, Utilities and Intermediate Income Securities Series may, to a
considerably lesser extent, invest in foreign securities.
Foreign securities investments may be affected by changes in currency
rates or exchange control regulations, changes in governmental administration
or economic or monetary policy (in the United States and abroad) or changed
circumstances in dealings between nations. Fluctuations in the relative rates
of exchange between the currencies of different nations will affect the value
of a Series' investments denominated in foreign currency. Changes in foreign
currency exchange rates relative to the U.S. dollar will affect the U.S.
dollar value of a Series' assets denominated in that currency and thereby
impact upon the Series' total return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected
by the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of
the exchanges on which the currencies trade. The foreign currency
transactions of a Series will be conducted on a spot basis or, in the case of
the Global Equity Series, through forward contracts or futures contracts
(described below under "Options and Futures Transactions"). The Series will
incur certain costs in connection with these currency transactions.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer
of Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory requirements
of U.S. companies and, as such, there may be less publicly available
information about such companies. Moreover, foreign companies are not subject
to uniform accounting, auditing and financial reporting standards and
requirements comparable to those applicable to U.S. companies.
Securities of foreign issuers may be less liquid than comparable
securities of U.S. issuers and, as such, their price changes may be more
volatile. Furthermore, foreign exchanges and broker-dealers are generally
subject to less government and exchange scrutiny and regulation than their
American counterparts. Brokerage commissions, dealer concessions and other
transaction costs may be higher on foreign markets than in the U.S. In
addition, differences in clearance and settlement procedures on foreign
markets may occasion delays in settlements of a Series' trades effected in
such markets. Inability to dispose of portfolio securities due to settlement
delays could result in losses to a Series
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due to subsequent declines in value of such securities and the inability of
the Series to make intended security purchases due to settlement problems
could result in a failure of the Series to make potentially advantageous
investments. To the extent a Series purchases Eurodollar certificates of
deposit issued by foreign branches of domestic United States banks,
consideration will be given to their domestic marketability, the lower
reserve requirements normally mandated for overseas banking operations, the
possible impact of interruptions in the flow of international currency
transactions, and future international political and economic developments
which might adversely affect the payment of principal or interest.
Mortgage-Backed Securities. The U.S. Government Securities Series may
invest in mortgage-backed securities. Mortgage-backed securities have certain
different characteristics than traditional debt securities. Among the major
differences are that interest and principal payments are made more
frequently, usually monthly, and that principal may be prepaid at any time
because the underlying mortgage loans or other assets generally may be
prepaid at any time. As a result, if the Series purchases such a security at
a premium, a prepayment rate that is faster than expected may reduce yield to
maturity, while a prepayment rate that is slower than expected may have the
opposite effect of increasing yield to maturity. Alternatively, if the Series
purchases these securities at a discount, faster than expected prepayments
will increase, while slower than expected prepayments may reduce, yield to
maturity.
Mortgage-backed securities, like all fixed-income securities, generally
decrease in value as a result of increases in interest rates. In addition,
although generally the value of fixed-income securities increases during
periods of falling interest rates, mortgage-backed securities may benefit
less than other fixed-income securities from declining interest rates because
of the risk of prepayments. As discussed above under "GNMA Certificates," the
assumed average life of mortgages backing the majority of GNMA Certificates
is twelve years. This average life is likely to be substantially shorter than
the original maturity of the mortgage pools underlying the certificates, as a
pool's duration may be shortened by unscheduled or early payments of
principal on the underlying mortgages. As prepayment rates vary widely, it is
not possible to accurately predict the average life of a particular pool.
Although the extent of prepayments or a pool of mortgage loans depends on
various factors, including the prevailing level of interest rates, general
economic conditions, the location and age of the mortgage and other social
and demographic conditions, as a general rule prepayments on fixed rate
mortgage loans will increase during a period of falling interest rates and
decrease during a period of rising interest rates. If the Series has
purchased securities backed by pools containing mortgages whose yields exceed
the prevailing interest rate any premium paid for such securities may be
lost. As a result, the net asset value of shares of the U.S. Government
Securities Series and the Series' ability to achieve its investment objective
may be adversely affected by mortgage prepayments. Amounts available for
reinvestment by the Series are likely to be greater during a period of
declining interest rates and, as a result, likely to be reinvested at lower
interest rates than during a period of rising interest rates.
There are certain risks associated specifically with CMOs. A number of
different factors, including the extent of prepayment of principal of the
Mortgage Assets, affect the availability of cash for principal payments by
the CMO issuer on any payment date and, accordingly, affect the timing of
principal payments on each CMO class.
Forward Foreign Currency Exchange Contracts. The American Value, Capital
Growth, Strategist, Utilities and Global Equity Series may enter into forward
foreign currency exchange contracts ("forward contracts") to facilitate
settlement of foreign currency denominated portfolio securities. In addition,
the Global Equity Series may enter into forward contracts in connection with
its foreign securities investments under various other circumstances.
A forward contract involves an obligation to purchase or sell a currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the
contract. A Series may enter into forward contracts as a hedge against
fluctuations in future foreign exchange rates.
When a Series enters into a contract for the purchase or sale of a
security denominated in a foreign currency, it may, for example, desire to
"lock in" the price of the security in U.S. dollars or some other foreign
currency which the Series is temporarily holding in its portfolio. By
entering into a forward contract for the purchase or sale, for a fixed amount
of dollars or other currency, of the amount of
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foreign currency involved in the underlying security transactions, the Series
will be able to protect itself against a possible loss resulting from an
adverse change in the relationship between the U.S. dollar or other currency
which is being used for the security purchase and the foreign currency in
which the security is denominated during the period between the date on which
the security is purchased or sold and the date on which payment is made or
received.
Other circumstances under which the Global Equity Series may enter into
forward contracts are as follows. At times, when, for example, the Global
Equity Series' Investment Manager believes that the currency of a particular
foreign country may suffer a substantial decline against the U.S. dollar or
some other foreign currency, the Global Equity Series may enter into a
forward contract to sell, for a fixed amount of dollars or other currency,
the amount of foreign currency approximating the value of some or all of the
Series' securities holdings (or securities which the Series has purchased for
its portfolio) denominated in such foreign currency. Under identical
circumstances, the Series may enter into a forward contract to sell, for a
fixed amount of U.S. dollars or other currency, an amount of foreign currency
other than the currency in which the securities to be hedged are denominated
approximating the value of some or all of the portfolio securities to be
hedged. This method of hedging, called "cross-hedging," will be selected by
the Investment Manager when it is determined that the foreign currency in
which the portfolio securities are denominated has insufficient liquidity or
is trading at a discount as compared with some other foreign currency with
which it tends to move in tandem.
In addition, when the Global Equity Series' Investment Manager anticipates
purchasing securities at some time in the future, and wishes to lock in the
current exchange rate of the currency in which those securities are
denominated against the U.S. dollar or some other foreign currency, the
Series may enter into a forward contract to purchase an amount of currency
equal to some or all of the value of the anticipated purchase, for a fixed
amount of U.S. dollars or other currency. The Series may, however, close out
the forward contract without purchasing the security which was the subject of
the "anticipatory" hedge.
Lastly, the Global Equity Series is permitted to enter into forward
contracts with respect to currencies in which certain of its portfolio
securities are denominated and on which options have been written (see
"Options and Futures Transactions").
In all of the above circumstances, if the currency in which the Series'
securities holdings (or anticipated portfolio securities) are denominated
rises in value with respect to the currency which is being purchased (or
sold), then the Series will have realized fewer gains than had the Series not
entered into the forward contracts. Moreover, the precise matching of the
forward contract amounts and the value of the securities involved will not
generally be possible, since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and
the date it matures. The Series are not required to enter into such
transactions with regard to their foreign currency-denominated securities and
will not do so unless deemed appropriate by the Investment Manager.
The Global Equity Series generally will not enter into a forward contract
with a term of greater than one year, although it may enter into forward
contracts for periods of up to five years. To the extent that the Global
Equity Series enters into forward foreign currency contracts to hedge against
a decline in the value of portfolio holdings denominated in a particular
foreign currency resulting from currency fluctuations, there is a risk that
the Series may nevertheless realize a gain or loss as a result of currency
fluctuations after such portfolio holdings are sold if the Series is unable
to enter into an "offsetting" forward foreign currency contract with the same
party or another party. The Global Equity Series may be limited in its
ability to enter into hedging transactions involving forward contracts by the
Internal Revenue Code's requirements relating to qualifications as a
regulated investment company (see "Dividends, Distributions and Taxes").
OPTIONS AND FUTURES TRANSACTIONS
As noted above, each of the American Value, Capital Growth, Strategist,
Utilities, Global Equity and Intermediate Income Securities Series may write
covered call options and covered put options on eligible portfolio securities
and on stock and bond indexes and purchase options of the same or similar
series to effect closing transactions, and may hedge against potential
changes in the market value of its investments (or anticipated investments)
by purchasing put and call options on securities which it holds (or has the
right to acquire) in its portfolio and engaging in transactions involving
interest rate futures contracts and index futures contracts and options on
such contracts. The Value-Added Market
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Series may purchase stock index futures as a temporary substitute for the
purchase of individual stocks. The Global Equity Series may also hedge
against potential changes in the market value of the currencies in which its
investments (or anticipated investments) are denominated by purchasing put
and call options on currencies and engaging in transactions involving
currency futures contracts and options on such contracts.
Call and put options on U.S. Treasury notes, bonds and bills, on various
foreign currencies and on equity securities are listed on Exchanges and are
written in over-the-counter transactions ("OTC options"). Listed options are
issued or guaranteed by the exchange on which they trade or by a clearing
corporation such as the Options Clearing Corporation ("OCC"). Ownership of a
listed call option gives the Series the right to buy from the OCC (in the
U.S.) or other clearing corporation or exchange the underlying security
covered by the option at the stated exercise price (the price per unit of the
underlying security) by filing an exercise notice prior to the expiration of
the option. The writer (seller) of the option would then have the obligation
to sell to the OCC (in the U.S.) or other clearing corporation or exchange
the underlying security at that exercise price prior to the expiration date
of the option, regardless of its then current market price. Ownership of a
listed put option would give the Series the right to sell the underlying
security to the OCC (in the U.S.) or other clearing corporation or exchange
at the stated exercise price. Upon notice of exercise of the put option, the
writer of the put would have the obligation to purchase the underlying
security from the OCC (in the U.S.) or other clearing corporation or exchange
at the exercise price.
Exchange-listed options are issued by the OCC (in the U.S.) or other
clearing corporation or exchange which assures that all transactions in such
options are properly executed. OTC options are purchased from or sold
(written) to dealers or financial institutions which have entered into direct
agreements with the Series. With OTC options, such variables as expiration
date, exercise price and premium will be agreed upon between the Series and
the transacting dealer, without the intermediation of a third party such as
the OCC. If the transacting dealer fails to make or take delivery of the
securities or currency underlying an option it has written, in accordance
with the terms of that option, the Series would lose the premium paid for the
option as well as any anticipated benefit of the transaction. The Series will
engage in OTC option transactions only with member banks of the Federal
Reserve System or primary dealers in U.S. Government securities or with
affiliates of such banks or dealers which have capital of at least $50
million or whose obligations are guaranteed by an entity having capital of at
least $50 million.
Covered Call Writing. Series are permitted to write covered call options
on portfolio securities, without limit, in order to aid them in achieving
their investment objectives. In the case of the Global Equity Series, such
options may be denominated in either U.S. dollars or foreign currencies and
may be on the U.S. dollar and foreign currencies. As a writer of a call
option, the Series has the obligation, upon notice of exercise of the option,
to deliver the security (or amount of currency) underlying the option prior
to the expiration date of the option (certain listed and OTC put options
written by a Series will be exercisable by the purchaser only on a specific
date).
Covered Put Writing. As a writer of covered put options, a Series incurs
an obligation to buy the security underlying the option from the purchaser of
the put, at the option's exercise price at any time during the option period,
at the purchaser's election (certain listed and OTC put options written by a
Series will be exercisable by the purchaser only on a specific date). Series
will write put options for two purposes: (1) to receive the income derived
from the premiums paid by purchasers; and (2) when the Series' management
wishes to purchase the security underlying the option at a price lower than
its current market price, in which case the Series will write the covered put
at an exercise price reflecting the lower purchase price sought. The
aggregate value of the obligations underlying the puts determined as of the
date the options are sold will not exceed 50% of a Series' net assets.
Purchasing Call and Put Options. Series may purchase listed and OTC call
and put options in amounts equalling up to 10% of their total assets. These
Series may purchase call options either to close out a covered call position
or to protect against an increase in the price of a security a Series
anticipates purchasing or, in the case of call options on a foreign currency,
to hedge against an adverse exchange rate change of the currency in which the
security the Global Equity Series anticipates purchasing is denominated
vis-a-vis the currency in which the exercise price is denominated. The Series
may purchase put options on securities which it holds (or has the right to
acquire) in its portfolio only
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to protect itself against a decline in the value of the security. Similarly,
the Global Equity Series may purchase put options on currencies in which
securities it holds are denominated only to protect itself against a decline
in value of such currency vis-a-vis the currency in which the exercise price
is denominated. The Series may also purchase put options to close out written
put positions in a manner similar to call option closing purchase
transactions. There are no other limits on the ability of these Series to
purchase call and put options.
Stock Index Options. Series may invest in options on stock indexes, which
are similar to options on stock except that, rather than the right to take or
make delivery of stock at a specified price, an option on a stock index gives
the holder the right to receive, upon exercise of the option, an amount of
cash if the closing level of the stock index upon which the option is based
is greater than, in the case of a call, or less than, in the case of a put,
the exercise price of the option.
Futures Contracts. The Intermediate Income Securities, American Value,
Capital Growth, Strategist, Utilities, Value-Added Market and Global Equity
Series may purchase and sell interest rate futures contracts that are
currently traded, or may in the future be traded, on U.S. commodity exchanges
on such underlying securities as U.S. Treasury bonds, notes, and bills and
GNMA Certificates and stock and bond index futures contracts that are traded
on U.S. commodity exchanges on such indexes as the Moody's Investment-Grade
Corporate Bond Index, the Standard & Poor's 500 Index and the New York Stock
Exchange Composite Index. The Global Equity Series may also purchase and sell
futures contracts that are currently traded, or may in the future be traded,
on foreign commodity exchanges on such underlying securities as common stocks
or any foreign government fixed-income security, on various currencies
("currency futures") and on various indexes of foreign equity and
fixed-income securities as may exist or come into being. As a futures
contract purchaser, a Series incurs an obligation to take delivery of a
specified amount of the obligation underlying the contract at a specified
time in the future for a specified price. As a seller of a futures contract,
a Series incurs an obligation to deliver the specified amount of the
underlying obligation at a specified time in return for an agreed upon price.
Series will purchase or sell interest rate futures contracts and bond
index futures contracts for the purpose of hedging their fixed-income
portfolio (or anticipated portfolio) securities against changes in prevailing
interest rates or, in the case of the Strategist and Utilities Series to
alter the Series' asset allocations. Series will, generally, purchase or sell
stock index futures contracts for the purpose of hedging their equity
portfolio (or anticipated portfolio) securities against changes in their
prices. The Value-Added Market Series will purchase stock index futures as a
temporary substitute for the purchase or sale of individual stocks, which may
then be purchased or sold in an orderly fashion. The Global Equity Series
will purchase or sell currency futures on currencies in which its portfolio
securities (or anticipated portfolio securities) are denominated for the
purposes of hedging against anticipated changes in currency exchange rates.
When, for example, either the Strategist or Utilities Series wishes to
increase its allocation in fixed-income securities, it may purchase a futures
contract on a bond index or on a U.S. Treasury bond, or a call option on such
futures contract, thereby increasing its exposure to the fixed-income sector.
Options on Futures Contracts. The Intermediate Income Securities, American
Value, Capital Growth, Strategist, Utilities and Global Equity Series may
purchase and write call and put options on futures contracts which are traded
on an exchange and enter into closing transactions with respect to such
options to terminate an existing position. An option on a futures contract
gives the purchaser the right, in return for the premium paid, to assume a
position in a futures contract (a long position if the option is a call and a
short position if the option is a put) at a specified exercise price at any
time during the term of the option. Series will only purchase and write
options on futures contracts for identical purposes to those set forth above
for the purchase of a futures contract (purchase of a call option or sale of
a put option) and the sale of a futures contract (purchase of a put option or
sale of a call option), or to close out a long or short position in futures
contracts.
Risks of Options and Futures Transactions. A Series may close out its
position as writer of an option, or as a buyer or seller of a futures
contract, only if a liquid secondary market exists for options or futures
contracts of that series. There is no assurance that such a market will
exist, particularly in the case of OTC options, as such options will
generally only be closed out by entering into a closing purchase transaction
with the purchasing dealer. Also, exchanges limit the amount by which the
price of a
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futures contract may move on any day. If the price moves equal the daily
limit on successive days, then it may prove impossible to liquidate a futures
position until the daily limit moves have ceased.
The extent to which a Series may enter into transactions involving options
and futures contracts may be limited by the Internal Revenue Code's
requirements for qualification of each Series as a regulated investment
company and the Fund's intention to qualify each Series as such. See
"Dividends, Distributions and Taxes."
Futures contracts and options transactions may be considered speculative
in nature and may involve greater risks than those customarily assumed by
other investment companies which do not invest in such instruments. One such
risk is that a Series' management could be incorrect in its expectations as
to the direction or extent of various interest rate movements or the time
span within which the movements take place. For example, if a Series sold
interest rate futures contracts for the sale of securities in anticipation of
an increase in interest rates, and then interest rates went down instead,
causing bond prices to rise, the Series would lose money on the sale. Another
risk which may arise in employing futures contracts to protect against the
price volatility of portfolio securities is that the prices of securities,
currencies and indexes subject to futures contracts (and thereby the futures
contract prices) may correlate imperfectly with the behavior of the U.S.
dollar cash prices of the portfolio securities (and, in the case of the
Global Equity Series, the securities' denominated currencies). Another such
risk is that prices of interest rate futures contracts may not move in tandem
with the changes in prevailing interest rates against which the Series seeks
a hedge. A correlation may also be distorted by the fact that the futures
market is dominated by short-term traders seeking to profit from the
difference between a contract or security price objective and their cost of
borrowed funds. Such distortions are generally minor and would diminish as
the contract approached maturity.
The Global Equity Series, by entering into transactions in foreign futures
and options markets, will incur risks similar to those discussed above under
"Foreign Securities."
New options and futures contracts and other financial products and various
combinations thereof continue to be developed. The Series may invest in any
such options, futures and other products as may be developed to the extent
consistent with their investment objectives and applicable regulatory
requirements, and will make any and all pertinent disclosures relating to
such investments in its Prospectus and/or Statement of Additional
Information. Except as otherwise noted above, and as set forth in other
investment policies and investment restrictions, there are no limitations on
any Series' ability to invest in options, futures or options on futures.
PORTFOLIO TRADING
Although each Series does not intend to engage in short-term trading of
portfolio securities as a means of achieving the investment objectives of the
respective Series, each Series may sell portfolio securities without regard
to the length of time they have been held whenever such sale will in the
opinion of the Investment Manager strengthen the Series' position and
contribute to its investment objectives. In determining which securities to
purchase for the Series or hold in a Series, the Investment Manager will rely
on information from various sources, including research, analysis and
appraisals of brokers and dealers, the views of Trustees of the Fund and
others regarding economic developments and interest rate trends, and the
Investment Manager's own analysis of factors it deems relevant.
Personnel of the Investment Manager have substantial experience in the use
of the investment techniques described above under the heading "Options and
Futures Transactions," which techniques require skills different from those
needed to select the portfolio securities underlying various options and
futures contracts.
Brokerage commissions are not normally charged on the purchase or sale of
money market instruments and U.S. Government obligations, or on currency
conversions, but such transactions will involve costs in the form of spreads
between bid and asked prices. Orders for transactions in portfolio securities
and commodities may be placed for the Fund with a number of brokers and
dealers, including Dean Witter Reynolds Inc. ("DWR"), a broker-dealer
affiliate of the Investment Manager. Pursuant to an order of the Securities
and Exchange Commission, the Fund may effect principal transactions in
certain money market instruments with DWR. In addition, the Fund may incur
brokerage commissions on transactions conducted through DWR.
The Liquid Asset and U.S. Government Money Market Series are expected to
have high portfolio turnovers due to the short-term maturities of secu-
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rities purchased, but this should not affect income or net asset value as
brokerage commissions are not normally charged on the purchase or sale of
money market instruments. It is not anticipated that the portfolio turnover
rates of the Series will exceed the following percentages in any year: U.S.
Government Securities Series, Capital Growth Series, Dividend Growth Series,
Utilities Series, Value-Added Market Series and Global Equity Series: 100%;
Intermediate Income Securities Series and Strategist Series: 200%; American
Value Series: 400%. A portfolio turnover rate exceeding 100% in any one year
is greater than that of many other investment companies. Each Series of the
Fund will incur underwriting discount costs (on underwritten securities)
and/or brokerage costs commensurate with its portfolio turnover rate.
Short-term gains and losses may result from such portfolio transactions. See
"Dividends, Distribution and Taxes" for a discussion of the tax implications
of these trading policies.
The expenses of the Global Equity Series relating to its portfolio
management are likely to be greater than those incurred by other investment
companies investing primarily in securities issued by domestic issuers as
custodial costs, brokerage commissions and other transaction charges related
to investing in foreign markets are generally higher than in the United
States. Short-term gains and losses may result from portfolio transactions.
See "Dividends, Distributions and Taxes" for a discussion of the tax
implications of the Series' trading policies. A more extensive discussion of
the Series' brokerage policies is set forth in the Statement of Additional
Information.
PORTFOLIO MANAGEMENT
The following individuals are primarily responsible for the day-to-day
management of certain of the Series of the Fund: Rajesh K. Gupta, Senior Vice
President of InterCapital, has been the primary portfolio manager of the U.S.
Government Securities Series since its inception; Mr. Gupta has been managing
portfolios comprised of U.S. Government and other securities at InterCapital
for over five years. Rochelle G. Siegel, Senior Vice President of
InterCapital, has been the primary portfolio manager of the Intermediate
Income Securities Series since its inception; Ms. Siegel has been managing
portfolios comprised of fixed-income securities at InterCapital for over five
years. Anita H. Kolleeny, Senior Vice President of InterCapital, has been the
primary portfolio manager of the American Value Series since its inception;
Ms. Kolleeny has been managing portfolios comprised of equity and other
securities at InterCapital for over five years. Paul D. Vance, Senior Vice
President of InterCapital, has been the primary portfolio manager of the
Dividend Growth Series since its inception; Mr. Vance has been managing
portfolios comprised of equity and other securities at InterCapital for over
five years. Peter Hermann, Vice President of InterCapital, has been the
primary portfolio manager of the Capital Growth Series since April, 1996;
prior to joining InterCapital in March, 1994, Mr. Hermann was a portfolio
manager at The Bank of New York. Mark Bavoso, Senior Vice President of
InterCapital, has been the primary portfolio manager of the Strategist Series
since January, 1994 and of the Global Equity Series since August, 1995; Mr.
Bavoso has been a portfolio manager at InterCapital for over five years.
Edward F. Gaylor, Senior Vice President of InterCapital, has been the primary
portfolio manager of the Utilities Series since its inception; Mr. Gaylor has
been managing portfolios comprised of equity and other securities at
InterCapital for over five years. Kenton J. Hinchliffe, Senior Vice President
of InterCapital, has been the primary portfolio manager of the Value-Added
Market Series since its inception; Mr. Hinchliffe has been managing
portfolios comprised of equity and other securities at InterCapital for over
five years.
INVESTMENT RESTRICTIONS
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The investment restrictions listed below are among the restrictions that
have been adopted as fundamental policies of the Intermediate Income
Securities, American Value, Capital Growth, Dividend Growth, Utilities,
Value-Added Market and Global Equity Series. In addition, the Liquid Asset
Series has adopted restrictions two and five as fundamental policies and the
Strategist Series has adopted restrictions three, four and five as
fundamental policies. Under the Investment Company Act of 1940, as amended
(the "Act"), a fundamental policy may not be changed with respect to a Series
without the vote of a majority of the outstanding voting securities of that
Series, as defined in the Act.
Each Series of the Fund may not:
1. As to 75% of its total assets, invest more than 5% of the value of its
total assets in the securities of any one issuer (other than obliga-
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tions issued, or guaranteed by, the United States Government, its agencies
or instrumentalities).
2. As to 75% of its total assets, purchase more than 10% of all
outstanding voting securities or any class of securities of any one
issuer. (All of the Series of the Fund may, collectively, purchase more
than 10% of all outstanding voting securities or any class of securities
of any one issuer.)
3. With the exception of the Utilities Series, invest 25% or more of the
value of its total assets in securities of issuers in any one industry.
This restriction does not apply to obligations issued or guaranteed by the
United States Government or its agencies or instrumentalities.
4. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three
years of continuous operation. This restriction shall not apply to any
obligation issued or guaranteed by the United States Government, its
agencies or instrumentalities.
5. Invest more than 15% (10% with respect to the Liquid Asset and U.S.
Government Money Market Series) of its total assets in "illiquid
Securities" (securities for which market quota tions are not readily
available) and repurchase agreements which have a maturity of longer than
seven days.
Generally, OTC options and the assets used as "cover" for written OTC
options are illiquid securities. However, a Series is permitted to treat
the securities it uses as cover for written OTC options as liquid provided
it follows a procedure whereby it will sell OTC options only to qualified
dealers who agree that the Series may repurchase such options at a maximum
price to be calculated pursuant to a predetermined formula set forth in
the option agreement. The formula set forth in the option agreement may
vary from agreement to agreement, but is generally based on a multiple of
the premium received by the Series for writing the option plus the amount,
if any, of the option's intrinsic value. An OTC option is considered an
illiquid asset only to the extent that the maximum repurchase price under
the formula exceeds the intrinsic value of the option.
The Liquid Asset Series has also adopted the following restrictions as
fundamental policies:
1. With respect to 75% of its total assets, purchase any securities,
other than obligations of the U.S. Government, or its agencies or in
strumentalities, if, immediately after such purchase, more than 5% of the
value of the Liquid Asset Series' total assets would be invested in
securities of any one issuer. (However, as a non-fundamental policy, the
Liquid Asset Series will not invest more than 10% of its total assets in
the securities of any one issuer. Furthermore, pursuant to current
regulatory requirements, the Liquid Asset Series may only invest more than
5% of its total assets in the securities of a single issuer (and only with
respect to one issuer at a time) for a period of not more than three
business days and only if the securities have received the highest quality
rating by at least two NRSROs.)
2. Purchase any securities, other than obligations of domestic banks or
of the U.S. Government, or its agencies or instrumentalities, if,
immediately after such purchase, more than 25% of the value of the Liquid
Asset Series' total assets would be invested in the securities of issuers
in the same industry; however, there is no limitation as to investments in
domestic bank obligations or in obligations issued or guaranteed by the
U.S. Government or its agencies or instrumentalities.
All percentage limitations apply immediately after a purchase or initial
investment, and any subsequent change in any applicable percentage resulting
from market fluctuations or other changes in the amount of total assets does
not require elimination of any security from the Series.
DETERMINATION OF NET ASSET VALUE
- -----------------------------------------------------------------------------
The net asset value per share is calculated separately for each Series. In
general, the net asset value per share is computed by taking the value of all
the assets of the Series, subtracting all liabilities, dividing by the number
of shares outstanding and adjusting the result to the nearest cent. The Fund
will compute the net asset value per share of each Series once daily at 4:00
p.m., New York time (or, on days when the New York Stock Exchange closes
prior to 4:00 p.m., at such earlier time), on each day the New York Stock
Exchange is open for trading. The net asset value per share will not be
determined
36
<PAGE>
on Good Friday and on such other federal and non-federal holidays as are
observed by the New York Stock Exchange.
The Liquid Asset and U.S. Government Money Market Series utilize the
amortized cost method in valuing their portfolio securities, which method
involves valuing a security at its cost adjusted by a constant amortization
to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. The purpose
of this method of calculation is to facilitate the maintenance of a constant
net asset value per share of $1.00. However, there can be no assurance that
the $1.00 net asset value will be maintained.
In the calculation of the net asset value of the Series other than the
Liquid Asset and U.S. Government Money Market Series: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign stock exchange is valued at its latest sale price on that
exchange prior to the time assets are valued (if there were no sales that
day, the security is valued at the closing bid price and in cases where
securities are traded on more than one exchange, the securities are valued on
the exchange designated as the primary market pursuant to procedures adopted
by the Trustees); and (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. When market
quotations are not readily available, including circumstances under which it
is determined by the Investment Manager that sale or bid prices are not
reflective of a security's market value, portfolio securities are valued at
their fair value as determined in good faith under procedures established by
and under the general supervision of the Fund's Trustees. Valuation of
securities for which market quotations are not readily available may also be
based upon current market prices of securities which are comparable in
coupon, rating and maturity or an appropriate matrix utilizing similar
factors. For valuation purposes, quotations of foreign portfolio securities,
other assets and liabilities and forward contracts stated in foreign currency
are translated into U.S. dollar equivalents at the prevailing market rates
prior to the close of the New York Stock Exchange. Dividends receivable are
accrued as of the ex-dividend date except for certain dividends from foreign
securities which are accrued as soon as the Fund is informed of such dividends
after the ex-dividend date.
Certain of the portfolio securities of each Series may be valued by an
outside pricing service approved by the Fund's Trustees. The pricing service
may utilize a matrix system incorporating security quality, maturity and
coupon as the evaluation model parameters, and/or research evaluations by its
staff, including review of broker-dealer market price quotations, in
determining what it believes is the fair valuation of the portfolio
securities valued by such pricing service.
Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees. Other short-term debt securities will be valued on a mark-to-market
basis until such time as they reach a remaining maturity of sixty days,
whereupon they will be valued at amortized cost using their value on the 61st
day unless the Trustees determine such does not reflect the securities'
market value, in which case these securities will be valued at their fair
value as determined by the Trustees. Options are valued at the mean between
their latest bid and asked prices. Futures are valued at the latest sale
price on the commodities exchange on which they trade unless the Trustees
determine that such price does not reflect their market value, in which case
they will be valued at their fair value as determined by the Trustees. All
other securities and other assets are valued at their fair value as
determined in good faith under procedures established by and under the
general supervision of the Trustees.
Generally, trading in foreign securities, as well as corporate bonds,
United States government securities and money market instruments, is
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of a Series' shares are determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of
the New York Stock Exchange. Occasionally, events which affect the values of
such securities and such exchange rates may occur between the times at which
they are determined and the close of the New York Stock Exchange and will
therefore not be reflected in the computation of a Series' net asset value.
If events materially affecting the value of such
37
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securities occur during such period, then those securities will be valued at
their fair value as determined in good faith under procedures established by
and under the supervision of the Trustees.
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
Shares of the Fund are offered for sale to investors participating in
various employee benefit plans and Individual Retirement Account ("IRA")
rollover plans on a continuous basis, without a sales charge, at the net
asset value per share of each Series. There is no minimum initial or
subsequent purchase of shares of the Fund.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of InterCapital, shares
of the Fund are distributed by the Distributor and offered by DWR and other
dealers who have entered into selected dealer agreements with the Distributor
("Selected Broker-Dealers"). The principal executive office of the
Distributor is located at Two World Trade Center, New York, New York 10048.
Initial and subsequent purchases may be made by contacting Dean Witter
Trust Company at P.O. Box 1040, Jersey City, NJ 07303, or by contacting an
account executive of DWR or another Selected Broker-Dealer. The Fund and/or
the Distributor reserve the right to permit purchases by non-employee benefit
plan investors.
All shares of the Fund, with the exception of shares of the Liquid Asset
and U.S. Government Money Market Series, are sold through the Distributor on
a normal three business day settlement basis; that is, payment is due on the
third business day (settlement date) after the order is placed with the
Distributor. The offering price of such shares will be the net asset value
per share next determined following receipt of an order (see "Determination
of Net Asset Value"). Shares of the U.S. Government Securities and
Intermediate Income Securities Series which are purchased through the
Distributor are entitled to dividends beginning on the next business day
following settlement date and shares of these Series purchased through the
Transfer Agent are entitled to dividends beginning on the next business day
following receipt of a purchase order. Shares of the U.S. Government
Securities Series and the Intermediate Income Securities Series will be
entitled to receive capital gains distributions if the order is received by
the close of business on the date prior to the record date for such
distribution. Investors in the American Value, Capital Growth, Dividend
Growth, Strategist, Utilities, Value-Added Market and Global Equity Series of
the Fund will be entitled to receive income dividends and capital gains
distributions if their order is received by the close of business on the day
prior to the record date for such distributions. Since the Distributor
forwards investors' funds on settlement date, it will benefit from the
temporary use of the funds if payment is made prior thereto. As noted above,
orders placed directly with the Transfer Agent must be accompanied by
payment. The Fund and the Distributor reserve the right to reject any
purchase orders.
Sales personnel of a Selected Broker-Dealer are compensated for shares of
the Fund sold by them by the Distributor or any of its affiliates and/or by a
Selected Broker-Dealer. In addition, some sales personnel of the Selected
Broker-Dealer will receive non-cash compensation as special sales incentives,
including trips, educational and/or business seminars and merchandise. The
Fund and the Distributor reserve the right to reject any purchase orders.
Liquid Asset and U.S. Government Money Market Series. The offering price
of the shares of the Liquid Asset and U.S. Government Money Market Series
will be at their net asset value next determined after receipt of a purchase
order and acceptance by the Transfer Agent in proper form and accompanied by
payment in Federal Funds (i.e., monies of member banks within the Federal
Reserve System held on deposit at a Federal Reserve Bank) available to the
Fund for investment. Shares commence earning income on the day following the
date of purchase. Share certificates will not be issued unless requested in
writing by the shareholder.
To initiate purchase by mail or wire, the investor should contact Dean
Witter Trust Company, at P.O. Box 1040, Jersey City, NJ 07303. Purchases by
wire must be preceded by a call to the Transfer Agent advising it of the
purchase and must be wired to Dean Witter Retirement Series: (name of
Series), The Bank of New York, for credit to the Account of Dean Witter Trust
Company, Harborside Financial Center, Plaza Two, Jersey City, New Jersey,
Account No. 8900188413. Wire purchase instructions must include the name of
the Fund and Series and the
38
<PAGE>
shareholder's account number. Purchases made by check are normally effective
within two business days for checks drawn on Federal Reserve System member
banks, and longer for most other checks. Wire purchases received by the
Transfer Agent prior to 12 noon New York time are normally effective that day
and wire purchases received after 12 noon New York time are normally
effective the next business day. The Fund reserves the right to reject any
purchase order.
Orders for the purchase of Liquid Asset and U.S. Government Money Market
Series shares placed by customers through the Distributor with payment in
clearing house funds will be transmitted by the Distributor to the Fund with
payment in Federal Funds on the business day following the day the order is
placed by the customer with the Distributor. Investors desiring same day
effectiveness should wire Federal Funds directly to the Transfer Agent.
For further information concerning purchases of the Fund's shares, contact
the Distributor or consult the Statement of Additional Information. The Fund
and the Distributor reserve the right to reject any purchase orders.
PLAN OF DISTRIBUTION
The Fund has entered into a Plan of Distribution pursuant to Rule 12b-1
under the Act with the Distributor and DWR whereby the Distributor and any of
its affiliates are authorized to utilize their own resources to finance
certain activities in connection with the distribution of the Fund's shares.
Among the activities and services which may be provided by the Distributor
under the Plan are: (1) compensation to, and expenses of, account executives
and other employees of the Distributor and others, including overhead and
telephone expenses; (2) sales incentives and bonuses to sales representatives
and to marketing personnel in connection with promoting sales of the Fund's
shares; (3) expenses incurred in connection with promoting sales of the
Fund's shares; (4) preparing and distributing sales literature; and (5)
providing advertising and promotional activities, including direct mail
solicitation and tele vision, radio, newspaper, magazine and other media
advertisements.
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
Automatic Investment of Dividends and Distributions. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the shareholders selected Series, unless the shareholder requests
that they be paid in cash. Each purchase of shares of the Fund is made upon
the condition that the Transfer Agent is thereby automatically appointed as
agent of the investor to receive all dividends and capital gains
distributions on shares owned by the investor. Such dividends and
distributions will be paid in shares, at the net asset value per share, each
day on which the Series' shares are valued (for the Liquid Asset and U.S.
Government Money Market Series) and in shares of the U.S. Government
Securities and Intermediate Income Securities Series on the monthly payment
date, which will be no later than the last business day of the month for
which the dividend or distribution is payable. Shareholders of the Liquid
Asset, U.S. Government Money Market, U.S. Government Securities and
Intermediate Income Securities Series who have requested to receive dividends
in cash will normally receive their monthly dividend check during the first
ten days of the following month. Dividends and distributions of the American
Value, Capital Growth, Dividend Growth, Utilities, Strategist, Value-Added
Market and Global Equity Series will be paid, at the net asset values per
share of each Series, in shares of the Series (or in cash if the shareholder
so requests) as of the close of business on the record date. At any time an
investor may request the Transfer Agent in writing to have subsequent
dividends and/or capital gains distributions paid to the investor in cash
rather than shares. To assure sufficient time to process the change, such
request must be received by the Transfer Agent at least five business days
prior to the payment date for which it commences to take effect. In case of
recently purchased shares for which registration instructions have not been
received on the record date, cash payments will be made to DWR or other
Selected Broker-Dealers through whom shares were purchased.
Systematic Withdrawal Plan. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset
value. The Withdrawal Plan provides for monthly or quarterly (March, June,
September and December) checks in any
39
<PAGE>
dollar amount, not less than $25, or in any whole percentage of the account
balance, on an annualized basis. Each withdrawal constitutes a redemption of
shares and any gain or loss realized must be recognized for federal income
tax purposes.
Shareholders wishing to enroll in the Withdrawal Plan should contact their
DWR or other Selected Broker-Dealer account executive or the Transfer Agent.
Systematic Payroll Deduction Plan. There is also available to employers a
Systematic Payroll Deduction Plan by which their employees may invest in
shares of the Fund. For further information please contact the Transfer Agent
or Distributor.
EXCHANGE PRIVILEGE
An "Exchange Privilege," that is, the privilege of exchanging shares of
one of the Fund's Series for another, is available to all shareholders. An
exchange of shares into any Series other than the Liquid Asset and U.S.
Government Money Market Series is effected on the basis of the next
calculated net asset value per share of the respective Series after the
exchange order is received. When exchanging into the Liquid Asset or U.S.
Government Money Market Series, shares of the relevant Series are redeemed at
their next calculated net asset value and exchanged for shares of the Liquid
Asset or U.S. Government Money Market Series at their net asset value
determined the following business day.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders
and, at the Investment Manager's discretion, may be limited by the Fund's
refusal to accept additional purchases and/or exchanges from the investor.
Although the Fund does not have any specific definition of what constitutes a
pattern of frequent exchanges, and will consider all relevant factors in
determining whether a particular situation is abusive and contrary to the
best interests of the Fund and its other shareholders, investors should be
aware that the Fund may, in its discretion, limit or otherwise restrict the
number of times this Exchange Privilege may be exercised by any investor. Any
such restriction will be made by the Fund on a prospective basis only, upon
notice to the shareholder not later than ten days following such
shareholder's most recent exchange.
The Exchange Privilege may be terminated or revised at any time by the
Fund upon such notice as may be required by applicable regulatory agencies
(presently sixty days' prior written notice for termination or material
revision), and provided further that the Exchange Privilege may be terminated
or materially revised without notice under certain unusual circumstances
described in the Statement of Additional Information. Shareholders
maintaining margin accounts with DWR or another Selected Broker-Dealer are
referred to their account executive regarding restrictions on exchanges of
shares of the Fund pledged in their margin account.
The current prospectus of the Fund describes investment objective(s) and
policies, and shareholders should read the disclosure relating to the Series
into which shares are to be exchanged carefully before investing. In the case
of any shareholder holding a share certificate or certificates, no exchanges
may be made until all applicable share certificates have been received by the
Transfer Agent and deposited in the shareholder's account. An exchange will
be treated for federal income tax purposes the same as a repurchase or
redemption of shares, on which the shareholder may realize a capital gain or
loss (shareholders holding shares in a qualified employee benefit plan may
not realize a capital gain or loss). However, the ability to deduct capital
losses on an exchange is limited in situations where there is an exchange of
shares within ninety days after the shares are purchased. The Exchange
Privilege is only available in states where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of any Series for shares of any other Series
pursuant to this Exchange Privilege by contacting their account executive
(no Exchange Privilege Authorization Form is required). Other shareholders
(and those shareholders who are clients of DWR or another Selected
Broker-Dealer but who wish to make exchanges directly by writing or
telephoning the Transfer Agent) must complete and forward to the Transfer
Agent an Exchange Privilege Authorization Form, copies of which may be
obtained from the Transfer Agent, to initiate an exchange. If the
Authorization Form is used, exchanges may be made in writing or by contacting
the Transfer Agent at (800) 869-NEWS (toll-free).
The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures
40
<PAGE>
include requiring various forms of personal identification such as name,
mailing address, social security or other tax identification number and DWR
or other Selected Broker-Dealer account number (if any). Telephone
instructions will also be recorded. If such procedures are not employed, the
Fund may be liable for any losses due to unauthorized or fraudulent
instructions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m., New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her DWR or other
Selected Broker-Dealer account executive, if appropriate, or make a written
exchange request. Shareholders are advised that during periods of drastic
economic or market changes it is possible that the telephone exchange
procedures may be difficult to implement, although this has not been the case
in the past with the Dean Witter Funds.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other Selected Broker-Dealer account executive or
the Transfer Agent.
The availability of various shareholder services described above is
determined by the parameters of the investor's employee benefit plan.
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
Redemptions. Shares of the Fund may be redeemed for cash through the
Transfer Agent (without redemption or other charge) on any day that the New
York Stock Exchange is open (see "Determination of Net Asset Value").
Redemptions will be effected at the net asset value per share next determined
after the receipt of a redemption request meeting the applicable requirements
described below. In most instances, however, redemptions of shares will be
governed by the parameters set forth in the investor's employee benefit plan.
With respect to the redemption of shares of all Series of the Fund with
the exception of the Liquid Asset and U.S. Government Money Market Series,
each request for redemption, whether or not accompanied by a share
certificate (see below), must be sent to the Transfer Agent, which will
redeem the shares at their net asset value next computed (see "Determination
of Net Asset Value") after it receives the request, and certificates, if any,
in good order. Any redemption request received after such computation will be
redeemed at the next determined net asset value. The term "good order" means
that the share certificate, if any, and request for redemption are properly
signed, accompanied by any documentation required by the Transfer Agent, and
bear signature guarantees when required by the Fund or the Transfer Agent.
Shares of the Liquid Asset and U.S. Government Money Market Series may be
redeemed in the following manners:
1. BY CHECK
The Transfer Agent will supply blank checks to any shareholder who has
requested them. The shareholder may make checks payable to the order of
anyone in any amount not less than $500 (checks written in amounts under $500
will not be honored by the Transfer Agent). Shareholders must sign checks
exactly as their shares are registered. If the account is a joint account,
the check may contain one signature unless the joint owners have specifically
specified otherwise on an investment application that all owners are required
to sign checks. Only shareholders having accounts in which no share
certificates have been issued will be permitted to redeem shares by check or
enroll in the Systematic Withdrawal Plan.
Shares will be redeemed at their net asset value next determined (see
"Determination of Net Asset Value") after receipt by the Transfer Agent of a
check which does not exceed the value of the account. Payment of the proceeds
of a check will normally be made on the next business day after receipt by
the Transfer Agent of the check in proper form. Shares purchased by check
(including a certified or bank cashier's check) are not normally available to
cover redemption checks until fifteen days after receipt of the check used
for investment by the Transfer Agent. The Transfer Agent will not honor a
check in an amount exceeding the value of the account at the time the check
is presented for payment. Since the dollar value of an account is constantly
changing, it is not possible for a shareholder to determine in advance the
total value of its account so as to write a check for the redemption of the
entire account.
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<PAGE>
2. BY TELEPHONE OR WIRE INSTRUCTIONS WITH
PAYMENT TO PREDESIGNATED BANK ACCOUNT
A shareholder may redeem shares by telephoning or sending wire
instructions to the Transfer Agent. Payment will be made by the Transfer
Agent to the shareholder's bank account at any commercial bank designated by
the shareholder in an Investment Application, by wire if the amount is $1,000
or more and the shareholder so requests, and otherwise by mail. Normally, the
Transfer Agent will transmit payment the next business day following receipt
of a request for redemption in proper form. Only shareholders having accounts
in which no share certificates have been issued will be permitted to redeem
shares by wire instructions.
Redemption instructions must include the shareholder's name and account
number and be called to the Transfer Agent at 800-869-NEWS (toll-free).
The Fund will employ reasonable procedures to confirm that redemption
instructions communicated over the telephone are genuine. Such procedures
include requiring various forms of personal identification such as name,
mailing address, social security or other tax identification number and DWR
or other Selected Broker-Dealer account number (if any). Telephone
instructions will also be recorded. If such procedures are not employed, the
Fund may be liable for any losses due to unauthorized or fraudulent
instructions.
Telephone redemptions will be accepted if received by the Transfer Agent
between 9:00 a.m. and 4:00 p.m., New York time, on any day the New York Stock
Exchange is open. Any shareholder wishing to make a telephone redemption and
who is unable to reach the Fund by telephone should contact his or her DWR or
other Selected Broker-Dealer account executive, if appropriate, or make a
written redemption request. Shareholders are advised that during periods of
drastic economic or market changes it is possible that the telephone
redemption procedures may be difficult to implement, although this has not
been the case in the past with other funds managed by the Investment Manager.
3. BY MAIL
A shareholder may redeem shares by sending a letter to Dean Witter Trust
Company, P.O. Box 983, Jersey City, NJ 07303, requesting redemption and
surrendering stock certificates if any have been issued.
Redemption proceeds will be mailed to the shareholder at his or her
registered address or mailed or wired to his or her predesignated bank
account, as he or she may request. Proceeds of redemption may also be sent to
some other person, as requested by the shareholder in accordance with the
general redemption requirements listed below.
GENERAL REDEMPTION REQUIREMENTS
Written requests for redemption must be signed by the registered
shareholder(s). Whether certificates are held by the shareholder or shares
are held in a shareholder's account, if the proceeds are to be paid to anyone
other than the registered shareholder(s) or sent to any address other than
the shareholder's registered address or predesignated bank account,
signatures must be guaranteed by an eligible guarantor acceptable to the
Transfer Agent (shareholders should contact the Transfer Agent for a
determination as to whether a particular institution is such an eligible
guarantor). Additional documentation may be required where shares are held by
a corporation, partnership, trust or other organization.
If shares to be redeemed are represented by a share certificate, the
request for redemption must be accompanied by the share certificate and a
stock power signed by the registered shareholder(s) exactly as the account is
registered. Such signatures must also be guaranteed by an eligible guarantor
acceptable to the Transfer Agent (shareholders should contact the Transfer
Agent for a determination as to whether a particular institution is such an
eligible guarantor). Additional documentation may be required where shares
are held by a corporation, partnership, trust or other organization. A stock
power may be obtained from any dealer or commercial bank. The Fund may change
the signature guarantee requirements from time to time upon notice to
shareholders, which may be by means of a new prospectus.
All requests for redemption should be sent to Dean Witter Trust Company,
P.O. Box 983, Jersey City, NJ 07303.
Generally, the Fund will attempt to make payment for all redemptions
within one business day, and in no event later than seven days after receipt
of such redemption request in proper form. However, if the shares being
redeemed were purchased by check (including a certified or bank cashier's
check), payment may be delayed for the minimum time needed to verify that the
check used for investment has been honored (not more than fifteen days from
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the time of investment of the check by the Transfer Agent). In addition, the
Fund may postpone redemptions at certain times when normal trading is not
taking place on the New York Stock Exchange.
Repurchase. DWR and other Selected Broker-Dealers are authorized to
repurchase, as agent for the Fund, shares represented by a share certificate
which is delivered to any of their offices. Shares held in a shareholder's
account without a share certificate may also be repurchased by DWR and other
Selected Broker-Dealers upon the telephonic request of the shareholder. The
repurchase price is the net asset value next determined (see "Purchase of
Fund Shares--Determination of Net Asset Value") after such repurchase order
is received. The offer by the Distributor to repurchase shares from
shareholders may be suspended by the Distributor at any time. In that event,
shareholders may redeem their shares through the Fund's Transfer Agent as set
forth above under "Redemption."
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
Dividends and Distributions. The Liquid Asset, U.S. Government Money
Market, U.S. Government Securities and Intermediate Income Securities Series
declare dividends of substantially all of their daily net investment income
on each day the New York Stock Exchange is open for business (see "Purchase
of Fund Shares"). The Liquid Asset and U.S. Government Money Market Series
pay all dividends from net investment income (and net short-term capital
gains, if any) to shareholders of record as of the close of business the
preceding business day. The amount of the dividend payable by each Series may
fluctuate from day to day and may be omitted on some days if net realized
losses on portfolio securities exceed its net investment income. The U.S.
Government Securities and Intermediate Income Securities Series will pay all
dividends from net investment income monthly and distribute all distributions
from net realized short-term capital gains, if any, in excess of any net
realized long-term losses, at least once per year. The Dividend Growth and
Utilities Series will declare and pay all dividends from net investment
income and (it is anticipated) net short-term capital gains, if any,
quarterly. The American Value, Capital Growth, Strategist, Value-Added Market
and Global Equity Series will pay all dividends from net investment income
and net short-term capital gains, if any, annually. Any net long-term capital
gains realized by any Series will be distributed at least once each year.
However, any Series may determine to distribute or to retain all or part of
any long-term capital gains in any year for reinvestment.
All dividends and any capital gains distributions will be paid in
additional Fund shares and automatically credited to the shareholder's
account without issuance of a share certificate unless the shareholder
requests in writing that all dividends and/or distributions be paid in cash.
Taxes. Because each Series of the Fund intends to distribute all of
its net investment income and capital gains to shareholders and otherwise
continue to qualify as a regulated investment company under Subchapter M
of the Internal Revenue Code, it is not expected that any Series will be
required to pay any federal income tax. Shareholders normally subject to
federal income tax will normally have to pay federal income taxes, and
any state income taxes, on the dividends and distributions they receive
from each Series of the Fund. Such dividends and distributions, to the
extent that they are derived from net investment income or short-term
capital gains, are taxable to the shareholder, who is normally subject
to income tax as ordinary income regardless of whether the shareholder
receives such payments in additional shares or in cash. Any dividends
declared in the last quarter of any calendar year which are paid in the
following year prior to February 1 will be deemed received by the
shareholder in the prior calendar year. Dividend payments will be eligible
for the federal dividends received deduction available to the Fund's
corporate shareholders only to the extent the aggregate dividends
received by the Series would be eligible for the deduction if the Serie
were the shareholder claiming the dividends received deduction. In this
regard, a 46-day holding period generally must be met. No portion of the
dividends payable by the Liquid Asset Series, the U.S. Government Money
Market Series, the U.S. Government Securities Series and the Intermediate
Income Securities Series will be eligible for the federal dividends received
deduction for corporations.
Gains or losses on a Series' transactions, if any, in listed options on
non-equity securities, futures and options on futures generally are treated
as 60% long-term and 40% short-term. When the Series engages in options and
futures transactions, various tax regulations applicable to the Series may
have
43
<PAGE>
the effect of causing the Series to recognize a gain or loss for tax purposes
before that gain or loss is realized, or to defer recognition of a realized
loss for tax purposes. Recognition, for tax purposes, of an unrealized loss
may result in a lesser amount of the Series' realized net gains being
available for distribution.
One of the requirements for a Series to remain qualified as a regulated
investment company is that less than 30% of its gross income be derived from
gains from the sale or other disposition of securities held for less than
three months. Accordingly, the Series may be restricted in the writing of
options on securities held for less than three months, in the writing of
options which expire in less than three months, and in effecting closing
transactions with respect to call or put options which have been written or
purchased less than three months prior to such transactions. A Series may
also be restricted in its ability to engage in transactions involving futures
contracts.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. Capital gains distributions are not
eligible for the dividends received deduction.
At the end of the year, shareholders will be sent full information on
their dividends and capital gains distributions for tax purposes, including
information as to the portion taxable as ordinary income, the portion taxable
as long-term capital gains and the portion eligible for the dividends
received deduction. To avoid being subject to a 31% federal backup
withholding tax on taxable dividends, capital gains distributions and the
proceeds of redemptions and repurchases, shareholders' taxpayer
identification numbers must be furnished and certified as to their accuracy.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation. Moreover, shares of the Fund which
are held in an employee benefit plan are subject to the distribution tax
rules appropriate to that plan. With respect to all purchases, redemptions,
repurchases, exchanges effected and distributions received on such shares of
the Fund, shareholders should consult with their tax adviser.
Dividends, interest and gains received by the Fund (primarily by the
Global Equity Series) may give rise to withholding and other taxes imposed by
foreign countries. If it qualifies for and has made the appropriate election
with the Internal Revenue Service, the Fund will report annually to its
shareholders the amount per share of such taxes, to enable shareholders to
deduct their pro rata portion of such taxes from their taxable income or
claim United States foreign tax credits with respect to such taxes. In the
absence of such an election, a Series would deduct foreign tax in computing
the amount of its distributable income.
A portion of the dividend distributions from the U.S. Government
Securities and U.S. Government Money Market Series may be exempt from certain
state's personal income taxes. The benefit of this tax-exemption may be lost
if the shares of such Series are held in a qualified plan which is exempt
from state income taxation.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
From time to time, the Liquid Asset and U.S. Government Money Market
Series may advertise their "yields" and "effective yields." The "yield" of
the Liquid Asset and U.S. Government Money Market Series refers to the income
generated by an investment in the Liquid Asset and U.S. Government Money
Market Series over a given period (which period will be stated in the
advertisement). This income is then "annualized." That is, the amount of
income generated by an investment during that seven-day period is assumed to
be generated each seven-day period within a 365-day period and is shown as a
percentage of investment. The "effective yield" for a seven-day period is
calculated similarly but, when annualized, the income earned by an investment
in the Liquid Asset and U.S. Government Money Market Series is assumed to be
reinvested each week within a 365-day period. The "effective yield" will be
slightly higher than the "yield" because of the compounding effect of this
assumed reinvestment.
From time to time the U.S. Government Securities and Intermediate Income
Securities Series may quote their "yield" in advertisements and sales
literature. The yield of a Series is computed by dividing the Series' net
investment income over a 30-day period by an average value (using the average
number of shares entitled to receive dividends and the net asset value per
share at the end of the
44
<PAGE>
period), all in accordance with applicable regulatory requirements. Such
amount is compounded for six months and then annualized for a twelve-month
period to derive the Series' yield.
Each Series of the Fund may also quote its "total return" in
advertisements and sales literature. The "average annual total return" of a
Series refers to a figure reflecting the average annualized percentage
increase (or decrease) in the value of an initial investment in the Fund of
$1,000 over a period of one or five years, as well as over the life of the
Series. Average annual total return on five one reflects all income earned
by a Series, any appreciation or depreciation of the Series' assets and all
expenses incurred by the Series, for the stated period. It also assumes
reinvestment of all dividends and distributions paid by the Series.
In addition to the foregoing, a Series may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or
other types of total return figures. The Series may also advertise the growth
of hypothetical investments of $10,000, $50,000 and $100,000 in shares of the
Series. A Series from time to time may also advertise its performance
relative to certain performance rankings and indexes compiled by independent
organizations, such as mutual fund performance rankings of Lipper Analytical
Services, Inc.
Both the yield and the total return of a Series are based on historical
earnings and are not intended to indicate future performance.
ADDITIONAL INFORMATION
- -----------------------------------------------------------------------------
The shares of beneficial interest of the Fund, with $0.01 par value, are
divided into eleven separate Series, and the shares of each Series are equal
as to earnings, assets and voting privileges with all other shares of that
Series. There are no conversion, preemptive or other subscription rights.
Upon liquidation of the Fund or any Series, shareholders of a Series are
entitled to share pro-rata in the net assets of that Series available for
distribution to shareholders after all debts and expenses have been paid. The
shares do not have cumulative voting rights.
The assets received by the Fund on the sale of shares of each Series and
all income, earnings, profits and proceeds thereof, subject only to the
rights of creditors, are allocated to each Series, and constitute the assets
of such Series. The assets of each Series are required to be segregated on
the Fund's books of account.
Additional Series (the proceeds of which would be invested in separate,
independently managed portfolios with distinct investment objectives,
policies and restrictions) may be offered in the future, but such additional
offerings would not affect the interests of the current shareholders in the
existing Series.
On any matters affecting only one Series, only the shareholders of that
Series are entitled to vote. On matters relating to all the Series but
affecting the Series differently, separate votes by Series are required.
Approval of an Investment Management Agreement and a change in fundamental
policies would be regarded as matters requiring separate voting by each
Series.
The Fund is not required to hold Annual Meetings of Shareholders and, in
ordinary circumstances, the Fund does not intend to hold such meetings.
Under Massachusetts law, shareholders of a business trust may, under
certain limited circumstances, be held personally liable as partners for
obligations of the Fund. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the
Fund, requires that Fund obligations include such disclaimer, and provides
for indemnification and reimbursement of expenses out of the Fund's property
for any shareholder held personally liable for the obligations of the Fund.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Fund itself
would be unable to meet its obligations. Given the above limitations on
shareholder personal liability, and the nature of the Fund's assets and
operations, in the opinion of Massachusetts counsel to the Fund, the risk to
Fund shareholders of personal liability is remote.
Code of Ethics. Directors, officers and employees of InterCapital, Dean
Witter Services Company Inc. and the Distributor are subject to a strict Code
of Ethics adopted by those companies. The Code of Ethics is intended to
ensure that the interests of shareholders and other clients are placed ahead
of any personal interest, that no undue personal benefit is obtained from a
person's employment activities and that actual and potential conflicts of
interest are avoided. To achieve these goals and
45
<PAGE>
comply with regulatory requirements, the Code of Ethics requires, among other
things, that personal securities transactions by employees of the companies
be subject to an advance clearance process to monitor that no investment
company managed or advised by InterCapital ("Dean Witter Fund") is engaged at
the same time in a purchase or sale of the same security. The Code of Ethics
bans the purchase of securities in an initial public offering, and also
prohibits engaging in futures and options transactions and profiting on
short-term trading (that is, a purchase within sixty days of a sale or a sale
within sixty days of a purchase) of a security. In addition, investment
personnel may not purchase or sell a security for their personal account
within thirty days before or after any transaction in any Dean Witter Fund
managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the 1994 report by the Investment Company Institute
Advisory Group on Personal Investing.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover
of this Prospectus.
As of October 1, 1996, the following persons may be deemed to "control"
the designated Series by virtue of ownership of over 25% of the outstanding
shares of the Series: Mesa Unified School District #4, Workers Compensation
Self Insurance Trust (U.S. Government Money Market Series); Cartwright
Employee Insured Beneficiary Account (U.S. Government Money Market Series);
SAP America VIP Plus 401(k) Plan dtd. 12/23/93 (American Value and Utilities
Series); VVP America Inc. Retirement Plan (Global Equity Series); Pizzagalli
Construction 401(k) Plan (Value-Added Market Series); Michael Conover and
Wanda Caton, Executors of the Estate of Curtis Votaw (Intermediate Income
Securities Series). This is primarily a consequence of the relative sizes of
the particular Series and the fact that the shareholders of record are in
most cases employee benefit plans which are comprised of multiple beneficial
shareholders.
46
<PAGE>
Dean Witter
Retirement Series
Two World Trade Center
New York, New York 10048
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
<PAGE>
DEAN WITTER
RETIREMENT SERIES
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 29, 1996
- -----------------------------------------------------------------------------
Dean Witter Retirement Series (the "Fund") is an open-end, no-load,
management investment company which provides a selection of investment
portfolios for institutional and individual investors participating in
various employee benefit plans and Individual Retirement Account rollover
plans. Each Series has its own investment objective and policies. Shares of
the Fund are sold and redeemed at net asset value without the imposition of a
sales charge. Dean Witter Distributors Inc., the Fund's Distributor (the
"Distributor"), and any of its affiliates are authorized, pursuant to a Plan
of Distribution pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended, entered into by the Fund with the Distributor and Dean
Witter Reynolds Inc., to make payments, out of their own resources, for
expenses incurred in connection with the promotion of distribution of shares
of the Fund.
The LIQUID ASSET SERIES seeks high current income, preservation of capital
and liquidity by investing in corporate and government money market
instruments.
The U.S. GOVERNMENT MONEY MARKET SERIES seeks security of principal, high
current income and liquidity by investing primarily in money market
instruments which are issued and/or guaranteed, as to principal and interest,
by the U.S. Government, its agencies or instrumentalities.
The U.S. GOVERNMENT SECURITIES SERIES seeks high current income consistent
with safety of principal by investing in a diversified portfolio of
obligations issued and/or guaranteed by the U.S. Government or its
instrumentalities.
The INTERMEDIATE INCOME SECURITIES SERIES seeks high current income
consistent with safety of principal by investing primarily in intermediate
term, investment grade fixed-income securities.
The AMERICAN VALUE SERIES seeks long-term growth consistent with an effort
to reduce volatility by investing principally in common stock of companies in
industries which, at the time of the investment, are believed to be
attractively valued given their above average relative earnings growth
potential at that time.
The CAPITAL GROWTH SERIES seeks long-term capital growth by investing
primarily in common stocks selected through utilization of a computerized
screening process.
The DIVIDEND GROWTH SERIES seeks to provide reasonable current income and
long-term growth of income and capital by investing primarily in the common
stock of companies with a record of paying dividends and the potential for
increasing dividends.
The STRATEGIST SERIES seeks to maximize its total return by actively
allocating its assets among the major asset categories of equity securities,
fixed-income securities and money market instruments.
The UTILITIES SERIES seeks to provide current income and long-term growth
of income and capital by investing in equity and fixed-income securities of
companies in the public utilities industry.
The VALUE-ADDED MARKET SERIES' investment objective is to achieve a high
level of total return on its assets through a combination of capital
appreciation and current income. It seeks to achieve this objective by
investing, on an equally-weighted basis, in a diversified portfolio of common
stocks of the companies which are represented in the Standard & Poor's 500
Composite Stock Price Index.
The GLOBAL EQUITY SERIES' investment objective is a high level of total
return on its assets, primarily through long-term capital growth and, to a
lesser extent, from income. It seeks to achieve this objective through
investments in all types of common stocks and equivalents, preferred stocks
and bonds and other debt obligations of domestic and foreign companies and
governments and international organizations.
A Prospectus for the Fund dated November 27, 1996, which provides the
basic information you should know before investing in the Fund, may be
obtained without charge from the Fund at the address or telephone numbers
listed below, from the Fund's Distributor, or from Dean Witter Reynolds Inc.
at any of its branch offices. This Statement of Additional Information is not
a Prospectus. It contains information in addition to and more detailed than
that set forth in the Prospectus. It is intended to provide additional
information regarding the activities and operations of the Fund, and should
be read in conjunction with the Prospectus.
Dean Witter
Retirement Series
Two World Trade Center
New York, New York 10048
(212) 392-2550 or (800) 869-NEWS
<PAGE>
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
The Fund and its Management ......... 3
Trustees and Officers ............... 6
Investment Practices and Policies .. 13
Investment Restrictions ............. 33
Portfolio Transactions and Brokerage 35
Determination of Net Asset Value ... 37
Purchase of Fund Shares ............. 39
Shareholder Services ................ 41
Redemptions and Repurchases ......... 43
Dividends, Distributions and Taxes . 43
Performance Information ............. 45
Description of Shares ............... 47
Custodian and Transfer Agent ....... 48
Independent Accountants ............. 48
Reports to Shareholders ............. 48
Legal Counsel ....................... 49
Experts ............................. 49
Registration Statement .............. 49
Principal Securities Holders ....... 49
Financial Statements -- July 31,
1996 ............................... 87
Report of Independent Accountants .. 106
Appendix ............................ 107
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
THE FUND
The Fund is a trust of the type commonly known as a "Massachusetts
business trust" and was organized under the laws of the Commonwealth of
Massachusetts on May 14, 1992.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. (the "Investment Manager" or
"InterCapital"), a Delaware corporation, whose address is Two World Trade
Center, New York, New York 10048, is the Fund's Investment Manager.
InterCapital is a wholly-owned subsidiary of Dean Witter, Discover & Co.
("DWDC"), a Delaware corporation. In an internal reorganization which took
place in January, 1993, InterCapital assumed the investment advisory,
administrative and management activities previously performed by the
InterCapital Division of Dean Witter Reynolds Inc. ("DWR"), a broker-dealer
affiliate of InterCapital. (As hereinafter used in this Statement of
Additional Information, the terms "InterCapital" and "Investment Manager"
refer to DWR's InterCapital Division prior to the internal reorganization and
to Dean Witter InterCapital Inc. thereafter.) The daily management of the
Fund and research relating to the portfolio of each Series of the Fund are
conducted by or under the direction of officers of the Fund and of the
Investment Manager, subject to review of investments by the Fund's Board of
Trustees. In addition, Trustees of the Fund provide guidance on economic
factors and interest rate trends. Information as to these Trustees and
officers is contained under the caption "Trustees and Officers."
InterCapital is also the investment manager (or investment adviser) of the
following investment companies:
<TABLE>
<CAPTION>
<S> <C>
OPEN-END FUNDS
1 Active Assets California Tax-Free Trust
2 Active Assets Government Securities Trust
3 Active Assets Money Trust
4 Active Assets Tax-Free Trust
5 Dean Witter American Value Fund
6 Dean Witter Balanced Growth Fund
7 Dean Witter Balanced Income Fund
8 Dean Witter California Tax-Free Daily Income
Trust
9 Dean Witter California Tax-Free Income Fund
10 Dean Witter Capital Appreciation Fund
11 Dean Witter Capital Growth Securities
12 Dean Witter Convertible Securities Trust
13 Dean Witter Developing Growth Securities Trust
14 Dean Witter Diversified Income Trust
15 Dean Witter Dividend Growth Securities Inc.
16 Dean Witter European Growth Fund Inc.
17 Dean Witter Federal Securities Trust
18 Dean Witter Global Asset Allocation Fund
19 Dean Witter Global Dividend Growth Securities
20 Dean Witter Global Short-Term Income Fund Inc.
21 Dean Witter Global Utilities Fund
22 Dean Witter Hawaii Municipal Trust
23 Dean Witter Health Sciences Trust
24 Dean Witter High Income Securities
25 Dean Witter High Yield Securities Inc.
26 Dean Witter Income Builder Fund
27 Dean Witter Information Fund
28 Dean Witter Intermediate Income Securities
29 Dean Witter Intermediate Term U.S. Treasury
Trust
30 Dean Witter International SmallCap Fund
31 Dean Witter Japan Fund
32 Dean Witter Limited Term Municipal Trust
33 Dean Witter Liquid Asset Fund Inc.
34 Dean Witter Mid-Cap Growth Fund
35 Dean Witter Multi-State Municipal Series Trust
36 Dean Witter National Municipal Trust
37 Dean Witter Natural Resource Development
Securities Inc.
38 Dean Witter New York Municipal Money Market Trust
39 Dean Witter New York Tax-Free Income Fund
40 Dean Witter Pacific Growth Fund Inc.
41 Dean Witter Precious Metals and Minerals Trust
42 Dean Witter Premier Income Trust
43 Dean Witter Retirement Series
44 Dean Witter Select Dimensions Investment Series
<PAGE>
45 Dean Witter Select Municipal Reinvestment Fund
46 Dean Witter Short-Term Bond Fund
47 Dean Witter Short-Term U.S. Treasury Trust
48 Dean Witter Special Value Fund
49 Dean Witter Strategist Fund
50 Dean Witter Tax-Exempt Securities Trust
51 Dean Witter Tax-Free Daily Income Trust
52 Dean Witter U.S. Government Money Market Trust
53 Dean Witter U.S. Government Securities Trust
54 Dean Witter Utilities Fund
55 Dean Witter Value-Added Market Series
56 Dean Witter Variable Investment Series
57 Dean Witter World Wide Income Trust
58 Dean Witter World Wide Investment Trust
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
CLOSED-END FUNDS
1 High Income Advantage Trust
2 High Income Advantage Trust II
3 High Income Advantage Trust III
4 InterCapital Income Securities Inc.
5 Dean Witter Government Income Trust
6 InterCapital Insured Municipal Bond Trust
7 InterCapital Insured Municipal Trust
8 InterCapital Insured Municipal Income Trust
9 InterCapital California Insured Municipal
Income Trust
10 InterCapital Insured Municipal Securities
11 InterCapital Insured California Municipal
Securities
12 InterCapital Quality Municipal Investment
Trust
13 InterCapital Quality Municipal Income Trust
14 InterCapital Quality Municipal Securities
15 InterCapital California Quality Municipal
Securities
16 InterCapital New York Quality Municipal
Securities
17 Municipal Income Trust
18 Municipal Income Trust II
19 Municipal Income Trust III
20 Municipal Income Opportunities Trust
21 Municipal Income Opportunities II
22 Municipal Income Opportunities III
23 Prime Income Trust
24 Municipal Premium Income Trust
</TABLE>
The foregoing investment companies, together with the Fund, are
collectively referred to as the Dean Witter Funds.
In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned
subsidiary of InterCapital, serves as manager for the following investment
companies for which TCW Funds Management, Inc. is the investment adviser (the
"TCW/DW Funds"):
1 TCW/DW Core Equity Trust
2 TCW/DW North American Government
Income Trust
3 TCW/DW Latin American Growth Fund
4 TCW/DW Income and Growth Fund
5 TCW/DW Small Cap Growth Fund
6 TCW/DW Balanced Fund
7 TCW/DW Mid-Cap Equity Trust
8 TCW/DW Global Telecom Trust
9 TCW/DW Strategic Income Trust
Closed-End Funds
10 TCW/DW Term Trust 2000
11 TCW/DW Term Trust 2002
12 TCW/DW Term Trust 2003
13 TCW/DW Total Return Trust
14 TCW/DW Emerging Markets
Opportunities Trust
InterCapital also serves as: (i) sub-adviser to Templeton Global
Opportunities Trust, an open-end investment company; (ii) administrator of
The BlackRock Strategic Term Trust Inc., a closed-end investment company; and
(iii) sub-administrator of MassMutual Participation Investors and Templeton
Global Governments Income Trust, closed-end investment companies.
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, such office space, facilities,
equipment, clerical help and bookkeeping and certain legal services as the
Fund may reasonably require in the conduct of its business, including the
preparation of prospectuses, statements of additional information, proxy
statements and reports required to be filed with federal and state securities
commissions (except insofar as the participation or assistance of independent
accountants and attorneys is, in the opinion of the Investment Manager,
necessary or desirable). In addition, the Investment Manager 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 service, heat, light, power and other utilities provided to the
Fund.
Effective December 31, 1993, pursuant to a Services Agreement between
InterCapital and DWSC, DWSC began to provide the administrative services to
the Fund which were previously performed directly by InterCapital. On April
17, 1995, DWSC was reorganized in the State of Delaware, necessitating the
entry into a new Services Agreement by InterCapital and DWSC on that date.
The foregoing internal reorganizations did not result in any change in the
nature or scope of the administrative services being provided to the Fund or
any of the fees being paid by the Fund for the overall services being
performed under the terms of the existing Management Agreement.
4
<PAGE>
Expenses not expressly assumed by the Investment Manager under the
Management Agreement (see below), or by the Distributor of the Fund's shares,
Dean Witter Distributors Inc. ("Distributors") (see "The Distributor"), will
be paid by the Fund. Each Series pays all other expenses incurred in its
operation and a portion of the Fund's general administration expenses
allocated on the basis of the asset size of the respective Series. Expenses
that are borne directly by a Series include, but are not limited to: charges
and expenses of any registrar, custodian, share transfer and dividend
disbursing agent; brokerage commissions; certain taxes; registration costs of
the Series and its shares under federal and state securities laws;
shareholder servicing costs; charges and expenses of any outside service used
for pricing of the shares of the Series; interest on borrowings by the
Series; fees and expenses of legal counsel, including counsel to the Trustees
who are not interested persons of the Fund or of the Investment Manager) not
including compensation or expenses of attorneys who are employees of the
Investment Manager and independent accountants; and all other expenses
attributable to a particular Series. Expenses which are allocated on the
basis of size of the respective Series include the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements
of additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing proxy statements and reports to shareholders;
fees and travel expenses of Trustees or members of any advisory board or
committee who are not employees of the Investment Manager or any corporate
affiliate of the Investment Manager; state franchise taxes; Securities and
Exchange Commission fees; membership dues of industry associations; postage;
insurance premiums on property or personnel (including officers and Trustees)
of the Fund which inure to its benefit; and all other costs of the Fund's
operations properly payable by the Fund and allocable on the basis of size of
the respective Series. Depending on the nature of a legal claim, liability or
lawsuit, litigation costs, payment of legal claims or liabilities and any
indemnification relating thereto may be directly applicable to the Series or
allocated on the basis of the size of the respective Series. The Trustees
have determined that this is an appropriate method of allocation of expenses.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily by applying each of
the following annual rates to the net assets of the respective Series of the
Fund, each business day: 0.50% (Liquid Asset Series); 0.50% (U.S. Government
Money Market Series); 0.65% (U.S. Government Securities Series); 0.65%
(Intermediate Income Securities Series); 0.85% (American Value Series); 0.85%
(Capital Growth Series); 0.75% (Dividend Growth Series); 0.85% (Strategist
Series); 0.75% (Utilities Series); 0.50% (Value-Added Market Series); and
1.0% (Global Equity Series). The management fees for the American Value,
Capital Growth, Dividend Growth, Strategist, Utilities and Global Equity
Series are higher than those paid by most investment policies.
The Investment Manager assumed all expenses (except for brokerage fees and
a portion of organizational expenses) for each Series and waived the
compensation provided for in the Agreement with respect to each Series during
the fiscal years ended July 31, 1994 and 1995 and the period August 1, 1995
through December 31, 1995 and has assumed all such expenses (except for
brokerage fees and a portion of organizational expenses) and waived the
compensation provided for in its Management Agreement with respect to any
Series to the extent that such expenses and compensation exceeded 1.00% of
the daily net assets of the Series for the period from January 1, 1996
through July 31, 1996. The Investment Manager has undertaken to continue to
assume, until July 31, 1997, all such expenses and waive compensation with
respect to any Series to the extent that such expenses and compensation
exceed 1.00% of the daily net assets of the Series. The Fund's Investment
Manager paid the organizational expenses of the Fund in the amount of
$150,000 ($13,636 allocated to each of the Series), will be reimbursed
by the Fund.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder,
the Investment Manager is not liable to the Fund or any of its investors for
any act or omission by the Investment Manager or for any losses sustained by
the Fund or its investors. The Agreement in no way restricts the Investment
Manager from acting as investment manager or adviser to others.
5
<PAGE>
The Agreement was initially approved by the Fund's Trustees on October 30,
1992 and, subsequently, by DWR as the then sole shareholder. The Agreement is
substantively identical to a prior investment management agreement which was
initially approved by the Fund's Trustees on July 29, 1992 and, subsequently,
by DWR as the then sole shareholder. The Agreement took effect on June 30,
1993 upon the spin-off by Sears, Roebuck and Co. of its remaining shares of
DWDC. The Agreement may be terminated at any time, without penalty, on thirty
days' notice by the Trustees of the Fund, by the holders of a majority, as
defined in the Investment Company Act of 1940, as amended (the "Act"), of the
outstanding shares of the Fund, or by the Investment Manager. The Agreement
will automatically terminate in the event of its assignment (as defined in
the Act).
Under its terms, the Agreement had an initial term ending April 30, 1994
and will continue from year to year thereafter with respect to each Series,
provided continuance of the Agreement is approved at least annually by the
vote of the holders of a majority of the outstanding shares of that Series,
as defined in the Act, or by the Trustees of the Fund; provided that in
either event such continuance is approved annually by the vote of a majority
of the Trustees of the Fund who are not parties to the Agreement or
"interested persons" (as defined in the Act) of any such party (the
"Independent Trustees"), which vote must be cast in person at a meeting
called for the purpose of voting on such approval. At their meeting held on
April 17, 1996, the Fund's Trustees, including all of the Independent
Trustees, approved the continuance of the Agreement until April 30, 1997.
The Fund has acknowledged that the name "Dean Witter" is a property right
of DWR. The Fund has agreed that DWR or its parent company may use, or at any
time permit others to use, the name "Dean Witter." The Fund has also agreed
that in the event the Agreement is terminated, or if the affiliation between
InterCapital and its parent company is terminated, the Fund will eliminate
the name "Dean Witter" from its name if DWR or its parent company shall so
request.
TRUSTEES AND OFFICERS
- -----------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital and with the 82 Dean Witter Funds and the 14 TCW/DW Funds are
shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------------- --------------------------------------------------------
<S> <C>
Michael Bozic (55) Chairman and Chief Executive Officer of Levitz Furniture
Trustee Corporation (since November, 1995); Director or Trustee of
c/o Levitz Furniture Corporation the Dean Witter Funds; formerly President and Chief Executive
6111 Broken Sound Parkway, N.W. Officer of Hills Department Stores (May, 1991-July, 1995);
Boca Raton, Florida formerly variously Chairman, Chief Executive Officer,
President and Chief Operating Officer (1987-1991) of the Sears
Merchandise Group of Sears, Roebuck and Co.; Director of
Eaglemark Financial Services Inc., the United Negro College
Fund and Weirton Steel Corporation.
Charles A. Fiumefreddo* (63) Chairman and Chief Executive Officer and Director of
Chairman, President InterCapital, DWSC and Distributors; Executive Vice President
Chief Executive Officer and Trustee and Director of DWR; Chairman, Director or Trustee, President
Two World Trade Center and Chief Executive Officer of the Dean Witter Funds; Chairman,
New York, New York Chief Executive Officer and Trustee of the TCW/DW Funds; Chairman
and Director of Dean Witter Trust Company ("DWTC"); Director
and/or officer of various DWDC subsidiaries.
6
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------------- --------------------------------------------------------
Edwin J. Garn (64) Director or Trustee of the Dean Witter Funds; formerly United
Trustee States Senator (R-Utah) (1974-1992) and Chairman, Senate
c/o Huntsman Chemical Corporation Banking Committee (1980-1986); formerly Mayor of Salt Lake
500 Huntsman Way City, Utah (1971-1974); formerly Astronaut, Space Shuttle
Salt Lake City, Utah Discovery (April 12-19, 1985); Vice Chairman, Huntsman Chemical
Corporation (since January, 1993); Director of Franklin Quest
(time management systems) and John Alden Financial Corp.; Member
of the board of various civic and charitable organizations.
John R. Haire (71) Chairman of the Audit Committee and Chairman of the Committee
Trustee of the Independent Directors or Trustees and Director or Trustee
Two World Trade Center of the Dean Witter Funds; Chairman of the Audit Committee
New York, New York and Chairman of the Committee of the Independent Trustees
and Trustee of the TCW/DW Funds; formerly President, Council
for Aid to Education (1978-1989) and Chairman and Chief Executive
Officer of Anchor Corporation, an Investment Adviser
(1964-1978); Director of Washington National Corporation
(insurance).
Dr. Manuel H. Johnson (47) Senior Partner, Johnson Smick International, Inc., a consulting
Trustee firm; Koch Professor of International Economics and Director
c/o Johnson Smick International, Inc. of the Center for Global Market Studies at George Mason
1133 Connecticut Avenue, N.W. University; Co-Chairman and a founder of the Group of Seven
Washington, DC Council (G7C), an international economic commission;
Director or Trustee of the Dean Witter Funds; Trustee of the
TCW/DW Funds; Director of NASDAQ (since June, 1995); Director
of Greenwich Capital Markets Inc. (broker-dealer); formerly
Vice Chairman of the Board of Governors of the Federal Reserve
System (1986-1990) and Assistant Secretary
of the U.S. Treasury (1982-1988).
Michael E. Nugent (60) General Partner, Triumph Capital, L.P., a private investment
Trustee partnership (since April, 1988); Director or Trustee of the
c/o Triumph Capital, L.P. Dean Witter Funds; Trustee of the TCW/DW Funds; formerly Vice
237 Park Avenue President, Bankers Trust Company and BT Capital Corporation
New York, New York (1984-1988); Director of various business organizations.
Philip J. Purcell* (53) Chairman of the Board of Directors and Chief Executive Officer
Trustee of DWDC, DWR and Novus Credit Services Inc.; Director of
Two World Trade Center InterCapital, DWSC and Distributors; Director or Trustee of
New York, New York the Dean Witter Funds; Director and/or officer of various
DWDC subsidiaries.
7
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------------- --------------------------------------------------------
John L. Schroeder (66) Retired; Director or Trustee of the Dean Witter Funds; Trustee
Trustee of the TCW/DW Funds; Director of Citizens Utilities Company;
c/o Gordon Altman Butowsky formerly Executive Vice President and Chief Investment Officer
Weitzen Shalov & Wein of the Home Insurance Company (August, 1991-September, 1995)
Counsel to the Independent Trustees and Chairman and Chief Investment Officer of Axe-Houghton
114 West 47th Street Management and the Axe-Houghton Funds (April, 1983-June, 1991).
New York, New York
Sheldon Curtis (64) Senior Vice President, Secretary and General Counsel of
Vice President, Secretary and General Counsel InterCapital and DWSC; Senior Vice President and Secretary
Two World Trade Center of DWTC; Senior Vice President, Assistant Secretary and
New York, New York Assistant General Counsel of Distributors; Assistant Secretary
of DWR and Vice President, Secretary and General Counsel of
the Dean Witter Funds and the TCW/DW Funds.
Thomas F. Caloia (50) First Vice President (since May, 1991) and Assistant Treasurer
Treasurer of InterCapital and DWSC; Treasurer of the Dean Witter Funds
Two World Trade Center and the TCW/DW Funds.
New York, New York
Mark Bavoso (35) Senior Vice President of InterCapital (since June, 1993);
Vice President Vice President of various Dean Witter Funds; previously Vice
Two World Trade Center President of InterCapital.
New York, New York
Patricia A. Cuddy (42) Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds.
Two World Trade Center
New York, New York
Edward F. Gaylor (55) Senior Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds.
Two World Trade Center
New York, New York
Rajesh K. Gupta (36) Senior Vice President of InterCapital (since May 1991); Vice
Vice President President of various Dean Witter Funds; previously Vice
Two World Trade Center President of InterCapital.
New York, New York
Peter Hermann (36) Vice President of InterCapital; Vice President of various Dean
Vice President Witter Funds.
Two World Trade Center
New York, New York
Jonathan R. Page (50) Senior Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds.
Two World Trade Center
New York, New York
Paul D. Vance (60) Senior Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds.
Two World Trade Center
New York, New York
8
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------------- --------------------------------------------------------
Anita H. Kolleeny (41) Senior Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds.
Two World Trade Center
New York, New York
Paula LaCosta (45) Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds.
Two World Trade Center
New York, New York
Rochelle G. Siegel (48) Senior Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds.
Two World Trade Center
New York, New York
Kenton J. Hinchliffe (52) Senior Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds.
Two World Trade Center
New York, New York
Alice S. Weiss (48) Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds.
Two World Trade Center
New York, New York
</TABLE>
- ------------
[FN]
* Denotes Trustees who are "interested persons" of the Fund, as defined in
the Act.
In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, Robert S. Giambrone, Senior Vice President of InterCapital,
DWSC, Distributors and DWTC and Director of DWTC, and Joseph J. McAlinden,
Executive Vice President and Chief Investment Officer of InterCapital and
Director of DWTC, are Vice Presidents of the Fund, and Marilyn K. Cranney and
Barry Fink, First Vice Presidents and Assistant General Counsels of
InterCapital and DWSC, and Lou Anne D. McInnis and Ruth Rossi, Vice
Presidents and Assistant General Counsels of InterCapital and DWSC, and
Carsten Otto and Frank Bruttomesso, Staff Attorneys with InterCapital, are
Assistant Secretaries of the Fund.
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees consists of eight (8) trustees. These same
individuals also serve as directors or trustees for all of the Dean Witter
Funds, and are referred to in this section as Trustees. As of the date of
this Statement of Additional Information, there are a total of 82 Dean Witter
Funds, comprised of 122 portfolios. As of September 30, 1996, the Dean Witter
Funds had total net assets of approximately $78 billion and more than five
million shareholders.
Six Trustees (75% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own
any stock or other securities issued by InterCapital's parent company, DWDC.
These are the "disinterested" or "independent" Trustees. The other two
Trustees (the "management Trustees") are affiliated with InterCapital. Four
of the six independent Trustees are also Independent Trustees of the TCW/DW
Funds.
Law and regulation establish both general guidelines and specific duties
for the Independent Trustees. The Dean Witter Funds seek as Independent
Trustees individuals of distinction and experience in business and finance,
government service or academia; these are people whose advice and counsel are
in demand by others and for whom there is often competition. To accept a
position on the Funds' Boards, such individuals may reject other attractive
assignments because the Funds make substantial
9
<PAGE>
demands on their time. Indeed, by serving on the Funds' Boards, certain
Trustees who would otherwise be qualified and in demand to serve on bank
boards would be prohibited by law from doing so.
All of the Independent Trustees serve as members of the Audit Committee
and the Committee of the Independent Trustees. Three of them also serve as
members of the Derivatives Committee. During the calendar year ended December
31, 1995, the three Committees held a combined total of fifteen meetings. The
Committees hold some meetings at InterCapital's offices and some outside
InterCapital. Management Trustees or officers do not attend these meetings
unless they are invited for purposes of furnishing information or making a
report.
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading
among Funds in the same complex; and approving fidelity bond and related
insurance coverage and allocations, as well as other matters that arise from
time to time. The Independent Trustees are required to select and nominate
individuals to fill any Independent Trustee vacancy on the Board of any Fund
that has a Rule 12b-1 plan of distribution. Most of the Dean Witter Funds
have such a plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing
engagement; approving professional services provided by the independent
accountants and other accounting firms prior to the performance of such
services; reviewing the independence of the independent accountants;
considering the range of audit and non-audit fees; reviewing the adequacy of
the Fund's system of internal controls; and preparing and submitting
Committee meeting minutes to the full Board.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect
to derivative investments, if any, made by the Fund.
DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT TRUSTEES AND AUDIT
COMMITTEE
The Chairman of the Committee of the Independent Trustees and the Audit
Committee maintains an office at the Funds' headquarters in New York. He is
responsible for keeping abreast of regulatory and industry developments and
the Funds' operations and management. He screens and/or prepares written
materials and identifies critical issues for the Independent Trustees to
consider, develops agendas for Committee meetings, determines the type and
amount of information that the Committees will need to form a judgment on
various issues, and arranges to have that information furnished to Committee
members. He also arranges for the services of independent experts and
consults with them in advance of meetings to help refine reports and to focus
on critical issues. Members of the Committees believe that the person who
serves as Chairman of both Committees and guides their efforts is pivotal to
the effective functioning of the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and
with the Funds' independent auditors. He arranges for a series of special
meetings involving the annual review of investment advisory, management and
other operating contracts of the Funds and, on behalf of the Committees,
conducts negotiations with the Investment Manager and other service
providers. In effect, the Chairman of the Committees serves as a combination
of chief executive and support staff of the Independent Trustees.
The Chairman of the Committee of the Independent Trustees and the Audit
Committee is not employed by any other organization and devotes his time
primarily to the services he performs as Committee Chairman and Independent
Trustee of the Dean Witter Funds and as an Independent Trustee and, since
July 1, 1996, as Chairman of the Committee of the Independent Trustees and
the Audit Committee of the TCW/DW Funds. The current Committee Chairman has
had more than 35 years experience as a senior executive in the investment
company industry.
10
<PAGE>
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN
WITTER FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and
enhances their ability to negotiate on behalf of each Fund with the Fund's
service providers. This arrangement also precludes the possibility of
separate groups of Independent Trustees arriving at conflicting decisions
regarding operations and management of the Funds and avoids the cost and
confusion that would likely ensue. Finally, having the same Independent
Trustees serve on all Fund Boards enhances the ability of each Fund to
obtain, at modest cost to each separate Fund, the services of Independent
Trustees, and a Chairman of their Committees, of the caliber, experience and
business acumen of the individuals who serve as Independent Trustees of the
Dean Witter Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund pays each Independent Trustee an annual fee of $1,000 plus a per
meeting fee of $50 for meetings of the Board of Trustees or committees of the
Board of Trustees attended by the Trustee (the Fund pays the Chairman of the
Audit Committee an annual fee of $750 and pays the Chairman of the Committee
of the Independent Trustees an additional annual fee of $1,200). The Fund
also reimburses such Trustees for travel and other out-of-pocket expenses
incurred by them in connection with attending such meetings. Trustees and
officers of the Fund who are or have been employed by the Investment Manager
or an affiliated company receive no compensation or expense reimbursement
from the Fund.
At such time as the Fund has been in operation, and has paid fees to the
Independent Trustees, for a full fiscal year, and assuming that during such
fiscal year the Fund holds the same number of Board and committee meetings as
were held by the other Dean Witter Funds during the calendar year ended
December 31, 1995, it is estimated that the compensation paid to each
Independent Trustee during such fiscal year will be the amount shown in the
following table:
FUND COMPENSATION (ESTIMATED)
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- --------------------------- ---------------
<S> <C>
Michael Bozic .............. $2,000
Edwin J. Garn .............. 2,000
John R. Haire .............. 3,950
Dr. Manuel H. Johnson ..... 2,000
Michael E. Nugent .......... 2,000
John L. Schroeder .......... 2,000
</TABLE>
11
<PAGE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1995 for
services to the 79 Dean Witter Funds and, in the case of Messrs. Haire,
Johnson, Nugent and Schroeder, the 11 TCW/DW Funds that were in operation at
December 31, 1995. With respect to Messrs. Haire, Johnson, Nugent and
Schroeder, the TCW/DW Funds are included solely because of a limited exchange
privilege between those Funds and five Dean Witter Money Market Funds. Mr.
Schroeder was elected as a Trustee of the TCW/DW Funds on April 20, 1995.
COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS
CHAIRMAN OF TOTAL
FOR SERVICE AS COMMITTEES OF COMPENSATION
DIRECTOR OR FOR SERVICE AS INDEPENDENT PAID FOR
TRUSTEE AND TRUSTEE AND DIRECTORS/ SERVICES TO 79
COMMITTEE MEMBER COMMITTEE MEMBER TRUSTEES AND DEAN WITTER
OF 79 DEAN WITTER OF 11 TCW/DW AUDIT FUNDS AND 11
NAME OF INDEPENDENT TRUSTEE FUNDS FUNDS COMMITTEES TCW/DW FUNDS
- --------------------------- ----------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C>
Michael Bozic .............. $126,050 -- -- $126,050
Edwin J. Garn .............. 136,450 -- -- 136,450
John R. Haire .............. 98,450 $82,038 $217,350(1) 397,838
Dr. Manuel H. Johnson ..... 136,450 82,038 -- 218,488
Michael E. Nugent .......... 124,200 75,038 -- 199,238
John L. Schroeder .......... 136,450 46,964 -- 183,414
</TABLE>
- ------------
(1) For the 79 Dean Witter Funds in operation at December 31, 1995. As
noted above, on July 1, 1996 Mr. Haire became Chairman of the Committee
of the Independent Trustees and the Audit Committee of the TCW/DW Funds
in addition to continuing to serve in such positions for the Dean
Witter Funds.
As of the date of this Statement of Additional Information, 57 of the Dean
Witter Funds, not including the Fund, have adopted a retirement program under
which an Independent Trustee who retires after serving for at least five
years (or such lesser period as may be determined by the Board) as an
Independent Director or Trustee of any Dean Witter Fund that has adopted the
retirement program (each such Fund referred to as an "Adopting Fund" and each
such Trustee referred to as an "Eligible Trustee") is entitled to retirement
payments upon reaching the eligible retirement age (normally, after attaining
age 72). Annual payments are based upon length of service. Currently, upon
retirement, each Eligible Trustee is entitled to receive from the Adopting
Fund, commencing as of his or her retirement date and continuing for the
remainder of his or her life, an annual retirement benefit (the "Regular
Benefit") equal to 25.0% of his or her Eligible Compensation plus 0.4166666%
of such Eligible Compensation for each full month of service as an
Independent Director or Trustee of any Adopting Fund in excess of five years
up to a maximum of 50.0% after ten years of service. The foregoing
percentages may be changed by the Board.(2) "Eligible Compensation" is
one-fifth of the total compensation earned by such Eligible Trustee for
service to the Adopting Fund in the five year period prior to the date of the
Eligible Trustee's retirement. Benefits under the retirement program are not
secured or funded by the Adopting Funds.
12
<PAGE>
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the 57 Dean Witter Funds (not including the
Fund) as of December 31, 1995, and the estimated retirement benefits for the
Fund's Independent Trustees from the 57 Dean Witter Funds as of December 31,
1995.
RETIREMENT BENEFITS FROM ALL DEAN WITTER FUNDS
<TABLE>
<CAPTION>
ESTIMATED
ANNUAL
RETIREMENT BENEFITS
ESTIMATED BENEFITS UPON
CREDITED YEARS ESTIMATED ACCRUED AS RETIREMENT
OF SERVICE AT PERCENTAGE OF EXPENSES BY FROM ALL
RETIREMENT ELIGIBLE ALL ADOPTING ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUNDS FUNDS(3)
- --------------------------- ---------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Michael Bozic .............. 10 50.0% $ 26,359 $ 51,550
Edwin J. Garn .............. 10 50.0 41,901 51,550
John R. Haire .............. 10 50.0 261,763 130,404
Dr. Manuel H. Johnson ..... 10 50.0 16,748 51,550
Michael E. Nugent .......... 10 50.0 30,370 51,550
John L. Schroeder .......... 8 41.7 51,812 42,958
</TABLE>
- ------------
(2) An Eligible Trustee may elect alternate payments of his or her
retirement benefits based upon the combined life expectancy of such
Eligible Trustee and his or her spouse on the date of such Eligible
Trustee's retirement. The amount estimated to be payable under this
method, through the remainder of the later of the lives of such
Eligible Trustee and spouse, will be the actuarial equivalent of the
Regular Benefit. In addition, the Eligible Trustee may elect that the
surviving spouse's periodic payment of benefits will be equal to either
50% or 100% of the previous periodic amount, an election that,
respectively, increases or decreases the previous periodic amount so
that the resulting payments will be the actuarial equivalent of the
Regular Benefit.
(3) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (2)
above.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1 percent of the Fund's shares
of beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- -----------------------------------------------------------------------------
LIQUID ASSET SERIES
Variable and Floating Rate Obligations. As stated in the Prospectus, the
Liquid Asset Series may invest in variable and floating rate obligations. The
interest rate payable on a variable rate obligation is adjusted at
predesignated periodic intervals and, on floating rate obligations, whenever
there is a change in the market rate of interest on which the interest rate
payable is based. Other features may include the right whereby the Liquid
Asset Series may demand prepayment of the principal amount of the obligation
prior to its stated maturity (a "demand feature") and the right of the issuer
to prepay the principal amount prior to maturity. The principal benefit of a
variable rate obligation is that the interest rate adjustment minimizes
changes in the market value of the obligation. As a result, the purchase of
variable rate and floating rate obligations should enhance the ability of the
Liquid Asset Series to maintain a stable net asset value per share (see "How
Net Asset Value is Determined") and to sell obligations prior to maturity at
a price approximating the full principal amount of the obligations. The
principal benefit to the Liquid Asset Series of purchasing obligations with a
demand feature is that liquidity, and the ability of the Liquid Asset Series
to obtain repayment of the full principal amount of an obligation prior to
maturity, is enhanced. The payment of principal and interest by issuers of
certain obligations purchased by the Liquid Asset Series may be guaranteed by
letters of credit or other credit facilities offered by banks or other
financial institutions. Such guarantees will be considered in determining
whether an obligation meets the Liquid Asset Series' investment quality
requirements.
13
<PAGE>
INTERMEDIATE INCOME SECURITIES SERIES
As stated in the Prospectus, the Intermediate Income Securities Series may
invest up to 5% of its net assets in lower rated fixed-income securities,
sometimes referred to as high yield securities. Because of the special nature
of high yield securities, the Investment Manager must take account of certain
special considerations in assessing the risks associated with such
investments. For example, as the high yield securities market is relatively
new, its growth had paralleled a long economic expansion and, until recently,
it had not faced adverse economic and market conditions. Therefore, an
economic downturn or increase in interest rates is likely to have a negative
effect on the high yield bond market and on the value of the high yield
securities held by the Intermediate Income Securities Series, as well as on
the ability of the securities' issuers to repay principal and interest on
their borrowings.
The prices of high yield securities have been found to be less sensitive
to changes in prevailing interest rates than higher-rated investments, but
are likely to be more sensitive to adverse economic changes or individual
corporate developments. During an economic downturn or substantial period of
rising interest rates, highly leveraged issuers may experience financial
stress which would adversely affect their ability to service their principal
and interest payment obligations, to meet their projected business goals or
to obtain additional financing. If the issuer of a fixed-income security
owned by the Intermediate Income Securities Series defaults, the Series may
incur additional expenses to seek recovery. In addition, periods of economic
uncertainty and change can be expected to result in an increased volatility
of market prices of high yield securities and a concomitant volatility in the
net asset value of a share of a Series. Moreover, the market prices of
certain of the Intermediate Income Securities Series' securities which are
structured as zero coupon and payment-in-kind securities are affected to a
greater extent by interest rate changes and thereby tend to be more volatile
than securities which pay interest periodically and in cash (see "Dividends,
Distributions and Taxes" for a discussion of the tax ramifications of
investments in such securities).
The secondary market for high yield securities may be less liquid than the
markets for higher quality securities and, as such, may have an adverse
effect on the market prices of certain securities. The limited liquidity of
the market may also adversely affect the ability of the Fund's Trustees to
arrive at a fair value for certain high yield securities at certain times and
could make it difficult for the Intermediate Income Securities Series to sell
certain securities.
New laws and proposed new laws may have a potentially negative impact on
the market for high yield bonds. For example, recent legislation requires
federally-insured savings and loan associations to divest their investments
in high yield bonds. This legislation and other proposed legislation may have
an adverse effect upon the value of high yield securities and a concomitant
negative impact upon the net asset value of a share of the Intermediate
Income Securities Series.
AMERICAN VALUE SERIES
As discussed in the Prospectus, the American Value Series offers investors
an opportunity to participate in a diversified portfolio of securities,
consisting principally of common stocks. The portfolio reflects an investment
decision-making process developed by the Investment Manager.
Industry Valuation Approach. As stated in the Prospectus, in managing the
American Value Series, the Investment Manager generally seeks to identify
industries, rather than individual companies, as prospects for capital
appreciation. This approach is designed to capitalize on the basic
assumptions that industry trends are a primary force governing company
earnings; conventional forecasts may not fully reflect underlying industry
conditions or changing economic cycles; the market's perception of industry
trends is often transitory or exaggerated; and distortions in relative
valuations beyond their normal ranges may provide significant buying or
selling opportunities.
The Investment Manager generally seeks to invest assets of the American
Value Series in industries it considers to exhibit underappreciated earnings
potential at the time of purchase and to sell those it considers to have
peaked in relative earnings potential.
The Investment Manager also uses models which employ economic indicators
or other financial variables to evaluate the relative attractiveness of
industries. Economic analysis includes traditional
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business cycle analysis and such signposts as current Federal Reserve
monetary posture, direction of commodity prices, and global currency and
economic trends. Economic indicators most relevant to particular industries
are reviewed. Some industries analyzed, such as aerospace and energy, do not
correlate with economic indicators and must be analyzed relative to their
respective specific industry cycles. Financial variables under consideration
may include corporate earnings growth and cashflow, corporate and industry
asset valuation, absolute and relative price/earnings ratios and dividend
discount valuations.
Once attractive industries have been identified, stocks to represent those
industries are selected utilizing a multivariate process that includes size
and quality of the company, earnings visibility of the company and various
valuation parameters. Valuation screens may include dividend discount model
values, price-to-book ratios, price to cashflow values, relative and absolute
price-to-earnings ratios and ratios of price to earnings multiples to
earnings growth. Price and earnings momentum ratings derived from external
sources are also factored into the stock selection decision. The Investment
Manager also evaluates fundamental company criteria such as product cycle
analysis, revenue growth, margin analysis, consistency of earnings
profitability, proprietary nature of the product and quality of management.
Stocks may be selected from the three capitalization tiers of the market:
large capitalization, medium capitalization, and small capitalization.
Based on the sum total of this analysis, approximately 40-60 industries
are studied and classified as attractive, moderately attractive or
unattractive. Attractive groups are purchased, moderately attractive groups
are bought or held, and unattractive groups are sold. The Investment Manager
may utilize services that examine historical industry relative
price-to-earnings ranges for input on the Investment Manager's valuation
analysis.
A basic tenet of the industry valuation approach is that there is no
certainty of superior performance in any specific industry selection, but
rather that approximately equal weighting of investments in a group of
industries, each of which has been identified as underappreciated, can
benefit from the performance probabilities of the total group.
The foregoing represents the main outlines of the industry valuation
approach. The following describes its key features, all of which are subject
to modification as described below or as result of applying the asset
allocation disciplines described later.
1. Equal Industry Weightings.
After determining the industries that it considers to be attractive, the
Investment Manager generally attempts to invest approximately equal amounts
of the equity portion of the portfolio in securities of companies in each of
such industries, subject to adjustment for company weightings as set forth in
the next paragraph.
2. Equal Company Weightings.
From the total of all companies included in the industry valuation
process, the Investment Manager selects a limited number from each industry
as representative of that industry. Such selections are made on the basis of
various criteria, including size and quality of a company, the visibility of
earnings, product cycle analysis, historic track record and various valuation
parameters. Valuation screens may include dividend discount model values,
price-to-book ratios, price-to-cashflow values, relative and absolute
price-to-earnings ratios and ratios of price-earnings multiples to earnings
growth. Price and earnings momentum ratings derived from external sources are
also factored into the stock selection decision. Those companies which are in
attractive industries and which the Investment Manager believes to be
attractive investments are finally selected for inclusion in the portfolio.
When final selections are made, approximately equal amounts of the equity
portion of the portfolio are invested in each of such companies. This may
vary depending on whether the Investment Manager is in the process of
building or reducing a stock position. Consideration will also be given to
valuation, capitalization and liquidity profile. Stocks in industries not
characterized as attractive may be underweighted. Also, smaller
capitalization issues may not be equally weighted due to liquidity
considerations.
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3. Relative Industry Values.
Industry selection only attempts to identify industries whose securities
might be expected to perform relatively better than the market as represented
by the S&P Index. It does not seek to identify securities which will
experience an absolute increase in value notwithstanding market conditions.
However, the process assumes that, despite interim fluctuations in stock
market prices, the long-term trend in equity security values will be up.
4. Practical Applications.
In applying the industry valuation approach to management of the American
Value Series, the Investment Manager will make adjustments in the Series
which reflect modifications of the underlying concepts whenever, in its
opinion, such adjustments are necessary or desirable to achieve the American
Value Series' objectives. Such adjustments may include, for example,
weighting some industries or companies more or less than others, based upon
the Investment Manager's judgment as to the investment merits of specific
companies. In addition, without specific action by the Investment Manager,
adjustments may result from fluctuations in market prices which distort
previously established industry and company weightings. The portfolio may, at
times, include securities of industries which are unattractive due to
consideration of stage-of-cycle analysis or may not include representation in
industries considered attractive due to considerations such as valuation
criteria, stage-of-cycle analysis or lack of earnings visibility, balance
sheet viability or management quality. Also, independent of the application
of the industry valuation process, the American Value Series continuously
sells and redeems its own shares, and, as a result, securities may have to be
sold at times from the American Value Series' portfolio to meet redemptions
and monies received upon sale of the American Value Series' shares. Such
sales and purchases of portfolio securities will result in a portfolio that
does not completely reflect equal weighting of investment in industries or
companies.
Asset Allocation. Common stocks, particularly those sought for possible
capital appreciation, have historically experienced a great amount of price
fluctuation. The Investment Manager believes it is desirable to attempt to
reduce the risks of extreme price fluctuations even if such an attempt
results, as it likely will at times, in reducing the probabilities of
obtaining greater capital appreciation. Accordingly, the Investment Manager's
investment process incorporates elements which may reduce, although certainly
not eliminate, the volatility of a portfolio. The American Value Series may
hold a portion of its assets in fixed-income securities in an effort to
moderate extremes of price fluctuation. The determination of the appropriate
asset allocation as between equity and fixed-income investments will be made
by the Investment Manager in its discretion, based upon its evaluation of
economic and market conditions.
CAPITAL GROWTH SERIES
As stated in the Prospectus, the money market instruments which the
Capital Growth Series may purchase include U.S. Government securities, bank
obligations, Eurodollar certificates of deposit, obligations of savings
institutions, fully insured certificates of deposit and commercial paper.
Such securities are limited to:
U.S. Government Securities. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as
the Federal Home Loan Bank), including Treasury bills, notes and bonds;
Bank Obligations. Obligations (including certificates of deposit, bankers'
acceptances, commercial paper (see below) and other debt obligations) of
banks subject to regulation by the U.S. Government and having total assets of
$1 billion or more, and instruments secured by such obligations, not
including obligations of foreign branches of domestic banks except as
permitted below;
Eurodollar Certificates of Deposit. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1
billion or more (investments in Eurodollar certificates may be affected by
changes in currency rates or exchange control regulations, or changes in
governmental administration or economic or monetary policy in the United
States and abroad);
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Obligations of Savings Institutions. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more (investments in savings institutions above $100,000 in principal amount
are not protected by federal deposit insurance);
Fully Insured Certificates of Deposit. Certificates of deposit of banks
and savings institutions, having total assets of less than $1 billion, if the
principal amount of the obligation is federally insured by the Bank Insurance
Fund or the Savings Association Insurance Fund (each of which is administered
by the FDIC), limited to $100,000 principal amount per certificate and to 15%
or less of the Capital Growth Series' total assets in all such obligations
and in all illiquid assets, in the aggregate;
Commercial Paper. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation ("S&P") or the highest grade by Moody's
Investors Service Inc. ("Moody's") or, if not rated, issued by a company
having an outstanding debt issue rated at least AA by S&P or Aa by Moody's.
GLOBAL EQUITY SERIES
Forward Foreign Currency Exchange Contracts. As discussed in the
Prospectus, the Global Equity Series may enter into forward foreign currency
exchange contracts ("forward contracts") as a hedge against fluctuations in
future foreign exchange rates. The Series will conduct its foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or through entering into
forward contracts to purchase or sell foreign currencies. A forward contract
involves an obligation to purchase or sell a specific currency at a future
date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. These
contracts are traded in the interbank market conducted directly between
currency traders (usually large, commercial and investment banks) and their
customers. Such forward contracts will only be entered into with United
States banks and their foreign branches or foreign banks whose assets total
$1 billion or more. A forward contract generally has no deposit requirement,
and no commissions are charged at any stage for trades.
When management of the Series believes that the currency of a particular
foreign country may suffer a substantial movement against the U.S. dollar, it
may enter into a forward contract to purchase or sell, for a fixed amount of
dollars or other currency, the amount of foreign currency approximating the
value of some or all of the Series' portfolio securities denominated in such
foreign currency. The Series will not enter into such forward contracts or
maintain a net exposure to such contracts where the consummation of the
contracts would obligate the Series to deliver an amount of foreign currency
in excess of the value of the Series' portfolio securities or other assets
denominated in that currency. Under normal circumstances, consideration of
the prospect for currency parities will be incorporated into the longer term
investment decisions made with regard to overall diversification strategies.
However, the management of the Fund believes that it is important to have the
flexibility to enter into such forward contracts when it determines that the
best interests of the Series will be served. The Series' custodian bank will
place cash, U.S. Government securities or other appropriate liquid portfolio
securities in a segregated account of the Series in an amount equal to the
value of the Series' total assets committed to the consummation of forward
contracts entered into under the circumstances set forth above. If the value
of the securities placed in the segregated account declines, additional cash
or securities will be placed in the account on a daily basis so that the
value of the account will equal the amount of the Series' commitments with
respect to such contracts.
Where, for example, the Series is hedging a portfolio position consisting
of foreign fixed-income securities denominated in a foreign currency against
adverse exchange rate moves vis-a-vis the U.S. dollar, at the maturity of the
forward contract for delivery by the Series of a foreign currency, the Series
may either sell the portfolio security and make delivery of the foreign
currency, or it may retain the security and terminate its contractual
obligation to deliver the foreign currency by purchasing an "offsetting"
contract with the same currency trader obligating it to purchase, on the same
maturity date, the same amount of the foreign currency (however, the ability
of the Series to terminate a contract is contingent upon the willingness of
the currency trader with whom the contract has been entered into to permit an
offsetting transaction). It is impossible to forecast the market value of
portfolio securities at the expiration of the contract. Accordingly, it may
be necessary for the Series to purchase additional foreign
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currency on the spot market (and bear the expense of such purchase) if the
market value of the security is less than the amount of foreign currency the
Series is obligated to deliver and if a decision is made to sell the security
and make delivery of the foreign currency. Conversely, it may be necessary to
sell on the spot market some of the foreign currency received upon the sale
of the portfolio securities if its market value exceeds the amount of foreign
currency the Series is obligated to deliver.
If the Series retains the portfolio securities and engages in an
offsetting transaction, the Series will incur a gain or loss to the extent
that there has been movement in spot or forward contract prices. If the
Series engages in an offsetting transaction, it may subsequently enter into a
new forward contract to sell the foreign currency. Should forward prices
decline during the period between the Series' entering into a forward
contract for the sale of a foreign currency and the date it enters into an
offsetting contract for the purchase of the foreign currency, the Series will
realize a gain to the extent the price of the currency it has agreed to sell
exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Series will suffer a loss to the extent the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell.
If the Series purchases a fixed-income security which is denominated in
U.S. dollars but which will pay out its principal based upon a formula tied
to the exchange rate between the U.S. dollar and a foreign currency, it may
hedge against a decline in the principal value of the security by entering
into a forward contract to sell an amount of the relevant foreign currency
equal to some or all of the principal value of the security.
At times when the Series has written a call option on a security or the
currency in which it is denominated, it may wish to enter into a forward
contract to purchase or sell the foreign currency in which the security is
denominated. A forward contract would, for example, hedge the risk of the
security on which a call option has been written declining in value to a
greater extent than the value of the premium received for the option. The
Series will maintain with its Custodian at all times, cash, U.S. Government
securities, or other appropriate liquid portfolio securities in a segregated
account equal in value to all forward contract obligations and option
contract obligations entered into in hedge situations such as this.
Although the Series values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. It will, however, do so from time to time, and
investors should be aware of the costs of currency conversion. Although
foreign exchange dealers do not charge a fee for conversion, they do realize
a profit based on the spread between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign
currency to the Series at one rate, while offering a lesser rate of exchange
should the Series desire to resell that currency to the dealer.
GENERAL INVESTMENT TECHNIQUES
Repurchase Agreements. When cash may be available for only a few days, it
may be invested by a Series in repurchase agreements until such time as it may
otherwise be invested or used for payments of obligations of the Series. A
repurchase agreement may be viewed as a type of secured lending by the Series
which typically involves the acquisition by the Series of government securities
from a selling financial institution such as a bank, savings and loan
association or broker-dealer. The agreement provides that the Series will
sell back to the institution, and that the institution will repurchase, the
underlying security ("collateral") at a specified price and at a fixed time
in the future, usually not more than seven days from the date of purchase.
The collateral will be maintained in a segregated account and will be marked
to market daily to determine that the full value of the collateral, as
specified in the agreement, does not decrease below the repurchase price plus
accrued interest. If such decrease occurs, additional collateral will be
added to the account to maintain full collateralization. In the event the
original seller defaults on its obligations to repurchase, as a result of its
bankruptcy or otherwise, the Series will seek to sell the collateral, which
action could involve costs or delays. In such case, the Series' ability to
dispose of the collateral to recover its investment may be restricted or
delayed.
The Series will, when received, accrue interest from the institution until
the time when the repurchase is to occur. Although such date is deemed by the
Series to be the maturity date of a repurchase agreement, the maturities of
securities subject to repurchase agreements are not subject to any limits and
may exceed one year.
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While repurchase agreements involve certain risks not associated with
direct investments in debt securities, each Series follows procedures
designed to minimize such risks. Repurchase agreements will be transacted
only with large, well-capitalized and well-established financial institutions
whose financial condition will be continuously monitored by the Investment
Manager subject to procedures established by the Trustees. The procedures
also require that the collateral underlying the agreement be specified.
Reverse Repurchase Agreements. As stated in the Prospectus, the Liquid
Asset, U.S. Government Money Market and Intermediate Income Securities Series
may also use reverse repurchase agreements as part of their investment
strategy. Reverse repurchase agreements involve sales by the Series of assets
concurrently with an agreement by the Series to repurchase the same assets at
a later date at a fixed price. Generally, the effect of such a transaction is
that the Series can recover all or most of the cash invested in the portfolio
securities involved during the term of the reverse repurchase agreement,
while it will be able to keep the interest income associated with those
portfolio securities. Such transactions are only advantageous if the interest
cost to the Series of the reverse repurchase transaction is less than the
cost of otherwise obtaining the cash. Opportunities to achieve this advantage
may not always be available, and the Series intend to use the reverse
repurchase technique only when it will be to its advantage to do so. The
Series will establish a segregated account with its custodian bank in which
it will maintain cash, U.S. Government securities or other liquid portfolio
securities equal in value to its obligations in respect of reverse repurchase
agreements. Reverse repurchase agreements are considered borrowings by the
Series and for purposes other than meeting redemptions may not exceed 5% of
the Series' total assets.
When-Issued and Delayed Delivery Securities and Forward Commitments. As
discussed in the Prospectus, from time to time, in the ordinary course of
business, a Series may purchase securities on a when-issued or delayed
delivery basis or may purchase or sell securities on a forward commitment
basis, i.e., delivery and payment can take place a month or more after the
date of the transactions. The securities so purchased are subject to market
fluctuation and no interest accrues to the purchaser during this period.
While a Series will only purchase securities on a when-issued, delayed
delivery or forward commitment basis with the intention of acquiring the
securities, the Series may sell the securities before the settlement date, if
it is deemed advisable. At the time the Series makes the commitment to
purchase securities on a when-issued or delayed delivery basis, the Series
will record the transaction and thereafter reflect the value, each day, of
such security in determining the net asset value of the Series. At the time
of delivery of the securities, the value may be more or less than the
purchase price. The Series will also establish a segregated account with the
Series' custodian bank in which it will continuously maintain cash or U.S.
Government securities or other liquid portfolio securities equal in value to
commitments for such when-issued or delayed delivery securities; subject to
this requirement, the Series may purchase securities on such basis without
limit. An increase in the percentage of the Series' assets committed to the
purchase of securities on a when-issued or delayed delivery basis may
increase the volatility of the Series' net asset value. The Investment
Manager and the Trustees do not believe that any Series' net asset value or
income will be adversely affected by its purchase of securities on such
basis.
When, As and If Issued Securities. As discussed in the Prospectus, each
Series (with the exception of the U.S. Government Money Market Series) may
purchase securities on a "when, as and if issued" basis under which the
issuance of the security depends upon the occurrence of a subsequent event,
such as approval of a merger, corporate reorganization, leveraged buyout or
debt restructuring. The commitment for the purchase of any such security will
not be recognized by the Series until the Investment Manager determines that
issuance of the security is probable. At such time, the Series will record
the transaction and, in determining its net asset value, will reflect the
value of the security daily. At such time, the Series will also establish a
segregated account with its custodian bank in which it will continuously
maintain cash or U.S. Government securities or other liquid portfolio
securities equal in value to recognized commitments for such securities.
Settlement of the trade will occur within five business days of the
occurrence of the subsequent event. The value of the Series' commitments to
purchase the securities of any one issuer, together with the value of all
securities of such issuer owned by the Series, may not exceed 5% of the value
of the Series' total assets at the time the initial
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commitment to purchase such securities is made (see "Investment
Restrictions"). Subject to the foregoing restrictions, any Series may
purchase securities on such basis without limit. An increase in the
percentage of the Series' assets committed to the purchase of securities on a
"when, as and if issued" basis may increase the volatility of its net asset
value. The Investment Manager and the Trustees do not believe that the net
asset value of any Series will be adversely affected by its purchase of
securities on such basis.
Zero Coupon Securities. A portion of the U.S. Government securities
purchased by each Series of the Fund may be "zero coupon" Treasury
securities. These are U.S. Treasury bills, notes and bonds which have been
stripped of their unmatured interest coupons and receipts or which are
certificates representing interests in such stripped debt obligations and
coupons. In addition, a portion of the fixed-income securities purchased by
such Series may be "zero coupon" securities. "Zero coupon" securities are
purchased at a discount from their face amount, giving the purchaser the
right to receive their full value at maturity. A zero coupon security pays no
interest to its holder during its life. Its value to an investor consists of
the difference between its face value at the time of maturity and the price
for which it was acquired, which is generally an amount significantly less
than its face value (sometimes referred to as a "deep discount" price).
The interest earned on such securities is, implicitly, automatically
compounded and paid out at maturity. While such compounding at a constant
rate eliminates the risk of receiving lower yields upon reinvestment of
interest if prevailing interest rates decline, the owner of a zero coupon
security will be unable to participate in higher yields upon reinvestment of
interest received if prevailing interest rates rise. For this reason, zero
coupon securities are subject to substantially greater market price
fluctuations during periods of changing prevailing interest rates than are
comparable debt securities which make current distributions of interest.
Current federal tax law requires that a holder (such as the Series) of a zero
coupon security accrue a portion of the discount at which the security was
purchased as income each year even though the Series receives no interest
payments in cash on the security during the year.
Currently, the only U.S. Treasury security issued without coupons is the
Treasury bill. However, in the last few years a number of banks and brokerage
firms have separated ("stripped") the principal portions from the coupon
portions of the U.S. Treasury bonds and notes and sold them separately in the
form of receipts or certificates representing undivided interests in these
instruments (which instruments are generally held by a bank in a custodial or
trust account).
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements and subject to Investment Restriction (11) below, each Series of
the Fund may lend its portfolio securities to brokers, dealers and other
financial institutions, provided that such loans are callable at any time by
the Series, and are at all times secured by cash or money market instruments,
which are maintained in a segregated account pursuant to applicable
regulations and that are equal to at least the market value, determined
daily, of the loaned securities. The advantage of such loans is that the
Series continues to receive the income on the loaned securities while at the
same time earning interest on the cash amounts deposited as collateral, which
will be invested in short-term obligations. A Series will not lend portfolio
securities having a value of more than 10% of its total assets.
A loan may be terminated by the borrower on one business day's notice, or
by a Series on four business days' notice. If the borrower fails to deliver
the loaned securities within four days after receipt of notice, the Series
could use the collateral to replace the securities while holding the borrower
liable for any excess of replacement cost over collateral. As with any
extensions of credit, there are risks of delay in recovery and in some cases
even loss of rights in the collateral should the borrower of the securities
fail financially. However, these loans of portfolio securities will only be
made of firms deemed by the Fund's management to be creditworthy and when the
income which can be earned from such loans justifies the attendant risks.
Upon termination of the loan, the borrower is required to return the
securities to the Fund. Any gain or loss in the market price during the loan
period would inure to the Series.
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When voting or consent rights which accompany loaned securities pass to
the borrower, a Series will follow the policy of calling the loaned
securities, in whole or in part as may be appropriate, to be delivered within
one day after notice, to permit the exercise of such rights if the matters
involved would have a material effect on the Series' investment in such
loaned securities. A Series will pay reasonable finder's, administrative and
custodial fees in connection with a loan of its securities. No Series lent
any of its portfolio securities during the fiscal period ended July 31, 1996
and no Series has any intention of lending any of its porfolio securities
during the current fiscal year of the Fund.
U.S. Government Securities. As stated in the Prospectus, the Intermediate
Income Securities and Utilities Series may invest in U.S. Government
securities. Securities issued by the U.S. Government, its agencies or
instrumentalities in which the Intermediate Income Securities and Utilities
Series may invest include:
(1) U.S. Treasury bills (maturities of one year or less), U.S. Treasury
notes (maturities of one to ten years) and U.S. Treasury bonds (generally
maturities of greater than ten years), all of which are direct obligations
of the U.S. Government and, as such, are backed by the "full faith and
credit" of the United States.
(2) Securities issued by agencies and instrumentalities of the U.S.
Government which are backed by the full faith and credit of the United
States. Among the agencies and instrumentalities issuing such obligations
are the Federal Housing Administration, the Government National Mortgage
Association ("GNMA"), the Department of Housing and Urban Development, the
Export Import Bank, the Farmers Home Administration; the General Services
Administration, the Maritime Administration and the Small Business
Administration. The maturities of such obligations range from three months
to thirty years although the Fund may not invest in securities with
maturities of more than twelve years.
(3) Securities issued by agencies and instrumentalies which are not
backed by the full faith and credit of the United States, but whose
issuing agency or instrumentality has the right to borrow, to meet its
obligations, from an existing line of credit with the U.S. Treasury. Among
the agencies and instrumentalities issuing such obligations are the
Tennessee Valley Authority, the Federal National Mortgage Association
("FNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC") and the
U.S. Postal Service.
(4) Securities issued by agencies and instrumentalities which are not
backed by the full faith and credit of the United States, but which are
backed by the credit of the issuing agency or instrumentality. Among the
agencies and instrumentalities issuing such obligations are the Federal
Farm Credit System and the Federal Home Loan Bank.
OPTIONS AND FUTURES TRANSACTIONS
As discussed in the Prospectus, each of the Intermediate Income
Securities, American Value, Capital Growth, Strategist, Utilities and Global
Equity Series may write covered call options against securities held in its
portfolio and covered put options on eligible portfolio securities (the
Capital Growth Series may also write covered put and call options on stock
and bond indexes) and purchase options of the same series to effect closing
transactions, and may hedge against potential changes in the market value of
investments (or anticipated investments) by purchasing put and call options
on portfolio (or eligible portfolio) securities and engaging in transactions
involving futures contracts and options on such contracts. The Global Equity
Series may also hedge against potential changes in the market value of the
currencies in which its investments (or anticipated investments) are
denominated by purchasing put and call options on currencies and engage in
transactions involving currency futures contracts and options on such
contracts.
Call and put options on U.S. Treasury notes, bonds and bills and equity
securities are listed on Exchanges and are written in over-the-counter
transactions ("OTC options"). Listed options are issued by the Options
Clearing Corporation ("OCC") and other clearing entities including foreign
exchanges. Ownership of a listed call option gives a Series the right to buy
from the OCC the underlying security covered by the option at the stated
exercise price (the price per unit of the underlying security) by filing
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an exercise notice prior to the expiration date of the option. The writer
(seller) of the option would then have the obligation to sell to the OCC the
underlying security at that exercise price prior to the expiration date of
the option, regardless of its then current market price. Ownership of a
listed put option would give the Series the right to sell the underlying
security to the OCC at the stated exercise price. Upon notice of exercise of
the put option, the writer of the put would have the obligation to purchase
the underlying security from the OCC at the exercise price.
Options on Treasury Bonds and Notes. Because trading in options written on
Treasury bonds and notes tends to center on the most recently auctioned
issues, the exchanges on which such securities trade will not continue
indefinitely to introduce options with new expirations to replace expiring
options on particular issues. Instead, the expirations introduced at the
commencement of options trading on a particular issue will be allowed to run
their course, with the possible addition of a limited number of new
expirations as the original ones expire. Options trading on each issue of
bonds or notes will thus be phased out as new options are listed on more
recent issues, and options representing a full range of expirations will not
ordinarily be available for every issue on which options are traded.
Options on Treasury Bills. Because a deliverable Treasury bill changes
from week to week, writers of Treasury bill calls cannot provide in advance
for their potential exercise settlement obligations by acquiring and holding
the underlying security. However, if a Series holds a long position in
Treasury bills with a principal amount of the securities deliverable upon
exercise of the option, the position may be hedged from a risk standpoint by
the writing of a call option. For so long as the call option is outstanding,
the Series will hold the Treasury bills in a segregated account with its
Custodian, so that they will be treated as being covered.
Options on GNMA Certificates. Currently, options on GNMA Certificates are
only traded over-the-counter. Since the remaining principal balance of GNMA
Certificates declines each month as a result of mortgage payments, a Series,
as a writer of a GNMA call holding GNMA Certificates as "cover" to satisfy
its delivery obligation in the event of exercise, may find that the GNMA
Certificates it holds no longer have a sufficient remaining principal balance
for this purpose. Should this occur, the Series will purchase additional GNMA
Certificates from the same pool (if obtainable) or replacement GNMA
Certificates in the cash market in order to maintain its cover. A GNMA
Certificate held by the Series to cover an option position in any but the
nearest expiration month may cease to represent cover for the option in the
event of a decline in the GNMA coupon rate at which new pools are originated
under the FHA/VA loan ceiling in effect at any given time, as such decline
may increase the prepayments made on other mortgage pools. If this should
occur, the Series will no longer be covered, and the Series will either enter
into a closing purchase transaction or replace such Certificate with a
Certificate which represents cover. When the Series closes out its position
or replaces such Certificate, it may realize an unanticipated loss and incur
transaction costs.
Options on Foreign Currencies. The Global Equity Series may purchase and
write options on foreign currencies for purposes similar to those involved
with investing in forward foreign currency exchange contracts. For example,
in order to protect against declines in the dollar value of portfolio
securities which are denominated in a foreign currency, the Global Equity
Series may purchase put options on an amount of such foreign currency
equivalent to the current value of the portfolio securities involved. As a
result, the Global Equity Series would be enabled to sell the foreign
currency for a fixed amount of U.S. dollars, thereby "locking in" the dollar
value of the portfolio securities (less the amount of the premiums paid for
the options). Conversely, the Global Equity Series may purchase call options
on foreign currencies in which securities it anticipates purchasing are
denominated to secure a set U.S. dollar price for such securities and protect
against a decline in the value of the U.S. dollar against such foreign
currency. The Global Equity Series may also purchase call and put options to
close out written option positions.
The Global Equity Series may also write call options on foreign currency
to protect against potential declines in its portfolio securities which are
denominated in foreign currencies. If the U.S. dollar value of the portfolio
securities falls as a result of a decline in the exchange rate between the
foreign currency in which a security is denominated and the U.S. dollar, then
a loss to the Series occasioned by such value
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decline would be ameliorated by receipt of the premium on the option sold. At
the same time, however, the Series gives up the benefit of any rise in value
of the relevant portfolio securities above the exercise price of the option
and, in fact, only receives a benefit from the writing of the option to the
extent that the value of the portfolio securities falls below the price of
the premium received. The Global Equity Series may also write options to
close out long call option positions.
The markets in foreign currency options are relatively new and the Global
Equity Series' ability to establish and close out positions on such options
is subject to the maintenance of a liquid secondary market. Although the
Series will not purchase or write such options unless and until, in the
opinion of management of the Series, the market for them has developed
sufficiently to ensure that the risks in connection with such options are not
greater than the risks in connection with the underlying currency, there can
be no assurance that a liquid secondary market will exist for a particular
option at any specific time. In addition, options on foreign currencies are
affected by all of those factors which influence foreign exchange rates and
investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of
the option position may vary with changes in the value of either or both
currencies and have no relationship to the investment merits of a foreign
security, including foreign securities held in a "hedged" investment
portfolio. Because foreign currency transactions occurring in the interbank
market involve substantially larger amounts than those that may be involved
in the use of foreign currency options, investors may be disadvantaged by
having to deal in an odd lot market (generally consisting of transactions of
less than $1 million) for the underlying foreign currencies at prices that
are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Quotation information available is generally representative of very large
transactions in the interbank market and thus may not reflect relatively
smaller transactions (i.e., less than $1 million) where rates may be less
favorable. The interbank market in foreign currencies is a global,
around-the-clock market. To the extent that the U.S. options markets are
closed while the markets for the underlying currencies remain open,
significant price and rate movements may take place in the underlying markets
that are not reflected in the options market.
OTC Options. Exchange-listed options are issued by the OCC (in the U.S.)
or other clearing corporation or exchange which assures that all transactions
in such options are properly executed. OTC options are purchased from or sold
(written) to dealers or financial institutions which have entered into direct
agreements with the relevant Series of the Fund. With OTC options, such
variables as expiration date, exercise price and premium will be agreed upon
between a Series and the transacting dealer, without the intermediation of a
third party such as the OCC. If the transacting dealer fails to make or take
delivery of the securities or amount of foreign currency underlying an option
it has written, in accordance with the terms of the option, the Series would
lose the premium paid for the option as well as any anticipated benefit of
the transaction. The Fund will engage in OTC option transactions only with
member banks of the Federal Reserve System or primary dealers in U.S.
Government securities or with affiliates of such banks or dealers which have
capital of at least $50 million or whose obligations are guaranteed by an
entity having capital of at least $50 million.
Covered Call Writing. As stated in the Prospectus, the Series are
permitted to write covered call options on portfolio securities, and the
Global Equity Series is permitted to write covered call options on the U.S.
dollar and foreign currencies, in each case without limit, in order to aid in
achieving their investment objectives. Generally, a call option is "covered"
if the Series owns, or has the right to acquire, without additional cash
consideration (or for additional cash consideration held for the Series by
its Custodian in a segregated account) the underlying security (currency)
subject to the option except that in the case of call options on U.S.
Treasury Bills, a Series might own U.S. Treasury Bills of a different series
from those underlying the call option, but with a principal amount and value
corresponding to the exercise price and a maturity date no later than that of
the securities (currency) deliverable under the call option. A call option is
also covered if the Series holds a call on the same security (currency) as
the
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underlying security of the written option, where the exercise price of the
call used for coverage is equal to or less than the exercise price of the
call written or greater than the exercise price of the call written if the
mark-to-market difference is maintained by the Series in cash, U.S.
Government securities or other high grade debt obligations which the Series
holds in a segregated account maintained with the Series' Custodian.
The Series will receive from the purchaser, in return for a call it has
written, a "premium," i.e., the price of the option. Receipt of these
premiums may better enable the Series to achieve a high current income return
for their shareholders or achieve a more consistent average total return than
would be realized from holding the underlying securities (and, in the case of
the Global Equity Series, currencies) alone. Moreover, the premium received
will offset a portion of the potential loss incurred by the Series if the
securities (currencies) underlying the option are ultimately sold (exchanged)
by the Series at a loss. The value of the premium received will fluctuate
with varying economic market conditions. If the market value of the portfolio
securities (or the currencies in which they are denominated) upon which call
options have been written increases, a Series may receive less total return
from the portion of its portfolio upon which calls have been written than it
would have had such calls not been written.
As regards listed options and certain over-the-counter ("OTC") options,
during the option period, the Series may be required, at any time, to deliver
the underlying security (currency) against payment of the exercise price on
any calls it has written (exercise of certain listed and OTC options may be
limited to specific expiration dates). This obligation is terminated upon the
expiration of the option period or at such earlier time when the writer
effects a closing purchase transaction. A closing purchase transaction is
accomplished by purchasing an option of the same series as the option
previously written. However, once the Series has been assigned an exercise
notice, the Series will be unable to effect a closing purchase transaction.
Closing purchase transactions are ordinarily effected to realize a profit
on an outstanding call option, to prevent an underlying security (currency)
from being called, to permit the sale of an underlying security (or the
exchange of the underlying currency) or to enable the Series to write another
call option on the underlying security (currency) with either a different
exercise price or expiration date or both. Also, effecting a closing purchase
transaction will permit the cash or proceeds from the concurrent sale of any
securities subject to the option to be used for other investments by the
Series. The Series may realize a net gain or loss from a closing purchase
transaction depending upon whether the amount of the premium received on the
call option is more or less than the cost of effecting the closing purchase
transaction. Any loss incurred in a closing purchase transaction may be
wholly or partially offset by unrealized appreciation in the market value of
the underlying security (currency). Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part or exceeded
by a decline in the market value of the underlying security (currency).
If a call option expires unexercised, the Series realizes a gain in the
amount of the premium on the option less the commission paid. Such a gain,
however, may be offset by depreciation in the market value of the underlying
security (currency) during the option period. If a call option is exercised,
the Series realizes a gain or loss from the sale of the underlying security
(currency) equal to the difference between the purchase price of the
underlying security (currency) and the proceeds of the sale of the security
(currency) plus the premium received when the option was written, less the
commission paid.
Options written by a Series normally have expiration dates of up to
eighteen months from the date written. The exercise price of a call option
may be below, equal to or above the current market value of the underlying
security (currency) at the time the option is written. See "Risks of Options
and Futures Transactions," below.
[The Series may also purchase put options to close out written put
positions in a manner similar to call options closing purchase transactions.
In addition, a Series may sell a put option which it has previously purchased
prior to the sale of the securities (currency) underlying such option. Such a
sale would result in a net gain or loss depending on whether the amount
received on the sale is more or less than the premium and other transaction
costs paid on the put option which is sold. Any such gain or loss could be
offset in whole or in part by a change in the market value of the underlying
security (currency). If a put option purchased by a Series expired without
being sold or exercised, the premium would be lost.]
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Covered Put Writing. As stated in the Prospectus, as a writer of a covered
put option, the Series incurs an obligation to buy the security underlying
the option from the purchaser of the put, at the option's exercise price at
any time during the option period, at the purchaser's election (certain
listed and OTC put options written by the Series will be exercisable by the
purchaser only on a specific date). A put is "covered" if the Series
maintains, at all times, in a segregated account maintained on its behalf at
its Custodian, cash, U.S. Government securities or other liquid portfolio
securities in an amount equal to at least the exercise price of the option,
at all times during the option period. Similarly, a written put position
could be covered by the Series by its purchase of a put option on the same
security as the underlying security of the written option, where the exercise
price of the purchased option is equal to or more than the exercise price of
the put written or less than the exercise price of the put written if the
mark-to-market difference is maintained by the Series in cash, U.S.
Government securities or other liquid portfolio securities which the Series
holds in a segregated account maintained at its Custodian. In writing puts, a
Series assumes the risk of loss should the market value of the underlying
security decline below the exercise price of the option (any loss being
decreased by the receipt of the premium on the option written). In the case
of listed options, during the option period, the Series may be required, at
any time, to make payment of the exercise price against delivery of the
underlying security. The operation of and limitations on covered put options
in other respects are substantially identical to those of call options.
A Series will write put options for two purposes: (1) to receive the
income derived from the premiums paid by purchasers; and (2) when the
Investment Manager wishes to purchase the security underlying the option at a
price lower than its current market price, in which case the Series will
write the covered put at an exercise price reflecting the lower purchase
price sought. The potential gain on a covered put option is limited to the
premium received on the option (less the commissions paid on the transaction)
while the potential loss equals the difference between the exercise price of
the option and the current market price of the underlying securities when the
put is exercised, offset by the premium received (less the commissions paid
on the transaction).
Purchasing Call and Put Options. As stated in the Prospectus, the Series
may purchase listed and OTC call and put options in amounts equalling up to
10% of the total assets of the Series. The Series may purchase call options
in order to close out a covered call position (see "Covered Call Writing"
above) or purchase call options on securities they intend to purchase. The
Global Equity Series may purchase a call option on foreign currency to hedge
against an adverse exchange rate move of the currency in which the security
it anticipates purchasing is denominated vis-a-vis the currency in which the
exercise price is denominated. The purchase of the call option to effect a
closing transaction or a call written over-the-counter may be a listed or an
OTC option. In either case, the call purchased is likely to be on the same
securities (currencies) and have the same terms as the written option. If
purchased over-the-counter, the option would generally be acquired from the
dealer or financial institution which purchased the call written by the
Series.
Each Series may purchase put options on securities (and, in the case of
the Global Equity Series, on currencies) which it holds (or has the right to
acquire) in its portfolio only to protect itself against a decline in the
value of the security (currency). If the value of the underlying security
(currency) were to fall below the exercise price of the put purchased in an
amount greater than the premium paid for the option, the Series would incur
no additional loss. A Series may also purchase put options to close out
written put positions in a manner similar to call options closing purchase
transactions. In addition, a Series may sell a put option which it has
previously purchased prior to the sale of the securities (currencies)
underlying such option. Such a sale would result in a net gain or loss
depending on whether the amount received on the sale is more or less than the
premium and other transaction costs paid on the put option when it was
purchased. Any such gain or loss could be offset in whole or in part by a
change in the market value of the underlying security (currency). If a put
option purchased by a Series expired without being sold or exercised, the
Series would realize a loss.
Risks of Options Transactions. The successful use of options depends on
the ability of the Investment Manager to forecast correctly interest rates
and market movements. If the market value of the portfolio securities (or, in
the case of the Global Equity Series, the currencies in which they are
denominated) upon which call options have been written increases, the Series
may receive a lower total
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return from the portion of its portfolio upon which calls have been written
than it would have had such calls not been written. In writing puts, the
Series assumes the risk of loss should the market value of the underlying
securities (or, in the case of the Global Equity Series, the currencies in
which they are denominated) decline below the exercise price of the option
(any loss being decreased by the receipt of the premium on the option
written). During the option period, the covered call writer has, in return
for the premium on the option, given up the opportunity for capital
appreciation above the exercise price should the market price of the
underlying security (or, in the case of the Global Equity Series, the value
of the security's denominated currency) increase, but has retained the risk
of loss should the price of the underlying security (or, in the case of the
Global Equity Series, the value of the security's denominated currency)
decline. The covered put writer also retains the risk of loss should the
market value of the underlying security decline below the exercise price of
the option less the premium received on the sale of the option. In both
cases, the writer has no control over the time when it may be required to
fulfill its obligation as a writer of the option. Once an option writer has
received an exercise notice, it cannot effect a closing purchase transaction
in order to terminate its obligation under the option and must deliver or
receive the underlying securities at the exercise price. A covered put option
writer who is unable to effect a closing purchase transaction or to purchase
an offsetting OTC option would continue to bear the risk of decline in the
market price of the underlying security (or, in the case of the Global Equity
Series, currency) until the option expires or is exercised. In addition, a
covered put writer would be unable to utilize the amount held in cash or U.S.
Government or other high grade short-term debt obligations as security for
the put option for other investment purposes until the exercise or expiration
of the option.
Prior to exercise or expiration, an option position can only be terminated
by entering into a closing purchase or sale transaction. If a covered put
call option writer is unable to effect a closing purchase transaction or to
purchase an offsetting OTC option, it cannot sell the underlying security
until the option expires or the option is exercised. Accordingly, a covered
call option writer may not be able to sell an underlying security (or, in the
case of the Global Equity Series, currency) at a time when it might otherwise
be advantageous to do so.
A Series' ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on option
exchanges. There is no assurance that such a market will exist, particularly
in the case of OTC options, as such options will generally only be closed out
by entering into a closing purchase transaction with the purchasing dealer.
However, a Series may be able to purchase an offsetting option which does not
close out its position as a writer but constitutes an asset of equal value to
the obligation under the option written. If the Series is not able to either
enter into a closing purchase transaction or purchase an offsetting position,
it will be required to maintain the securities subject to the call, or the
collateral underlying the put, even though it might not be advantageous to do
so, until a closing transaction can be entered into (or the option is
exercised or expires).
Among the possible reasons for the absence of a liquid secondary market on
an exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes
or series of options or underlying securities; (iv) interruption of the
normal operations on an exchange; (v) inadequacy of the facilities of an
exchange or the Options Clearing Corporation ("OCC") to handle current
trading volume; or (vi) a decision by one or more exchanges to discontinue
the trading of options (or a particular class or series of options), in which
event the secondary market on that exchange (or in that class or series of
options) would cease to exist, although outstanding options on that exchange
that had been issued by the OCC as a result of trades on that exchange would
generally continue to be exercisable in accordance with their terms.
In the event of the bankruptcy of a broker through which a Series engages
in transactions in options, the Series could experience delays and/or losses
in liquidating open positions purchased or sold through the broker and/or
incur a loss of all or part of its margin deposits with the broker.
Similarly, in the event of the bankruptcy of the writer of an OTC option
purchased by a Series, the Series could experience a loss of all or part of
the value of the option. Transactions are entered into by a Series only with
brokers or financial institutions deemed creditworthy by the Fund's
management.
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Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security or futures
contract (whether or not covered) which may be written by a single investor,
whether acting alone or in concert with others (regardless of whether such
options are written on the same or different exchanges or are held or written
on one or more accounts or through one or more brokers). An exchange may
order the liquidation of positions found to be in violation of these limits
and it may impose other sanctions or restrictions. These position limits may
restrict the number of listed options which a Series may write.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be
reflected in the option markets.
Stock Index Options. Series may also invest in options on stock indexes.
As stated in the Prospectus, options on stock indexes are similar to options
on stock except that, rather than the right to take or make delivery of stock
at a specified price, an option on a stock index gives the holder the right
to receive, upon exercise of the option, an amount of cash if the closing
level of the stock index upon which the option is based is greater than, in
the case of a call, or less than, in the case of a put, the exercise price of
the option. This amount of cash is equal to such difference between the
closing price of the index and the exercise price of the option expressed in
dollars times a specified multiple (the "multiplier"). The multiplier for an
index option performs a function similar to the unit of trading for a stock
option. It determines the total dollar value per contract of each point in
the difference between the exercise price of an option and the current level
of the underlying index. A multiplier of 100 means that a one-point
difference will yield $100. Options on different indexes may have different
multipliers. The writer of the option is obligated, in return for the premium
received, to make delivery of this amount. Unlike stock options, all
settlements are in cash and a gain or loss depends on price movements in the
stock market generally (or in a particular segment of the market) rather than
the price movements in individual stocks. Currently, options are traded on,
among other indexes, the Standard & Poor's 100 Index and the Standard &
Poor's 500 Index on the Chicago Board Options Exchange, the Major Market
Index and the Computer Technology Index, Oil Index and Institutional Index on
the American Stock Exchange and the NYSE Index and NYSE Beta Index on the New
York Stock Exchange). The Financial News Composite Index on the Pacific Stock
Exchange and the Value Line Index, National O-T-C Index and Utilities Index
on the Philadelphia Stock Exchange, each of which and any similar index on
which options are traded in the future which include stocks that are not
limited to any particular industry or segment of the market is referred to as
a "broadly based stock market index." Options on broad-based stock indexes
provide the Series with a means of protecting the Series against the risk of
market-wide price movements. If the Investment Manager anticipates a market
decline, the Series could purchase a stock index put option. If the expected
market decline materialized, the resulting decrease in the value of the
Series' portfolio would be offset to the extent of the increase in the value
of the put option. If the Investment Manager anticipates a market rise, the
Series may purchase a stock index call option to enable the Series to
participate in such rise until completion of anticipated common stock
purchases by the Series. Purchases and sales of stock index options also
enable the Investment Manager to more speedily achieve changes in a Series'
equity positions.
Series will be able to write put options on stock indexes only if such
positions are covered by cash, U.S. Government securities or other high grade
debt obligations equal to the aggregate exercise price of the puts, or by a
put option on the same stock index with a strike price no lower than the
strike price of the put option sold by the Series, which cover is held by the
Series in a segregated account maintained for it by its Custodian. All call
options on stock indexes written by a Series will be covered either by a
portfolio of stocks substantially replicating the movement of the index
underlying the call option or by holding a separate call option on the same
stock index with a strike price no higher than the strike price of the call
option sold by the Series.
Risks of Options on Indexes. Because exercises of stock index options are
settled in cash, the Series, as a call writer, would not be able to provide
in advance for their potential settlement obligations by acquiring and
holding the underlying securities. A call writer can offset some of the risk
of its position
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by holding a diversified portfolio of stocks similar to those on which the
underlying index is based. However, most investors cannot, as a practical
matter, acquire and hold a portfolio containing exactly the same stocks as
the underlying index, and, as a result, bear a risk that the value of the
securities held will vary from the value of the index. Even if an index call
writer could assemble a stock portfolio that exactly reproduced the
composition of the underlying index, the writer still would not be fully
covered from a risk standpoint because of the "timing risk" inherent in
writing index options. When an index option is exercised, the amount of cash
that the holder is entitled to receive is determined by the difference
between the exercise price and the closing index level on the date when the
option is exercised. As with other kinds of options, the writer will not
learn that it has been assigned until the next business day, at the earliest.
The time lag between exercise and notice of assignment poses no risk for the
writer of a covered call on a specific underlying security, such as a common
stock, because there the writer's obligation is to deliver the underlying
security, not to pay its value as of a fixed time in the past. So long as the
writer already owns the underlying security, it can satisfy its settlement
obligations by simply delivering it, and the risk that its value may have
declined since the exercise date is borne by the exercising holder. In
contrast, even if the writer of an index call holds stocks that exactly match
the composition of the underlying index, it will not be able to satisfy its
assignment obligations by delivering those stocks against payment of the
exercise price. Instead, it will be required to pay cash in an amount based
on the closing index value on the exercise date; and by the time it learns
that it has been assigned, the index may have declined, with a corresponding
decline in the value of its stock portfolio. This "timing risk" is an
inherent limitation on the ability of index call writers to cover their risk
exposure by holding stock positions.
A holder of an index option who exercises it before the closing index
value for that day is available runs the risk that the level of the
underlying index may subsequently change. If such a change causes the
exercised option to fall out-of-the-money, the exercising holder will be
required to pay the difference between the closing index value and the
exercise price of the option (times the applicable multiplier) to the
assigned writer.
If dissemination of the current level of an underlying index is
interrupted, or if trading is interrupted in stocks accounting for a
substantial portion of the value of an index, the trading of options on that
index will ordinarily be halted. If the trading of options on an underlying
index is halted, an exchange may impose restrictions prohibiting the exercise
of such options.
Futures Contracts. As stated in the Prospectus, the Utilities, American
Value, Capital Growth, Strategist, Value-Added Market, Intermediate Income
Securities and Global Equity Series may purchase and sell interest rate
futures contracts that are traded, or may in the future be traded, on U.S.
(and in the case of Global Equity Series, foreign) commodity exchanges on
such underlying securities as U.S. Treasury bonds, notes, bills and GNMA
Certificates and stock and bond index futures contracts that are traded, or
may in the future be traded, on U.S. commodity exchanges on such indexes as
the Moody's Investment-Grade Corporate Bond Index, S&P 500 Index and the New
York Stock Exchange Composite Index.
As a futures contract purchaser, a Series incurs an obligation to take
delivery of a specified amount of the obligation underlying the contract at a
specified time in the future for a specified price. As a seller of a futures
contract, a Series incurs an obligation to deliver the specified amount of
the underlying obligation at a specified time in return for an agreed upon
price.
Series will purchase or sell interest rate futures contracts for the
purpose of hedging their fixed-income portfolio (or anticipated portfolio)
securities against changes in prevailing interest rates or, to alter the
Series' asset allocation in fixed-income securities. If it is anticipated
that interest rates may rise and, concomitantly, the price of certain of its
portfolio securities fall, a Series may sell an interest rate futures
contract or a bond index futures contract. If declining interest rates are
anticipated, or if the Investment Manager wishes to increase the Series'
allocation of fixed-income securities, a Series may purchase an interest rate
futures contract or a bond index futures contract to protect against a
potential increase in the price of securities the Series intends to purchase.
Subsequently, appropriate securities may be purchased by the Series in an
orderly fashion; as securities are purchased, corresponding futures positions
would be terminated by offsetting sales of contracts.
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Series will purchase or sell stock index futures contracts for the purpose
of hedging their equity portfolio (or anticipated portfolio) securities
against changes in their prices. If the Investment Manager anticipates that
the prices of stock held by a Series may fall or wishes to decrease the
Series' asset allocation in equity securities, the Series may sell a stock
index futures contract. Conversely, if the Investment Manager wishes to
increase the assets of the Series which are invested in stocks or as a hedge
against anticipated prices rises in those stocks which the Series intends to
purchase, the Series may purchase stock index futures contracts. This allows
the Series to purchase equities, in accordance with the asset allocations of
the Series management, in an orderly and efficacious manner.
The Global Equity Series will purchase or sell futures contracts on
currencies in which its portfolio securities (or anticipated portfolio
securities) are denominated for the purposes of hedging against anticipated
changes in currency exchange rates. The Global Equity Series will enter into
currency futures contracts for the same reasons as set forth under the
heading "Forward Foreign Currency Exchange Contracts" under "The Global
Equity Series" above for entering into forward foreign currency contracts;
namely, to "lock-in" the value of a security purchased or sold in a given
currency vis-a-vis a different currency or to hedge against an adverse
currency exchange rate movement of a portfolio security's (or anticipated
portfolio security's) denominated currency vis-a-vis a different currency.
In addition to the above, interest rate and bond index and stock index
(and currency) futures contracts will be bought or sold in order to close out
a short or long position in a corresponding futures contract.
Although most interest rate futures contracts call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. Index futures
contracts provide for the delivery of an amount of cash equal to a specified
dollar amount times the difference between the index value at the open or
close of the last trading day of the contract and the futures contract price.
A futures contract sale is closed out by effecting a futures contract
purchase for the same aggregate amount of the specific type of security (or,
in the case of the Global Equity Series, currency) and the same delivery
date. If the sale price exceeds the offsetting purchase price, the seller
would be paid the difference and would realize a gain. If the offsetting
purchase price exceeds the sale price, the seller would pay the difference
and would realize a loss. Similarly, a futures contract purchase is closed
out by effecting a futures contract sale for the same aggregate amount of the
specific type of security (currency) and the same delivery date. If the
offsetting sale price exceeds the purchase price, the purchaser would realize
a gain, whereas if the purchase price exceeds the offseting sale price, the
purchaser would realize a loss. There is no assurance that a Series will be
able to enter into a closing transaction.
When a Series enters into a futures contract it is initially required to
deposit with its Custodian, in an account in the name of the broker
performing the transaction, an "initial margin" of cash or U.S. Government
securities or other high grade short-term obligations equal to approximately
2% (for interest rate futures contracts) of the contract amount. Initial
margin requirements are established by the Exchanges on which futures
contracts trade and may, from time to time, change. In addition, brokers may
establish margin deposit requirements in excess of those required by the
Exchanges.
Initial margin in futures contract transactions is different from margin
in securities transactions in that initial margin does not involve the
borrowing of funds by a broker's client but is, rather, a good faith deposit
on the futures contract which will be returned to the Series upon the proper
termination of the futures contract. The margin deposits made are marked to
market daily and the Series may be required to make subsequent deposits of
cash or U.S. Government securities, called "variation margin", with the
Series' futures contract clearing broker, which are reflective of price
fluctuations in the futures contract. Currently, interest rate futures
contracts can be purchased on debt securities such as U.S. Treasury Bills and
Bonds, U.S. Treasury Notes with maturities between 6-1/2 and 10 years, GNMA
Certificates and Bank Certificates of Deposit.
Index Futures. As discussed in the Prospectus, the Series may also invest
in stock index futures contracts. An index futures contract sale creates an
obligation by the Series, as seller, to deliver cash at a specified future
time. An index futures contract purchase would create an obligation by the
Series, as
29
<PAGE>
purchaser, to take delivery of cash at a specified future time. Futures
contracts on indexes do not require the physical delivery of securities, but
provide for a final cash settlement on the expiration date which reflects
accumulated profits and losses credited or debited to each party's account.
The Series is required to maintain margin deposits with brokerage firms
through which it effects index futures contracts in a manner similar to that
described above for interest rate futures contracts. Currently, the initial
margin requirements range from 3% to 10% of the contract amount for index
futures. In addition, due to current industry practice, daily variations in
gains and losses on open contracts are required to be reflected in cash in
the form of variation margin payments. The Series may be required to make
additional margin payments during the term of the contract.
At any time prior to expiration of the futures contract, the Series may
elect to close the position by taking an opposite position which will operate
to terminate the Series' position in the futures contract. A final
determination of variation margin is then made, additional cash is required
to be paid by or released to the Series and the Series realizes a loss or a
gain.
Currently, index futures contracts can be purchased or sold with respect
to, among others, the Standard & Poor's 500 Stock Price Index and the
Standard & Poor's 100 Stock Price Index on the Chicago Mercantile Exchange,
the New York Stock Exchange Composite Index on the New York Futures Exchange,
the Major Market Index on the American Stock Exchange, the Value Line Stock
Index on the Kansas City Board of Trade and the Moody's Investment-Grade
Corporate Bond Index on the Chicago Board of Trade.
Currency Futures. As noted above, the Global Equity Series may invest in
foreign currency futures. Generally, foreign currency futures provide for the
delivery of a specified amount of a given currency, on the exercise date, for
a set exercise price denominated in U.S. dollars or other currency. Foreign
currency futures contracts would be entered into for the same reason and
under the same circumstances as forward foreign currency exchange contracts.
The Global Equity Series' management will assess such factors as cost
spreads, liquidity and transaction costs in determining whether to utilize
futures contracts or forward contracts in its foreign currency transactions
and hedging strategy. Currently, currency futures exist for, among other
foreign currencies, the Japanese yen, German mark, Canadian dollar, British
pound, Swiss franc and European currency unit.
Purchasers and sellers of foreign currency futures contracts are subject
to the same risks that apply to the buying and selling of futures generally.
In addition, there are risks associated with foreign currency futures
contracts and their use as a hedging device similar to those associated with
options on foreign currencies described above. Further, settlement of a
foreign currency futures contract must occur within the country issuing the
underlying currency. Thus, the Global Equities Series must accept or make
delivery of the underlying foreign currency in accordance with any U.S. or
foreign restrictions or regulation regarding the maintenance of foreign
banking arrangements by U.S. residents and may be required to pay any fees,
taxes or charges associated with such delivery which are assessed in the
issuing country.
Options on foreign currency futures contracts may involve certain
additional risks. Trading options on foreign currency futures contracts is
relatively new. The ability to establish and close out positions on such
options is subject to the maintenance of a liquid secondary market. To reduce
this risk, the Global Equity Series will not purchase or write options on
foreign currency futures contracts unless and until, in the opinion of the
Series' management, the market for such options has developed sufficiently
that the risks in connection with such options are not greater than the risks
in connection with transactions in the underlying foreign currency futures
contracts.
Options on Futures Contracts. The Series may purchase and write call and
put options on futures contracts which are traded on an exchange and enter
into closing transactions with respect to such options to terminate an
existing position. An option on a futures contract gives the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the term of
the option. Upon the exericse of the option, the delivery of the futures
position by the writer of the
30
<PAGE>
option to the holder of the option is accompanied by delivery of the
accumulated balance in the writer's futures margin account, which represents
the amount by which the market price of the futures contract at the time of
exercise exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option on the futures contract.
The Series will only purchase and write options on futures contracts for
identical purposes to those set forth above for the purchase of a futures
contract (purchase of a call option or sale of a put option) and the sale of
a futures contract (purchase of a put option or sale of a call option), or to
close out a long or short position in futures contracts. If, for example, the
Investment Manager wished to protect against an increase in interest rates
and the resulting negative impact on the value of a portion of a Series'
fixed-income portfolio, it might write a call option on an interest rate
futures contract, the underlying security of which correlates with the
portion of the portfolio the Series' management seeks to hedge. Any premiums
received in the writing of options on futures contracts may, of course,
augment the income of the Series and thereby provide a further hedge against
losses resulting from price declines in portions of its portfolio.
The writer of an option on a futures contract is required to deposit
initial and variation margin pursuant to requirements similar to those
applicable to futures contracts. Premiums received from the writing of an
option on a futures contract are included in initial margin deposits.
Limitations on Futures Contracts and Options on Futures. The Series may
not enter into futures contracts or purchase related options thereon if,
immediately thereafter, the amount committed to initial margin plus the
amount paid for premiums for unexpired options on futures contracts exceeds
5% of the value of the Series' total assets, after taking into account
unrealized gains and unrealized losses on such contracts it has entered into,
provided, however, that in the case of an option that is in-the-money (the
exercise price of the call (put) option is less (more) than the market price
of the underlying security) at the time of purchase, the in-the-money amount
may be excluded in calculating the 5%. However, there is no overall
limitation on the percentage of a Series' assets which may be subject to a
hedge position. In addition, in accordance with the regulations of the
Commodity Futures Trading Commission ("CFTC") under which the Fund is
exempted from registration as a commodity pool operator, Series may only
enter into futures contracts and options on futures contracts transactions
for purposes of hedging a part or all of the Series' portfolio. If the CFTC
changes its regulations so that the Fund would be permitted to write options
on futures contracts for income purposes without CFTC registration, these
Series may engage in such transactions for those purposes. Except as
described above, there are no other limitations on the use of futures and
options thereon by these Series.
Risks of Transactions in Futures Contracts and Related Options. The
successful use of futures and related options depends on the ability of the
Investment Manager to accurately predict market and interest rate movements.
As stated in the Prospectus, a Series may sell a futures contract to protect
against the decline in the value of securities (or, in the case of the Global
Equity Series, the currency in which securities are denominated) held by the
Series. However, it is possible that the futures market may advance and the
value of securites (or, in the case of the Global Equity Series, the currency
in which they are denominated) held in the Series may decline. If this
occurred, the Series would lose money on the futures contract and also
experience a decline in value of its portfolio securities. However, while
this could occur for a very brief period or to a very small degree, over time
the value of a diversified portfolio will tend to move in the same direction
as the futures contracts.
If the Series purchases a futures contract to hedge against the increase
in value of securities it intends to buy (or the currency in which they are
denominated), and the value of such securities (currency) decreases, then the
Series may determine not to invest in the securities as planned and will
realize a loss on the futures contract that is not offset by a reduction in
the price of the securities.
If a Series maintains a short position in a futures contract or has sold a
call option on a futures contract, it will cover this position by holding, in
a segregated account maintained at its Custodian, cash, U.S. Government
securities or other high grade debt obligations equal in value (when added to
any initial or variation margin on deposit) to the market value of the
securities (currencies) underlying the futures contract or the exercise price
of the option. Such a position may also be covered by owning the securities
31
<PAGE>
(currencies) underlying the futures contract (in the case of a stock index
futures contract a portfolio of securities substantially replicating the
relevant index), or by holding a call option permitting the Series to
purchase the same contract at a price no higher than the price at which the
short position was established.
In addition, if a Series holds a long position in a futures contract or
has sold a put option on a futures contract, it will hold cash, U.S.
Government securities or other high grade debt obligations equal to the
purchase price of the contract or the exercise price of the put option (less
the amount of initial or variation margin on deposit) in a segregated account
maintained for the Series by its Custodian. Alternatively, the Series could
cover its long position by purchasing a put option on the same futures
contract with an exercise price as high or higher than the price at which the
short position was established.
In addition, if a Series holds a long position in a futures contract or
has sold a put option on a futures contract, it will hold cash, U.S.
Government securities or other high grade debt obligations equal to the
purchase price of the contract or the exercise price of the put option (less
the amount of initial or variation margin on deposit) in a segregated account
maintained for the Series by its Custodian. Alternatively, the Series could
cover its long position by purchasing a put option on the same futures
contract with an exercise price as high or higher than the price of the
contract held by the Series.
Exchanges limit the amount by which the price of a futures contract may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased. In the event of adverse price movements, the Series
would continue to be required to make daily cash payments of variation margin
on open futures positions. In such situations, if the Series has insufficient
cash, it may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. In addition,
the Series may be required to take or make delivery of the instruments
underlying interest rate futures contracts it holds at a time when it is
disadvantageous to do so. The inability to close out options and futures
positions could also have an adverse impact on the Series' ability to
effectively hedge its portfolio.
With regard to the Global Equity Series, futures contracts and options
thereon which are purchased or sold on foreign commodities exchanges may have
greater price volatility than their U.S. counterparts. Furthermore, foreign
commodities exchanges may be less regulated and under less governmental
scrutiny than U.S. exchanges. Brokerage commissions, clearing costs and other
transaction costs may be higher on foreign exchanges. Greater margin
requirements may limit the Global Equity Series' ability to enter into
certain commodity transactions on foreign exchanges. Moreover, differences in
clearance and delivery requirements on foreign exchanges may occasion delays
in the settlement of the Series' transactions effected on foreign exchanges.
In the event of the bankruptcy of a broker through which the Series
engages in transactions in futures or options thereon, the Series could
experience delays and/or losses in liquidating open positions purchased or
sold through the broker and/or incur a loss of all or part of its margin
deposits with the broker. Similarly, in the event of the bankruptcy of the
writer of an OTC option purchased by the Series, the Series could experience
a loss of all or part of the value of the option. Transactions are entered
into by a Series only with brokers or financial institutions deemed
creditworthy by the Series' management.
While the futures contracts and options transactions to be engaged in by a
Series for the purpose of hedging the Series' portfolio securities are not
speculative in nature, there are risks inherent in the use of such
instruments. One such risk which may arise in employing futures contracts to
protect against the price volatility of portfolio securities (and, for the
Global Equity Series, the currencies in which they are denominated) is that
the prices of securities and indexes subject to futures contracts (and
thereby the futures contract prices) may correlate imperfectly with the
behavior of the cash prices of the Series' portfolio securities (and the
currencies in which they are denominated). Another such risk is that prices
of interest rate futures contracts may not move in tandem with the changes in
prevailing interest rates against which the Series seeks a hedge. A
correlation may also be distorted by the fact that the futures market is
dominated by short-term traders seeking to profit from the difference between
a contract or security price objective and their cost of borrowed funds. Such
distortions are generally minor and would diminish as the contract approached
maturity.
32
<PAGE>
As stated in the Prospectus, there may exist an imperfect correlation
between the price movements of futures contracts purchased by the Series and
the movements in the prices of the securities (currencies) which are the
subject of the hedge. If participants in the futures market elect to close
out their contracts through offsetting transactions rather than meet margin
deposit requirements, distortions in the normal relationship between the debt
securities and futures markets could result. Price distortions could also
result if investors in futures contracts opt to make or take delivery of
underlying securities rather than engage in closing transactions due to the
resultant reduction in the liquidity of the futures market. In addition, due
to the fact that, from the point of view of speculators, the deposit
requirements in the futures markets are less onerous than margin requirements
in the cash market, increased participation by speculators in the futures
market could cause temporary price distortions. Due to the possibility of
price distortions in the futures market and because of the imperfect
correlation between movements in the prices of securities and movements in
the prices of futures contracts, a correct forecast of interest rate trends
may still not result in a successful hedging transaction.
As stated in the Prospectus, there is no assurance that a liquid secondary
market will exist for futures contracts and related options in which Series
may invest. In the event a liquid market does not exist, it may not be
possible to close out a futures position, and in the event of adverse price
movements, a Series would continue to be required to make daily cash payments
of variation margin. In addition, limitations imposed by an exchange or board
of trade on which futures contracts are traded may compel or prevent a Series
from closing out a contract which may result in reduced gain or increased
loss to the Series. The absence of a liquid market in futures contracts might
cause the Series to make or take delivery of the underlying securities
(currencies) at a time when it may be disadvantageous to do so.
The extent to which the Series may enter into transactions involving
futures contracts and options thereon may be limited by the Internal Revenue
Code's requirements for qualification as a regulated investment company and
the Fund's intention to qualify each Series as such (see "Dividends,
Distributions and Taxes" in the Prospectus).
Compared to the purchase or sale of futures contracts, the purchase of
call or put options on futures contracts involves less potential risk to a
Series because the maximum amount at risk is the premium paid for the options
(plus transaction costs). However, there may be circumstances when the
purchase of a call or put option on a futures contract would result in a loss
to the Series notwithstanding that the purchase or sale of a futures contract
would not result in a loss, as in the instance where there is no movement in
the prices of the futures contract or underlying securities (currencies).
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus,
the investment restrictions listed below have been adopted by the Fund as
fundamental policies of the Series, except as otherwise indicated. Under the
Act, a fundamental policy may not be changed with respect to a Series without
the vote of a majority of the outstanding voting securities of that Series,
as defined in the Act. Such a majority is defined as the lesser of (a) 67% or
more of the shares of the Series present at a meeting of shareholders of the
Fund, if the holders of more than 50% of the outstanding shares of the Series
are present or represented by proxy or (b) more than 50% of the outstanding
shares of the Series. For purposes of the following restrictions and those
contained in the Prospectus: (i) all percentage limitations apply immediately
after a purchase or initial investment; and (ii) any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in
the amount of total or net assets does not require elimination of any
security from the portfolio.
RESTRICTIONS APPLICABLE TO ALL SERIES
Each Series of the Fund may not:
1. Borrow money, except from banks for temporary or emergency purposes,
including the meeting of redemption requests which might otherwise require
the untimely disposition of securities; or through its transactions in
reverse repurchase agreements. Borrowing in the aggregate, including reverse
repurchase agreements, may not exceed 5% (10% for Liquid Asset Series and 15%
for U.S. Government
33
<PAGE>
Money Market Series), and borrowing for purposes other than meeting
redemptions may not exceed 5% (10% for Liquid Asset Series) of the value of
the Series' total assets (including the amount borrowed), less liabilities
(not including the amount borrowed) at the time the borrowing is made.
2. Pledge its assets or assign or otherwise encumber them except to secure
borrowings effected within the limitations set forth in restriction (1). For
the purpose of this restriction, collateral arrangements with respect to the
writing of options and collateral arrangements with respect to initial or
variation margin for futures are not deemed to be pledges of assets.
3. Make short sales of securities.
4. Engage in the underwriting of securities, except insofar as the Series
may be deemed an underwriter under the Securities Act of 1933 in disposing of
a portfolio security.
5. Purchase or sell commodities or commodities contracts, except that the
Series may purchase or write interest rate, currency and stock and bond index
futures contracts and related options thereon.
6. Purchase or sell real estate or interests therein (including real
estate limited partnerships), although the Series may purchase securities of
issuers which engage in real estate operations and securities secured by real
estate or interests therein (as such, in case of default of such securities,
a Series may hold the real estate securing such security).
7. Purchase oil, gas or other mineral leases, rights or royalty contracts
or exploration or development programs, except that the Series may invest in
the securities or companies which operate, invest in, or sponsor such
programs.
8. Purchase securities on margin (but the Series may obtain such
short-term loans as are necessary for the clearance of transactions). The
deposit or payment by a Series of initial or variation margin in connection
with futures contracts or related options thereon is not considered the
purchase of a security on margin.
9. Issue senior securities as defined in the Act, except insofar as the
Series may be deemed to have issued a senior security by reason of (a)
entering into any repurchase or reverse repurchase agreement; (b) purchasing
any securities on a when-issued or delayed delivery basis; (c) purchasing or
selling futures contracts, forward foreign exchange contracts or options; (d)
borrowing money in accordance with restrictions described above; or (e)
lending portfolio securities.
10. Purchase securities of any issuer for the purpose of exercising
control or management.
11. Make loans of money or securities, except: (a) by the purchase of
publicly distributed debt obligations in which the Series may invest
consistent with its investment objectives and policies; (b) by investment in
repurchase agreements; or (c) by lending its portfolio securities.
12. Participate on a joint or a joint and several basis in any securities
trading account. The "bunching" of orders of two or more Series (or of one or
more Series and of other accounts under the investment management of the
Investment Manager) for the sale or purchase of portfolio securities shall
not be considered participating in a joint securities trading account.
13. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets or in accordance with the provisions of Section 12(d) of the Act and
any Rules promulgated thereunder.
In addition, as a nonfundamental policy, the Fund may not invest in
securities of any issuer if, to the knowledge of the Fund, any officer or
trustee of the Fund or any officer or director of the Investment Manager owns
more than 1/2 of 1% of the outstanding securities of such issuer, and such
officers, trustees and directors who own more than 1/2 of 1% own in the
aggregate more than 5% of the outstanding securities of such issuers.
34
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
- -----------------------------------------------------------------------------
Subject to the general supervision of the Board of Trustees, the
Investment Manager is responsible for decisions to buy and sell securities
for each Series of the Fund, the selection of brokers and dealers to effect
the transactions, and the negotiation of brokerage commissions, if any.
Purchases and sales of securities on a stock exchange are effected through
brokers who charge a commission for their services. In the over-the-counter
market, securities are generally traded on a "net" basis with dealers acting
as principal for their own accounts without a stated commission, although the
price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are purchased at a fixed price which
includes an amount of compensation to the underwriter, generally referred to
as the underwriter's concession or discount. When securities are purchased or
sold directly from or to an issuer, no commissions or discounts are paid. For
the fiscal years ended July 31, 1994, 1995 and 1996, the Series of the Fund
paid brokerage commissions as follows:
<TABLE>
<CAPTION>
BROKERAGE
BROKERAGE COMMISSIONS BROKERAGE COMMISSIONS COMMISSIONS PAID FOR
PAID FOR FISCAL YEAR PAID FOR FISCAL YEAR FISCAL YEAR ENDED
NAME OF SERIES ENDED 7/31/94 ENDED 7/31/95 7/31/96
- ------------------------- --------------------- --------------------- --------------------
<S> <C> <C> <C>
American Value Series ... $10,490 $66,581 $140,058
Capital Growth Series ... 125 629 3,207
Dividend Growth Series .. 12,614 37,711 51,116
Strategist Series ........ 937 6,628 17,146
Utilities Series ......... 3,960 4,444 4,668
Value-Added Market Series 4,703 7,693 7,588
Global Equity Series .... 492 28,597 78,153
</TABLE>
Purchases of money market instruments are made from dealers, underwriters
and issuers; sales, if any, prior to maturity, are made to dealers and
issuers. The Fund does not normally incur brokerage commission expense on
such transactions. Money market instruments are generally traded on a "net"
basis with dealers acting as principal for their own accounts without a
stated commission, although the price of the security usually includes a
profit to the dealer.
The Investment Manager serves as investment adviser to a number of
clients, including other investment companies, and may in the future act as
investment manager or adviser to others. It is the practice of the Investment
Manager to cause purchase and sale transactions to be allocated among the
Series of the Fund and others whose assets it manages in such manner as it
deems equitable. In making such allocations among the Series of the Fund and
other client accounts, various factors may be considered, including the
respective investment objectives, the relative size of portfolio holdings of
the same or comparable securities, the availability of cash for investment,
the size of investment commitments generally held and the opinions of the
persons responsible for managing the portfolios of the Fund and other client
accounts. In the case of certain initial and secondary public offerings, the
Investment Manager may utilize a pro-rata allocation process based on the
size of the Dean Witter Funds involved and the number of shares available
from the public offering. This procedure may, under certain circumstances,
have an adverse effect on the Fund or any of its Series.
The policy of the Fund regarding purchases and sales of securities for the
various Series is that primary consideration will be given to obtaining the
most favorable prices and efficient executions of transactions. Consistent
with this policy, when securities transactions are effected on a stock
exchange, the Fund's policy is to pay commissions which are considered fair
and reasonable without necessarily determining that the lowest possible
commissions are paid in all circumstances. The Fund believes that a
requirement always to seek the lowest possible commission cost could impede
effective portfolio management and preclude the Fund and the Investment
Manager from obtaining a high quality of brokerage and research services. In
seeking to determine the reasonableness of brokerage commissions paid in any
transaction, the Investment Manager relies upon its experience and knowledge
regarding commissions generally charged by various brokers and on its
judgment in evaluating the brokerage and research services received from the
broker effecting the transaction. Such determinations are necessarily
subjective and imprecise, as in most cases an exact dollar value for those
services is not ascertainable.
35
<PAGE>
The Fund anticipates that certain of its transactions involving foreign
securities will be effected on foreign securities exchanges. Fixed
commissions on such transactions are generally higher than negotiated
commissions on domestic transactions. There is also generally less government
supervision and regulation of foreign securities exchanges and brokers than
in the United States.
In seeking to implement the policies of the Series of the Fund, the
Investment Manager effects transactions with those brokers and dealers who
the Investment Manager believes provide the most favorable prices and are
capable of providing efficient executions. If the Investment Manager believes
such price and execution are obtainable from more than one broker or dealer,
it may give consideration to placing portfolio transactions with those
brokers and dealers who also furnish research and other services to the Fund
or the Investment Manager. Such services may include, but are not limited to,
any one or more of the following: information as to the availability of
securities for purchase or sale; statistical or factual information or
opinions pertaining to investment; wire services; and appraisals or
evaluations of portfolio securities. The Fund will give no weight to any
research services provided by a dealer, transacting with the Fund as
principal, in determining the price of a security purchased from or sold to
that dealer.
The information and services received by the Investment Manager from
brokers and dealers may be of benefit to the Investment Manager or in the
management of accounts of some of its other clients and may not in all cases
benefit a Series of the Fund directly. While the receipt of such information
and services is useful in varying degrees and would generally reduce the
amount of research or services otherwise performed by the Investment Manager
and thus reduce its expenses, it is of indeterminable value and the fees paid
to the Investment Manager are not reduced by any amount that may be
attributable to the value of such services. For the fiscal year ended July
31, 1996, the Series of the Fund directed the payment of commissions in
connection with transactions in the following aggregate amounts to brokers
because of research services provided:
<TABLE>
<CAPTION>
AGGREGATE DOLLAR
BROKERAGE COMMISSIONS AMOUNT OF TRANSACTIONS
DIRECTED IN CONNECTION FOR WHICH SUCH
WITH RESEARCH SERVICES COMMISSIONS WERE PAID
PROVIDED FOR FISCAL FOR FISCAL YEAR ENDED
NAME OF SERIES YEAR ENDED 7/31/96 7/31/95
- ------------------------- ---------------------- ----------------------
<S> <C> <C>
American Value Series ... $64,174 $43,666,358
Capital Growth Series ... 1,211 806,758
Dividend Growth Series .. 20,157 14,238,705
Strategist Series ........ 5,147 2,131,092
Utilities Series ......... 385 191,474
Value-Added Market Series 0 0
Global Equity Series .... 72,485 13,727,536
</TABLE>
Pursuant to an order of the Securities and Exchange Commission, the Fund
may effect principal transactions in certain money market instruments with
DWR. The Fund will limit its transactions with DWR to U.S. Government and
Government Agency Securities, Bank Money Instruments (i.e., Certificates of
Deposit and Bankers' Acceptance) and Commercial Paper. Such transactions will
be effected with DWR only when the price available from DWR is better than
that available from other dealers.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through DWR. In order for DWR to effect any portfolio
transactions for the Fund, the commissions, fees or other remuneration
received by them must be reasonable and fair compared to the commissions,
fees or other remuneration paid to other brokers in connection with
comparable transactions involving similar securities being purchased or sold
on an exchange during a comparable period of time. This standard would allow
these brokers to receive no more than the remuneration which would be
expected to be received by an unaffiliated broker in a commensurate
arm's-length transaction. Furthermore, the Trustees of the Fund, including a
majority of the Trustees who are not "interested" persons of the Fund, as
defined in the Act, have adopted procedures which are reasonably designed to
provide that any commissions, fees or other remuneration
36
<PAGE>
paid to these brokers are consistent with the foregoing standard. The Fund
does not reduce the management fee it pays to the Investment Manager by any
amount of the brokerage commissions it may pay to these brokers. For the
fiscal year ended July 31, 1994, the Series paid the following dollar amounts
of brokerage commissions to DWR: American Value Series: $8,855; Capital
Growth Series: $117; Dividend Growth Series: $11,918; Strategist Series:
$711; Utilities Series: $3,855; and Global Equity Series: $91.For the fiscal
year ended July 31, 1995, the Series paid the following dollar amounts of
brokerage commissions to DWR: American Value Series: $18,882; Capital Growth
Series: $519; Dividend Growth Series: $28,711; Strategist Series: $5,710;
Utilities Series: $3,970; and Global Equity Series: $3,713. For the fiscal
year ended July 31, 1996, the Series paid brokerage commissions to DWR for
transactions as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF AGGREGATE
DOLLAR AMOUNT OF
EXECUTED TRADES ON
PERCENTAGE OF AGGREGATE WHICH BROKERAGE
BROKERAGE COMMISSIONS BROKERAGE COMMISSIONS COMMISSIONS WERE PAID
PAID TO DWR FOR FISCAL FOR FISCAL YEAR ENDED FOR FISCAL YEAR ENDED
NAME OF SERIES YEAR ENDED 7/31/96 7/31/96 7/31/96
- ---------------------- ---------------------- ----------------------- -----------------------
<S> <C> <C> <C>
American Value Series $67,847 48.44% 57.28%
Capital Growth Series 1,774 55.37 59.97
Dividend Growth Series 30,759 60.17 68.64
Strategist Series .... 10,751 62.70 76.16
Utilities Series ...... 4,140 88.70 86.56
Global Equity Series . 5,635 7.21 24.36
</TABLE>
During the fiscal year ended July 31, 1996, the American Value Series and
the Value Added Series purchased common stock issued by Merrill Lynch & Co.,
Inc. ("Merrill Lynch") and Morgan Stanley Group, Inc. ("Morgan Stanley"); the
Strategist Series purchased debt securities issued by PaineWebber Group Inc.
("PaineWebber"); and the Global Equity Series purchased common stock issued
by Merrill Lynch. At July 31, 1996, the American Value Series held common
stock issued by Merrill Lynch and Morgan Stanley with market values of
$120,750 and $326,625, respectively; the Strategist Series held common stock
issued by Morgan Stanley and Merrill Lynch and debt securities issued by
PaineWebber with a market value of $78,000, $81,506 and $51,680,
respectively; the Value Added Series held common stock issued by Merrill
Lynch and Morgan Stanley with a market value of $39,244 and $43,875,
respectively; and the Global Equity Series held common stock issued by
Merrill Lynch with a market value of $105,052.
DETERMINATION OF NET ASSET VALUE
- -----------------------------------------------------------------------------
As discussed in the Prospectus, the net asset value of the shares of each
Series is determined once daily at 4:00 p.m., New York time (or, on days when
the New York Stock Exchange closes prior to 4:00 p.m., at such earlier time),
on each day that the New York Stock Exchange is open for trading. The New
York Stock Exchange currently observes the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
As discussed in the Prospectus, the Liquid Asset and U.S. Government Money
Market Series each utilize the amortized cost method in valuing their
portfolio securities for purposes of determining the net asset value of its
shares. The Series utilize the amortized cost method in valuing their
portfolio securities even though the portfolio securities may increase or
decrease in market value, generally in connection with changes in interest
rates. The amortized cost method of valuation involves valuing a security at
its cost at the time of purchase adjusted by a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. While this method
provides certainty in valuation, it may result in periods during which value,
as determined by amortized cost, is higher or lower than the price the Series
would receive if they sold the investment. During such periods, the yield to
investors in the Series may differ somewhat from that obtained in a similar
company which uses mark-to-market values for all of its portfolio securities.
For example, if the use of amortized cost resulted in a lower (higher)
aggregate portfolio value on a particular day, a
37
<PAGE>
prospective investor in a Series would be able to obtain a somewhat higher
(lower) yield than would result from investment in such a similar company and
existing investors would receive less (more) investment income. The purpose
of this method of calculation is to facilitate the maintenance of a constant
net asset value per share of $1.00.
The use of the amortized cost method to value the portfolio securities of
the Liquid Asset and U.S. Government Money Market Series and the maintenance
of the per share net asset value of $1.00 is permitted pursuant to Rule 2a-7
under the Act (the "Rule") and is conditioned on its compliance with various
conditions contained in the Rule including: (a) the Trustees are obligated,
as a particular responsibility within the overall duty of care owed to the
Series' shareholders, to establish procedures reasonably designed, taking
into account current market conditions and the Series' investment objectives,
to stabilize the net asset value per share as computed for the purpose of
distribution and redemption at $1.00 per share; (b) the procedures include
(i) calculation, at such intervals as the Trustees determine are appropriate
and as are reasonable in light of current market conditions, of the
deviation, if any, between net asset value per share using amortized cost to
value portfolio securities and net asset value per share based upon available
market quotations with respect to such portfolio securities; (ii) periodic
review by the Trustees of the amount of deviation as well as methods used to
calculate it; and (iii) maintenance of written records of the procedures, and
the Trustees' considerations made pursuant to them and any actions taken upon
such consideration; (c) the Trustees should consider what steps should be
taken, if any, in the event of a difference of more than 1/2 of 1% between
the two methods of valuation; and (d) the Trustees should take such action as
they deem appropriate (such as shortening the average portfolio maturity,
realizing gains or losses, withholding dividends or, as provided by the
Declaration of Trust, reducing the number of outstanding shares of a Series)
to eliminate or reduce to the extent reasonably practicable material dilution
or other unfair results to investors or existing shareholders which might
arise from differences between the two methods of valuation. Any reduction of
outstanding shares will be effected by having each shareholder
proportionately contribute to the Series' capital the necessary shares that
represent the amount of excess upon such determination.
Generally, for purposes of the procedures adopted under the Rule, the
maturity of a portfolio instrument is deemed to be the period remaining
(calculated from the trade date or such other date on which the Series'
interest in the instrument is subject to market action) until the date noted
on the face of the instrument as the date on which the principal amount must
be paid, or in the case of an instrument called for redemption, the date on
which the redemption payment must be made.
A variable rate obligation that is subject to a demand feature is deemed
to have a maturity equal to the longer of the period remaining until the next
readjustment of the interest rate or the period remaining until the principal
amount can be recovered through demand. A floating rate instrument that is
subject to a demand feature is deemed to have a maturity equal to the period
remaining until the principal amount can be recovered through demand.
An Eligible Security is defined in the Rule to mean a security which: (a)
has a remaining maturity of thirteen months or less; (b)(i) is rated in the
two highest short-term rating categories by any two nationally recognized
statistical rating organizations ("NRSROs") that have issued a short-term
rating with respect to the security or class of debt obligations of the
issuer; or (ii) if only one NRSRO has issued a short-term rating with respect
to the security, then by that NRSRO; (c) was a long-term security at the time
of issuance whose issuer has outstanding a short-term debt obligation which
is comparable in priority and security and has a rating as specified in
clause (b) above; or (d) if no rating is assigned by any NRSRO as provided in
clauses (b) and (c) above, the unrated security is determined by the Board to
be of comparable quality to any such rated security. The Liquid Asset and
U.S. Government Money Market Series will limit their investments to
securities that meet the requirements for Eligible Securities including the
required ratings by S&P or Moody's, as set forth in the prospectus.
As permitted by the Rule, the Board has delegated to the Fund's Investment
Manager, subject to the Board's oversight pursuant to guidelines and
procedures adopted by the Board, the authority to determine which securities
present minimal credit risks and which unrated securities are comparable in
quality to rated securities.
38
<PAGE>
Also, as required by the Rule, the Series will limit their investments in
securities, other than Government securities, so that, at the time of
purchase: (a) except as further limited in (b) below with regard to certain
securities, no more than 5% of their total assets will be invested in the
securities of any one issuer; and (b) with respect to Eligible Securities
that have received a rating in less than the highest category by any one of
the NRSROs whose ratings are used to qualify the security as an Eligible
Security, or that have been determined to be of comparable quality: (i) no
more than 5% in the aggregate of the Series' total assets in all such
securities, and (ii) no more than the greater of 1% of total assets, or $1
million, in the securities on any one issuer.
The presence of a line of credit or other credit facility offered by a
bank or other financial institution which guarantees the payment obligation
of the issuer, in the event of a default in the payment of principal or
interest of an obligation, may be taken into account in determining whether
an investment is an Eligible Security, provided that the guarantee itself is
an Eligible Security.
The Rule further requires that the Series limit their investments to U.S.
dollar-denominated instruments which the Trustees determine present minimal
credit risks and which are Eligible Securities. The Rule also requires the
Series to maintain a dollar-weighted average portfolio maturity (not more
than 90 days) appropriate to its objective of maintaining a stable net asset
value of $1.00 per share and precludes the purchase of any instrument with a
remaining maturity of more than 397 days. Should the disposition of a
portfolio security result in a dollar-weighted average portfolio maturity of
more than 90 days, the Series will invest its available cash in such a manner
as to reduce such maturity to 90 days or less as soon as is reasonably
practicable.
If the Board determines that it is no longer in the best interests of the
Series and its shareholders to maintain a stable price of $1 per share or if
the Board believes that maintaining such price no longer reflects a
market-based net asset value per share, the Board has the right to change
from an amortized cost basis of valuation to valuation based on market
quotations. The Fund will notify shareholders of the Series of any such
change.
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
As discussed in the Prospectus, shares of the Fund are offered for sale on
a continuous basis at an offering price equal to the net asset value per
share of each Series next determined following a receipt of an order. The
Trustees of the Fund have approved a Distribution Agreement appointing Dean
Witter Distributors Inc. (the "Distributor") as exclusive distributor of the
Fund's shares. The Distributor has entered into a selected dealer agreement
with DWR, which through its own sales organization sells shares of the Fund.
In addition, the Distributor may enter into similar agreements with other
selected broker-dealers. The Distributor, a Delaware corporation, is a
wholly-owned subsidiary of DWDC. The Trustees of the Fund, including all of
the Independent Trustees of the Fund, approved, at their meeting held on
October 30, 1992, the current Distribution Agreement. The present
Distribution Agreement is substantively identical to the Fund's previous
distribution agreement. The Distribution Agreement took effect on June 30,
1993 upon the spin-off by Sears, Roebuck and Co. of its remaining shares of
DWDC. By its terms, the Distribution Agreement had an initial term ending
April 30, 1994 and will remain in effect from year to year thereafter if
approved by the Trustees. At their meeting held on April 17, 1996, the
Trustees, including all of the Independent Trustees, approved the
continuation of the Agreement until April 30, 1997.
The Distributor has agreed to pay certain expenses of the offering of the
Fund's shares, including the costs of printing and distributing prospectuses
and supplements thereto used in connection with the offering and sale of the
Fund's shares. The Fund will bear the costs of initial typesetting, printing
and distribution to shareholders. The Fund and the Distributor have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act of 1933, as amended.
PLAN OF DISTRIBUTION
As discussed in the Prospectus, the Fund has entered into a Plan of
Distribution pursuant to Rule 12b-1 under the Act (the "Plan") with the
Distributor and DWR whereby the Distributor and any of its
39
<PAGE>
affiliates are authorized to utilize their own resources to finance certain
activities in connection with the distribution of shares of the Fund. The
Plan was initially approved by the Trustees of the Fund on July 29, 1992 and,
subsequently, by DWR as the then sole shareholder of the Fund. The vote of
the Trustees included a majority of the Trustees who are not and were not at
the time of their votes interested persons of the Fund and who have and had
at the time of their votes no direct or indirect financial interest in the
operation of the Plan (the "Independent 12b-1 Trustees"), cast in person at a
meeting called for the purpose of voting on such Plan. In determining to
approve the Plan, the Trustees, including the Independent 12b-1 Trustees,
concluded that, in their judgment, there is a reasonable likelihood that the
Plan will benefit the Fund and its shareholders.
The Plan provides that the Fund authorizes the Distributor and DWR to bear
the expense of all promotional and distribution-related activities on behalf
of the Fund, except for expenses that the Trustees determine to reimburse.
Among the activities and services which may be provided by the Distributor
under the Plan are: (1) compensation to and expenses of account executives
and other employees of the Distributor and other broker-dealers, including
overhead and telephone expenses; (2) sales incentives and bonuses to sales
representatives and to marketing personnel in connection with promoting sales
of the Fund's shares; (3) expenses incurred in connection with promoting
sales of the Fund's shares; (4) preparing and distributing sales literature;
and (5) providing advertising and promotional activities, including direct
mail solicitation and television, radio, newspaper, magazine and other media
advertisements.
DWR's account executives are paid a monthly residual commission,
calculated based upon the current value of the respective accounts for which
they are the account executives of record. The "gross residual" is a charge
which reflects residual commissions paid by DWR to its account executives and
DWR's expenses associated with the servicing of shareholders' accounts,
including the expenses of operating DWR's branch offices in connection with
the servicing of shareholders' accounts, which expenses include lease costs,
the salaries and employee benefits of operations and sales support personnel,
utility costs, communications costs and the costs of stationery and supplies
and other expenses relating to branch office servicing of shareholder
accounts.
Under the Plan, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment
or mistake of law or for any act or omission or for any losses sustained by
the Fund or its shareholders.
Under its terms, the Plan had an initial term ending April 30, 1993 and
will remain in effect from year to year thereafter, provided such continuance
is approved annually by a vote of the Trustees, including a majority of the
Independent 12b-1 Trustees. An amendment to increase materially the maximum
amount authorized to be spent under the Plan on behalf of any Series must be
approved by the shareholders of such Series, and all material amendments to
the Plan must be approved by the Trustees in the manner described above. The
Plan may be terminated on behalf of any Series at any time, without payment
of any penalty, by vote of the majority of the Independent 12b-1 Trustees or
by a vote of a majority of the outstanding voting securities of such Series
(as defined in the Act) on not more than 30 days written notice to any other
party to the Plan. The authority for the Distributor to finance distribution
activities automatically terminates in the event of an assignment (as defined
in the Act). After such an assignment, the Fund's authority to make payments
to its Distributor would resume, subject to certain conditions. So long as
the Plan is in effect, the selection or nomination of the Independent 12b-1
Trustees is committed to the discretion of the Independent 12b-1 Trustees.
Continuation of the Plan was most recently approved by the Trustees,
including a majority of the Independent 12b-1 Trustees, on April 17, 1996, at
a meeting called for the purpose of voting on such Plan.
No interested person of the Fund nor any Trustee of the Fund who is not an
interested person of the Fund, as defined in the Act, has any direct or
indirect financial interest in the operation of the Plan except to the extent
that the Distributor or DWR or certain of their employees may be deemed to
have such an interest as a result of benefits derived from the successful
operation of the Plan or as a result of receiving a portion of the amounts
expended thereunder by the Distributor.
40
<PAGE>
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
Shareholder Investment Account. Upon purchase of shares of the Fund, a
Shareholder Investment Account is opened for the investor on the books of
each Series of the Fund owned by the investor, maintained by Dean Witter
Trust Company (the "Transfer Agent"), in full and fractional shares of the
Series (rounded to the nearest 1/100 of a share). This is an open account in
which shares owned by the investor are credited by the Transfer Agent in lieu
of issuance of a share certificate. If a share certificate is desired, it
must be requested in writing for each transaction. Certificates are issued
only for full shares and may be redeposited in the account at any time. There
is no charge to the investor for issuance of a certificate. No certificates
will be issued for fractional shares or to shareholders who have elected the
Systematic Withdrawal Plan or check writing privilege of withdrawing cash
from their accounts. Whenever a shareholder-instituted transaction takes
place in the Shareholder Investment Account, the shareholder will be mailed a
statement by DWR or other selected broker-dealer, the Distributor or the
Transfer Agent reflecting the status of such Account.
Automatic Investment of Dividends and Distributions. All dividends and
capital gains distributions are automatically paid in full and fractional
shares of the Fund, unless the shareholder requests that they be paid in
cash. Each purchase of shares of the Fund is made upon the condition that the
Transfer Agent is thereby automatically appointed as agent of the investor to
receive all dividends and capital gains distributions on shares owned by the
investor. An investor may terminate such agency at any time and may request
the Transfer Agent in writing to have subsequent dividends and/or capital
gains distributions paid in cash rather than shares. Such request must be
received by the Transfer Agent at least five (5) business days prior to the
record date for which it commences to take effect. In case of recently
purchased shares for which registration instructions have not been received
on the record date, cash payments will be made to the Distributor.
Systematic Withdrawal Plan. As discussed in the Prospectus, a systematic
withdrawal plan (the "Withdrawal Plan") is available for shareholders who own
or purchase shares of the Fund having a minimum value of $10,000 based upon
the then current offering price. The Withdrawal Plan provides for monthly or
quarterly (March, June, September and December) checks in any amount, not
less than $25, or in any whole percentage of the account balance, on an
annualized basis.
Dividends and capital gains distributions on shares held under the
Withdrawal Plan will be invested in additional full and fractional shares at
net asset value. Shares will be credited to an open account for the investor
by the Transfer Agent; no share certificates will be issued. A shareholder is
entitled to a share certificate upon written request to the Transfer Agent,
although in that event the shareholder's Withdrawal Plan will be terminated.
The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the
amount of the periodic withdrawal payment designated in the application. The
shares will be redeemed at their net asset value determined, at the
shareholder's option, on the tenth or twenty-fifth day (or next following
business day) of the relevant month or quarter and normally a check for the
proceeds will be mailed by the Transfer Agent within five business days after
the date of redemption. The Withdrawal Plan may be terminated at any time by
the Fund.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net
investment income and net capital gains, the shareholder's original
investment will be correspondingly reduced and ultimately exhausted.
A shareholder may, at any time change the amount and interval of
withdrawal payments and the address to which checks are mailed by written
notification to the Transfer Agent. The shareholder's signature on such
notification must be guaranteed by an eligible guarantor acceptable to the
Transfer Agent (shareholders should contact the Transfer Agent for a
determination as to whether a particular institution is such an eligible
guarantor). The shareholder may also terminate the Withdrawal Plan at any
time by written notice to the Transfer Agent. In the event of such
termination, the account will be continued as a Shareholder Investment
Account. The shareholder may also redeem all or part of the shares held in
the Withdrawal Plan account (see "Redemptions and Repurchases" in the
Prospectus) at any time. Shareholders wishing to enroll in the Withdrawal
Plan should contact their account executive or the Transfer Agent.
41
<PAGE>
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its
shareholders an Exchange Privilege whereby shareholders of any Series of the
Fund may exchange their shares for shares of any other Series of the Fund.
There is no holding period for exchanges of shares. An exchange will be
treated for federal income tax purposes the same as a repurchase or
redemption of shares, on which the shareholder may realize a capital gain or
loss, unless shares are held in a qualified retirement plan which is not
subject to taxation.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the
present account, unless the Transfer Agent receives written notification to
the contrary. For telephone exchanges, the exact registration of the existing
Account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit
should not be endorsed.)
The Transfer Agent acts as agent for shareholders of the Fund in effecting
redemptions of Fund shares and in applying the proceeds to the purchase of
other fund shares. In the absence of negligence on its part, neither the
Transfer Agent nor the Fund shall be liable for any redemption of Fund shares
caused by unauthorized telephone or telegraph instructions. Accordingly, in
such event the investor shall bear the risk of loss. The staff of the
Securities and Exchange Commission is currently considering the propriety of
such a policy.
With respect to the redemption or repurchase of shares of any Series of
the Fund, the application of proceeds to the purchase of new shares in the
Fund and the general administration of the Exchange Privilege, the Transfer
Agent acts as agent for the Distributor and for the shareholder's selected
broker-dealer, if any, in the performance of such functions. With respect to
exchanges, redemptions or repurchases, the Transfer Agent shall be liable for
its own negligence and not for the default or negligence of its
correspondents or for losses in transit. The Fund shall not be liable for any
default or negligence of the Transfer Agent, the Distributor or any selected
broker-dealer.
The Distributor and any selected broker-dealer have authorized and
appointed the Transfer Agent to act as their agent in connection with the
application of proceeds of any redemption of Fund shares to the purchase of
shares of any other Series and the general administration of the Exchange
Privilege. No commission or discounts will be paid to the Distributor or any
selected broker-dealer for any transactions pursuant to this Exchange
Privilege.
The Fund may limit the number of times this Exchange Privilege may be
exercised by any investor within a specified period of time. Also, the
Exchange Privilege may be terminated or revised at any time by the Fund, upon
such notice as may be required by applicable regulatory agencies (presently
sixty days' prior written notice for termination or material revision),
provided that the Exchange Privilege may be terminated or materially revised
without notice at times (a) when the New York Stock Exchange is closed for
other than customary weekends and holidays, (b) when trading on that Exchange
is restricted, (c) when an emergency exists as a result of which disposal by
the Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, (d) during any other period when the Securities and Exchange
Commission by order so permits (provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to
whether the conditions prescribed in (b) or (c) exist), or (e) if the Fund
would be unable to invest amounts effectively in accordance with its
investment objective, policies and restrictions.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other selected broker-dealer account executive or
the Transfer Agent.
42
<PAGE>
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
As discussed in the Prospectus, shares of the Fund may be redeemed at net
asset value on any day the New York Stock Exchange is open (see
"Determination of Net Asset Value"). Redemptions will be effected at the net
asset value per share next determined after the receipt of a redemption
request meeting the applicable requirements discussed in the Prospectus. When
a redemption is made by check and a check is presented to the Transfer Agent
for payment, the Transfer Agent will redeem a sufficient number of full and
fractional shares in the shareholder's account to cover the amount of the
check. This enables the shareholder to continue earning daily income
dividends until the check has cleared.
A check drawn by a shareholder against his or her account in the Fund
constitutes a request for redemption of a number of shares sufficient to
provide proceeds equal to the amount of the check. Payment of the proceeds of
a check will normally be made on the next business day after receipt by the
Transfer Agent of the check in proper form. If a check is presented for
payment to the Transfer Agent by a shareholder or payee in person, the
Transfer Agent will make payment by means of a check drawn on the Fund's
account or, in the case of a shareholder payee, to the shareholder's
predesignated bank account, but will not make payment in cash.
The Fund reserves the right to suspend redemptions or postpone the date of
payment (1) for any periods during which the New York Stock Exchange is
closed (other than for customary weekend and holiday closings), (2) when
trading on that Exchange is restricted or an emergency exists, as determined
by the Securities and Exchange Commission, so that disposal of the Fund's
investments or determination of the Fund's net asset value is not reasonably
practicable, or (3) for such other periods as the Commission by order may
permit for the protection of the Fund's shareholders.
The Transfer Agent acts as agent for shareholders of the Fund in effecting
redemptions of shares of the Fund. In the absence of negligence on its part,
neither the Transfer Agent nor the Fund shall be liable for any redemption of
Fund shares caused by unauthorized telephone or telegraph instructions.
The Prospectus describes redemption procedures by check, telephone or wire
instructions with payment to a predesignated bank account, or by mail.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
Liquid Asset Series and U.S. Government Money Market Series. As discussed
in the Prospectus, dividends from net income on the Liquid Asset and U.S.
Government Money Market Series will be declared payable on each day the New
York Stock Exchange is open for business to shareholders of record as of the
close of business the preceding business day. Net income, for dividend
purposes, includes accrued interest and amortization of original issue and
market discount, less the amortization of market premium and the estimated
expenses of the Series. Net income will be calculated immediately prior to
the determination of net asset value per share of the Series (see
"Determination of Net Asset Value" above and in the Prospectus). The amount
of dividend may fluctuate from day to day and may be omitted on some days if
realized losses on portfolio securities exceed the Series' net investment
income. The Trustees may revise the above dividend policy, or postpone the
payment of dividends, if either Series should have or anticipate any large
unexpected expense, loss or fluctuation in net assets which in the opinion of
the Trustees might have a significant adverse effect on shareholders. On
occasion, in order to maintain a constant $1.00 per share net asset value,
the Trustees may direct that the number of outstanding shares of either
Series be reduced in each shareholder's account. Such reduction may result in
taxable income to a shareholder in excess of the net increase (i.e.,
dividends, less such reductions), if any, in the shareholder's account for a
period. Furthermore, such reduction may be realized as a capital loss when
the shares are liquidated. Any net realized capital gains will be declared
and paid at least once per calendar year, except that net short-term gains
may be paid more frequently, with the distribution of dividends from net
investment income.
Other Series. The dividend policies of the U.S. Government Securities,
Intermediate Income Securities, American Value, Capital Growth, Dividend
Growth, Strategist, Utilities, Value-Added Market and Global Equity Series
are discussed in the Prospectus. In computing interest income, these Series
43
<PAGE>
will not amortize any discount or premium resulting from the purchase of debt
securities except those original issue discounts for which amortization is
required for federal income tax purposes. Gains or losses resulting from
unamortized market discount or premium on securities issued prior to July 19,
1984 will be treated as capital gains or losses when realized. With respect
to market discount on bonds issued after July 18, 1984, a portion of any
capital gain realized upon disposition may be recharacterized as taxable
ordinary income in accordance with the provisions of the Internal Revenue
Code (the "Code"). Dividends, interest and capital gains received by Series
holding foreign securities may give rise to withholding and other taxes
imposed by foreign countries.
Options and Futures. Exchange-traded futures contracts, listed options on
futures contracts and certain listed options are classified as "Section 1256"
contracts under the Code. Unless the Series makes an election as discussed
below, the character of gain or loss resulting from the sale, disposition,
closing out, expiration or other termination of Section 1256 contracts would
generally be treated as long-term capital gain or loss to the extent of 60
percent thereof and short-term capital gain or loss to the extent of 40
percent thereof and such Section 1256 contracts would also be required to be
marked-to-market at the end of the Fund's fiscal year, for purposes of
federal income tax calculations.
Over-the-counter options are not classified as Section 1256 contracts and
are not subject to the mark-to-market or 60 percent-40 percent taxation
rules. When call options written by a Series, or put options purchased by a
Series, are exercised, the gain or loss realized on the sales of the
underlying securities may be either short-term or long-term, depending upon
the holding period of the securities. In determining the amount of gain or
loss, the sales proceeds are reduced by the premium paid for over-the-counter
puts or increased by the premium received for over-the-counter calls.
If a Series holds a security which is offset by a Section 1256 contract,
the Series would by deemed to hold a "mixed straddle" position, as such is
defined in the Code. A Series may elect to identify its mixed straddle
positions pursuant to Section 1256(d) of the Code and thereby avoid
application of both the mark-to-market and 60 percent/40 percent taxation
rules. The Series may also make certain other elections with respect to mixed
straddles which could avoid or limit the application of certain rules which
could, in certain circumstances, cause deferral or disallowance of losses,
change long-term capital gains into short-term capital gains, or change
short-term capital losses into long-term capital losses.
Whether the portfolio security constituting part of the identified mixed
straddle is deemed to have been held for less than three months for purposes
of determining qualification of the Series as a regulated investment company
will be determined generally by the actual holding period of the security. In
certain circumstances, entering into a mixed straddle could result in the
recognition of unrealized gain or loss which would be taken into account in
determining the amount of income available for the Series' distributions, and
can result in an amount which is greater or less than the Series' net
realized gains being available for distribution. If an amount which is less
than the Series' net realized gains is available for distribution, the Series
may elect to distribute more than such available amount, up to the full
amount of such net realized gains. Such a distribution may, in part,
constitute a return of capital to the shareholders. If the Series does not
elect to identify a mixed straddle, no recognition of gain or loss on the
securities in its portfolio will result when the mixed straddle is entered
into. However, any losses realized on the straddle will be governed by a
number of tax rules which might, under certain circumstances, defer or
disallow the losses in whole or in part, change long-term gains into
short-term gains, or change short-term losses into long-term losses. A
deferral or disallowance of recognition of a realized loss may result in an
amount being available for the Series' distributions which is greater than
the Series' net realized gains.
Special Rules for Certain Foreign Currency Transactions (Global Equity
Series). In general, gains from foreign currencies and from foreign currency
options, foreign currency futures and forward foreign exchange contracts
relating to investments in stock, securities or foreign currencies are
currently considered to be qualifying income for purposes of determining
whether the Global Equity Series qualifies as a regulated investment company.
It is currently unclear, however, who will be treated as the issuer of
certain foreign currency instruments or how foreign currency options,
futures, or forward foreign
44
<PAGE>
currency contracts will be valued for purposes of the regulated investment
company diversification requirements applicable to the Series. The Global
Equity Series may request a private letter ruling from the Internal Revenue
Service on some or all of these issues.
Under Code Section 988, special rules are provided for certain
transactions in a foreign currency other than the taxpayer's functional
currency (i.e., unless certain special rules apply, currencies other than the
U.S. dollar). In general, foreign currency gains or losses from forward
contracts, from futures contracts that are not "regulated futures contracts",
and from unlisted options will be treated as ordinary income or loss under
Code Section 988. Also, certain foreign exchange gains or losses derived with
respect to foreign fixed-income securities are also subject to Section 988
treatment. In general, therefore, Code Section 988 gains or losses will
increase or decrease the amount of the Global Equity Series' investment
company taxable income available to be distributed to shareholders as
ordinary income, rather than increasing or decreasing the amount of the
Global Equity Series' net capital gain. Additionally, to the extent that Code
Section 988 losses exceeded other investment company taxable income during a
taxable year, the Global Equity Series' distributions for that year could
constitute a return of capital (i.e., a return of the shareholder's
investment).
If the Global Equity Series invests in an entity which is classified as a
"passive foreign investment company" ("PFIC") for U.S. tax purposes, the
application of certain technical tax provisions applying to such companies
could result in the imposition of federal income tax with respect to such
investments at the Series level which could not be eliminated by
distributions to shareholders. The U.S. Treasury issued proposed regulation
section 1.1291-8 which establishes a mark-to-market regime which allows
investment companies investing in PFICs to avoid most, if not all, of the
difficulties posed by the PFIC rules. In any event, it is not anticipated
that taxes on the Global Equity Series with respect to investments in PFICs
would be significant.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
The annualized current yield of the Liquid Asset Series and U.S.
Government Money Market Series, as may be quoted from time to time in
advertisements and other communications to shareholders and potential
investors, is computed by determining, for a stated seven-day period, the net
change, exclusive of capital changes and including the value of additional
shares purchased with dividends and any dividends declared therefrom, in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the period, subtracting a hypothetical charge which reflects
deductions from shareholder accounts (such as management fees), and dividing
the difference by the value of the account at the beginning of the base
period to obtain the base period return, and then multiplying the base period
return by (365/7).
The Liquid Asset and U.S. Government Money Market Series' annualized
effective yield, as may be quoted from time to time in advertisements and
other communications to shareholders and potential investors, is computed by
determining (for the same stated seven-day period as for the current yield),
the net change, exclusive of capital changes and including the value of
additional shares purchased with dividends and any dividends declared
therefrom, in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, subtracting a
hypothetical charge reflecting deductions from shareholder accounts, and
dividing the difference by the value of the account at the beginning of the
base period to obtain the base period return, and then compounding the base
period return by adding 1, raising the sum to a power equal to 365 divided by
7, and subtracting 1 from the result. The annualized and effective yields for
the seven-days ended July 31, 1996 for the Liquid Asset and U.S. Government
Money Market Series, were as follows: 4.45% and 4.55% for the Liquid Asset
Series; and 4.29% and 4.38% for the U.S. Government Money Market Series. Had
the Series been paying their investment management fees and had the
Investment Manager not been assuming any of their expenses during the period,
the annualized and effective yields for the Liquid Asset and U.S. Government
Money Market Series would have been 4.30% and 4.39%, and 4.24% and 4.33%,
respectively.
45
<PAGE>
As discussed in the Prospectus, from time to time the U.S. Government
Securities and Intermediate Income Securities Series may quote their "yields"
in advertisements and sales literature. Yield is calculated for any 30-day
period as follows: the amount of interest and/or dividend income for each
security in the Series' portfolio is determined in accordance with regulatory
requirements; the total for the entire portfolio constitutes the Series'
gross income for the period. Expenses accrued during the period are
subtracted to arrive at "net investment income". The resulting amount is
divided by the product of the net asset value per share on the last day of
the period multiplied by the average number of Fund shares outstanding during
the period that were entitled to dividends. This amount is added to 1 and
raised to the sixth power. 1 is then subtracted from the result and the
difference is multiplied by 2 to arrive at the annualized yield. For the
30-day period ended July 31, 1996, the yields of the U.S. Government
Securities and Intermediate Income Series were 5.77% and 5.85%, respectively,
calculated pursuant to the above formula. Had these Series been paying their
investment management fees and had the Investment Manager not been assuming
any expenses during the period, the 30-day period yields for the U.S.
Government Securities and the Intermediate Income Securities Series would
have been 5.45% and 4.97%, respectively.
As discussed in the Prospectus, each Series of the Fund may quote its
"total return" in advertisements and sales literature. A Series' "average
annual return" represents an annualization of the Series' total return over a
particular period and is computed by finding the annual percentage rate which
will result in the ending redeemable value of a hypothetical $1,000
investment made at the beginning of a one year period, or for the period from
the date of commencement of the Series' operations, if shorter than any of
the foregoing. For the purpose of this calculation, it is assumed that all
dividends and distributions are reinvested. The formula for computing the
average annual total return involves a percentage obtained by dividing the
ending redeemable value by the amount of the initial investment, taking a
root of the quotient (where the root is equivalent to the number of years in
the period) and subtracting 1 from the result. The average annual total
returns for the period from commencement of the Series' operations through
July 31, 1996 and for the fiscal year ended July 31, 1996 were:
<TABLE>
<CAPTION>
WITHOUT FEE WAIVER AND EXPENSE
ASSUMPTION
AVERAGE ANNUAL AVERAGE ANNUAL
TOTAL RETURN FOR AVERAGE ANNUAL TOTAL RETURN FOR AVERAGE ANNUAL
PERIOD FROM TOTAL RETURN PERIOD FROM TOTAL RETURN FOR
COMMENCEMENT OF FOR FISCAL YEAR COMMENCEMENT OF FISCAL YEAR
COMMENCEMENT OF OPERATIONS THROUGH ENDED JULY 31, OPERATIONS THROUGH ENDED JULY 31,
SERIES OPERATIONS JULY 31, 1996 1996 JULY 31, 1996 1996
------- --------------- ------------------ --------------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
U.S. Government Securities 1/8/93 3.92% 4.49% 3.18% 3.72%
Intermediate Income
Securities ................. 1/12/93 4.20 3.95 3.80 3.18
American Value .............. 2/1/93 11.54 9.83 11.20 9.32
Capital Growth .............. 2/2/93 7.85 14.58 7.36 13.31
Dividend Growth ............. 1/7/93 14.59 16.09 14.32 15.77
Strategist .................. 1/7/93 9.03 16.97 8.69 16.32
Utilities ................... 1/8/93 8.32 8.76 7.65 7.93
Value-Added Market .......... 2/1/93 12.21 11.19 11.91 10.87
Global Equity ............... 1/8/93 5.68 7.26 5.12 6.35
</TABLE>
In addition to the foregoing, a Series may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or
other types of total return figures. A Series may also compute its aggregate
total return for specified periods by determining the aggregate percentage
rate which will result in the ending value of a hypothetical $1,000
investment made at the beginning of the period. For the purpose of this
calculation, it is assumed that all dividends and distributions are
reinvested. The formula for computing aggregate total return involves a
percentage obtained by dividing the ending value by the initial $1,000
investment and subtracting 1 from the result. Based on the foregoing
calculation, the total returns of the period from commencement of operations
through July 31, 1996 and for the fiscal year ended July 31, 1996 were:
46
<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN FOR
TOTAL RETURN FROM FISCAL YEAR
COMMENCEMENT OF OPERATIONS ENDED JULY 31,
SERIES THROUGH JULY 31, 1996 1996
------ -------------------------- ----------------
<S> <C> <C>
U.S. Government Securities .... 14.67% 4.49%
Intermediate Income Securities 15.74 3.95
American Value ................. 46.45 9.83
Capital Growth ................. 30.20 14.58
Dividend Growth ................ 62.42 16.09
Strategist ..................... 36.08 16.97
Utilities ...................... 32.91 8.76
Value-Added Market ............. 49.55 11.19
Global Equity .................. 21.71 7.26
</TABLE>
A Series may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Series by adding 1 to the
Series' aggregate total return to date (expressed as a decimal) and
multiplying by 10,000, 50,000 or 100,000, as the case may be. Investments at
commencement of operations of $10,000, $50,000 and $100,000 in each Series of
the Fund would have grown to the following amounts as of July 31, 1996:
<TABLE>
<CAPTION>
INVESTMENT AT
COMMENCEMENT OF OPERATIONS OF
--------------------------------
SERIES $10,000 $50,000 $100,000
------ -------- --------- ----------
<S> <C> <C> <C>
Liquid Asset ......................$11,759 $58,795 $117,590
U.S. Government Money Market ...... 11,581 57,905 115,810
U.S. Government Securities .... 11,467 57,335 115,810
Intermediate Income Securities 11,574 57,870 115,740
American Value ................. 14,645 73,225 146,450
Capital Growth ................. 13,020 65,100 130,200
Dividend Growth ................ 16,242 81,210 162,420
Strategist ..................... 13,608 68,040 136,080
Utilities ...................... 13,291 66,455 132,910
Value-Added Market ............. 14,955 74,775 149,550
Global Equity .................. 12,171 60,855 121,710
</TABLE>
The yields quoted in any advertisement or other communication should not
be considered a representation of the yields of the Liquid Asset and U.S.
Government Money Market Series in the future since the yield is not fixed.
Actual yields will depend not only on the type, quality and maturities of the
investments held by the Series and changes in interest rates on such
investments, but also on changes in the Series' expenses during the period.
Yield information may be useful in reviewing the performance of the Liquid
Asset and U.S. Government Money Market Series and for providing a basis for
comparison with other investment alternatives. However unlike bank deposits
or other investments which typically pay a fixed yield for a stated period of
time, the Liquid Asset and U.S. Government Money Market Series yields
fluctuate.
The Fund may, from time to time, advertise the performance of a Series
relative to certain performance rankings and indices compiled by independent
organizations.
DESCRIPTION OF SHARES
- -----------------------------------------------------------------------------
As discussed in the Prospectus, the shareholders of each Series of the
Fund are entitled to a full vote for each full share held. The Trustees
themselves have the power to alter the number and the terms of office of the
Trustees as provided for in the Declaration of Trust, and they may at any
time lengthen their own terms or make their terms of unlimited duration and
appoint their own successors, provided that always at least a majority of the
Trustees has been elected by the shareholders of the Fund. Under certain
circumstances, Trustees may be removed by action of the Trustees. The
shareholders also have
47
<PAGE>
the right under certain circumstances to remove the Trustees. The voting
rights of shareholders are not cumulative, so that holders of more than 50
percent of the shares voting can, if they choose, elect all Trustees being
elected, while the holders of the remaining shares would be unable to elect
any Trustees.
The Fund is not required to hold Annual Meetings of Shareholders and, in
ordinary circumstances, the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholders
vote as may be required by the Act or the Fund's Declaration of Trust.
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series (which would be used to distinguish among the rights of
different categories of shareholders). However, the Trustees have not
presently authorized any such additional series or classes of shares.
The Declaration of Trust further provides that no Trustee, officer,
employee or agent of the Fund is liable to the Fund or to a shareholder, nor
is any Trustee, officer, employee or agent liable to any third persons in
connection with the affairs of the Fund, except as such liability may arise
from his/her or its own bad faith, willful misfeasance, gross negligence, or
reckless disregard of his/her or its duties. It also provides that all third
persons shall look solely to the Fund's property for satisfaction of claims
arising in connection with the affairs of the Fund. With the exceptions
stated, the Declaration of Trust provides that a Trustee, officer, employee
or agent is entitled to be indemnified against all liability in connection
with the affairs of the Fund.
The Fund shall be of unlimited duration subject to the provisions in the
Declaration of Trust concerning termination by action of the shareholders.
CUSTODIAN AND TRANSFER AGENT
- -----------------------------------------------------------------------------
The Bank of New York, 90 Washington Street, New York, New York, 10286 is
the Custodian of the Fund's assets. Any of the Fund's cash balances in excess
of $100,000 are unprotected by federal deposit insurance. Such balances may,
at times, be substantial.
Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and
Dividend Disbursing Agent for payment of dividends and distributions of Fund
shares and Agent for shareholders under various investment plans described
herein. Dean Witter Trust Company is an affiliate of Dean Witter InterCapital
Inc., the Fund's Investment Manager, and of Dean Witter Distributors Inc.,
the Fund's Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean
Witter Trust Company's responsibilities include maintaining shareholder
accounts, including providing subaccounting and recordkeeping services for
certain retirement accounts; disbursing cash dividends and distributions and
reinvesting dividends and distributions; processing account registration
changes; handling purchase and redemption transactions; mailing prospectuses
and reports; mailing and tabulating proxies; processing share certificate
transactions; and maintaining shareholder records and lists. For these
services, Dean Witter Trust Company receives a per shareholder account fee
from the Fund.
INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund.
The independent accountants are responsible for auditing the annual financial
statements of each Series of the Fund.
REPORTS TO SHAREHOLDERS
- -----------------------------------------------------------------------------
The Fund, on behalf of each Series, will send to shareholders, at least
semi-annually, reports showing each Series' portfolio and other information.
An annual report, containing financial statements audited by independent
accountants, together with their report, will be sent to shareholders each
year.
48
<PAGE>
The Fund's fiscal year ends on July 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Trustees.
LEGAL COUNSEL
- -----------------------------------------------------------------------------
Sheldon Curtis, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- -----------------------------------------------------------------------------
The annual financial statements of each Series of the Fund for the year
ended July 31, 1996, which are included in this Statement of Additional
Information and incorporated by reference in the Prospectus, have been so
included and incorporated by reference in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.
REGISTRATION STATEMENT
- -----------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
PRINCIPAL SECURITIES HOLDERS
- -----------------------------------------------------------------------------
The following parties held, as of October 1, 1996, five percent or more of
the voting securities of the Series indicated, in the percentage amount
indicated: Boilermaker's Lodge No. 154 Welfare Fund, Attn: Len Spenser/Weaver
Assoc., 1200 Three Gateway Center, Pittsburgh, PA (Liquid Asset Series:
5.2%); DWTC as Custodian for Willdan Assoc. Profit Sharing Plan, Products
401(k) Plan, PO Box 957, Jersey City, NJ (Liquid Asset Series: 6.6%); DWTC as
Trustee for Bulkmatic Transport Company Profit Sharing Plan, PO Box 957,
Jersey City, NJ (Liquid Asset Series: 6.7%); Indian Health Council, P.O. Box
406, Pauma Valley, CA (Liquid Asset Series: 10.5%); Liljenquist Investment
Co. Ltd., a Utah Limited Partnership, 5205 South 300 West, Salt Lake City, UT
(U.S. Government Money Market Series: 10.2%); DWTC as Trustee for Cygnus
401(k) Plan, P.O. Box 957, Jersey City, NJ (U.S. Government Money Market
Series: 5.8%); DWTC as Trustee for Foulke Management Corp 401(k) Plan, P.O.
Box 957, Jersey City, NJ (U.S. Government Securities Series: 13.1%); DWTC as
Trustee for Bulkmatic Transport Company, Profit Sharing Plan, P.O. Box 957,
Jersey City, NJ (U.S. Government Securities Series: 11.7%); Plasma &
Materials Technologie, Attn: John W. Lavelle-CFO, 9255 Deering Avenue,
Chatsworth, CA (U.S. Government Securities Series: 9.8%); DWTC as Trustee for
Private Business Inc., 401(k) Plan, 1242 Old Hillsboro Road, Franklin, TN
(Intermediate Income Securities Series: 11.5%); DWTC as Trustee for VVP
America Inc. Retirement Plan, P.O. Box 957, Jersey City, NJ (American Value
Series: 8.9%); Charles E Behr Trustee of Charles E Behr Trust, DTD 6/30/94,
802 N Ft Harrison Ave, Clearwater, FL (American Value Series: 5.9%); DWTC as
Trustee for Bulkmatic Transport Company, Profit Sharing Plan, P.O. Box 957,
Jersey City, NJ (American Value Series: 6.3%); DWTC as Trustee for St.
Petersburg Kennel Club, 401(k) Plan, P.O. Box 957, Jersey City, NJ (Capital
Growth Series: 11.1%); Dean Witter as Trustee for Private Business Inc.,
401(k) Plan, 1242 Old Hillsboro Road, Franklin, TN (Capital Growth Series:
21.7%); DWTC as Trustee for Van De Kamp's Inc., 401(k) Plan, P.O. Box 957,
Jersey City, NJ (Capital Growth Series: 6.7%); Dean Witter Reynolds Inc. as
Custodian for Candies, for the benefit of Neil Cole and Gary Klein, VIP Plus
401(k) Plan DTD 11/15/95, 2975 Westchester Ave, Purchase, NY (Capital Growth
Series: 5.4%); RPM002 Cozad State Bank & Trust, Profit Sharing Plan DTD
12/5/95,
49
<PAGE>
Investment Manager Capital Growth Fund, Box 2000, Cozad, NE (Capital Growth
Series: 20.4%); The Chase Manhattan Bank, N.A., as Trustee for the benefit of
The NFL Player, Second Career Savings Plan, 3 Chase Metrotech Center,
Brooklyn, NY (Dividend Growth Series: 16.5%); Dean Witter Reynolds as
Custodian, Attn: Vicki Davis, VIP Plus 401(k) Plan DTD 12/23/93, 701 Lee Road
Suite 200, Wayne, PA (Dividend Growth Series: 12.8%); DWTC as Trustee, VVP
America Inc. Retirement Plan, P.O. Box 957, Jersey City, NJ (Dividend Growth
Series: 8.9%); DWTC as Trustee for Pizzagalli Construction, 401(k) Plan,
Harborside Financial Center, Jersey City, NJ (Dividend Growth Series: 9.0%);
DWTC as Trustee, Fenner Manheim Inc, Profit Sharing Plan, P.O. Box 957,
Jersey City, NJ (Strategist Series: 8.6%); DWTC as Trustee, VVP America Inc.
Retirement Plan, P.O. Box 957, Jersey City, NJ (Strategist Series: 17.5%);
DWTC as Trustee for Bulkmatic Transport Company, Profit Sharing Plan, P.O.
Box 957, Jersey City, NJ (Strategist Series: 6.8%); DWTC as Trustee for
Citrus Cannery Local Union, 401(k) Plan, P.O. Box 957, Jersey City, NJ
(Utilities Series: 9.0%); DWTC as Trustee for Zeus 401(k) Pl, P.O. Box 957,
Jersey City, NJ (Utilities Series: 5.3%); DWTC as Trustee for Foulke
Management Corp. 401(k) Plan, P.O. Box 957, Jersey City, NJ (Utilities
Series: 6.8%); DWTC as Trustee, D&H Manufacturing CD 401(k) Plan, P.O. Box
957, Jersey City, NJ (Utilities Series: 6.1%); DWTC as Trustee for Cygnus
401(k) PL, P.O. Box 957, Jersey City, NJ (Value Added Series: 5.5%); DWTC as
Trustee for Sunnyvale Value and Fitting Company, P.O. Box 957, Jersey City,
NJ (Value Added Series: 6.1%).
In addition, at October 1, 1996, InterCapital held 16.0% of the shares of
the Capital Growth Series.
50
<PAGE>
DEAN WITTER RETIREMENT SERIES -LIQUID ASSET
PORTFOLIO OF INVESTMENTS July 31, 1996
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF
THOUSANDS PURCHASE MATURITY DATE VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (83.9%)
Automotive -Finance (9.7%)
$1,675 Ford Motor Credit Co. .......................................... 5.36-5.49% 09/04/96-10/04/96 $1,663,448
2,500 General Motors Acceptance Corp. ................................ 5.43-5.56 09/23/96-11/14/96 2,474,920
-------------
4,138,368
-------------
Bank Holding Companies (15.7%)
1,855 Barnett Banks Inc. ............................................. 5.33-5.36 08/07/96-08/09/96 1,853,305
1,860 Fleet Financial Group, Inc. .................................... 5.36 08/01/96 1,860,000
2,000 PNC Funding Corp. .............................................. 5.45 08/08/96 1,997,892
1,000 U.S. Bancorp ................................................... 5.65 11/05/96 985,200
-------------
6,696,397
-------------
Banks -Commercial (9.3%)
1,500 Canadian Imperial Holdings Inc. ................................ 5.39 08/30/96 1,493,572
500 Dresdner U.S. Finance Inc. ..................................... 5.06 08/26/96 498,288
2,000 National Australia Funding (DE) Inc. ........................... 5.11 08/05/96 1,998,889
-------------
3,990,749
-------------
Brokerage (7.3%)
1,200 Goldman Sachs Group L.P. ....................................... 5.37 08/08/96 1,198,752
1,935 Morgan Stanley Group, Inc. ..................................... 5.35-5.37 08/28/96-09/06/96 1,925,997
-------------
3,124,749
-------------
Canadian Government Agency (3.9%)
1,675 Canadian Wheat Board ........................................... 5.31 08/20/96 1,670,323
-------------
Finance -Consumer (11.4%)
1,900 American Express Credit Corp. .................................. 5.38 08/19/96 1,894,917
1,500 Avco Financial Services Inc. ................................... 5.39 08/14/96 1,497,124
1,500 Norwest Financial, Inc. ........................................ 5.38 08/16/96 1,496,656
-------------
4,888,697
-------------
Finance -Diversified (4.4%)
1,900 Commercial Credit Co. .......................................... 5.37 08/15/96 1,896,054
-------------
Foods & Beverages (5.0%)
1,900 Heinz (H.J.) Co. ............................................... 5.37 08/29/96 1,892,094
250 Unilever Capital Corp. ......................................... 5.48 10/25/96 246,842
-------------
2,138,936
-------------
Healthcare -Diversified (2.2%)
950 SmithKline Beecham Corp. ....................................... 5.36 08/12/96 948,453
-------------
SEE NOTES TO FINANCIAL STATEMENTS
51
<PAGE>
DEAN WITTER RETIREMENT SERIES -LIQUID ASSET
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF
THOUSANDS PURCHASE MATURITY DATE VALUE
- -------------------------------------------------------------------------------------------------------------------------
Office Equipment (9.4%)
$1,000 IBM Credit Corp. ............................................... 5.37% 08/12/96 $ 998,368
1,135 Pitney Bowes Credit Corp. ...................................... 5.37 08/01/96 1,135,000
400 Xerox Corp. .................................................... 5.31 08/02/96 399,941
1,475 Xerox Credit Corp. ............................................. 5.30 08/20/96 1,470,890
-------------
4,004,199
-------------
Retail (1.9%)
800 Sears Roebuck Acceptance Corp. ................................. 5.38 08/23/96 797,404
-------------
Telephones (3.7%)
1,600 AT&T Corp. ..................................................... 5.38 08/22/96 1,595,035
-------------
TOTAL COMMERCIAL PAPER (Amortized Cost $35,889,364) ........................................... 35,889,364
-------------
CERTIFICATES OF DEPOSIT (8.2%)
2,000 Chase Manhattan Bank (USA) ..................................... 5.42 09/03/96 2,000,000
1,500 Union Bank of California, N.A. ................................. 5.47 09/11/96 1,500,000
-------------
TOTAL CERTIFICATES OF DEPOSIT (Amortized Cost $3,500,000) ..................................... 3,500,000
-------------
SHORT-TERM BANK NOTES (5.9%)
1,000 First National Bank of Boston .................................. 5.47 09/13/96 1,000,000
1,500 La Salle National Bank ......................................... 5.43 09/12/96 1,500,000
-------------
TOTAL SHORT-TERM BANK NOTES (Amortized Cost $2,500,000) ....................................... 2,500,000
-------------
U.S. GOVERNMENT AGENCY (2.4%)
1,030 Federal Home Loan Mortgage Corp. (Amortized Cost $1,029,848) ... 5.32 08/02/96 1,029,848
-------------
BANKERS' ACCEPTANCES (1.9%)
833 First National Bank of Boston (Amortized Cost $831,073) ........ 5.42-5.46 08/05/96-09/03/96 831,073
-------------
TOTAL INVESTMENTS
(Amortized Cost $43,750,285) (a) ............................................ 102.3% 43,750,285
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS .............................. (2.3) (997,647)
------ -------------
NET ASSETS .................................................................. 100.0% $42,752,638
====== =============
</TABLE>
- ------------
(a) Cost is the same for federal income tax purposes.
SEE NOTES TO FINANCIAL STATEMENTS
52
<PAGE>
DEAN WITTER RETIREMENT SERIES -U.S. GOVERNMENT MONEY MARKET
PORTFOLIO OF INVESTMENTS July 31, 1996
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF
THOUSANDS PURCHASE MATURITY DATE VALUE
- ----------- --------------------------- ------------ ------------------- ------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCIES (97.8%)
$1,965 Federal Farm Credit Bank .. 5.13-5.37% 08/06/96-09/04/96 $1,959,402
2,975 Federal Home Loan Banks ... 5.22-5.38 08/01/96-08/20/96 2,972,929
950 Federal National Mortgage
Assoc. ..................... 5.25-5.29 08/12/96-08/29/96 947,652
600 Tennessee Valley Authority 5.23 08/02/96 599,913
------------
TOTAL U.S. GOVERNMENT AGENCIES
(Amortized Cost $6,479,896) ................................. 6,479,896
------------
U.S. GOVERNMENT OBLIGATION (2.2%)
150 U.S. Treasury Bill
(Amortized Cost $148,319) . 5.53 10/17/96 148,319
------------
TOTAL INVESTMENTS
(Amortized Cost $6,628,215) (a) ........ 100.0% 6,628,215
LIABILITIES IN EXCESS OF CASH AND OTHER
ASSETS .................................. -- (438)
------ ------------
NET ASSETS .............................. 100.0% $6,627,777
====== ============
</TABLE>
- ------------
(a) Cost is the same for federal income tax purposes.
SEE NOTES TO FINANCIAL STATEMENTS
53
GE>
DEAN WITTER RETIREMENT SERIES -U.S. GOVERNMENT SECURITIES
PORTFOLIO OF INVESTMENTS July 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS COUPON RATE MATURITY DATE VALUE
- ----------- --------------------------- ----------- ----------------- ------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT & AGENCIES OBLIGATIONS (93.8%)
Government National
Mortgage Assoc. I (41.9%)
$2,864 ............................ 7.00% 06/15/23-11/15/25 $2,738,773
906 ............................ 7.50 01/15/24-06/15/24 890,021
------------
3,628,794
------------
1,014 Government National
Mortgage Assoc. II (11.2%) 7.00 03/20/26 964,921
------------
U.S. Treasury Notes (25.9%)
800 ............................ 5.75 09/30/97 797,750
100 ............................ 6.00 11/30/97 99,922
1,380 ............................ 5.75 10/31/00 1,340,325
------------
2,237,997
------------
U.S. Treasury Principal Strips (14.8%)
100 ............................ 0.00 08/15/96 99,797
500 ............................ 0.00 05/15/97 477,898
800 ............................ 0.00 08/15/98 705,558
------------
1,283,253
------------
TOTAL U.S. GOVERNMENT & AGENCIES OBLIGATIONS
(Identified Cost $8,342,593) ............................. 8,114,965
------------
SHORT-TERM INVESTMENTS (a) (5.8%)
U.S. GOVERNMENT OBLIGATIONS
500 U.S. Treasury Bills
(Amortized Cost $500,000) . 4.76-4.78 08/01/96 500,000
------------
TOTAL INVESTMENTS
(Identified Cost $8,842,593) (b) ...... 99.6% 8,614,965
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES ............................ 0.4 35,848
----------------- ------------
NET ASSETS ............................. 100.0% $8,650,813
================= ============
</TABLE>
- ------------
(a) Securities were purchased on a discount basis. The interest rates
shown have been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation was
$61,084 and the aggregate gross unrealized depreciation was
$288,712, resulting in net unrealized depreciation of $227,628.
SEE NOTES TO FINANCIAL STATEMENTS
54
<PAGE>
DEAN WITTER RETIREMENT SERIES -INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS July 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (27.6%)
Automobile -Rentals (2.2%)
$100 Hertz Corp. .................................................... 6.00 % 01/15/03 $ 93,811
------------
Automotive (0.5%)
20 Chrysler Corp. ................................................. 10.40 08/01/99 20,776
------------
Automotive -Finance (0.6%)
25 General Motors Acceptance Corp. ................................ 8.40 10/15/99 26,105
------------
Bank Holding Companies (0.6%)
25 Star Bank N.A. ................................................. 6.375 03/01/04 23,626
------------
Banks (7.0%)
100 ABN-AMRO Bank NV (Netherlands) ................................. 7.55 06/28/06 101,237
100 BankAmerica Corp. .............................................. 6.20 02/15/06 91,384
100 Santander Financial Issuances (Cayman Islands) ................. 7.75 05/15/05 101,312
------------
293,933
------------
Brokerage (2.4%)
100 Bear Stearns Companies, Inc. ................................... 6.75 08/15/00 99,084
------------
Electronics -Semiconductors (2.2%)
100 Texas Instruments, Inc. ........................................ 6.125 02/01/06 91,907
------------
Foreign Government (3.4%)
50 Republic of Indonesia .......................................... 7.75 08/01/06 49,879
100 State of Israel ................................................ 6.375 12/15/05 92,265
------------
142,144
------------
Healthcare (0.6%)
25 Columbia/HCA Healthcare Corp. .................................. 6.87 09/15/03 24,591
------------
Industrials (2.3%)
100 Comdisco, Inc. ................................................. 5.75 02/15/01 95,023
------------
Manufacturing (1.1%)
50 Reebok International Ltd. (United Kingdom) ..................... 6.75 09/15/05 47,236
------------
Paper & Forest Products (2.3%)
100 Noranda Forest, Inc. (Canada) .................................. 6.875 11/15/05 94,805
------------
Textiles (0.6%)
25 Burlington Industries, Inc. .................................... 7.25 09/15/05 23,417
------------
SEE NOTES TO FINANCIAL STATEMENTS
55
<PAGE>
DEAN WITTER RETIREMENT SERIES -INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------
Tobacco (0.6%)
$ 25 RJR Nabisco, Inc. .............................................. 8.75 % 08/15/05 $ 24,543
------------
Transportation (1.2%)
50 Union Pacific Corp. ............................................ 7.375 05/15/01 50,528
------------
TOTAL CORPORATE BONDS
(Identified Cost $1,184,627) ....................................................... 1,151,529
------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (69.5%)
100 Federal Home Loan Mortgage Corp. ............................... 6.905 06/11/99 100,051
500 U.S. Treasury Note ............................................. 7.25 11/15/96 502,266
5 U.S. Treasury Note ............................................. 6.375 06/30/97 5,020
1,250 U.S. Treasury Note ............................................. 7.125 09/30/99 1,274,023
100 U.S. Treasury Note ............................................. 5.75 10/31/00 97,125
100 U.S. Treasury Note ............................................. 6.25 02/15/03 97,859
150 U.S. Treasury Note ............................................. 5.75 08/15/03 142,219
650 U.S. Treasury Note ............................................. 7.50 02/15/05 680,672
------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Identified Cost $2,985,177) ....................................................... 2,899,235
------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $4,169,804) (a) ........................................ 97.1% 4,050,764
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES .......................... 2.9 120,952
-------- ------------
NET ASSETS .............................................................. 100.0% $4,171,716
======== ============
</TABLE>
- ------------
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation was
$3,625 and the aggregate gross unrealized depreciation was
$122,665, resulting in net unrealized depreciation of $119,040.
SEE NOTES TO FINANCIAL STATEMENTS
56
<PAGE>
DEAN WITTER RETIREMENT SERIES -AMERICAN VALUE
PORTFOLIO OF INVESTMENTS July 31, 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
COMMON STOCKS (81.4%)
<S> <C> <C>
Aerospace (3.7%)
8,000 Boeing Co. ..................................................... $ 708,000
3,500 Lockheed Martin Corp. .......................................... 290,062
5,000 Raychem Corp. .................................................. 330,625
5,000 Sundstrand Corp. ............................................... 180,625
-------------
1,509,312
-------------
Agriculture Related (1.6%)
8,000 AGCO Corp. ..................................................... 162,000
5,000 Case Corp. ..................................................... 221,250
5,000 Pioneer Hi-Bred International, Inc. ............................ 268,750
-------------
652,000
-------------
Apparel (0.8%)
4,000 Jones Apparel Group, Inc.* ..................................... 206,000
3,000 St. John Knits, Inc. ........................................... 118,500
-------------
324,500
-------------
Auto Related (0.7%)
3,000 Harley-Davidson, Inc. .......................................... 123,000
5,000 Lear Corp.* .................................................... 170,000
-------------
293,000
-------------
Banks (1.8%)
5,000 First Bank System, Inc. ........................................ 306,250
5,000 NationsBank Corp. .............................................. 429,375
-------------
735,625
-------------
Banks -Money Center (2.1%)
5,000 BankAmerica Corp. .............................................. 398,750
5,500 Citicorp ....................................................... 450,312
-------------
849,062
-------------
Beverages -Soft Drinks (2.8%)
6,000 Coca Cola Co. .................................................. 281,250
8,000 Coca-Cola Enterprises, Inc. .................................... 282,000
5,000 Panamerican Beverages, Inc. (Class A) (Mexico) ................. 215,625
11,000 PepsiCo Inc. ................................................... 347,875
-------------
1,126,750
-------------
Biotechnology (0.2%)
4,000 IDEC Pharmaceuticals Corp.* .................................... 61,000
-------------
Brokerage (1.1%)
2,000 Merrill Lynch & Co., Inc. ...................................... 120,750
6,700 Morgan Stanley Group, Inc. ..................................... 326,625
-------------
447,375
-------------
Chemicals (2.5%)
9,900 Cytec Industries, Inc.* ........................................ $ 297,000
17,500 Monsanto Co. ................................................... 546,875
5,000 Witco Corp. .................................................... 145,000
-------------
988,875
-------------
Communications -Equipment &
Software (2.8%)
2,000 Ascend Communications, Inc.* ................................... 96,750
3,000 Cascade Communications Corp.* .................................. 184,125
4,000 Cisco Systems, Inc.* ........................................... 207,000
4,000 Pairgain Technologies, Inc.* ................................... 220,000
6,000 Tellabs, Inc.* ................................................. 358,500
1,000 U.S. Robotics Corp.* ........................................... 53,750
-------------
1,120,125
-------------
Computer Services (3.4%)
2,000 BDM International Inc.* ........................................ 103,000
3,000 Cambridge Technology Partners, Inc.* ........................... 78,375
1,000 CBT Group PLC (ADR)* (Ireland) ................................. 43,000
2,000 Computer Sciences Corp.* ....................................... 136,000
4,000 Dendrite International, Inc.* .................................. 111,000
4,000 DST Systems, Inc.* ............................................. 114,000
3,171 First Data Corp. ............................................... 246,149
2,000 HNC Software, Inc.* ............................................ 50,000
3,000 Keane, Inc.* ................................................... 112,500
1,200 Onewave, Inc.* ................................................. 18,000
3,000 Reuters Holdings PLC (ADR) (United Kingdom) .................... 187,875
6,000 Sterling Commerce, Inc.* ....................................... 189,750
-------------
1,389,649
-------------
Computer Software (2.5%)
4,000 Baan Company NV* (Netherlands) ................................. 118,500
3,000 BMC Software, Inc.* ............................................ 190,500
6,000 Cognos, Inc.* (Canada) ......................................... 120,000
3,000 Computer Associates International, Inc. ......................... 152,625
1,000 Microsoft Corp.* ............................................... 117,750
1,000 Peoplesoft, Inc.* .............................................. 67,500
3,000 Rational Software Corp.* ....................................... 131,625
2,000 Security Dynamics Technologies, Inc.* .......................... 123,000
200 Siebel Systems, Inc.* .......................................... 5,800
-------------
1,027,300
-------------
SEE NOTES TO FINANCIAL STATEMENTS
57
<PAGE>
DEAN WITTER RETIREMENT SERIES -AMERICAN VALUE
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
Conglomerates (2.4%)
6,100 General Electric Co. ........................................... $ 502,487
4,000 United Technologies Corp. ...................................... 450,500
-------------
952,987
-------------
Consumer/Business Services (2.3%)
6,500 Apollo Group, Inc. (Class A)* .................................. 178,750
14,000 National Education Corp.* ...................................... 211,750
3,000 Reynolds & Reynolds Co. (Class A) .............................. 145,125
7,000 Service Corp. International .................................... 385,875
-------------
921,500
-------------
Consumer Products (3.3%)
5,000 Anheuser-Busch Companies, Inc. ................................. 373,750
6,000 Avon Products, Inc. ............................................ 264,000
5,000 Gillette Co. ................................................... 318,125
6,000 Mondavi (Robert) Corp. (The) (Class A)* ........................ 165,000
10,000 Sunbeam Corporation, Inc. ...................................... 192,500
-------------
1,313,375
-------------
Energy (1.9%)
8,000 Apache Corp. ................................................... 227,000
1,000 Chesapeake Energy Corp.* ....................................... 49,625
3,000 Louisiana Land & Exploration Co. 162,000
6,000 Western Atlas, Inc.* ........................................... 325,500
-------------
764,125
-------------
Entertainment/Gaming & Lodging (6.4%)
8,000 Callaway Golf Co. .............................................. 240,000
10,000 Cannondale Corp.* .............................................. 192,500
8,000 Circus Circus Enterprises, Inc.* ............................... 246,000
13,000 International Game Technology .................................. 227,500
6,000 ITT Corp.* ..................................................... 340,500
6,000 Marriot International, Inc. .................................... 308,250
10,000 MGM Grand, Inc.* ............................................... 373,750
14,000 Mirage Resorts, Inc.* .......................................... 315,000
2,000 Showboat, Inc. ................................................. 41,000
8,000 Sodak Gaming, Inc.* ............................................ 308,000
-------------
2,592,500
-------------
Financial -Miscellaneous (2.5%)
9,000 Aames Financial Corp. .......................................... 353,250
8,000 Federal National Mortgage Assoc. ............................... 254,000
1,900 First USA, Inc. ................................................ 92,862
4,000 Household International, Inc. .................................. 298,000
-------------
998,112
-------------
Hardware & Tools (0.2%)
2,000 Black & Decker Corp. ........................................... 73,500
-------------
Healthcare Products & Services (2.9%)
6,000 HBO & Co. ...................................................... $ 366,000
9,000 Health Management Associates, Inc. (Class A)* .................. 181,125
2,000 Healthsouth Corp.* ............................................. 60,750
10,500 PhyCor, Inc.* .................................................. 317,625
2,000 Shared Medical Systems Corp. ................................... 109,500
4,000 Vivra, Inc.* ................................................... 116,500
-------------
1,151,500
-------------
Household Products (2.7%)
4,000 Clorox Co. ..................................................... 363,500
5,000 Kimberly-Clark Corp. ........................................... 380,000
4,000 Procter & Gamble Co. ........................................... 357,500
-------------
1,101,000
-------------
Insurance (2.1%)
5,000 Allstate Corp. ................................................. 223,750
5,000 Conseco Inc. ................................................... 199,375
4,000 Exel Ltd. (Bermuda) ............................................ 133,000
5,000 SunAmerica, Inc. ............................................... 303,750
-------------
859,875
-------------
Manufacturing -Diversified (0.8%)
9,000 Thermo Electron Corp.* ......................................... 336,375
-------------
Media (6.4%)
8,000 Chancellor Broadcasting Co. (Class A)* ......................... 274,000
5,300 Clear Channel Communications, Inc.* ............................ 422,013
7,000 Emmis Broadcasting Corp. (Class A)* ............................ 288,750
6,000 Evergreen Media Corp. (Class A)* ............................... 262,500
5,000 General Motors Corp. (Class H) ................................. 285,000
14,000 Heftel Broadcasting Corp. (Class A)* ........................... 399,000
10,000 Infinity Broadcasting Corp. (Class A)* ......................... 275,000
6,000 Jacor Communications, Inc.* .................................... 183,000
5,000 Sinclair Broadcast Group, Inc. (Class A)* ...................... 201,250
-------------
2,590,513
-------------
Medical Supplies (1.5%)
3,000 Becton, Dickinson & Co. ........................................ 223,875
5,500 Guidant Corp. .................................................. 279,125
3,000 Target Therapeutics, Inc.* ..................................... 94,500
-------------
597,500
-------------
58
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES -AMERICAN VALUE
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
Oil Equipment & Services (5.7%)
6,000 Baker Hughes, Inc. ............................................. $ 176,250
5,000 BJ Services Co.* ............................................... 165,625
8,300 Diamond Offshore Drilling, Inc.* ............................... 392,175
3,000 Dresser Industries, Inc. ....................................... 81,000
8,000 Falcon Drilling Company, Inc.* ................................. 166,000
10,000 Global Marine, Inc.* ........................................... 133,750
3,000 Halliburton Co. ................................................ 156,375
10,000 Marine Drilling Company, Inc.* ................................. 83,750
11,000 Reading & Bates Corp.* ......................................... 224,125
6,000 Rowan Companies, Inc.* ......................................... 86,250
4,000 Schlumberger, Ltd. ............................................. 320,000
6,000 Smith International, Inc.* ..................................... 201,000
2,000 Sonat Offshore Drilling, Inc. .................................. 98,000
-------------
2,284,300
-------------
Pharmaceuticals (3.9%)
8,000 American Home Products Corp. ................................... 454,000
3,500 Johnson & Johnson .............................................. 167,125
8,000 Lilly (Eli) & Co. .............................................. 448,000
7,000 Pfizer, Inc. ................................................... 489,125
-------------
1,558,250
-------------
Restaurants (0.2%)
3,500 Starbucks Corp.* ............................................... 91,000
-------------
Retail -Department Stores (1.2%)
3,000 Dayton-Hudson Corp. ............................................ 90,750
7,000 Federated Department Stores, Inc.* ............................. 211,750
6,000 Kohl's Corp.* .................................................. 188,250
-------------
490,750
-------------
Retail -Food Chains (3.9%)
8,000 Albertson's, Inc. .............................................. 328,000
6,000 American Stores Co. ............................................ 223,500
13,000 Safeway, Inc.* ................................................. 468,000
14,000 Vons Companies, Inc.* .......................................... 554,750
-------------
1,574,250
-------------
Retail -General Merchandise (0.3%)
3,000 Sears, Roebuck & Co. ........................................... 123,000
-------------
Retail -Specialty (1.7%)
2,000 Gucci Group NV (Italy) ......................................... 113,500
3,000 Home Depot, Inc. ............................................... 151,500
6,000 Pacific Sunwear of California, Inc.* ............................. 109,500
8,500 Price/Costco, Inc.* ............................................ 173,188
4,000 Tiffany & Co. .................................................. 131,500
-------------
679,188
-------------
Shoes (0.8%)
2,000 Fila Holding SpA (ADR) (Italy) ................................. $ 161,250
1,500 Nike, Inc. (Class B) ........................................... 154,313
-------------
315,563
-------------
Telecommunications (1.5%)
11,000 MFS Communications Company, Inc.* .............................. 346,502
10,000 WorldCom, Inc.* ................................................ 258,750
-------------
605,252
-------------
Tobacco (0.8%)
3,000 Philip Morris Companies, Inc. .................................. 313,875
-------------
TOTAL COMMON STOCKS
(Identified Cost $31,720,261) .................................. 32,812,863
-------------
PREFERRED STOCK (0.5%)
Computer Software
1,300 SAP AG (Germany) (Identified Cost $201,436) .................... 185,840
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
--------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (A) (20.7%)
<S> <C> <C>
U.S. GOVERNMENT AGENCY
Federal Home Loan Banks 5.62% due 08/01/96 (Amortized Cost
$8,350 $8,350,000) .................................................... 8,350,000
------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $40,271,697) (b) 102.6% 41,348,703
LIABILITIES IN EXCESS OF CASH AND
OTHER ASSETS ..................... (2.6) (1,027,339)
-------- -------------
NET ASSETS ....................... 100.0% $40,321,364
======== =============
</TABLE>
- ------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown
has been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes is $40,341,168;
the aggregate gross unrealized appreciation is $2,104,967 and the
aggregate gross unrealized depreciation is $1,097,432, resulting in
net unrealized appreciation of $1,007,535.
SEE NOTES TO FINANCIAL STATEMENTS
59
<PAGE>
DEAN WITTER RETIREMENT SERIES -CAPITAL GROWTH
PORTFOLIO OF INVESTMENTS July 31, 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (89.9%)
Advertising (2.0%)
900 Interpublic Group of Companies, Inc. ........................... $ 39,712
------------
Apparel (2.1%)
800 Cintas Corp.* .................................................. 40,800
------------
Automotive -Replacement Parts (2.1%)
1,000 Genuine Parts Co. .............................................. 42,375
------------
Banking (1.6%)
600 Fifth Third Bancorp. ........................................... 31,050
------------
Beverages -Soft Drinks (2.4%)
1,000 Coca Cola Co. .................................................. 46,875
------------
Business Systems (2.1%)
800 Electronic Data Systems Corp. .................................. 42,300
------------
Chemicals -Specialty (2.1%)
800 Sigma-Aldrich Corp. ............................................ 41,600
------------
Commercial Services (1.0%)
350 Affiliated Computer Services, Inc.* ............................ 18,900
------------
Communications -
Equipment & Software (3.2%)
500 Cisco Systems, Inc.* ........................................... 25,875
400 Tellabs, Inc.* ................................................. 23,900
250 U.S. Robotics Corp.* ........................................... 13,437
------------
63,212
------------
Computer Services (3.3%)
1,000 Automatic Data Processing, Inc. ................................ 39,625
800 Sterling Commerce, Inc.* ....................................... 25,300
------------
64,925
------------
Computer Software (4.7%)
900 Computer Associates International, Inc. ........................ 45,787
400 Microsoft Corp.* ............................................... 47,100
------------
92,887
------------
Consumer Business Services (2.2%)
800 Service Corp. International .................................... 44,100
------------
Drugs (2.2%)
800 Schering-Plough Corp. .......................................... 44,100
------------
Drugs & Healthcare (2.4%)
1,100 Abbott Laboratories ............................................ 48,400
------------
Electronics (4.0%)
1,200 Dionex Corp.* .................................................. 41,700
850 Harman International Industries, Inc. .......................... 38,144
------------
79,844
------------
Environmental Control (0.5%)
400 United Waste Systems, Inc. ..................................... $ 10,200
------------
Financial -Miscellaneous (7.1%)
1,500 Federal National Mortgage Assoc. ............................... 47,625
1,000 Green Tree Financial Corp. ..................................... 33,625
450 Household International, Inc. .................................. 33,525
1,000 Primark Corp.* ................................................. 27,000
------------
141,775
------------
Food Wholesalers (2.0%)
1,400 Sysco Corp. .................................................... 40,600
------------
Foods (3.4%)
1,100 ConAgra, Inc. .................................................. 46,750
400 Wrigley (Wm.) Jr. Co. (Class A) ................................ 20,650
------------
67,400
------------
Gaming (1.7%)
1,100 Circus Circus Enterprises, Inc.* ............................... 33,825
------------
Gold Mining (2.0%)
1,400 Barrick Gold Corp. (Canada) .................................... 39,025
------------
Home Building (2.1%)
2,400 Clayton Homes, Inc. ............................................ 42,000
------------
Hotels/Motels (3.3%)
400 HFS, Inc.* ..................................................... 24,000
2,250 La Quinta Inns, Inc. ........................................... 41,062
------------
65,062
------------
Household Furnishings &
Appliances (1.6%)
1,550 Heilig-Meyers Co. .............................................. 31,775
------------
Insurance (2.1%)
450 American International Group, Inc. ............................. 42,356
------------
Manufacturing (1.6%)
1,450 Federal Signal Corp. ........................................... 31,900
------------
Manufacturing -Diversified (4.0%)
900 Sherwin-Williams Co. ........................................... 40,725
1,050 Thermo Electron Corp.* ......................................... 39,244
------------
79,969
------------
Media (2.0%)
500 Clear Channel Communications, Inc.* ............................ 39,813
------------
Medical Products & Supplies (2.1%)
900 Medtronic Inc . ................................................. 42,638
------------
Oil & Gas Products (1.1%)
700 Input/Output, Inc.* ............................................ 22,050
------------
Pharmaceuticals (2.4%)
1,000 Johnson & Johnson .............................................. 47,750
------------
SEE NOTES TO FINANCIAL STATEMENTS
60
<PAGE>
DEAN WITTER RETIREMENT SERIES -CAPITAL GROWTH
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
Restaurants (0.8%)
1,260 Brinker International, Inc.* ................................... $ 16,538
------------
Retail -Department Stores (2.2%)
1,800 Wal-Mart Stores, Inc. .......................................... 43,200
------------
Retail -Drugs Stores (2.2%)
1,400 Walgreen Co. ................................................... 44,450
------------
Retail -Food Chains (2.3%)
1,100 Albertson's, Inc. .............................................. 45,100
------------
Retail -Specialty (3.9%)
900 Home Depot, Inc. ............................................... 45,450
1,900 Staples, Inc.* ................................................. 31,350
------------
76,800
------------
Utilities (2.1%)
3,768 Citizens Utilities Co. (Series A)* (Note 3) .................... 41,448
------------
TOTAL COMMON STOCKS (Identified Cost $1,678,590) ............... 1,786,754
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) (14.8%)
<S> <C> <C>
U.S. GOVERNMENT AGENCIES
$175 Federal Farm Credit Bank
5.22% due 08/01/96 ............................................. 175,000
120 Federal Home Loan Banks
5.62% due 08/01/96 ............................................. 120,000
------------
TOTAL SHORT-TERM INVESTMENTS
(Amortized Cost $295,000) ...................................... 295,000
------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $1,973,590) (b) 104.7% 2,081,754
LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS ................ (4.7) (93,901)
-------- -----------
NET ASSETS ...................... 100.0% $1,987,853
======== ===========
</TABLE>
- ------------
* Non-income producing security.
(a) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes is $1,978,342; the
aggregate gross unrealized appreciation is $166,642 and the aggregate gross
unrealized depreciation is $63,230, resulting in net unrealized
appreciation of $103,412.
SEE NOTES TO FINANCIAL STATEMENTS
61
<PAGE>
DEAN WITTER RETIREMENT SERIES -DIVIDEND GROWTH
PORTFOLIO OF INVESTMENTS July 31, 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (98.1%)
Aerospace (2.7%)
39,000 Raytheon Co. ................................................... $1,891,500
-------------
Aluminum (2.6%)
31,000 Aluminum Co. of America ........................................ 1,798,000
-------------
Automotive (5.3%)
64,000 Chrysler Corp. ................................................. 1,816,000
57,200 Ford Motor Co. ................................................. 1,859,000
-------------
3,675,000
-------------
Banks (2.7%)
21,700 NationsBank Corp. .............................................. 1,863,487
-------------
Banks -Money Center (2.7%)
23,500 BankAmerica Corp. .............................................. 1,874,125
-------------
Beverages -Soft Drinks (2.5%)
56,000 PepsiCo Inc. ................................................... 1,771,000
-------------
Chemicals (5.2%)
23,000 Du Pont (E.I.) de Nemours & Co., Inc. .......................... 1,857,250
34,100 Eastman Chemical Co. ........................................... 1,781,725
-------------
3,638,975
-------------
Computers -Systems (2.7%)
17,500 International Business Machines Corp. .......................... 1,887,812
-------------
Conglomerates (5.2%)
2,700 Imation Corp.* ................................................. 61,425
27,000 Minnesota Mining & Manufacturing Co. ........................... 1,755,000
37,000 Tenneco, Inc. .................................................. 1,822,250
-------------
3,638,675
-------------
Drugs (2.5%)
20,200 Bristol-Myers Squibb Co. ....................................... 1,749,825
-------------
Drugs & Healthcare (2.6%)
42,000 Abbott Laboratories ............................................ 1,848,000
-------------
Electric -Major (2.6%)
21,900 General Electric Co. ........................................... 1,804,012
-------------
Energy (2.6%)
31,500 Kerr-McGee Corp. ............................................... 1,795,500
-------------
Foods (5.2%)
56,000 Quaker Oats Company (The) ...................................... 1,792,000
12,700 Unilever NV (ADR) (Netherlands) ................................ 1,806,575
-------------
3,598,575
-------------
Machinery -Agricultural (2.5%)
50,000 Deere & Co. .................................................... 1,787,500
-------------
Manufacturing -Diversified (5.2%)
34,800 Honeywell, Inc. ................................................ $1,844,400
48,500 Timken Co. ..................................................... 1,776,313
-------------
3,620,713
-------------
Metals & Mining (2.6%)
30,500 Phelps Dodge Corp. ............................................. 1,791,875
-------------
Natural Gas (2.5%)
44,000 Enron Corp. .................................................... 1,732,500
-------------
Office Equipment (2.6%)
38,000 Pitney Bowes, Inc. ............................................. 1,843,000
-------------
Oil -Domestic (5.2%)
26,400 Amoco Corp. .................................................... 1,765,500
50,000 Ashland, Inc. .................................................. 1,831,250
-------------
3,596,750
-------------
Oil Integrated -International (2.6%)
22,000 Exxon Corp. .................................................... 1,809,500
-------------
Paper & Forest Products (2.6%)
43,000 Weyerhaeuser Co. ............................................... 1,795,250
-------------
Photography (2.7%)
25,000 Eastman Kodak Co. .............................................. 1,865,625
-------------
Railroads (2.7%)
38,800 CSX Corp. ...................................................... 1,872,100
-------------
Retail -Department Stores (2.7%)
42,400 May Department Stores Co. ...................................... 1,902,700
-------------
Retail -Food Chains (2.6%)
49,500 American Stores Co. ............................................ 1,843,875
-------------
Telecommunications (2.6%)
49,500 Sprint Corp. ................................................... 1,812,938
-------------
Telephones (2.5%)
30,200 Bell Atlantic Corp. ............................................ 1,785,575
-------------
Tobacco (2.6%)
17,200 Philip Morris Companies, Inc. .................................. 1,799,550
-------------
Utilities -Electric (6.8%)
78,000 Houston Industries, Inc. ....................................... 1,764,750
56,000 New England Electric System .................................... 1,771,000
61,500 Pacific Gas & Electric Co. ..................................... 1,214,625
-------------
4,750,375
-------------
TOTAL COMMON STOCKS
(Identified Cost $61,143,388) .................................. 68,444,312
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
62
<PAGE>
DEAN WITTER RETIREMENT SERIES -DIVIDEND GROWTH
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (a) (2.4%)
U.S. GOVERNMENT AGENCY
$1,700 Federal Home Loan Banks 5.62% due 08/01/96 (Amortized Cost $1,700,000
$1,700,000) ....................................................
------------
</TABLE>
<TABLE>
<CAPTION>
TOTAL INVESTMENTS
(IDENTIFIED COST $62,843,388) (b) 100.5% 70,144,312
<S> <C> <C>
LIABILITIES IN EXCESS OF CASH AND
OTHER ASSETS ...................... (0.5) (381,700)
-------- ------------
NET ASSETS ........................ 100.0% $69,762,612
======== ============
</TABLE>
- ------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown
has been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes is $62,918,003;
the aggregate gross unrealized appreciation is $8,841,457 and the
aggregate gross unrealized depreciation is $1,615,148, resulting in
net unrealized appreciation of $7,226,309.
SEE NOTES TO FINANCIAL STATEMENTS
63
<PAGE>
DEAN WITTER RETIREMENT SERIES -UTILITIES
PORTFOLIO OF INVESTMENTS July 31, 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (81.7%)
Natural Gas (16.6%)
10,000 American Water Works Company, Inc. ............................. $ 198,750
5,000 Enron Corp. .................................................... 196,875
5,500 MCN Corp. ...................................................... 129,250
5,000 NorAm Energy Corp. ............................................. 54,375
5,000 Pacific Enterprises ............................................ 146,875
3,500 PanEnergy Corp. ................................................ 111,125
4,000 Questar Corp. .................................................. 126,000
2,500 Sonat, Inc. .................................................... 106,562
2,000 Tenneco, Inc. .................................................. 98,500
2,000 Williams Companies, Inc. ....................................... 91,750
-----------
1,260,062
-----------
Telecommunications (35.8%)
5,000 360 Communications Co.* ........................................ 115,625
3,000 Airtouch Communications, Inc.* ................................. 82,500
5,000 Alcatel Alsthom (ADR) (France) ................................. 81,250
4,000 Alltel Corp. ................................................... 109,500
2,000 AT&T Corp. ..................................................... 104,250
3,000 BellSouth Corp. ................................................ 123,000
3,000 Cable & Wireless PLC (ADR) (United Kingdom) .................... 56,625
2,500 Century Telephone Enterprises, Inc. ............................ 79,687
5,000 Comcast Corp. (Class A Special) ................................ 70,625
4,500 Frontier Corp. ................................................. 126,562
3,500 GTE Corp. ...................................................... 144,375
4,000 IntelCom Group, Inc.* .......................................... 77,000
4,000 LCI International, Inc.* ....................................... 121,000
5,000 Liberty Media Group (Class A)* ................................. 110,000
4,200 MCI Communications Corp. ....................................... 102,900
7,000 Metromedia International Group Inc.* ........................... 71,750
2,000 SBC Communications, Inc. ....................................... 97,750
3,000 Sprint Corp. ................................................... 109,875
3,000 Tele Danmark AS (ADR) (Denmark) ................................ 70,125
5,000 Telefonica de Argentina S.A. (ADR) (Argentina) ................. 116,875
3,000 Telefonica de Espana S.A. (ADR) (Spain) ........................ 156,750
2,000 Telefonos de Mexico S.A. de C.V. (Series L) (ADR) (Mexico) ..... 61,250
3,000 Telephone & Data Systems, Inc. ................................. 115,875
2,700 Teleport Communications Group Inc. (Class A)* .................. 41,850
5,000 U.S. West Media Group* ......................................... $ 86,250
3,000 Vodafone Group PLC (ADR) (United Kingdom) ...................... 107,250
7,000 WorldCom, Inc.* ................................................ 181,125
-----------
2,721,624
-----------
Utilities -Electric (29.3%)
3,000 Central & South West Corp. ..................................... 80,250
3,000 CINergy Corp. .................................................. 88,875
4,000 CMS Energy Corp. ............................................... 121,500
4,000 DPL, Inc. ...................................................... 90,500
4,050 DQE, Inc. ...................................................... 110,869
2,500 Duke Power Co. ................................................. 119,687
6,000 Edison International ........................................... 93,000
3,000 Enersis S.A. (ADR) (Chile) ..................................... 91,500
4,000 Entergy Corp. .................................................. 102,000
5,000 General Public Utilities Corp. ................................. 162,500
4,000 Illinova Corp. ................................................. 103,000
3,500 NIPSCO Industries, Inc. ........................................ 130,813
4,000 Northwestern Public Service Co. ................................ 109,500
3,500 PacifiCorp ..................................................... 73,063
5,000 Peco Energy Co. ................................................ 117,500
3,000 Pinnacle West Capital Corp. .................................... 84,750
3,000 Public Service Company of Colorado ............................. 106,125
Public Service Company of
5,000 New Mexico ..................................................... 99,375
4,000 Teco Energy, Inc. .............................................. 93,000
2,800 Unicom Corp. ................................................... 65,800
3,000 Utilicorp United, Inc. ......................................... 80,625
3,500 Western Resources, Inc. ........................................ 100,188
-----------
2,224,420
-----------
TOTAL COMMON STOCKS
(Identified Cost $5,593,805) ................................... 6,206,106
-----------
PREFERRED STOCKS (1.8%)
Utilities -Electric
2,000 Alabama Power Capital Trust I (Series Q) $1.84 ................. 47,000
1,000 Duquesne Capital LP (Series A) $2.09 ........................... 24,625
1,500 Public Service Electric & Gas Co. $2.00 ........................ 36,938
1,000 Virginia Power Capital $2.01 ................................... 24,875
-----------
TOTAL PREFERRED STOCKS
(Identified Cost $137,264) ..................................... 133,438
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
64
<PAGE>
DEAN WITTER RETIREMENT SERIES -UTILITIES
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BOND (0.6%)
Telecommunications
Southwestern Bell Telephone Co. 7.25% due 07/15/25 (Identified
$50 Cost $51,438) .................................................. $ 46,894
----------
U.S. GOVERNMENT AGENCY (0.3%)
Tennessee Valley Authority
25 8.00% due 03/31/45 (Identified Cost $25,000) ................... 25,375
----------
SHORT-TERM INVESTMENTS (a) (14.5%)
U.S. GOVERNMENT AGENCIES
500 Federal Home Loan Banks 5.62% due 08/01/96 ..................... 500,000
600 Federal Home Loan Mortgage Corp. 5.19% due 08/01/96 ............ 600,000
----------
TOTAL SHORT-TERM INVESTMENTS (Amortized Cost $1,100,000) ....... 1,100,000
----------
</TABLE>
<TABLE>
<CAPTION>
TOTAL INVESTMENTS
(IDENTIFIED COST $6,907,507) (b) 98.9% 7,511,813
<S> <C> <C>
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES ............ 1.1 81,484
-------- -----------
NET ASSETS ....................... 100.0% $7,593,297
======== ===========
</TABLE>
- ------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Securities were purchased on a discount basis. The interest rates
shown have been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes is $6,910,995; the
aggregate gross unrealized appreciation is $794,335 and the aggregate
gross unrealized depreciation is $193,517, resulting in net
unrealized appreciation of $600,818.
SEE NOTES TO FINANCIAL STATEMENTS
65
<PAGE>
DEAN WITTER RETIREMENT SERIES -VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (97.3%)
Aerospace & Defense (1.4%)
445 Boeing Co. ..................................................... $ 39,382
610 General Dynamics Corp. ......................................... 39,040
490 Lockheed Martin Corp. .......................................... 40,609
950 McDonnell Douglas Corp. ........................................ 42,512
620 Northrop Grumman Corp. ......................................... 42,625
850 Raytheon Co. ................................................... 41,225
800 Rockwell International Corp. ................................... 42,000
325 United Technologies Corp. ...................................... 36,603
-------------
323,996
-------------
Airlines (0.7%)
550 AMR Corp.* ..................................................... 43,381
600 Delta Air Lines, Inc. .......................................... 41,925
1,750 Southwest Airlines Co. ......................................... 43,312
2,400 USAir Group, Inc.* ............................................. 43,800
-------------
172,418
-------------
Aluminum (0.4%)
1,200 Alcan Aluminum Ltd. (Canada) ................................... 35,700
700 Aluminum Co. of America ........................................ 40,600
700 Reynolds Metals Co. ............................................ 35,525
-------------
111,825
-------------
Auto Parts -After Market (0.7%)
2,050 Cooper Tire & Rubber Co. ....................................... 38,694
1,300 Echlin, Inc. ................................................... 43,387
860 Genuine Parts Co. .............................................. 36,442
950 Goodyear Tire & Rubber Co. ..................................... 42,037
-------------
160,560
-------------
Automobiles (0.5%)
1,400 Chrysler Corp. ................................................. 39,725
1,150 Ford Motor Co. ................................................. 37,375
900 General Motors Corp. ........................................... 43,875
-------------
120,975
-------------
Banks -Money Center (1.1%)
495 BankAmerica Corp. .............................................. 39,476
530 Bankers Trust New York Corp. ................................... 38,094
600 Chase Manhattan Corp. .......................................... 41,700
500 Citicorp ....................................................... 40,937
1,050 First Chicago NBD Corp. ........................................ 40,425
450 Morgan (J.P.) & Co., Inc. ...................................... 38,700
-------------
239,332
-------------
Banks -Regional (4.1%)
1,100 Banc One Corp. ................................................. 38,087
750 Bank of Boston Corp. ........................................... 39,750
800 Bank of New York Co., Inc. ..................................... 41,200
600 Barnett Banks, Inc. ............................................ $ 36,825
970 Boatmen's Bancshares, Inc. ..................................... 38,679
880 Comerica, Inc. ................................................. 38,610
1,000 Corestates Financial Corp. ..................................... 39,250
700 Fifth Third Bancorp ............................................ 36,225
650 First Bank System, Inc. ........................................ 39,812
650 First Union Corp. .............................................. 41,275
900 Fleet Financial Group, Inc. .................................... 36,450
1,000 KeyCorp ........................................................ 38,625
750 Mellon Bank Corp. .............................................. 39,562
1,050 National City Corp. ............................................ 36,356
490 NationsBank Corp. .............................................. 42,079
1,050 Norwest Corp. .................................................. 37,275
1,280 PNC Bank Corp. ................................................. 37,280
600 Republic New York Corp. ........................................ 38,025
1,000 SunTrust Banks, Inc. ........................................... 36,750
1,075 U.S. Bancorp ................................................... 36,819
850 Wachovia Corp. ................................................. 37,612
160 Wells Fargo & Co. .............................................. 37,260
-------------
843,806
-------------
Beverages -Alcoholic (0.8%)
570 Anheuser-Busch Companies, Inc. ................................. 42,607
1,100 Brown-Forman Corp. (Class B) ................................... 40,425
2,300 Coors (Adolph) Co. ............................................. 42,550
1,130 Seagram Co. Ltd. (Canada) ...................................... 37,572
-------------
163,154
-------------
Beverages -Soft Drinks (0.4%)
870 Coca Cola Co. .................................................. 40,781
1,160 PepsiCo Inc. ................................................... 36,685
-------------
77,466
-------------
Broadcast Media (0.6%)
2,800 Comcast Corp. (Class A Special) ................................ 39,550
2,500 Tele-Communications, Inc. (Class A)* ........................... 35,625
2,300 U.S. West Media Group* ......................................... 39,675
-------------
114,850
-------------
Building Materials (0.6%)
1,400 Masco Corp. .................................................... 39,025
950 Owens-Corning Fiberglas Corp. .................................. 35,981
900 Sherwin-Williams Co. ........................................... 40,725
-------------
115,731
-------------
Chemicals (1.9%)
750 Air Products & Chemicals, Inc. ................................. 40,031
530 Dow Chemical Co. ............................................... 39,419
445 Du Pont (E.I.) de Nemours & Co., Inc. .......................... 35,934
SEE NOTES TO FINANCIAL STATEMENTS
66
<PAGE>
DEAN WITTER RETIREMENT SERIES -VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
750 Eastman Chemical Co. ........................................... $ 39,187
1,150 Goodrich (B.F.) Co. ............................................ 41,687
750 Hercules, Inc. ................................................. 37,594
1,400 Monsanto Co. ................................................... 43,750
1,080 Praxair, Inc. .................................................. 41,445
600 Rohm & Haas Co. ................................................ 35,700
960 Union Carbide Corp. ............................................ 40,320
-------------
395,067
-------------
Chemicals -Diversified (0.8%)
800 Avery Dennison Corp. ........................................... 41,400
2,000 Engelhard Corp. ................................................ 41,000
650 FMC Corp.* ..................................................... 41,925
800 PPG Industries, Inc. ........................................... 39,400
-------------
163,725
-------------
Chemicals -Specialty (0.9%)
650 Grace (W.R.) & Co. ............................................. 41,437
650 Great Lakes Chemical Corp. ..................................... 37,456
1,070 Morton International, Inc. ..................................... 38,520
1,250 Nalco Chemical Co. ............................................. 37,500
700 Sigma-Aldrich Corp. ............................................ 36,400
-------------
191,313
-------------
Communications -
Equipment/Manufacturers (2.0%)
1,050 3Com Corp.* .................................................... 41,344
950 Andrew Corp.* .................................................. 38,475
1,650 Bay Networks, Inc.* ............................................ 37,950
750 Cabletron Systems, Inc.* ....................................... 42,937
780 Cisco Systems, Inc.* ........................................... 40,365
1,250 DSC Communications Corp.* ...................................... 37,187
1,600 General Instrument Corp.* ...................................... 40,200
850 Northern Telecom Ltd. (Canada) ................................. 39,950
3,100 Scientific-Atlanta, Inc. ....................................... 41,462
700 Tellabs, Inc.* ................................................. 41,825
-------------
401,695
-------------
Computer Software & Services (1.9%)
1,500 Autodesk, Inc. ................................................. 34,500
1,000 Automatic Data Processing, Inc. ................................ 39,625
900 Ceridian Corp.* ................................................ 39,150
820 Computer Associates International, Inc. ........................ 41,717
600 Computer Sciences Corp.* ....................................... 40,800
535 First Data Corp. ............................................... 41,529
350 Microsoft Corp.* ............................................... 41,212
3,700 Novell, Inc.* .................................................. 39,312
1,050 Oracle Corp.* .................................................. 40,950
700 Shared Medical Systems Corp. ................................... 38,325
-------------
397,120
-------------
Computers -Systems (2.6%)
4,500 Amdahl Corp.* .................................................. $ 44,437
2,000 Apple Computer, Inc.* .......................................... 43,750
800 COMPAQ Computer Corp.* ......................................... 43,800
4,050 Data General Corp.* ............................................ 42,019
1,200 Digital Equipment Corp.* ....................................... 42,450
2,000 EMC Corp.* ..................................................... 38,750
1,000 Hewlett-Packard Co. ............................................ 44,000
3,850 Intergraph Corp.* .............................................. 39,944
360 International Business Machines Corp. .......................... 38,835
1,550 Silicon Graphics, Inc.* ........................................ 36,425
750 Sun Microsystems, Inc.* ........................................ 40,875
4,150 Tandem Computers Inc.* ......................................... 43,575
6,200 Unisys Corp.* .................................................. 36,425
-------------
535,285
-------------
Conglomerates (0.6%)
1,130 Teledyne, Inc. ................................................. 40,680
850 Tenneco, Inc. .................................................. 41,862
550 Textron Inc. ................................................... 44,000
-------------
126,542
-------------
Containers -Metal & Glass (0.4%)
1,650 Ball Corp. ..................................................... 41,044
850 Crown Cork & Seal Co., Inc.* ................................... 37,825
-------------
78,869
-------------
Containers -Paper (0.6%)
1,130 Bemis Company, Inc. ............................................ 36,866
3,200 Stone Container Corp. .......................................... 40,000
800 Temple-Inland Inc. ............................................. 37,900
-------------
114,766
-------------
Cosmetics (0.8%)
1,000 Alberto-Culver Co. (Class B) ................................... 43,125
840 Avon Products, Inc. ............................................ 36,960
650 Gillette Co. ................................................... 41,356
900 International Flavors & Fragrances Inc. ........................ 38,475
-------------
159,916
-------------
Distributors -
Consumer Products (0.6%)
2,950 Fleming Cos., Inc. ............................................. 44,619
1,350 SuperValu Stores, Inc. ......................................... 37,631
1,400 Sysco Corp. .................................................... 40,600
-------------
122,850
-------------
SEE NOTES TO FINANCIAL STATEMENTS
67
<PAGE>
DEAN WITTER RETIREMENT SERIES -VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
Electrical Equipment (1.7%)
1,100 AMP, Inc. ...................................................... $ 42,487
450 Emerson Electric Co. ........................................... 37,969
450 General Electric Co. ........................................... 37,069
950 General Signal Corp. ........................................... 37,169
565 Grainger (W.W.), Inc. .......................................... 39,691
700 Honeywell, Inc. ................................................ 37,100
550 Raychem Corp. .................................................. 36,369
1,100 Thomas & Betts Corp. ........................................... 40,150
2,350 Westinghouse Electric Corp. .................................... 39,362
-------------
347,366
-------------
Electronics -Defense (0.2%)
2,300 EG & G, Inc. ................................................... 41,687
-------------
Electronics -Instrumentation (0.4%)
760 Perkin-Elmer Corp. ............................................. 39,710
950 Tektronix, Inc. ................................................ 36,337
-------------
76,047
-------------
Electronics -Semiconductors (1.5%)
3,300 Advanced Micro Devices, Inc.* .................................. 40,012
1,650 Applied Materials, Inc.* ....................................... 39,187
550 Intel Corp. .................................................... 41,250
1,950 LSI Logic Corp.* ............................................... 38,025
2,000 Micron Technology, Inc. ........................................ 37,500
750 Motorola, Inc. ................................................. 40,500
2,800 National Semiconductor Corp.* .................................. 39,550
900 Texas Instruments Inc. ......................................... 38,925
-------------
314,949
-------------
Engineering & Construction (0.4%)
650 Fluor Corp. .................................................... 39,162
950 Foster Wheeler Corp. ........................................... 40,969
-------------
80,131
-------------
Entertainment (0.8%)
1,050 King World Productions Inc.* ................................... 37,669
1,150 Time Warner, Inc. .............................................. 40,106
1,050 Viacom, Inc. (Class B)* ........................................ 36,750
750 Walt Disney Co. ................................................ 41,719
-------------
156,244
-------------
Financial -Miscellaneous (1.6%)
920 American Express Co. ........................................... 40,250
1,100 American General Corp. ......................................... 38,225
430 Federal Home Loan Mortgage Corp. ............................... 36,227
1,300 Federal National Mortgage Assoc. ............................... 41,275
1,300 Green Tree Financial Corp. ..................................... 43,712
1,500 MBNA Corp. ..................................................... 41,812
700 MGIC Investment Corp. .......................................... 42,000
600 Transamerica Corp. ............................................. 41,475
-------------
324,976
-------------
Foods (2.6%)
2,400 Archer-Daniels-Midland Co. ..................................... $ 42,600
585 Campbell Soup Co. .............................................. 39,707
960 ConAgra, Inc. .................................................. 40,800
550 CPC International Inc. ......................................... 36,781
700 General Mills, Inc. ............................................ 37,975
1,150 Heinz (H.J.) Co. ............................................... 38,094
550 Hershey Foods Corp. ............................................ 45,100
540 Kellogg Co. .................................................... 40,365
1,300 Quaker Oats Company (The) ...................................... 41,600
650 Ralston-Ralston Purina Group ................................... 40,787
1,200 Sara Lee Corp. ................................................. 38,400
280 Unilever NV (ADR) (Netherlands) ................................ 39,830
800 Wrigley (Wm.) Jr. Co. (Class A) ................................ 41,300
-------------
523,339
-------------
Gold Mining (1.4%)
1,550 Barrick Gold Corp. (Canada) .................................... 43,206
4,600 Battle Mountain Gold Co. ....................................... 41,975
4,100 Echo Bay Mines Ltd. (Canada) ................................... 42,025
2,350 Homestake Mining Co. ........................................... 38,481
850 Newmont Mining Corp. ........................................... 41,969
1,650 Placer Dome Inc. (Canada) ...................................... 38,569
3,000 Santa Fe Pacific Gold Corp. .................................... 40,125
-------------
286,350
-------------
Hardware & Tools (0.6%)
1,050 Black & Decker Corp. ........................................... 38,587
950 Snap-On, Inc. .................................................. 42,156
1,340 Stanley Works .................................................. 38,190
-------------
118,933
-------------
Healthcare -Diversified (1.4%)
935 Abbott Laboratories ............................................ 41,140
1,030 Allergan, Inc. ................................................. 41,972
680 American Home Products Corp. ................................... 38,590
470 Bristol-Myers Squibb Co. ....................................... 40,714
840 Johnson & Johnson .............................................. 40,110
1,000 Mallinckrodt Group, Inc. ....................................... 37,375
700 Warner-Lambert Co. ............................................. 38,150
-------------
278,051
-------------
Healthcare -Drugs (1.0%)
690 Lilly (Eli) & Co. .............................................. 38,640
630 Merck & Co., Inc. .............................................. 40,477
550 Pfizer, Inc. ................................................... 38,431
930 Pharmacia & Upjohn, Inc. ....................................... 38,362
750 Schering-Plough Corp. .......................................... 41,344
-------------
197,254
-------------
SEE NOTES TO FINANCIAL STATEMENTS
68
<PAGE>
DEAN WITTER RETIREMENT SERIES -VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
Healthcare -Miscellaneous (0.8%)
1,650 Alza Corp.* .................................................... $ 40,837
800 Amgen Inc.* .................................................... 43,700
4,200 Beverly Enterprises, Inc.* ..................................... 39,900
1,100 Manor Care, Inc. ............................................... 36,300
-------------
160,737
-------------
Healthcare HMOs (0.4%)
2,550 Humana, Inc.* .................................................. 42,712
1,250 United Healthcare Corp. ........................................ 42,187
-------------
84,899
-------------
Heavy Duty Trucks & Parts (1.2%)
1,100 Cummins Engine Co., Inc. ....................................... 41,112
1,400 Dana Corp. ..................................................... 39,025
700 Eaton Corp. .................................................... 39,025
1,800 ITT Industries, Inc. ........................................... 41,400
4,400 Navistar International Corp.* .................................. 44,000
850 PACCAR, Inc. ................................................... 38,462
-------------
243,024
-------------
Home Building (0.6%)
1,300 Centex Corp. ................................................... 37,700
3,200 Kaufman & Broad Home Corp. ..................................... 38,000
1,500 Pulte Corp. .................................................... 37,875
-------------
113,575
-------------
Hospital Management (0.6%)
700 Columbia/HCA Healthcare Corp. .................................. 35,875
4,600 Community Psychiatric Centers* ................................. 36,800
2,100 Tenet Healthcare Corp.* ........................................ 40,687
-------------
113,362
-------------
Hotels/Motels (0.8%)
1,700 Harrah's Entertainment, Inc.* .................................. 37,400
410 Hilton Hotels Corp. ............................................ 41,820
640 ITT Corp.* ..................................................... 36,320
770 Marriot International, Inc. .................................... 39,559
-------------
155,099
-------------
Household Furnishings & Appliances (0.6%)
680 Armstrong World Industries Inc. ................................ 37,740
1,850 Maytag Corp. ................................................... 37,000
800 Whirlpool Corp. ................................................ 39,400
-------------
114,140
-------------
Household Products (0.8%)
480 Clorox Co. ..................................................... 43,620
500 Colgate-Palmolive Co. .......................................... 39,250
530 Kimberly-Clark Corp. ........................................... $ 40,280
450 Procter & Gamble Co. ........................................... 40,219
-------------
163,369
-------------
Housewares (0.6%)
1,250 Newell Co. ..................................................... 40,156
1,350 Rubbermaid, Inc. ............................................... 38,812
950 Tupperware Corp. ............................................... 40,612
-------------
119,580
-------------
Insurance Brokers (0.6%)
2,300 Alexander & Alexander Services, Inc. ........................... 37,950
800 Aon Corp. ...................................................... 38,900
410 Marsh & McLennan Cos., Inc. .................................... 37,156
-------------
114,006
-------------
Investment Banking/Brokerage (1.0%)
700 Dean Witter, Discover & Co. (Note 3) ........................... 35,612
650 Merrill Lynch & Co., Inc. ...................................... 39,244
900 Morgan Stanley Group, Inc. ..................................... 43,875
950 Salomon, Inc. .................................................. 40,612
900 Travelers Group, Inc. .......................................... 38,025
-------------
197,368
-------------
Leisure Time (0.6%)
1,650 Bally Entertainment Corp.* ..................................... 43,106
2,150 Brunswick Corp. ................................................ 40,850
2,500 Outboard Marine Corp. .......................................... 39,062
-------------
123,018
-------------
Life Insurance (1.2%)
733 Jefferson-Pilot Corp. .......................................... 38,482
950 Lincoln National Corp. ......................................... 40,494
1,000 Providian Corp. ................................................ 39,625
900 Torchmark Corp. ................................................ 38,362
630 UNUM Corp. ..................................................... 38,430
1,350 USLIFE Corp. ................................................... 40,162
-------------
235,555
-------------
Machine Tools (0.4%)
1,800 Cincinnati Milacron, Inc. ...................................... 35,550
3,450 Giddings & Lewis, Inc. ......................................... 39,675
-------------
75,225
-------------
Machinery -Diversified (2.0%)
1,050 Briggs & Stratton Corp. ........................................ 39,506
950 Case Corp. ..................................................... 42,037
550 Caterpillar, Inc. .............................................. 36,231
SEE NOTES TO FINANCIAL STATEMENTS
69
<PAGE>
DEAN WITTER RETIREMENT SERIES -VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
1,070 Cooper Industries, Inc. ........................................ $ 42,131
1,100 Deere & Co. .................................................... 39,325
1,300 Harnischfeger Industries, Inc. ................................. 40,300
1,000 Ingersoll-Rand Co. ............................................. 42,625
750 NACCO Industries, Inc. (Class A) ............................... 38,531
1,150 Timken Co. ..................................................... 42,119
900 Varity Corp.* .................................................. 42,300
-------------
405,105
-------------
Manufactured Housing (0.2%)
1,320 Fleetwood Enterprises, Inc. .................................... 40,095
-------------
Manufacturing -Diversified (1.9%)
675 AlliedSignal, Inc. ............................................. 39,656
1,000 Crane Co. ...................................................... 36,500
900 Dover Corp. .................................................... 38,587
650 Illinois Tool Works Inc. ....................................... 41,844
550 Johnson Controls, Inc. ......................................... 39,600
1,100 Millipore Corp. ................................................ 37,537
1,600 Pall Corp. ..................................................... 38,600
1,200 Parker-Hannifin Corp. .......................................... 41,850
1,400 Trinova Corp. .................................................. 41,650
930 Tyco International Ltd. ........................................ 38,130
-------------
393,954
-------------
Medical Products & Supplies (1.8%)
1,300 Bard (C.R.), Inc. .............................................. 39,650
1,150 Bausch & Lomb, Inc. ............................................ 40,825
900 Baxter International, Inc. ..................................... 37,462
500 Becton, Dickinson & Co. ........................................ 37,312
2,750 Biomet, Inc.* .................................................. 41,937
900 Boston Scientific Corp.* ....................................... 42,975
750 Medtronic Inc. ................................................. 35,531
1,250 St. Jude Medical, Inc.* ........................................ 41,719
1,200 United States Surgical Corp. ................................... 41,100
-------------
358,511
-------------
Metals -Miscellaneous (1.0%)
1,550 ASARCO, Inc. ................................................... 37,200
1,750 Cyprus Amax Minerals Co. ....................................... 37,625
1,400 Freeport-McMoran Copper & Gold, Inc. (Class B) ................. 41,475
1,300 Inco Ltd. (Canada) ............................................. 39,975
650 Phelps Dodge Corp. ............................................. 38,188
-------------
194,463
-------------
Miscellaneous (2.1%)
1,500 Airtouch Communications, Inc.* ................................. $ 41,250
American Greetings Corp.
1,650 (Class A) ...................................................... 39,600
1,100 Corning, Inc. .................................................. 40,563
1,350 Dial Corp. ..................................................... 39,488
850 Harcourt General, Inc. ......................................... 40,694
700 Harris Corp. ................................................... 40,250
2,200 Jostens, Inc. .................................................. 42,075
590 Minnesota Mining & Manufacturing Co. ........................... 38,350
660 Pioneer Hi-Bred International, Inc. ............................ 35,475
450 TRW, Inc. ...................................................... 40,669
1,700 Whitman Corp. .................................................. 38,038
-------------
436,452
-------------
Multi-Line Insurance (0.8%)
700 Aetna Inc. ..................................................... 40,728
1 Aetna Inc. (Class C) (Conv. Pref.) $1.48+ ...................... 58
420 American International Group, Inc. ............................. 39,533
380 CIGNA Corp. .................................................... 40,470
840 ITT Hartford Group, Inc.* ...................................... 44,415
-------------
165,204
-------------
Office Equipment & Supplies (0.8%)
950 Alco Standard Corp. ............................................ 41,563
2,300 Moore Corp. Ltd. (Canada) ...................................... 39,963
800 Pitney Bowes, Inc. ............................................. 38,800
840 Xerox Corp. .................................................... 42,315
-------------
162,641
-------------
Oil & Gas Drilling (0.4%)
1,150 Helmerich & Payne, Inc. ........................................ 40,250
2,600 Rowan Cos., Inc.* .............................................. 37,375
-------------
77,625
-------------
Oil -Domestic Integrated (2.1%)
750 Amerada Hess Corp. ............................................. 36,469
1,150 Ashland, Inc. .................................................. 42,119
350 Atlantic Richfield Co. ......................................... 40,600
750 Kerr-McGee Corp. ............................................... 42,750
775 Louisiana Land & Exploration Co. ............................... 41,850
1,850 Occidental Petroleum Corp. ..................................... 41,394
850 Pennzoil Co. ................................................... 41,756
1,000 Phillips Petroleum Co. ......................................... 39,500
1,400 Sun Co., Inc. .................................................. 36,225
1,140 Unocal Corp. ................................................... 37,193
1,750 USX-Marathon Group ............................................. 35,875
-------------
435,731
-------------
SEE NOTES TO FINANCIAL STATEMENTS
70
<PAGE>
DEAN WITTER RETIREMENT SERIES -VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
Oil -Exploration & Production (0.6%)
1,000 Burlington Resources, Inc. ..................................... $ 42,750
2,500 Oryx Energy Co.* ............................................... 39,375
3,600 Santa Fe Energy Resources, Inc.* ............................... 40,950
-------------
123,075
-------------
Oil -International Integrated (1.2%)
600 Amoco Corp. .................................................... 40,125
650 Chevron Corp. .................................................. 37,619
450 Exxon Corp. .................................................... 37,013
340 Mobil Corp. .................................................... 37,528
270 Royal Dutch Petroleum Co. (Netherlands) ........................ 40,736
500 Texaco, Inc. ................................................... 42,500
-------------
235,521
-------------
Oil Well Equipment & Services (1.1%)
1,250 Baker Hughes, Inc. ............................................. 36,719
1,450 Dresser Industries, Inc. ....................................... 39,150
720 Halliburton Co. ................................................ 37,530
2,050 McDermott International, Inc. .................................. 37,156
480 Schlumberger, Ltd. ............................................. 38,400
650 Western Atlas, Inc.* ........................................... 35,263
-------------
224,218
-------------
Paper & Forest Products (2.3%)
1,250 Boise Cascade Corp. ............................................ 40,625
950 Champion International Corp. ................................... 40,138
480 Georgia-Pacific Corp. .......................................... 35,880
1,000 International Paper Co. ........................................ 37,875
1,600 James River Corp. of Virginia .................................. 40,400
1,800 Louisiana-Pacific Corp. ........................................ 36,675
700 Mead Corp. ..................................................... 38,325
1,050 Potlatch Corp. ................................................. 39,375
800 Union Camp Corp. ............................................... 38,400
1,450 Westvaco Corp. ................................................. 41,144
850 Weyerhaeuser Co. ............................................... 35,488
700 Willamette Industries, Inc. .................................... 40,600
-------------
464,925
-------------
Personal Loans (0.4%)
700 Beneficial Corp. ............................................... 37,800
515 Household International, Inc. .................................. 38,368
-------------
76,168
-------------
Photography/Imaging (0.4%) .....................................
600 Eastman Kodak Co. .............................................. 44,775
850 Polaroid Corp. ................................................. 35,913
-------------
80,688
-------------
Pollution Control (0.6%)
1,850 Browning-Ferris Industries, Inc. ............................... $ 41,394
4,400 Laidlaw Inc. (Class B) (Canada) ................................ 40,700
1,400 WMX Technologies, Inc. ......................................... 41,475
-------------
123,569
-------------
Property -Casualty Insurance (1.3%)
950 Allstate Corp. ................................................. 42,513
1,000 Chubb Corp. .................................................... 41,750
260 General Re Corp. ............................................... 38,155
500 Loews Corp. .................................................... 40,313
1,100 SAFECO Corp. ................................................... 37,813
690 St. Paul Companies, Inc. ....................................... 35,708
2,400 USF&G Corp. .................................................... 38,100
-------------
274,352
-------------
Publishing (0.6%)
650 Dun & Bradstreet Corp. ......................................... 37,375
1,000 McGraw-Hill, Inc. .............................................. 39,000
1,050 Meredith Corp. ................................................. 42,656
-------------
119,031
-------------
Publishing -Newspaper (1.2%)
950 Dow Jones & Co., Inc. .......................................... 37,169
600 Gannett Co., Inc. .............................................. 39,375
600 Knight-Ridder Newspapers, Inc. ................................. 39,300
1,350 New York Times Co. (Class A) ................................... 39,319
1,045 Times Mirror Co. (Class A) ..................................... 43,237
550 Tribune Co. .................................................... 38,500
-------------
236,900
-------------
Railroads (1.0%)
500 Burlington Northern Santa Fe Corp. ............................. 39,438
600 Conrail, Inc. .................................................. 39,300
850 CSX Corp. ...................................................... 41,013
500 Norfolk Southern Corp. ......................................... 40,438
550 Union Pacific Corp. ............................................ 37,675
-------------
197,864
-------------
Restaurants (1.2%)
5,000 Darden Restaurants, Inc. ....................................... 39,375
1,800 Luby's Cafeterias, Inc. ........................................ 43,650
850 McDonald's Corp. ............................................... 39,419
5,150 Ryan's Family Steak Houses, Inc.* .............................. 38,625
4,400 Shoney's Inc.* ................................................. 40,150
2,050 Wendy's International, Inc. .................................... 34,850
-------------
236,069
-------------
SEE NOTES TO FINANCIAL STATEMENTS
71
<PAGE>
DEAN WITTER RETIREMENT SERIES -VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
Retail -Department Stores (1.2%)
1,300 Dillard Department Stores, Inc. (Class A) ...................... $ 40,788
1,230 Federated Department Stores, Inc.* ............................. 37,208
1,000 May Department Stores Co. ...................................... 44,875
800 Mercantile Stores Co., Inc. .................................... 39,200
1,000 Nordstrom, Inc. ................................................ 41,375
800 Penney (J.C.) Co., Inc. ........................................ 39,800
-------------
243,246
-------------
Retail -Drug Stores (0.6%)
1,050 Longs Drug Stores Corp. ........................................ 40,688
1,300 Rite Aid Corp. ................................................. 38,675
1,300 Walgreen Co. ................................................... 41,275
-------------
120,638
-------------
Retail -Food Chains (1.2%)
910 Albertson's, Inc. .............................................. 37,310
1,200 American Stores Co. ............................................ 44,700
1,190 Giant Food, Inc. (Class A) ..................................... 40,014
1,450 Great Atlantic & Pacific Tea Co., Inc. ......................... 40,056
960 Kroger Co.* .................................................... 36,240
1,150 Winn-Dixie Stores, Inc. ........................................ 40,250
-------------
238,570
-------------
Retail -General Merchandise (0.8%)
1,350 Dayton-Hudson Corp. ............................................ 40,838
3,800 Kmart Corp.* ................................................... 38,000
950 Sears, Roebuck & Co. ........................................... 38,950
1,650 Wal-Mart Stores, Inc. .......................................... 39,600
-------------
157,388
-------------
Retail -Specialty (1.8%)
1,185 Circuit City Stores, Inc. ...................................... 37,328
800 Home Depot, Inc. ............................................... 40,400
1,300 Lowe's Companies, Inc. ......................................... 42,413
1,030 Melville Corp. ................................................. 40,299
1,250 Pep Boys-Manny Moe & Jack ...................................... 37,813
2,150 Price/Costco, Inc.* ............................................ 43,806
1,000 Tandy Corp. .................................................... 42,250
1,550 Toys 'R' Us, Inc.* ............................................. 40,881
2,100 Woolworth Corp.* ............................................... 40,425
-------------
365,615
-------------
Retail -Specialty Apparel (0.8%)
6,600 Charming Shoppes, Inc. ......................................... 41,663
1,400 Gap, Inc. ...................................................... 41,650
1,950 Limited (The), Inc. ............................................ $ 37,538
1,350 TJX Companies, Inc. ............................................ 40,669
-------------
161,520
-------------
Savings & Loan Companies (0.6%)
1,600 Ahmanson (H.F.) & Co. .......................................... 40,400
700 Golden West Financial Corp. .................................... 38,850
1,580 Great Western Financial Corp. .................................. 37,525
-------------
116,775
-------------
Shoes (0.6%)
400 Nike, Inc. (Class B) ........................................... 41,150
1,200 Reebok International Ltd. (United Kingdom) ..................... 42,000
5,700 Stride Rite Corp. .............................................. 41,325
-------------
124,475
-------------
Specialized Services (1.6%)
1,450 Block (H.&R.), Inc. ............................................ 37,881
1,250 CUC International, Inc.* ....................................... 43,438
1,200 Ecolab, Inc. ................................................... 37,050
1,000 Interpublic Group of Companies, Inc. ........................... 44,125
1,000 National Service Industries, Inc. .............................. 38,125
2,150 Ogden Corp. .................................................... 41,388
2,550 Safety-Kleen Corp. ............................................. 44,306
785 Service Corp. International .................................... 43,273
-------------
329,586
-------------
Specialty Printing (0.6%)
1,075 Deluxe Corp. ................................................... 39,641
1,300 Donnelley (R.R.) & Sons Co. .................................... 41,925
1,550 Harland (John H.) Co. .......................................... 37,588
-------------
119,154
-------------
Steel (1.1%)
8,100 Armco, Inc.* ................................................... 36,450
4,100 Bethlehem Steel Corp.* ......................................... 41,000
2,400 Inland Steel Industries, Inc. .................................. 41,700
800 Nucor Corp. .................................................... 37,500
1,550 USX-U.S. Steel Group ........................................... 39,331
1,950 Worthington Industries, Inc. ................................... 36,806
-------------
232,787
-------------
Telecommunications -Long Distance (0.8%)
850 AT&T Corp. ..................................................... 44,306
1,750 MCI Communications Corp. ....................................... 42,875
1,050 Sprint Corp. ................................................... 38,456
1,600 WorldCom, Inc.* ................................................ 41,400
-------------
167,037
-------------
SEE NOTES TO FINANCIAL STATEMENTS
72
<PAGE>
DEAN WITTER RETIREMENT SERIES -VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
Textiles (1.0%)
1,550 Fruit of the Loom, Inc. (Class A)* ............................. $ 39,138
1,175 Liz Claiborne, Inc. ............................................ 38,334
1,300 Russell Corp. .................................................. 43,550
800 Springs Industries, Inc. (Class A) ............................. 36,500
650 VF Corp. ....................................................... 36,319
-------------
193,841
-------------
Tobacco (0.6%)
930 American Brands, Inc. .......................................... 42,315
400 Philip Morris Companies, Inc. .................................. 41,850
1,200 UST, Inc. ...................................................... 39,900
-------------
124,065
-------------
Toys (0.4%)
1,050 Hasbro Inc. .................................................... 37,669
1,450 Mattel, Inc. ................................................... 35,888
-------------
73,557
-------------
Transportation -Miscellaneous (0.4%)
500 Federal Express Corp.* ......................................... 38,875
1,450 Ryder System, Inc. ............................................. 38,606
-------------
77,481
-------------
Truckers (0.6%)
2,150 Caliber System, Inc. ........................................... 39,238
2,200 Consolidated Freightways, Inc. ................................. 43,175
2,900 Yellow Corp.* .................................................. 36,613
-------------
119,026
-------------
Utilities -Electric (4.9%)
930 American Electric Power Co., Inc. .............................. 38,595
1,450 Baltimore Gas & Electric Co. ................................... 37,338
1,050 Carolina Power & Light Co. ..................................... 37,800
1,350 Central & South West Corp. ..................................... 36,113
1,330 CINergy Corp. .................................................. 39,401
1,500 Consolidated Edison Co. of New York, Inc. ...................... 40,500
1,500 Detroit Edison Co. ............................................. 43,125
990 Dominion Resources, Inc. ....................................... 37,249
800 Duke Power Co. ................................................. 38,300
2,430 Edison International ........................................... 37,665
1,500 Entergy Corp. .................................................. 38,250
900 FPL Group, Inc. ................................................ 40,838
1,200 General Public Utilities Corp. ................................. 39,000
1,790 Houston Industries, Inc. ....................................... 40,499
5,630 Niagara Mohawk Power Corp.* .................................... 40,818
800 Northern States Power Co. ...................................... $ 35,800
1,850 Ohio Edison Co. ................................................ 38,850
2,050 Pacific Gas & Electric Co. ..................................... 40,488
1,750 PacifiCorp ..................................................... 36,531
1,550 Peco Energy Co. ................................................ 36,425
1,700 PP&L Resources, Inc. ........................................... 38,038
1,450 Public Service Enterprise Group, Inc. .......................... 37,881
1,700 Southern Co. ................................................... 38,463
970 Texas Utilities Co. ............................................ 40,740
1,700 Unicom Corp. ................................................... 39,950
980 Union Electric Co. ............................................. 36,873
-------------
1,005,530
-------------
Utilities -Natural Gas (2.7%)
1,000 Coastal Corp. .................................................. 37,250
760 Columbia Gas System, Inc. ...................................... 40,755
800 Consolidated Natural Gas Co. ................................... 40,300
1,300 Eastern Enterprises ............................................ 41,763
900 Enron Corp. .................................................... 35,438
1,900 ENSERCH Corp. .................................................. 37,525
1,550 NICOR, Inc. .................................................... 43,981
3,750 NorAm Energy Corp. ............................................. 40,781
1,600 ONEOK, Inc. .................................................... 42,200
1,500 Pacific Enterprises ............................................ 44,063
1,300 PanEnergy Corp. ................................................ 41,275
1,200 Peoples Energy Corp. ........................................... 37,350
900 Sonat, Inc. .................................................... 38,363
770 Williams Companies, Inc. ....................................... 35,324
-------------
556,368
-------------
Utilities -Telephone (1.8%)
1,450 Alltel Corp. ................................................... 39,694
750 Ameritech Corp. ................................................ 41,625
700 Bell Atlantic Corp. ............................................ 41,388
950 BellSouth Corp. ................................................ 38,950
1,000 GTE Corp. ...................................................... 41,250
900 NYNEX Corp. .................................................... 40,388
1,150 Pacific Telesis Group .......................................... 38,669
850 SBC Communications, Inc. ....................................... 41,544
1,170 U.S. West Communications Group . ................ 35,539
-------------
359,047
-------------
TOTAL COMMON STOCKS
(Identified Cost $17,671,690) .................................. 19,837,412
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
73
<PAGE>
DEAN WITTER RETIREMENT SERIES -VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (6.2%)
U.S. GOVERNMENT AGENCY (a) (2.0%)
$ 400 Federal National Mortgage Assoc. 5.26% due 08/13/96 ............ $ 399,299
-------------
REPURCHASE AGREEMENT (4.2%)
The Bank of New York 5.75% due 08/01/96 (dated 07/31/96;
proceeds $861,663; collateralized by $1,021,571 Federal Mortgage
Acceptance Corp. 7.00% due 04/01/24 valued at $878,756)
862 (Identified Cost $861,525) ..................................... 861,525
-------------
TOTAL SHORT-TERM
INVESTMENTS
(Identified Cost $1,260,824) ................................... 1,260,824
-------------
</TABLE>
<TABLE>
<CAPTION>
TOTAL INVESTMENTS
(IDENTIFIED COST $18,932,514) (b) 103.5% 21,098,236
<S> <C> <C>
LIABILITIES IN EXCESS OF
OTHER ASSETS ...................... (3.5) (719,001)
-------- ------------
NET ASSETS ........................ 100.0% $20,379,235
======== ============
</TABLE>
- ------------
ADR American Depository Receipt.
+ Acquired through a special stock dividend.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown
has been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes is $18,942,744;
the aggregate gross unrealized appreciation is $2,929,470 and the
aggregate gross unrealized depreciation is $773,978, resulting in net
unrealized appreciation of $2,155,492.
SEE NOTES TO FINANCIAL STATEMENTS
74
<PAGE>
DEAN WITTER RETIREMENT SERIES -GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS (94.8%)
ARGENTINA (0.7%)
Brewery
1,000 Quilmes Industrial S.A. (ADR) .................................. $ 9,625
-------------
Energy
4,300 Perez Companc S.A. (Class B) ................................... 25,113
1,000 Yacimentos Petroliferos Fiscales S.A. (ADR) .................... 21,000
-------------
46,113
-------------
Steel
1,500 Siderar S.A. (A Shares) (ADR)* -144A** ......................... 29,437
-------------
TOTAL ARGENTINA ................................................ 85,175
-------------
AUSTRALIA (1.0%)
Business Services
4,800 Mayne Nickless Ltd. ............................................ 27,285
-------------
Energy
1,700 Broken Hill Proprietary Co. Ltd. ............................... 22,391
-------------
Metals & Mining
20,000 M.I.M. Holdings Ltd. ........................................... 23,357
14,000 Pasminco Ltd. .................................................. 20,248
-------------
43,605
-------------
Retail
7,990 Woolworth's Ltd. ............................................... 17,982
-------------
TOTAL AUSTRALIA ................................................ 111,263
-------------
AUSTRIA (0.3%)
Energy
330 OMV AG ......................................................... 30,740
-------------
BELGIUM (0.2%)
Retail
500 G.I.B. Holdings Ltd. ........................................... 22,126
-------------
BRAZIL (1.6%)
Appliances & Household Durables
2,000 Refrigeracao Parana S.A. (ADR) ................................. 26,260
-------------
Steel & Iron
2,900 Usinas Siderurgicas de Minas Gerais S.A. (S Shares) (ADR) ...... 30,798
-------------
Supermarkets
2,000 Companhia Brasileiras de Distribuicao (GDR) -144A** ............ 35,500
-------------
Telecommunications
900 Telecommunicacoes Brasileiras S.A. (ADR) ....................... $ 65,250
-------------
Utilities -Electric
1,200 Companhia Energetica de Minas Gerais S.A. (ADR) ................ 32,700
-------------
TOTAL BRAZIL ................................................... 190,508
-------------
CANADA (0.4%)
Metals & Mining
1,500 Barrick Gold Corp. ............................................. 41,755
-------------
CHILE (0.8%)
Foods & Beverages
500 Compania Cervecerias Unidas S.A. (ADR) ......................... 11,875
500 Embotelladora Andina S.A. (ADR) ................................ 18,500
-------------
30,375
-------------
Forest Products, Paper & Packaging
1,000 Cristalerias de Chile (ADR) .................................... 24,375
-------------
Telecommunications
350 Compania de Telecommunicaciones de Chile S.A. (ADR) ............ 33,994
-------------
TOTAL CHILE .................................................... 88,744
-------------
DENMARK (0.5%)
Pharmaceuticals
200 Novo-Nordisk AS (Series B) ..................................... 28,975
-------------
Transportation
300 Kobenhavns Lufthavne AS ........................................ 30,065
-------------
TOTAL DENMARK .................................................. 59,040
-------------
EGYPT (0.1%)
Banking
1,000 Commercial International Bank (GDR)* ........................... 13,900
-------------
FINLAND (0.3%)
Manufacturing
800 KCI Konecranes International* .................................. 20,854
500 Valmet Corp. (ADR) ............................................. 15,625
-------------
TOTAL FINLAND .................................................. 36,479
-------------
SEE NOTES TO FINANCIAL STATEMENTS
75
<PAGE>
DEAN WITTER RETIREMENT SERIES -GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
FRANCE (2.4%)
Banking
300 Societe Generale ............................................... $ 33,087
-------------
Broadcast Media
200 Societe Television Francaise 1 ................................. 23,499
-------------
Building Materials
200 Compagnie de Saint-Gobain ...................................... 25,140
-------------
Business & Public Services
200 Compagnie Generale des Eaux .................................... 20,577
-------------
Financial Services
350 Credit Local de France ......................................... 29,059
-------------
Foods & Beverages
160 LVMH Moet-Hennessy Louis Vuitton ............................... 35,420
-------------
Pharmaceuticals
550 Sanofi S.A. .................................................... 42,769
-------------
Retail
75 Carrefour Supermarche .......................................... 41,133
180 Castorama Dubois Investissement ................................ 35,200
-------------
76,333
-------------
TOTAL FRANCE ................................................... 285,884
-------------
GERMANY (1.8%)
Apparel
400 Adidas AG ...................................................... 31,239
-------------
Automotive
60 Volkswagen AG .................................................. 20,374
-------------
Business Services
300 SAP AG (Pref.) ................................................. 42,886
-------------
Chemicals
700 BASF AG ........................................................ 18,801
-------------
Manufacturing -Diversified
100 Mannesmann AG .................................................. 35,891
-------------
Pharmaceuticals
100 Gehe AG ........................................................ 62,004
-------------
TOTAL GERMANY .................................................. 211,195
-------------
HONG KONG (4.0%)
Banking
6,000 Hang Seng Bank Ltd. ............................................ 59,549
3,140 HSBC Holdings PLC .............................................. 50,146
-------------
109,695
-------------
Conglomerates
10,000 Hutchison Whampoa, Ltd. ........................................ $ 59,742
6,500 Swire Pacific Ltd. (Class A) ................................... 55,685
-------------
115,427
-------------
Hotels
44,000 Harbour Centre Development ..................................... 57,467
-------------
Real Estate
10,000 Cheung Kong (Holdings) Ltd. .................................... 68,212
3,000 Sun Hung Kai Properties Ltd. ................................... 28,320
-------------
96,532
-------------
Telecommunications
2,700 Hong Kong Telecommunications, Ltd. (ADR) ....................... 44,550
-------------
Transportation
2,500 The Guangshen Railway Co., Ltd. (ADR)* ......................... 45,000
-------------
TOTAL HONG KONG ................................................ 468,671
-------------
INDIA (0.2%)
Aluminum
300 Hindalco Industries Ltd. (GDR)* -144A** ........................ 10,125
-------------
Building & Construction
600 Larsen & Toubro Ltd. (GDR) ..................................... 9,750
-------------
TOTAL INDIA .................................................... 19,875
-------------
INDONESIA (0.3%)
Telecommunications
1,100 PT Indosat (ADR) ............................................... 33,550
-------------
ITALY (1.0%)
Energy
1,500 Ente Nazionale Idrocarburi SpA (ADR) ........................... 66,937
-------------
Telecommunications
10,000 Stet Societa' Finanziaria Telefonica SpA ....................... 30,435
10,000 Telecom Italia Mobile SpA ...................................... 20,949
-------------
51,384
-------------
TOTAL ITALY .................................................... 118,321
-------------
SEE NOTES TO FINANCIAL STATEMENTS
76
<PAGE>
DEAN WITTER RETIREMENT SERIES -GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
JAPAN (34.2%)
Automotive
10,000 Mitsubishi Motors Corp. ........................................ $ 84,457
3,000 Suzuki Motor Co. Ltd. .......................................... 35,674
-------------
120,131
-------------
Banking
9,000 Asahi Bank, Ltd. ............................................... 100,281
5,000 Sanwa Bank, Ltd. ............................................... 87,079
5,000 Sumitomo Bank .................................................. 91,760
3,000 Sumitomo Trust & Banking ....................................... 39,326
-------------
318,446
-------------
Brewery
2,000 Kirin Brewery Co., Ltd. ........................................ 23,783
-------------
Building & Construction
8,000 Nishimatsu Construction Co. .................................... 80,899
7,000 Sekisui House Ltd. ............................................. 76,685
-------------
157,584
-------------
Building Materials
2,000 Tostem Corp. ................................................... 61,049
1,000 Toyo Shutter ................................................... 8,708
-------------
69,757
-------------
Business Services
4,000 Dai Nippon Printing Co. Ltd. ................................... 75,281
1,000 Secom Co. ...................................................... 65,543
-------------
140,824
-------------
Chemicals
12,000 Asahi Chemical Industry Co. Ltd. ............................... 82,022
8,000 Kaneka Corp. ................................................... 53,109
6,000 Nippon Shokubai K.K. Co. ....................................... 55,169
3,000 Shin-Etsu Chemical Co. ......................................... 55,744
-------------
246,044
-------------
Computer Software
1,000 Square Co. Ltd. ................................................ 54,120
-------------
Consumer Products
6,000 Kao Corp. ...................................................... 79,775
-------------
Electronics
6,000 Canon, Inc. .................................................... 113,483
9,000 Hitachi, Ltd. .................................................. 74,747
4,000 Matsushita Electric Industrial Co. Ltd. ........................ 69,663
3,000 NEC Corp. ...................................................... 31,461
1,000 Sony Corp. ..................................................... 63,202
-------------
352,556
-------------
Electronics - Semiconductors/Components
1,000 Kyocera Corp. .................................................. $ 68,446
2,000 Rohm Co., Ltd. ................................................. 119,850
2,000 Ryoyo Electro Corp. ............................................ 41,199
-------------
229,495
-------------
Engineering & Construction
2,000 Kajima Corp. ................................................... 19,101
8,000 Kawasaki Heavy Industries ...................................... 38,802
-------------
57,903
-------------
Financial Services
8,000 New Japan Securities Co., Ltd.* ................................ 40,974
3,000 Nomura Securities Co. Ltd. ..................................... 52,528
2,000 Orix Corp. ..................................................... 78,652
1,000 Promise Co., Ltd. .............................................. 48,034
-------------
220,188
-------------
Food Processing
1,000 Stamina Foods .................................................. 8,099
-------------
Furniture
1,000 Itoki Crebio Corp. ............................................. 8,408
-------------
Insurance
5,000 Dai-Tokyo Fire & Marine Insurance Co. Ltd. ..................... 34,878
6,000 Tokio Marine & Fire Insurance Co. .............................. 74,719
-------------
109,597
-------------
International Trade
5,000 Mitsubishi Corp. ............................................... 63,202
13,000 Mitsui & Co. ................................................... 114,663
-------------
177,865
-------------
Leisure
1,000 Nintendo Corp., Ltd. ........................................... 70,037
-------------
Machine Tools
7,000 Asahi Diamond Industries Co. Ltd. .............................. 84,551
-------------
Machinery
2,000 Daikin Industries Ltd. ......................................... 21,161
9,000 Komatsu Ltd. ................................................... 82,500
1,000 Mabuchi Motor Co. .............................................. 61,330
4,000 Minebea Co., Ltd. .............................................. 32,584
11,000 Mitsubishi Heavy Industries, Ltd. .............................. 93,212
1,000 Nippon Thompson Co. ............................................ 7,921
-------------
298,708
-------------
SEE NOTES TO FINANCIAL STATEMENTS
77
<PAGE>
DEAN WITTER RETIREMENT SERIES -GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
Manufacturing
1,000 Bridgestone Metalpha Corp. ..................................... $ 12,734
2,000 Nippon Electric Glass Co., Ltd. ................................ 34,082
-------------
46,816
-------------
Metals & Mining
21,000 Nippon Steel Co. ............................................... 69,803
-------------
Pharmaceuticals
5,000 Eisai Co. Ltd. ................................................. 92,228
1,000 Terumo ......................................................... 11,985
-------------
104,213
-------------
Real Estate
1,000 Cesar Co. ...................................................... 8,820
10,000 Sumitomo Realty & Development .................................. 73,970
-------------
82,790
-------------
Restaurants
5 Yoshinoya D & C Company Ltd. ................................... 65,543
-------------
Retail
1,000 Aoyama Trading Co., Ltd. ....................................... 27,434
5,000 Izumiya Co. Ltd. ............................................... 94,101
2,000 Jusco Co. ...................................................... 64,420
-------------
185,955
-------------
Steel & Iron
35,000 NKK Corp.* ..................................................... 99,953
-------------
Telecommunications
20 DDI Corp. ...................................................... 161,611
4 Nippon Telegraph & Telephone ................................... 28,539
-------------
190,150
-------------
Textiles -Apparel
4,000 Kuraray Co. Ltd. ............................................... 43,820
4,000 Tokyo Style .................................................... 67,416
-------------
111,236
-------------
Transportation
12 East Japan Railway Co. ......................................... 62,360
9,000 Nippon Yusen Kabushiki Kaish ................................... 50,646
8,000 Yamato Transport Co. Ltd. ...................................... 93,633
-------------
206,639
-------------
TOTAL JAPAN .................................................... 3,990,969
-------------
MALAYSIA (3.0%)
Banking
11,000 DCB Holdings Berhad ............................................ 33,510
4,000 Malayan Banking Berhad ......................................... 34,151
22,666 Public Bank Berhad ............................................. 41,792
-------------
109,453
-------------
Building & Construction
9,000 United Engineers Malaysia Berhad ............................... $ 60,606
-------------
Entertainment
25,000 Magnum Corporation Berhad ...................................... 39,081
-------------
Machinery
6,000 UMW Holdings Berhad ............................................ 22,487
-------------
Natural Gas
5,000 Petronas Gas Berhad ............................................ 19,541
-------------
Telecommunications
12,000 Technology Resources Industries Berhad* ........................ 36,796
-------------
Tobacco
15,000 RJ Reynolds Berhad ............................................. 43,591
-------------
Utilities -Electric
5,000 Tenaga Nasional Berhad ......................................... 21,044
-------------
TOTAL MALAYSIA ................................................. 352,599
-------------
MEXICO (2.3%)
Automotive
3,200 Sanluis Corporacion S.A. de C.V. (Units)++ ..................... 18,737
-------------
Banking
10,000 Grupo Financiero Banamex Accival S.A. de C.V. (B Shares)* ...... 19,122
609 Grupo Financiero Banamex Accival S.A. de C.V. (Series L)* ...... 1,087
-------------
20,209
-------------
Building & Construction
8,000 Corporacion GEO S.A. de C.V. (Series B)* ....................... 34,340
600 Empresas ICA Sociedad Controladora S.A. de C.V. (ADR)* ......... 8,025
-------------
42,365
-------------
Building Materials
3,000 Apasco S.A. de C.V. ............................................ 16,616
1,087 Cementos de Mexico S.A. (B Shares) ............................. 3,885
20,000 Grupo Cementos de Chihuahua S.A. de C.V. (B Shares)* ........... 21,522
-------------
42,023
-------------
Conglomerates
6,914 Grupo Industria Alfa S.A. de C.V. (A Shares) ................... 27,992
-------------
SEE NOTES TO FINANCIAL STATEMENTS
78
<PAGE>
DEAN WITTER RETIREMENT SERIES -GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
Foods & Beverages
500 Panamerican Beverages, Inc. (Class A) .......................... $ 21,562
-------------
Manufacturing
2,000 Elamax S.A. de C.V.* ........................................... 16,250
-------------
Metals & Mining
2,000 Industrias Penoles S.A. ........................................ 8,282
2,200 Tubos de Acero de Mexico S.A. de C.V. (ADR)* ................... 21,862
-------------
30,144
-------------
Telecommunications
1,800 Telefonos de Mexico S.A. de C.V. (Series L) (ADR) .............. 55,125
-------------
TOTAL MEXICO ................................................... 274,407
-------------
NETHERLANDS (2.5%)
Banking
400 ABN-AMRO Holding NV ............................................ 21,208
-------------
Building Materials
400 Hunter Douglas NV .............................................. 26,268
-------------
Business & Public Services
700 Randstad Holdings NV ........................................... 51,477
-------------
Furniture
700 Ahrend Groep NV ................................................ 29,530
-------------
Insurance
500 Aegon NV ....................................................... 22,939
875 ING Groep NV ................................................... 26,850
-------------
49,789
-------------
Publishing
900 Elsevier NV .................................................... 13,673
200 Wegener NV ..................................................... 21,789
500 Wolters Kluwer NV .............................................. 58,165
-------------
93,627
-------------
Retail
500 Koninklijke Ahold NV ........................................... 25,421
-------------
TOTAL NETHERLANDS .............................................. 297,320
-------------
NEW ZEALAND (0.2%)
Telecommunications
300 Telecom Corporation of New Zealand Ltd. (ADR) .................. 22,087
-------------
NORWAY (0.3%)
Insurance
6,500 UNI Storebrand AS (A Shares)* .................................. $ 31,556
-------------
PANAMA (0.3%)
Banking
700 Banco Latinoamericano de Exportaciones S.A. (E Shares) ......... 35,875
-------------
PERU (0.7%)
Metals & Mining
2,500 Companhia de Minas Buenaventura S.A. (ADR)* .................... 44,687
-------------
Telecommunications
1,500 CPT Telefonica del Peru S.A. (ADR) ............................. 32,813
-------------
TOTAL PERU ..................................................... 77,500
-------------
PORTUGAL (0.2%)
Telecommunications
1,100 Portugal Telecom S.A. (ADR) .................................... 28,187
-------------
SINGAPORE (3.4%)
Banking
4,500 Development Bank of Singapore, Ltd. ............................ 50,966
5,000 United Overseas Bank, Ltd. ..................................... 43,888
-------------
94,854
-------------
Foods & Beverages
4,800 Fraser & Neave Ltd. ............................................ 48,248
-------------
Machinery -Diversified
5,000 Keppel Corp., Ltd. ............................................. 37,871
-------------
Publishing
4,000 Singapore Press Holdings Ltd. .................................. 69,654
-------------
Real Estate
17,000 DBS Land Ltd. .................................................. 53,670
9,000 Singapore Land Ltd. ............................................ 57,655
-------------
111,325
-------------
Transportation
4,000 Singapore Airlines Ltd. ........................................ 40,207
-------------
TOTAL SINGAPORE ................................................ 402,159
-------------
SOUTH KOREA (0.1%)
Utilities -Electric
450 Korea Electric Power Corp. (ADR) ............................... 9,281
-------------
SEE NOTES TO FINANCIAL STATEMENTS
79
<PAGE>
DEAN WITTER RETIREMENT SERIES -GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
SPAIN (1.3%)
Banks
1,100 Banco Bilbao Vizcaya ........................................... $ 46,187
200 Banco Popular Espanol S.A. ..................................... 34,513
-------------
80,700
-------------
Telecommunications
500 Telefonica de Espana S.A. (ADR) ................................ 26,125
-------------
Utilities -Electric
700 Empresa Nacional de Electricidad S.A. .......................... 40,914
-------------
TOTAL SPAIN .................................................... 147,739
-------------
SWEDEN (1.6%)
Automotive
1,400 Autoliv AB ..................................................... 39,921
-------------
Business & Public Services
1,200 Assa Abloy AB (Series B) ....................................... 18,929
-------------
Machinery
2,300 Kalmar Industries AB ........................................... 45,176
-------------
Pharmaceuticals
1,000 Astra AB (Series "A" Free) ..................................... 42,089
-------------
Telecommunications
2,250 Ericsson (L.M.) Telephone Co. AB (Series "B" Free) ............. 45,218
-------------
TOTAL SWEDEN ................................................... 191,333
-------------
SWITZERLAND (0.6%)
Pharmaceuticals
30 Ciba-Geigy AG .................................................. 35,614
30 Sandoz AG (Series B) ........................................... 33,283
-------------
TOTAL SWITZERLAND .............................................. 68,897
-------------
UNITED KINGDOM (5.9%)
Aerospace
8,300 Rolls-Royce PLC ................................................ 28,016
-------------
Aerospace & Defense
2,437 British Aerospace PLC .......................................... 35,178
2,900 Smiths Industries PLC .......................................... 32,253
-------------
67,431
-------------
Auto Parts
3,116 BBA Group PLC .................................................. 14,153
-------------
Banking
4,400 Lloyds TSB Group PLC ........................................... $ 23,681
1,970 National Westminster Bank PLC .................................. 19,183
-------------
42,864
-------------
Beverages
1,500 Bass PLC ....................................................... 18,269
2,000 Guinness PLC ................................................... 14,311
-------------
32,580
-------------
Broadcast Media
3,600 Flextech PLC* .................................................. 26,543
-------------
Building & Construction
5,571 Blue Circle Industries PLC ..................................... 31,370
-------------
Business Services
1,400 Compass Group PLC .............................................. 12,195
3,000 Reuters Holdings PLC ........................................... 31,359
-------------
43,554
-------------
Chemicals
4,000 Albright & Wilson PLC .......................................... 11,200
-------------
Consumer Products
2,000 Vendome Luxury Group PLC (Units)++ ............................. 17,795
-------------
Energy
5,378 British Petroleum Co. PLC ...................................... 48,687
2,800 Shell Transport & Trading Co. PLC .............................. 40,178
-------------
88,865
-------------
Food Processing
600 Associated British Foods PLC ................................... 3,714
-------------
Insurance
2,723 General Accident PLC ........................................... 26,473
3,798 Prudential Corp. PLC ........................................... 25,640
5,441 Royal & Sun Alliance Insurance Group PLC ....................... 31,992
-------------
84,105
-------------
Leisure
2,631 Granada Group PLC .............................................. 32,924
-------------
Pharmaceuticals
1,600 Glaxo Wellcome PLC ............................................. 22,262
5,070 Medeva PLC ..................................................... 19,322
-------------
41,584
-------------
Retail
4,300 Next PLC ....................................................... 34,313
-------------
SEE NOTES TO FINANCIAL STATEMENTS
80
<PAGE>
DEAN WITTER RETIREMENT SERIES -GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
Telecommunications
4,000 British Telecommunications PLC ................................. $ 22,586
4,602 Securicor PLC .................................................. 17,896
-------------
40,482
-------------
Transportation
2,823 British Airways PLC ............................................ 23,054
-------------
Utilities
3,051 Thames Water PLC ............................................... 25,532
-------------
TOTAL UNITED KINGDOM ........................................... 690,079
-------------
UNITED STATES (22.5%)
Aerospace
990 Boeing Co. ..................................................... 87,615
-------------
Aircraft & Aerospace
2,320 Loral Space & Communications* .................................. 32,770
-------------
Aluminum
1,650 Aluminum Co. of America ........................................ 95,700
-------------
Automotive
1,640 General Motors Corp. ........................................... 79,950
-------------
Beverages -Soft Drinks
3,000 PepsiCo Inc. ................................................... 94,875
-------------
Brokerage
1,740 Merrill Lynch & Co., Inc. ...................................... 105,052
-------------
Chemicals
1,200 Dow Chemical Co. ............................................... 89,250
-------------
Computer Software
780 Microsoft Corp.* ............................................... 91,845
-------------
Computers - Peripheral Equipment
4,700 Teradyne, Inc.* ................................................ 63,450
-------------
Computers -Systems
1,760 Hewlett-Packard Co. ............................................ 77,440
1,500 Sun Microsystems, Inc.* ........................................ 81,750
-------------
159,190
-------------
Electrical Equipment
1,640 Honeywell, Inc. ................................................ 86,920
-------------
Electronics - Semiconductors/Components
1,200 Intel Corp. .................................................... 90,000
1,700 Texas Instruments Inc. ......................................... 73,525
-------------
163,525
-------------
Entertainment
3,030 Carnival Corp. (Class A) ....................................... $ 81,431
-------------
Financial -Miscellaneous
3,600 Federal National Mortgage Assoc. ................................ 114,300
-------------
Foods
1,750 General Mills, Inc. ............................................ 94,937
-------------
Gaming
2,200 Circus Circus Enterprises, Inc.* ............................... 67,650
1,480 ITT Corp.* ..................................................... 83,990
-------------
151,640
-------------
Oil Integrated -International
1,600 Chevron Corp. .................................................. 92,600
1,100 Exxon Corp. .................................................... 90,475
830 Mobil Corp. .................................................... 91,611
-------------
274,686
-------------
Paper
2,300 Champion International Corp. ................................... 97,175
-------------
Pharmaceuticals
1,850 American Home Products Corp. ................................... 104,987
1,400 Pfizer, Inc. ................................................... 97,825
-------------
202,812
-------------
Restaurants
1,860 McDonald's Corp. ............................................... 86,258
-------------
Retail
1,900 May Department Stores Co. ...................................... 85,263
3,220 Payless ShoeSource, Inc.* ...................................... 104,248
-------------
189,511
-------------
Tobacco
1,000 Philip Morris Companies, Inc. .................................. 104,625
-------------
Transportation
1,300 Conrail, Inc. .................................................. 85,150
-------------
TOTAL UNITED STATES ............................................ 2,632,667
-------------
VENEZUELA (0.1%)
Steel & Iron
3,000 Siderurgica Venezolana Sivens S.A. de C.V. (ADR) ............... 9,150
-------------
TOTAL COMMON AND PREFERRED STOCKS
(Identified Cost $10,507,747) .................................. 11,079,031
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
81
<PAGE>
DEAN WITTER RETIREMENT SERIES -GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (5.7%)
U.S. GOVERNMENT AGENCY (a) (4.3%)
$ 500 Federal Home Loan Mortgage Corp. 5.22% due 08/12/96 ............ $499,203
-------------
REPURCHASE AGREEMENT (1.4%)
161 The Bank of New York 5.75% due 08/01/96 (dated 07/31/96;
proceeds $160,672; collateralized by $191,570 Federal Home Loan
Mortgage Corp. 6.50% due 12/15/23 valued at $163,859)
(Identified Cost $160,646) ..................................... 160,646
-------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $659,849) ..................................... 659,849
-------------
</TABLE>
<TABLE>
<CAPTION>
TOTAL INVESTMENTS
(IDENTIFIED COST $11,167,596) (b) 100.5% 11,738,880
<S> <C> <C>
LIABILITIES IN EXCESS OF
OTHER ASSETS ..................... (0.5) (53,637)
------ ------------
NET ASSETS ....................... 100.0% $11,685,243
====== ============
</TABLE>
- ------------
ADR American Depository Receipt.
GDR Global Depository Receipt.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
++ Consists of more than one class of securities traded together as a
unit; generally stocks with attached warrants.
(a) Security was purchased on a discount basis. The interest rate shown
has been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes is $11,181,345;
the aggregate gross unrealized appreciation is $891,541 and the
aggregate gross unrealized depreciation is $334,006, resulting in net
unrealized appreciation of $557,535.
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JULY 31, 1996:
<TABLE>
<CAPTION>
CONTRACTS TO DELIVERY UNREALIZED
RECEIVE IN EXCHANGE FOR DATE DEPRECIATION
- --------------- ---------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
$ 22,787 ARS 22,798 08/02/96 $(12)
DKK 82,729 $ 14,546 08/02/96 (1)
pounds
sterling 14,529 $ 22,651 08/06/96 (50)
--------------
Total unrealized depreciation................ $(63)
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
82
<PAGE>
DEAN WITTER RETIREMENT SERIES -GLOBAL EQUITY
SUMMARY OF INVESTMENTS July 31, 1996
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ------------------------------ ------------- ------------
<S> <C> <C>
Aerospace ..................... $ 115,631 1.0%
Aerospace & Defense ........... 67,431 0.6
Aircraft & Aerospace .......... 32,770 0.3
Aluminum ...................... 105,825 0.9
Apparel ....................... 31,239 0.3
Appliances & Household
Durables ..................... 26,260 0.2
Auto Parts .................... 14,153 0.1
Automotive .................... 279,113 2.4
Banking ....................... 799,591 6.8
Banks ......................... 80,700 0.7
Beverages ..................... 32,580 0.3
Beverages -Soft Drinks ........ 94,875 0.8
Brewery ....................... 33,408 0.3
Broadcast Media ............... 50,042 0.4
Brokerage ..................... 105,052 0.9
Building & Construction ...... 301,675 2.6
Building Materials ............ 163,188 1.4
Business & Public Services ... 90,983 0.8
Business Services ............. 254,549 2.2
Chemicals ..................... 365,295 3.1
Computer Software ............. 145,965 1.2
Computers -Peripheral
Equipment .................... 63,450 0.5
Computers -Systems ............ 159,190 1.4
Conglomerates ................. 143,419 1.2
Consumer Products ............. 97,570 0.8
Electrical Equipment .......... 86,920 0.7
Electronics ................... 352,556 3.0
Electronics -Semiconductors/
Components ................... 393,020 3.4
Energy ........................ 255,046 2.2
Engineering & Construction ... 57,903 0.5
Entertainment ................. 120,512 1.0
Financial -Miscellaneous ..... 114,300 1.0
Financial Services ............ 249,247 2.1
Food Processing ............... 11,813 0.1
Foods ......................... $ 94,937 0.8%
Foods & Beverages ............. 135,605 1.2
Forest Products, Paper &
Packaging .................... 24,375 0.2
Furniture ..................... 37,938 0.3
Gaming ........................ 151,640 1.3
Hotels ........................ 57,467 0.5
Insurance ..................... 275,047 2.4
International Trade ........... 177,865 1.5
Leisure ....................... 102,961 0.9
Machine Tools ................. 84,551 0.7
Machinery ..................... 366,371 3.1
Machinery -Diversfied ......... 37,871 0.3
Manufacturing ................. 99,545 0.9
Manufacturing -Diversified ... 35,891 0.3
Metals & Mining ............... 229,994 2.0
Natural Gas ................... 19,541 0.2
Oil Integrated -International 274,686 2.4
Paper ......................... 97,175 0.8
Pharmaceuticals ............... 593,343 5.1
Publishing .................... 163,281 1.4
Real Estate ................... 290,647 2.5
Repurchase Agreement .......... 160,646 1.4
Restaurants ................... 151,801 1.3
Retail ........................ 551,641 4.7
Steel ......................... 29,437 0.2
Steel & Iron .................. 139,901 1.2
Supermarkets .................. 35,500 0.3
Telecommunications ............ 705,711 6.0
Textiles -Apparel ............. 111,236 1.0
Tobacco ....................... 148,216 1.3
Transportation ................ 430,115 3.7
U.S. Government Agency ........ 499,203 4.3
Utilities ..................... 25,532 0.2
Utilities -Electric ........... 103,939 0.9
------------- ------------
$11,738,880 100.5%
============= ============
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
- ----------------------- ------------- ------------
<S> <C> <C>
Common Stocks .......... $11,036,145 94.4%
Preferred Stocks ....... 42,886 0.4
Short-Term Investments 659,849 5.7
------------- ------------
$11,738,880 100.5%
============= ============
</TABLE>
83
<PAGE>
DEAN WITTER RETIREMENT SERIES -STRATEGIST
PORTFOLIO OF INVESTMENTS July 31, 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (51.8%)
Aluminum (0.5%)
1,600 Aluminum Co. of America ........................................ $ 92,800
-------------
Appliances & Household Durables (1.3%)
11,000 Maytag Corp. ................................................... 220,000
-------------
Automotive (2.4%)
8,000 Chrysler Corp. ................................................. 227,000
3,500 Ford Motor Co. ................................................. 113,750
1,600 General Motors Corp. ........................................... 78,000
-------------
418,750
-------------
Banks -Money Center (0.5%)
1,000 Citicorp ....................................................... 81,875
-------------
Banks -Regional (0.4%)
330 Wells Fargo & Co. .............................................. 76,849
-------------
Beverages -Soft Drinks (0.6%)
3,400 PepsiCo Inc. ................................................... 107,525
-------------
Biotechnology (0.4%)
900 Chiron Corp.* .................................................. 78,750
-------------
Broadcast Media (0.9%)
9,400 U.S. West Media Group* ......................................... 162,150
-------------
Brokerage (0.9%)
1,350 Merrill Lynch & Co., Inc. ...................................... 81,506
1,600 Morgan Stanley Group, Inc. ..................................... 78,000
-------------
159,506
-------------
Business Systems (0.5%)
1,630 Electronic Data Systems Corp. .................................. 86,186
-------------
Chemicals (1.2%)
1,250 Dow Chemical Co. ............................................... 92,969
3,750 Monsanto Co. ................................................... 117,187
-------------
210,156
-------------
Chemicals -Specialty (0.5%)
2,600 Georgia Gulf Corp. ............................................. 79,950
-------------
Communications -Equipment &
Software (1.0%)
1,840 Cisco Systems, Inc.* ........................................... 95,220
1,900 Newbridge Networks Corp.* (Canada) ............................. 82,650
-------------
177,870
-------------
Computer Equipment (0.4%)
1,360 Seagate Technology, Inc.* ...................................... 65,790
-------------
Computer Services (0.7%)
2,300 Diebold, Inc. .................................................. 125,925
-------------
Computer Software (1.6%)
1,430 Intuit, Inc.* .................................................. $ 50,050
900 Microsoft Corp.* ............................................... 105,975
3,150 Oracle Corp.* .................................................. 122,850
-------------
278,875
-------------
Computers (1.7%)
2,600 Dell Computer Corp.* ........................................... 143,975
3,900 Gateway 2000, Inc.* ............................................ 156,000
-------------
299,975
-------------
Computers -Systems (1.6%)
2,200 Hewlett-Packard Co. ............................................ 96,800
900 International Business Machines Corp. .......................... 97,087
1,650 Sun Microsystems, Inc.* ........................................ 89,925
-------------
283,812
-------------
Conglomerates (1.2%)
2,580 General Electric Co. ........................................... 212,527
-------------
Drugs & Healthcare (0.5%)
1,800 Abbott Laboratories ............................................ 79,200
-------------
Electrical Equipment (1.9%)
2,410 Emerson Electric Co. ........................................... 203,344
1,900 Sony Corp. (ADR) (Japan) ....................................... 121,600
-------------
324,944
-------------
Electronics -
Semiconductors/Components (1.3%)
3,000 Intel Corp. .................................................... 225,000
-------------
Entertainment (1.5%)
10,000 Carnival Corp. (Class A) ....................................... 268,750
-------------
Financial -Miscellaneous (1.7%)
5,000 American Express Co. ........................................... 218,750
2,600 Federal National Mortgage Assoc. ............................... 82,550
-------------
301,300
-------------
Foods (2.2%)
1,430 Campbell Soup Co. .............................................. 97,061
1,260 General Mills, Inc. ............................................ 68,355
7,000 Quaker Oats Company (The) ...................................... 224,000
-------------
389,416
-------------
Gaming (1.2%)
7,000 Circus Circus Enterprises, Inc.* ............................... 215,250
-------------
Hardware & Tools (1.3%)
6,000 Black & Decker Corp. ........................................... 220,500
-------------
SEE NOTES TO FINANCIAL STATEMENTS
84
<PAGE>
DEAN WITTER RETIREMENT SERIES -STRATEGIST
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
Healthcare -Miscellaneous (2.2%)
11,200 Humana, Inc.* .................................................. $ 187,600
3,000 PacifiCare Health Systems (Class B)* ........................... 202,500
-------------
390,100
-------------
Household Products (1.8%)
1,300 Procter & Gamble Co. ........................................... 116,187
4,800 Tupperware Corp. ............................................... 205,200
-------------
321,387
-------------
Manufacturing -Diversified (1.2%)
3,905 Honeywell, Inc. ................................................ 206,965
-------------
Office Equipment & Supplies (1.3%)
5,000 Alco Standard Corp. ............................................ 218,750
-------------
Oil Drilling & Services (0.6%)
1,350 Schlumberger, Ltd. ............................................. 108,000
-------------
Oil Integrated -International (2.7%)
2,070 Chevron Corp. .................................................. 119,801
1,400 Exxon Corp. .................................................... 115,150
1,000 Mobil Corp. .................................................... 110,375
1,500 Texaco, Inc. ................................................... 127,500
-------------
472,826
-------------
Paper (0.5%)
2,100 Champion International Corp. ................................... 88,725
-------------
Pharmaceuticals (1.4%)
2,400 American Home Products Corp. ................................... 136,200
2,200 Johnson & Johnson .............................................. 105,050
-------------
241,250
-------------
Railroads (1.2%)
1,400 Conrail, Inc. .................................................. 91,700
2,300 CSX Corp. ...................................................... 110,975
-------------
202,675
-------------
Retail -Department Stores (0.7%)
4,200 Dayton-Hudson Corp. ............................................ 127,050
-------------
Retail -Specialty (3.1%)
10,000 Bed Bath & Beyond, Inc.* ....................................... 218,750
2,300 Home Depot, Inc. ............................................... 116,150
9,500 Pier 1 Imports, Inc. ........................................... 160,313
2,400 Price/Costco, Inc.* ............................................ 48,900
-------------
544,113
-------------
Retail -Specialty Apparel (0.7%)
4,400 Gap, Inc. ...................................................... 130,900
-------------
Savings & Loan Associations (0.9%)
1,500 Golden West Financial Corp. .................................... $ 83,250
4,200 Roosevelt Financial Group, Inc. ................................ 67,200
-------------
150,450
-------------
Shoes (0.9%)
1,500 Nike, Inc. (Class B) ........................................... 154,313
-------------
Steel & Iron (0.4%)
4,300 Inland Steel Industries, Inc. .................................. 74,713
-------------
Textiles -Apparel Manufacturers (0.7%)
3,500 Liz Claiborne, Inc. ............................................ 114,188
-------------
Tobacco (1.6%)
6,000 Dimon, Inc. .................................................... 113,250
1,630 Philip Morris Companies, Inc. .................................. 170,539
-------------
283,789
-------------
TOTAL COMMON STOCKS (Identified Cost $8,112,422) ............... 9,073,825
-------------
PREFERRED STOCK (0.1%)
Insurance
172 Aetna Inc. (Class C) (Conv.) $1.48 (Identified Cost $11,244) ... 10,772
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (3.7%)
Automotive -Finance (0.1%)
$ 15 Ford Capital BV 9.375% due 05/15/01 (Netherlands) .............. 16,381
-------------
Banks (0.6%)
50 CoreStates Financial Corp. 9.625% due 02/15/01 ................. 54,971
50 First Nationwide Bank 10.00% due 10/01/06 ...................... 55,564
-------------
110,535
-------------
Brokerage (0.3%)
50 Paine Webber Group, Inc. 8.25% due 05/01/02 .................... 51,680
-------------
Financial Services (0.6%)
50 Conseco, Inc. 10.50% due 12/15/04 .............................. 57,013
50 RHG Finance Corp. 8.875% due 10/01/05 .......................... 51,486
-------------
108,499
-------------
SEE NOTES TO FINANCIAL STATEMENTS
85
<PAGE>
DEAN WITTER RETIREMENT SERIES -STRATEGIST
PORTFOLIO OF INVESTMENTS July 31, 1996, continued
PRINCIPAL AMOUNT IN
THOUSANDS VALUE
- --------------------------------------------------------------------------------------------
Hospital Management (0.3%)
$ 50 Columbia/HCA Healthcare Corp. 7.50% due 11/15/95 ............... $ 47,125
-------------
Industrials (0.6%)
50 Lockheed Martin Corp. 7.70% due 06/15/08 ....................... 50,966
50 WMX Technologies Inc. 7.10% due 08/01/26 ....................... 50,313
-------------
101,279
-------------
Oil -Domestic (0.7%)
50 Occidental Petroleum Corp. 11.125% due 08/01/10 ................ 64,005
50 Pennzoil Co. 10.125% due 11/15/09 .............................. 58,808
-------------
122,813
-------------
Steel & Iron (0.1%)
10 Pohang Iron & Steel Co., Ltd. 7.50% due 08/01/02 (South Korea) . 10,062
-------------
Utilities -Electric (0.4%)
20 Long Island Lighting Co. 6.25% due 07/15/01 .................... 18,313
50 Niagara Mohawk Power Corp. 9.25% due 10/01/01 .................. 49,194
-------------
67,507
-------------
TOTAL CORPORATE BONDS
(Identified Cost $645,507) ..................................... 635,881
-------------
U.S. GOVERNMENT OBLIGATIONS (31.8%)
100 U.S. Treasury Bond 6.25% due 08/15/23 .......................... 90,031
150 U.S. Treasury Bond 7.625% due 02/15/25 ......................... 160,453
465 U.S. Treasury Bond 6.875% due 08/15/25 ......................... 456,499
175 U.S. Treasury Note 6.50% due 05/15/97 .......................... 175,820
400 U.S. Treasury Note 6.00% due 08/31/97 .......................... 399,938
50 U.S. Treasury Note 6.375% due 01/15/99 ......................... 50,070
360 U.S. Treasury Note 6.875% due 08/31/99 ......................... 364,331
25 U.S. Treasury Note 7.875% due 11/15/99 ......................... 26,031
800 U.S. Treasury Note 7.75% due 12/31/99 .......................... 831,250
300 U.S. Treasury Note 6.75% due 04/30/00 .......................... 302,391
$505 U.S. Treasury Note 5.625% due 11/30/00 ......................... $ 487,798
400 U.S. Treasury Note 5.75% due 08/15/03 .......................... 379,250
640 U.S. Treasury Note 7.25% due 05/15/04 .......................... 659,900
400 U.S. Treasury Note 7.25% due 08/15/04 .......................... 412,375
350 U.S. Treasury Note 7.50% due 02/15/05 .......................... 366,516
415 U.S. Treasury Note 6.50% due 05/15/05 .......................... 407,738
-------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Identified Cost $5,627,359) ................................... 5,570,391
-------------
SHORT-TERM INVESTMENTS (26.0%)
U.S. GOVERNMENT AGENCY (a) (22.5%)
3,930 Federal Home Loan Banks 5.62% due 08/01/96 ..................... 3,930,000
-------------
REPURCHASE AGREEMENT (3.5%)
623 The Bank of New York 5.75% due 08/01/96 (dated 07/31/96;
proceeds $623,580; collateralized by $739,303 Federal Mortgage
Acceptance Corp. 7.00% due 04/01/24 valued at $635,950)
(Identified Cost $623,480) ..................................... 623,480
-------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $4,553,480) ................................... 4,553,480
-------------
</TABLE>
<TABLE>
<CAPTION>
TOTAL INVESTMENTS
<S> <C> <C>
(IDENTIFIED COST $18,950,012) (b) 113.4% 19,844,349
LIABILITIES IN EXCESS OF
OTHER ASSETS ...................... (13.4) (2,348,643)
-------- -------------
NET ASSETS ........................ 100.0% $17,495,706
======== =============
</TABLE>
- ------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown
has been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes is $18,957,709;
the aggregate gross unrealized appreciation is $1,124,563 and the
aggregate gross unrealized depreciation is $237,923, resulting in net
unrealized appreciation of $886,640.
SEE NOTES TO FINANCIAL STATEMENTS
86
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
JULY 31, 1996
<TABLE>
<CAPTION>
INTERMEDIATE
U.S. GOVERNMENT U.S. GOVERNMENT INCOME
LIQUID ASSET MONEY MARKET SECURITIES SECURITIES
- ----------------------------------------------- -------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value * ......... $43,750,285 $6,628,215 $8,614,965 $4,050,764
Cash ........................................... 4,083 4,992 50,172 38,178
Receivable for:
Investments sold .............................. -- -- 500,625 --
Shares of beneficial interest sold ............ 24,087 975 25,052 2,734
Dividends ..................................... -- -- -- --
Interest ...................................... 59,564 -- 64,811 92,846
Foreign withholding taxes reclaimed ........... -- -- -- --
Prepaid expenses and other assets .............. 11,778 885 3,121 1,109
Deferred organizational expenses ............... 3,849 4,004 3,918 3,916
Receivable from affiliate ...................... 12,943 17,549 11,011 10,391
-------------- --------------- --------------- --------------
TOTAL ASSETS .................................. 43,866,589 6,656,620 9,273,675 4,199,938
-------------- --------------- --------------- --------------
LIABILITIES:
Payable for:
Investments purchased ......................... -- -- 499,790 --
Shares of beneficial interest repurchased .... 1,071,341 217 92,565 3,601
Dividends to shareholders ..................... -- -- 2,534 1,324
Investment management fees .................... 19,133 -- -- --
Accrued expenses and other payables ............ 18,036 23,030 22,479 17,791
Organizational expenses payable ................ 5,441 5,596 5,494 5,506
-------------- --------------- --------------- --------------
TOTAL LIABILITIES ............................. 1,113,951 28,843 622,862 28,222
-------------- --------------- --------------- --------------
NET ASSETS:
Paid-in-capital ................................ 42,752,596 6,627,775 8,862,015 4,319,568
Accumulated undistributed net investment income 42 2 24 --
Accumulated undistributed net realized gain
(accumulated net realized loss) ............... -- -- 16,402 (28,812)
Net unrealized appreciation (depreciation) .... -- -- (227,628) (119,040)
-------------- --------------- --------------- --------------
NET ASSETS .................................... $42,752,638 $6,627,777 $8,650,813 $4,171,716
============== =============== =============== ==============
*IDENTIFIED COST ............................... $43,750,285 $6,628,215 $8,842,593 $4,169,804
============== =============== =============== ==============
SHARES OF BENEFICIAL INTEREST OUTSTANDING .... 42,752,596 6,627,774 901,751 443,442
============== =============== =============== ==============
NET ASSET VALUE PER SHARE
(unlimited authorized shares of $.01 par
value) ........................................ $1.00 $1.00 $9.59 $9.41
============== =============== =============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
87
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
AMERICAN CAPITAL DIVIDEND
VALUE GROWTH GROWTH UTILITIES
- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
$41,348,703 $2,081,754 $70,144,312 $7,511,813
27,710 2,111 22,815 78,945
1,170,642 -- 54,036 --
87,588 7,544 118,156 13,594
13,020 1,501 104,192 22,587
--- -- -- 167
201 -- -- 662
5,836 3,305 8,216 1,637
4,096 4,096 3,910 3,918
3,173 6,729 2,874 6,107
- ------------- ------------ ------------- ------------
42,660,969 2,107,040 70,458,511 7,639,430
- ------------- ------------ ------------- ------------
2,241,377 37,443 500,879 --
52,339 60,052 121,898 21,732
--- -- -- --
9,649 -- 27,046 1,375
30,553 16,005 40,575 17,517
5,687 5,687 5,501 5,509
- ------------- ------------ ------------- ------------
2,339,605 119,187 695,899 46,133
- ------------- ------------ ------------- ------------
36,475,819 1,852,813 60,289,273 7,087,008
93,984 2,106 350,190 33,362
2,674,518 24,770 1,822,225 (131,379)
1,077,043 108,164 7,300,924 604,306
- ------------- ------------ ------------- ------------
$40,321,364 $1,987,853 $69,762,612 $7,593,297
============= ============ ============= ============
$40,271,697 $1,973,590 $62,843,388 $6,907,507
============= ============ ============= ============
3,082,783 157,685 4,773,848 643,891
============= ============ ============= ============
$13.08 $12.61 $14.61 $11.79
============= ============ ============= ============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
VALUE-ADDED
MARKET GLOBAL EQUITY STRATEGIST
------------- ------------- -------------
<C> <C> <C>
$21,098,236 $11,738,880 $19,844,349
-- -- --
129,911 30,790 401,453
25,310 20,722 30,357
21,446 9,106 5,836
138 26 127,954
-- 4,683 144
5,037 4,435 1,482
4,096 3,918 3,910
6,301 13,744 3,163
------------- ------------- -------------
21,290,475 11,826,304 20,418,648
------------- ------------- -------------
874,348 90,260 2,867,298
3,225 16,066 21,499
-- -- --
8,370 1,924 6,553
19,610 27,302 22,091
5,687 5,509 5,501
------------- ------------- -------------
911,240 141,061 2,922,942
------------- ------------- -------------
17,893,631 10,700,702 15,790,823
172,103 49,495 174,703
147,779 363,465 635,843
2,165,722 571,581 894,337
------------- ------------- -------------
$20,379,235 $11,685,243 $17,495,706
============= ============= =============
$18,932,514 $11,167,596 $18,950,012
============= ============= =============
1,463,322 990,721 1,388,256
============= ============= =============
$13.93 $11.79 $12.60
============= ============= =============
</TABLE>
88
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS, continued
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1996
<TABLE>
<CAPTION>
INTERMEDIATE
U.S. GOVERNMENT U.S. GOVERNMENT INCOME
LIQUID ASSET MONEY MARKET SECURITIES SECURITIES
- ----------------------------------------------------- -------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
NET INVESTMENT INCOME:
INCOME
Interest ............................................. $3,628,008 $778,612 $ 484,486 $ 245,172
Dividends ............................................ -- -- -- --
Dividends from affiliate (Note 3) .................... -- -- -- --
-------------- --------------- --------------- --------------
TOTAL INCOME ....................................... 3,628,008 778,612 484,486 245,172
-------------- --------------- --------------- --------------
EXPENSES
Investment management fees ........................... 318,178 69,837 50,913 24,158
Transfer agent fees and expenses ..................... 34,188 6,087 28,515 5,087
Shareholder reports and notices ...................... 27,803 8,061 5,254 2,329
Professional fees .................................... 17,134 15,533 17,898 13,856
Trustees' fees and expenses .......................... 1,243 913 1,278 103
Registration fees .................................... 6,388 9,432 6,948 6,599
Custodian fees ....................................... 1,062 725 192 261
Organizational expenses .............................. 2,734 2,734 2,734 2,734
Other ................................................ 2,131 1,380 2,583 3,684
-------------- --------------- --------------- --------------
TOTAL EXPENSES BEFORE AMOUNTS WAIVED/REIMBURSED .... 410,861 114,702 116,315 58,811
LESS: AMOUNTS WAIVED/REIMBURSED ................... (198,909) (63,212) (66,766) (32,131)
-------------- --------------- --------------- --------------
TOTAL EXPENSES AFTER AMOUNTS WAIVED/REIMBURSED . ... 211,952 51,490 49,549 26,680
-------------- --------------- --------------- --------------
NET INVESTMENT INCOME ............................. 3,416,056 727,122 434,937 218,492
-------------- --------------- --------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ........................................ -- -- 18,226 (27,045)
Foreign exchange transactions ...................... -- -- -- --
-------------- --------------- --------------- --------------
TOTAL GAIN (LOSS) .................................. -- -- 18,226 (27,045)
-------------- --------------- --------------- --------------
Net change in unrealized appreciation/depreciation
on:
Investments ........................................ -- -- (149,772) (116,038)
Translation of forward foreign currency
contracts, other assets and liabilities
denominated in foreign currencies ................. -- -- -- --
-------------- --------------- --------------- --------------
TOTAL APPRECIATION (DEPRECIATION) .................. -- -- (149,772) (116,038)
-------------- --------------- --------------- --------------
NET GAIN (LOSS) .................................... -- -- (131,546) (143,083)
-------------- --------------- --------------- --------------
NET INCREASE ......................................... $3,416,056 $727,122 $ 303,391 $ 75,409
============== =============== =============== ==============
</TABLE>
- ------------
* Net of $1,671, $21, $6,310, $4,768, $1,074, $12,960 and $11 foreign
withholding tax, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
89
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
AMERICAN CAPITAL DIVIDEND VALUE-ADDED GLOBAL
VALUE GROWTH GROWTH UTILITIES MARKET EQUITY STRATEGIST
- ------------- ---------- ------------ ----------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
$ 203,082 $ 1,783 $ 44,648 $ 31,187 $ 52,053 $ 22,357 $ 253,093
251,988* 15,856* 1,520,953* 213,902* 360,926* 122,604* 101,344*
-- -- -- -- 476 -- --
- ------------- ---------- ------------ ----------- ------------- ---------- ------------
455,070 17,639 1,565,601 245,089 413,455 144,961 354,437
- ------------- ---------- ------------ ----------- ------------- ---------- ------------
273,275 11,858 382,200 48,060 87,508 91,939 85,382
55,485 3,271 64,036 15,021 11,953 30,935 34,726
18,837 330 31,429 5,512 10,311 6,621 8,804
18,618 16,578 15,625 17,989 16,817 15,832 17,933
782 86 1,202 323 683 247 547
7,585 3,213 12,172 5,799 3,723 2,382 8,476
364 92 311 280 490 1,435 476
2,734 2,734 2,734 2,734 2,734 2,734 2,734
2,290 1,411 2,294 1,462 1,472 7,062 2,493
- ------------- ---------- ------------ ----------- ------------- ---------- ------------
379,970 39,573 512,003 97,180 135,691 159,187 161,571
(169,504) (28,933) (191,391) (57,201) (53,608) (98,757) (94,804)
- ------------- ---------- ------------ ----------- ------------- ---------- ------------
210,466 10,640 320,612 39,979 82,083 60,430 66,767
- ------------- ---------- ------------ ----------- ------------- ---------- ------------
244,604 6,999 1,244,989 205,110 331,372 84,531 287,670
- ------------- ---------- ------------ ----------- ------------- ---------- ------------
4,355,860 31,476 2,317,010 (13,965) 186,832 435,387 730,868
-- -- -- -- -- (592) --
- ------------- ---------- ------------ ----------- ------------- ---------- ------------
4,355,860 31,476 2,317,010 (13,965) 186,832 434,795 730,868
- ------------- ---------- ------------ ----------- ------------- ---------- ------------
(2,487,504) 45,817 2,701,826 257,350 1,044,025 47,341 291,438
37 -- -- -- -- 150 --
- ------------- ---------- ------------ ----------- ------------- ---------- ------------
(2,487,467) 45,817 2,701,826 257,350 1,044,025 47,491 291,438
- ------------- ---------- ------------ ----------- ------------- ---------- ------------
1,868,393 77,293 5,018,836 243,385 1,230,857 482,286 1,022,306
- ------------- ---------- ------------ ----------- ------------- ---------- ------------
$ 2,112,997 $ 84,292 $ 6,263,825 $ 448,495 $1,562,229 $ 566,817 $1,309,976
============= ========== ============ =========== ============= ========== ============
</TABLE>
90
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS, continued
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED JULY 31,
<TABLE>
<CAPTION>
U.S. GOVERNMENT
LIQUID ASSET MONEY MARKET
------------------------------- --------------------------------------
1996 1995 1996 1995
- ----------------------------------------------------- --------------- -------------- -------------- ----------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................ $ 3,416,056 $ 518,526 $ 727,122 $ 83,800
Net realized gain (loss) ............................. -- -- -- --
Net change in unrealized appreciation/depreciation .. -- -- -- --
--------------- -------------- -------------- ----------------------
NET INCREASE ....................................... 3,416,056 518,526 727,122 83,800
--------------- -------------- -------------- ----------------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income ................................ (3,416,043) (518,501) (727,125) (83,795)
Net realized gain .................................... -- -- -- --
--------------- -------------- -------------- ----------------------
TOTAL .............................................. (3,416,043) (518,501) (727,125) (83,795)
--------------- -------------- -------------- ----------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Net proceeds from sales .............................. 177,956,895 51,847,905 27,880,399 11,309,909
Reinvestment of dividends and distributions ......... 3,416,043 518,501 727,125 83,795
Cost of shares repurchased ........................... (174,251,486) (18,259,628) (32,674,558) (1,253,703)
--------------- -------------- -------------- ----------------------
NET INCREASE (DECREASE) ............................ 7,121,452 34,106,778 (4,067,034) 10,140,001
--------------- -------------- -------------- ----------------------
TOTAL INCREASE (DECREASE) .......................... 7,121,465 34,106,803 (4,067,037) 10,140,006
NET ASSETS:
Beginning of period .................................. 35,631,173 1,524,370 10,694,814 554,808
--------------- -------------- -------------- ----------------------
END OF PERIOD ...................................... $ 42,752,638 $ 35,631,173 $ 6,627,777 $10,694,814
=============== ============== ============== ======================
UNDISTRIBUTED NET INVESTMENT INCOME .................. $ 42 $ 29 $ 2 $ 5
=============== ============== ============== ======================
SHARES ISSUED AND REPURCHASED:
Sold ................................................. 177,956,895 51,847,905 27,880,399 11,309,909
Issued in reinvestment of dividends and distributions 3,416,043 518,501 727,125 83,795
Repurchased .......................................... (174,251,486) (18,259,628) (32,674,558) (1,253,703)
--------------- -------------- -------------- ----------------------
NET INCREASE (DECREASE) .............................. 7,121,452 34,106,778 (4,067,034) 10,140,001
=============== ============== ============== ======================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
91
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
U.S. GOVERNMENT INTERMEDIATE INCOME
SECURITIES SECURITIES AMERICAN VALUE CAPITAL GROWTH
- ---------------------------- -------------------------- ---------------------------- -------------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ------------- ------------- ------------- ----------- ------------- ------------- ------------ -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 434,937 $ 199,657 $ 218,492 $ 40,524 $ 244,604 $ 240,274 $ 6,999 $ 5,040
18,226 (1,820) (27,045) 3,997 4,355,860 1,027,331 31,476 924
(149,772) 48,200 (116,038) 12,308 (2,487,467) 3,493,914 45,817 67,202
- ------------- ------------- ------------- ----------- ------------- ------------- ------------ -----------------------
303,391 246,037 75,409 56,829 2,112,997 4,761,519 84,292 73,166
- ------------- ------------- ------------- ----------- ------------- ------------- ------------ -----------------------
(434,913) (200,544) (218,918) (40,260) (299,827) (138,219) (8,566) (3,260)
-- -- (4,854) -- (2,309,181) (1,962) (4,860) --
- ------------- ------------- ------------- ----------- ------------- ------------- ------------ -----------------------
(434,913) (200,544) (223,772) (40,260) (2,609,008) (140,181) (13,426) (3,260)
- ------------- ------------- ------------- ----------- ------------- ------------- ------------ -----------------------
9,509,649 2,981,288 4,840,703 601,204 21,806,112 13,053,502 1,518,128 419,996
433,619 190,802 217,069 39,011 2,602,757 136,829 13,426 3,185
(5,369,758) (1,962,783) (1,731,472) (123,468) (6,172,981) (2,070,877) (292,073) (30,293)
- ------------- ------------- ------------- ----------- ------------- ------------- ------------ -----------------------
4,573,510 1,209,307 3,326,300 516,747 18,235,888 11,119,454 1,239,481 392,888
- ------------- ------------- ------------- ----------- ------------- ------------- ------------ -----------------------
4,441,988 1,254,800 3,177,937 533,316 17,739,877 15,740,792 1,310,347 462,794
4,208,825 2,954,025 993,779 460,463 22,581,487 6,840,695 677,506 214,712
- ------------- ------------- ------------- ----------- ------------- ------------- ------------ -----------------------
$ 8,650,813 $ 4,208,825 $ 4,171,716 $ 993,779 $40,321,364 $22,581,487 $1,987,853 $677,506
============= ============= ============= =========== ============= ============= ============ =======================
$ 24 $ -- $ -- $ 426 $ 93,984 $ 149,207 $ 2,106 $ 3,673
============= ============= ============= =========== ============= ============= ============ =======================
971,490 312,897 499,259 63,283 1,603,955 1,204,547 119,028 40,391
44,420 20,021 22,618 4,153 203,340 13,574 1,087 335
(547,637) (208,493) (181,670) (13,120) (447,666) (184,040) (23,095) (2,856)
- ------------- ------------- ------------- ----------- ------------- ------------- ------------ -----------------------
468,273 124,425 340,207 54,316 1,359,629 1,034,081 97,020 37,870
============= ============= ============= =========== ============= ============= ============ =======================
</TABLE>
92
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS, continued
STATEMENTS OF CHANGES IN NET ASSSETS, continued
For the year ended July 31,
<TABLE>
<CAPTION>
DIVIDEND GROWTH UTILITIES
---------------------------- ----------------------------------------
1996 1995 1996 1995
- ------------------------------------------------------ ------------- ------------- ------------- -------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................. $ 1,244,989 $ 832,540 $ 205,110 $ 178,226
Net realized gain (loss) .............................. 2,317,010 160,385 (13,965) (111,170)
Net change in unrealized appreciation/depreciation ... 2,701,826 4,782,860 257,350 449,814
------------- ------------- ------------- -------------------------
NET INCREASE ........................................ 6,263,825 5,775,785 448,495 516,870
------------- ------------- ------------- -------------------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income ................................. (1,199,564) (622,946) (230,987) (148,664)
Net realized gain ..................................... (590,466) (202,526) -- (7,657)
------------- ------------- ------------- -------------------------
TOTAL ............................................... (1,790,030) (825,472) (230,987) (156,321)
------------- ------------- ------------- -------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Net proceeds from sales ............................... 36,503,267 22,705,910 3,456,194 2,925,355
Reinvestment of dividends and distributions .......... 1,779,713 787,071 227,657 153,082
Cost of shares repurchased ............................ (8,398,184) (5,860,692) (1,687,882) (1,918,748)
------------- ------------- ------------- -------------------------
NET INCREASE (DECREASE) ............................. 29,884,796 17,632,289 1,995,969 1,159,689
------------- ------------- ------------- -------------------------
TOTAL INCREASE (DECREASE) ........................... 34,358,591 22,582,602 2,213,477 1,520,238
NET ASSETS:
Beginning of period ................................... 35,404,021 12,821,419 5,379,820 3,859,582
------------- ------------- ------------- -------------------------
END OF PERIOD ....................................... $69,762,612 $35,404,021 $ 7,593,297 $ 5,379,820
============= ============= ============= =========================
UNDISTRIBUTED NET INVESTMENT INCOME ................... $ 350,190 $ 304,765 $ 33,362 $ 59,239
============= ============= ============= =========================
SHARES ISSUED AND REPURCHASED:
Sold .................................................. 2,524,798 1,985,940 288,411 279,150
Issued in reinvestment of dividends and distributions 126,953 70,952 18,947 14,928
Repurchased ........................................... (583,926) (514,831) (141,590) (186,431)
------------- ------------- ------------- -------------------------
NET INCREASE (DECREASE) ............................... 2,067,825 1,542,061 165,768 107,647
============= ============= ============= =========================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
93
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
VALUE-ADDED MARKET GLOBAL EQUITY STRATEGIST
- ---------------------------- --------------------------- ----------------------------------------------
1996 1995 1996 1995 1996 1995
- ------------- ------------- ------------- ------------ ------------- -------------------------------
<S> <C> <C> <C> <C> <C>
$ 331,372 $ 158,945 $ 84,531 $ 121,191 $ 287,670 $ 194,436
186,832 55,495 434,795 (65,955) 730,868 64,346
1,044,025 1,097,897 47,491 520,815 291,438 655,133
- ------------- ------------- ------------- ------------ ------------- -------------------------------
1,562,229 1,312,337 566,817 576,051 1,309,976 913,915
- ------------- ------------- ------------- ------------ ------------- -------------------------------
(257,479) (128,720) (126,784) (51,908) (244,742) (84,091)
(78,439) (57,957) -- -- (159,285) --
- ------------- ------------- ------------- ------------ ------------- -------------------------------
(335,918) (186,677) (126,784) (51,908) (404,027) (84,091)
- ------------- ------------- ------------- ------------ ------------- -------------------------------
6,512,239 8,377,903 6,329,119 5,661,746 12,101,707 6,668,052
329,833 185,438 121,869 48,705 403,090 83,213
(1,769,137) (741,603) (2,492,083) (968,314) (2,673,732) (2,098,857)
- ------------- ------------- ------------- ------------ ------------- -------------------------------
5,072,935 7,821,738 3,958,905 4,742,137 9,831,065 4,652,408
- ------------- ------------- ------------- ------------ ------------- -------------------------------
6,299,246 8,947,398 4,398,938 5,266,280 10,737,014 5,482,232
14,079,989 5,132,591 7,286,305 2,020,025 6,758,692 1,276,460
- ------------- ------------- ------------- ------------ ------------- -------------------------------
$20,379,235 $14,079,989 $11,685,243 $7,286,305 $17,495,706 $ 6,758,692
============= ============= ============= ============ ============= ===============================
$ 172,103 $ 98,210 $ 49,495 $ 91,401 $ 174,703 $ 131,775
============= ============= ============= ============ ============= ===============================
468,279 672,727 542,027 551,389 972,731 671,204
24,706 17,678 10,862 4,871 34,364 8,650
(129,743) (65,288) (214,741) (93,327) (218,134) (211,811)
- ------------- ------------- ------------- ------------ ------------- -------------------------------
363,242 625,117 338,148 462,933 788,961 468,043
============= ============= ============= ============ ============= ===============================
</TABLE>
94
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 31, 1996
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Retirement Series (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment
company, consisting of eleven separate Series ("Series"). All of the Series,
with the exception of Strategist, are diversified.
The Fund was organized on May 14, 1992 as a Massachusetts business trust and
each of the Series commenced operations as follows:
<TABLE>
<CAPTION>
COMMENCEMENT OF COMMENCEMENT OF
OPERATIONS OPERATIONS
--------------------- --------------------
<S> <C> <C> <C>
Liquid Asset ....................... December 30, 1992 Dividend Growth ....... January 7, 1993
U.S. Government Money Market ...... January 20, 1993 Utilities ............. January 8, 1993
U.S. Government Securities ......... January 8, 1993 Value-Added Market .... February 1, 1993
Intermediate Income Securities .... January 12, 1993 Global Equity ......... January 8, 1993
American Value ..................... February 1, 1993 Strategist ............ January 7, 1993
Capital Growth ..................... February 2, 1993
</TABLE>
The investment objectives of each Series are as follows:
<TABLE>
<CAPTION>
SERIES INVESTMENT OBJECTIVE
- ----------------------- ---------------------------------------------------------------------------------
<S> <C>
Liquid Asset Seeks high current income, preservation of capital and liquidity by investing in
short-term money market instruments.
- ----------------------- ---------------------------------------------------------------------------------
U.S. Government Money Seeks high current income, preservation of capital and liquidity by investing
Market primarily in money market instruments which are issued and/or guaranteed by the
U.S. Government, its agencies or instrumentalities.
- ----------------------- ---------------------------------------------------------------------------------
U.S. Government Seeks high current income consistent with safety of principal by investing in a
Securities diversified portfolio of obligations issued and/or guaranteed by the U.S.
Government or its instrumentalities.
- ----------------------- ---------------------------------------------------------------------------------
Intermediate Income Seeks high current income consistent with safety of principal by investing
Securities primarily in intermediate term, investment grade fixed-income securities.
- ----------------------- ---------------------------------------------------------------------------------
American Value Seeks long-term growth consistent with an effort to reduce volatility by
investing principally in common stock of companies in industries which, at the
time of investment, are believed to be undervalued in the marketplace.
- ----------------------- ---------------------------------------------------------------------------------
95
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 31, 1996, continued
SERIES INVESTMENT OBJECTIVE
- ----------------------- ---------------------------------------------------------------------------------
Capital Growth Seeks long-term capital growth by investing primarily in common stocks.
- ----------------------- ---------------------------------------------------------------------------------
Dividend Growth Seeks to provide reasonable current income and long-term growth of income and
capital by investing primarily in common stock of companies with a record of
paying dividends and the potential for increasing dividends.
- ----------------------- ---------------------------------------------------------------------------------
Strategist Seeks a high total investment return through a fully managed investment policy
utilizing equity securities, investment grade fixed income and money market
securities.
- ----------------------- ---------------------------------------------------------------------------------
Utilities Seeks to provide current income and long-term growth of income and capital by
investing in equity and fixed-income securities of companies in the public
utilities industry.
- ----------------------- ---------------------------------------------------------------------------------
Value-Added Market Seeks to achieve a high level of total return on its assets through a combination
of capital appreciation and current income. It seeks to achieve this objective by
investing, on an equally weighted basis, in a diversified portfolio of common
stocks of the companies which are represented in the Standard & Poor's 500
Composite Stock Price Index.
- ----------------------- ---------------------------------------------------------------------------------
Global Equity Seeks to provide a high level of total return on its assets, primarily through
long-term capital growth and, to a lesser extent, from income. It seeks to
achieve this objective through investments in all types of common stocks and
equivalents, preferred stocks and bonds and other debt obligations of domestic
and foreign companies, governments and international organizations.
- ----------------------- ---------------------------------------------------------------------------------
</TABLE>
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 -- Liquid Asset and U.S. Government Money Market:
Securities are valued at amortized cost which approximates market value. All
remaining Series: (1) an equity security listed or traded on the New York,
American or other domestic or foreign stock exchange is valued at its latest
sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price
(in cases where securities are traded on more than one exchange, the
securities are valued on the exchange designated as the primary market 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, portfolio securities are valued at their fair value as
determined in good faith under procedures
96
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 31, 1996, continued
established by and under the general supervision of the Trustees; (4) certain
portfolio securities may be valued by an outside pricing service approved by
the Trustees. The pricing service utilizes a matrix system incorporating
security quality, maturity and coupon as the evaluation model parameters,
and/or research and evaluations by its staff, including review of
broker-dealer market price quotations, if available, in determining what it
believes is the fair valuation of the securities valued by such pricing
service; and (5) short-term debt securities having a maturity date of more
than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a maturity
date of sixty days or less at the time of purchase are valued at amortized
cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. Dividend income and distributions are recorded on the ex-dividend
date except for certain dividends on foreign securities which are recorded as
soon as the Fund is informed after the ex-dividend date. Interest income is
accrued daily except where collection is not expected. Liquid Asset and U.S.
Government Money Market amortize premiums and accrete discounts on securities
owned; gains and losses realized upon the sale of such securities are based
on their amortized cost. Discounts for all other Series are accreted over the
life of the respective securities.
C. FOREIGN CURRENCY TRANSLATION -- The books and records of the Portfolios
investing in foreign currency denominated transactions are translated into
U.S. dollars as follows: (1) the foreign currency market value of investment
securities, other assets and liabilities and forward contracts are translated
at the exchange rates prevailing at the end of the period; and (2) purchases,
sales, income and expenses are translated at the exchange rates prevailing on
the respective dates of such transactions. The resultant exchange gains and
losses are included in the Statement of Operations as realized and unrealized
gain/loss on foreign exchange transactions. Pursuant to U.S. Federal income
tax regulations, certain foreign exchange gains/losses included in realized
and unrealized gain/loss are included in or are a reduction of ordinary
income for federal income tax purposes. The Portfolios do not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the changes in the market prices of the
securities.
D. FORWARD FOREIGN CURRENCY CONTRACTS -- Some of the Portfolios may enter
into forward foreign currency contracts which are valued daily at the
appropriate exchange rates. The resultant unrealized exchange gains and
losses are included in the Statement of Operations as unrealized foreign
currency gain or loss. The Portfolios record realized gains or losses on
delivery of the currency or at the time the forward contract is extinguished
(compensated) by entering into a closing transaction prior to delivery.
97
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 31, 1996, continued
E. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply
individually for each Series 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.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
G. EXPENSES -- Direct expenses are charged to the respective Series and
general Fund expenses are allocated on the basis of relative net assets or
equally among the Series.
H. ORGANIZATIONAL EXPENSES -- Dean Witter InterCapital Inc. (the "Investment
Manager") paid the organizational expenses of the Fund in the amount of
$150,000 ($13,636 allocated to each of the Series) and will be reimbursed,
exclusive of amounts waived. Such expenses have been deferred and are being
amortized by the Fund 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 "Agreement"), the Fund
pays the Investment Manager a management fee, accrued daily and payable
monthly, by applying the following annual rates to each Series' net assets
determined at the close of each business day: Liquid Asset, U.S. Government
Money Market and Value-Added Market -0.50%; U.S. Government Securities and
Intermediate Income Securities -0.65%; Dividend Growth and Utilities -0.75%;
American Value, Capital Growth and Strategist -0.85%; and Global Equity
- -1.0%.
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
98
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 31, 1996, continued
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services,
heat, light, power and other utilities provided to the Fund.
The Investment Manager had undertaken to reimburse the Fund for all expenses
(except for any brokerage fees and a portion of the organizational expenses)
and waive the compensation (the "management fee") provided for in the
Agreement until December 31, 1995. At July 31, 1996, included in the
Statement of Assets and Liabilities are receivables from an affiliate which
represent expense reimbursements due to the Fund. For the period January 1,
1996 through July 31, 1997, the Investment Manager will continue to waive the
management fee and reimburse expenses to the extent they exceed 1.00% of
daily net assets of each Series.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
Purchases and sales/maturities of portfolio securities, excluding short-term
investments (except for Liquid Asset and U.S. Government Money Market), for
the year ended July 31, 1996 were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES OTHER
---------------------------- ------------------------------
SALES/ SALES/
PURCHASES PREPAYMENTS PURCHASES MATURITIES
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Liquid Asset ................... $ 76,427,868 $ 78,370,000 $947,688,391 $941,077,474
U.S. Government Money Market .. 908,937,524 913,788,475 -- --
U.S. Government Securities .... 7,476,168 3,453,055 -- --
Intermediate Income Securities 6,371,832 3,912,977 1,752,163 965,765
American Value ................. 7,404,435 8,357,071 93,617,353 83,522,312
Capital Growth ................. 21,947 -- 1,924,150 898,643
Dividend Growth ................ -- -- 37,363,095 9,097,587
Utilities ...................... -- -- 2,460,477 980,366
Value-Added Market ............. 25,954 -- 6,435,048 1,318,037
Global Equity .................. -- 13,230 12,001,793 8,348,869
Strategist ..................... 5,842,565 1,875,522 12,225,699 8,154,259
</TABLE>
Included in the aforementioned purchases of portfolio securities of
Value-Added Market are common stock purchases of Dean Witter Discover & Co.,
an affiliate of the Investment Manager, of $8,843.
During the year ended July 31, 1996, Capital Growth purchased and
subsequently sold equity securities of Citizens Utilities Co., an affiliate
of the Fund by virtue of a common Trustee, in the amount of $31,421 and
$3,949, respectively.
99
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 31, 1996, continued
For the year ended July 31, 1996, the following respective Series incurred
brokerage commissions with Dean Witter Reynolds Inc. ("DWR"), an affiliate of
the Investment Manager, for portfolio transactions executed on behalf of such
Series.
<TABLE>
<CAPTION>
AMERICAN CAPITAL DIVIDEND
VALUE GROWTH GROWTH
---------- --------- ----------
<S> <C> <C> <C>
Commissions .. $67,847 $1,774 $30,759
========== ========= ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
GLOBAL
UTILITIES EQUITY STRATEGIST
----------- -------- ------------
<S> <C> <C> <C>
Commissions .. $4,140 $5,635 $10,751
=========== ======== ============
</TABLE>
Included in the payable for investments purchased and receivable for
investments sold for unsettled trades with DWR at July 31, 1996 were as
follows:
<TABLE>
<CAPTION>
AMERICAN CAPITAL DIVIDEND GLOBAL
VALUE GROWTH GROWTH EQUITY STRATEGIST
------------ --------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Payable for investments purchased $1,177,406 $25,481 $392,324 $21,953 $1,379,200
============ ========= ========== ========= ============
Receivable for investments sold .. $ 385,825 $ -- $ 54,036 $ -- $ 103,267
============ ========= ========== ========= ============
</TABLE>
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Fund's transfer agent. At July 31, 1996 the following Series had approximate
transfer agent fees and expenses payable:
<TABLE>
<CAPTION>
INTERMEDIATE
LIQUID U.S. GOVERNMENT U.S. GOVERNMENT INCOME
ASSET MONEY MARKET SECURITIES SECURITIES AMERICAN VALUE
-------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
$4,100 $500 $3,800 $480 $5,900
======== ================ ================ ================ ================
</TABLE>
<TABLE>
<CAPTION>
CAPITAL DIVIDEND VALUE-ADDED GLOBAL
GROWTH GROWTH UTILITIES MARKET EQUITY STRATEGIST
- --------- ---------- ----------- ------------- -------- ------------
<S> <C> <C> <C> <C> <C>
$300 $7,100 $1,200 $1,300 $5,100 $2,000
========= ========== =========== ============= ======== ============
</TABLE>
4. FEDERAL INCOME TAX STATUS
At July 31, 1996, the following Series had approximate net capital loss
carryovers which may be used to offset future capital gains to the extent
provided by regulations:
<TABLE>
<CAPTION>
AVAILABLE THROUGH
JULY 31
------------------
2003 2004
-------- --------
<S> <C> <C>
Intermediate Income Securities $ -- $ 5,700
Utilities ...................... 62,800 39,200
</TABLE>
During the year ended July 31, 1996, the following Series utilized
approximate net capital loss carryovers:
Capital Growth --$900; Global Equity --$3,500.
100
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 31, 1996, continued
Net capital and net currency losses incurred after October 31 ("post-October"
losses) within the taxable year are deemed to arise on the first business day
of the Series' next taxable year. The following Series incurred and will
elect to defer post-October losses during fiscal 1996:
<TABLE>
<CAPTION>
INTERMEDIATE
INCOME GLOBAL
SECURITIES UTILITIES EQUITY
- -------------- ----------- --------
<S> <C> <C>
$23,110 $25,929 $939
============== =========== ========
</TABLE>
At July 31, 1996, the primary reason(s) for temporary book/tax differences
were as follows:
<TABLE>
<CAPTION>
POST-OCTOBER CAPITAL LOSS DEFERRALS
LOSSES FROM WASH SALES
---------------- --------------------------
<S> <C> <C>
Intermediate Income Securities .... o
American Value ..................... o
Capital Growth ..................... o
Dividend Growth .................... o
Utilities .......................... o o
Value-Added Market ................. o
Global Equity ...................... o o
Strategist ......................... o
</TABLE>
Additionally, Global Equity had temporary book/tax differences attributable
to income from the mark-to-market of passive foreign investment companies.
5. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
Some of the Portfolios may enter into forward foreign currency contracts
("forward contracts") to facilitate settlement of foreign currency
denominated portfolio transactions or to manage foreign currency exposure
associated with foreign currency denominated securities. Global Equity is
also permitted to write covered call options on securities and certain
foreign currencies to hedge against a decline in the value of a security or
the underlying currency of such security.
At July 31, 1996, Global Equity had outstanding forward contracts to
facilitate settlement of foreign currency denominated portfolio transactions.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Portfolios bear the
risk of an unfavorable change in foreign exchange rates underlying the
forward contracts. Risks may also arise upon entering into these contracts
from the potential inability of the counterparties to meet the terms of their
contracts.
101
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
NET ASSET
YEAR VALUE NET NET REALIZED TOTAL FROM TOTAL DIVIDENDS
ENDED BEGINNING INVESTMENT AND UNREALIZED INVESTMENT DIVIDENDS TO DISTRIBUTIONS AND
JULY 31 OF PERIOD INCOME GAIN (LOSS) OPERATIONS SHAREHOLDERS TO SHAREHOLDERS DISTRIBUTIONS
- ---------- ----------- ------------ -------------- ------------ -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
LIQUID ASSET
1993 (1) $ 1.00 $0.02 $-- $ 0.02 $(0.02) $-- $(0.02)
1994 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1995 1.00 0.06 -- 0.06 (0.06) -- (0.06)
1996 1.00 0.05 -- 0.05 (0.05) -- (0.05)
U.S. GOVERNMENT MONEY MARKET
1993 (2) 1.00 --++ -- -- -- -- --
1994 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1995 1.00 0.06 -- 0.06 (0.06) -- (0.06)
1996 1.00 0.05 -- 0.05 (0.05) -- (0.05)
U.S. GOVERNMENT SECURITIES
1993 (3) 10.00 0.19 0.07 0.26 (0.20) -- (0.20)
1994 10.06 0.44 (0.50) (0.06) (0.44) -- (0.44)
1995 9.56 0.56 0.15 0.71 (0.56) -- (0.56)
1996 9.71 0.55 (0.12) 0.43 (0.55) -- (0.55)
INTERMEDIATE INCOME SECURITIES
1993 (4) 10.00 0.19 (0.02) 0.17 (0.19) -- (0.19)
1994 9.98 0.60 (0.57) 0.03 (0.60) -- (0.60)
1995 9.41 0.61 0.22 0.83 (0.61) -- (0.61)
1996 9.63 0.59 (0.21) 0.38 (0.59) (0.01) (0.60)
AMERICAN VALUE
1993 (5) 10.00 0.06 (0.01) 0.05 -- -- --
1994 10.05 0.03 (0.09) (0.06) (0.02) (0.04) (0.06)
1995 9.93 0.14 3.15 3.29 (0.12) -- (0.12)
1996 13.10 0.09 1.17 1.26 (0.15) (1.13) (1.28)
</TABLE>
- ------------
* After application of the Fund's expense limitation.
+ Calculated based on the net asset value as of the last business day of the
period.
++ Includes dividends from net investment income of $0.004 per share.
Commencement of operations:
(1) December 30, 1992.
(2) January 20, 1993.
(3) January 8, 1993.
(4) January 12, 1993.
(5) February 1, 1993.
(a) Not annualized.
(b) Annualized.
(c) Restated.
SEE NOTES TO FINANCIAL STATEMENTS
102
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET RATIOS TO AVERAGE NET
ASSETS (BEFORE EXPENSES ASSETS (AFTER EXPENSES
WERE ASSUMED)* WERE ASSUMED)
------------------------- -------------------------
NET ASSET NET ASSETS
VALUE TOTAL END OF NET NET PORTFOLIO AVERAGE
END OF INVESTMENT PERIOD INVESTMENT INVESTMENT TURNOVER COMMISSION
PERIOD RETURN+ (OOO'S) EXPENSES INCOME (LOSS) EXPENSES INCOME (LOSS) RATE RATE PAID
- ----------- ------------ ------------ ---------- ------------- ---------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.00 1.77%(a) $ 1,081 1.30%(b) 0.53%(b) 0.14%(b) 3.02%(b) N/A N/A
1.00 3.48 1,524 2.50 0.99 -- 3.49 N/A N/A
1.00 5.90 35,631 1.16 4.96 -- 6.12 N/A N/A
1.00 5.44 42,753 0.65 5.05 0.33 5.37 N/A N/A
1.00 0.42 (a) 125 2.50 (b) (0.95)(b) 2.13 (b) 0.83 (b) N/A N/A
1.00 3.52 555 2.50 0.82 -- 3.32 N/A N/A
1.00 5.86 10,695 2.50 3.62 -- 6.12 N/A N/A
1.00 5.23 6,628 0.82 4.75 0.37 5.21 N/A N/A
10.06 2.60 (a) 1,756 1.81 (b) 0.33 (b) 0.18 (b) 3.66 (b) -- N/A
9.56 (0.69) 2,954 2.50 1.96 -- 4.46 (c) 29% N/A
9.71 7.72 4,209 2.36 3.49 -- 5.85 14 N/A
9.59 4.49 8,651 1.48 4.70 0.63 5.55 47 N/A
9.98 1.67 (a) 182 2.50 (b) 1.00 (b) 1.62 (b) 3.50 (b) -- N/A
9.41 0.26 460 2.50 3.64 -- 6.14 40 N/A
9.63 9.22 994 2.50 4.08 -- 6.58 37 N/A
9.41 3.95 4,172 1.58 5.01 0.72 5.87 142 N/A
10.05 0.50 (a) 308 2.50 (b) (0.66)(b) 0.74 (b) 1.10 (b) 121 (a) --
9.93 (0.59) 6,841 2.50 (0.81) -- 1.69 136 --
13.10 33.48 22,581 1.42 0.39 -- 1.81 234 --
13.08 9.83 40,321 1.18 0.23 0.65 0.76 301 $0.0543
</TABLE>
103
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL HIGHLIGHTS, continued
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
NET ASSET
YEAR VALUE NET NET REALIZED TOTAL FROM TOTAL DIVIDENDS
ENDED BEGINNING INVESTMENT AND UNREALIZED INVESTMENT DIVIDENDS TO DISTRIBUTIONS AND
JULY 31 OF PERIOD INCOME GAIN (LOSS) OPERATIONS SHAREHOLDERS TO SHAREHOLDERS DISTRIBUTIONS
- ------------ ----------- ------------ -------------- ------------ -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITAL GROWTH
1993 (4) $10.00 $(0.02) $(1.10) $(1.12) $ -- $-- $ --
1994 8.88 0.13 0.45 0.58 (0.04) -- (0.04)
1995 9.42 0.10 1.77 1.87 (0.12) -- (0.12)
1996 11.17 0.07 1.55 1.62 (0.11) (0.07) (0.18)
DIVIDEND GROWTH
1993 (2) 10.00 0.13 0.58 0.71 (0.10) -- (0.10)
1994 10.61 0.28 0.37 0.65 (0.23) (0.01) (0.24)
1995 11.02 0.34 2.13 2.47 (0.31) (0.10) (0.41)
1996 13.08 0.32 1.76 2.08 (0.36) (0.19) (0.55)
UTILITIES
1993 (1) 10.00 0.19 1.30 1.49 (0.14) -- (0.14)
1994 11.35 0.37 (0.95) (0.58) (0.34) (0.01) (0.35)
1995 10.42 0.42 0.80 1.22 (0.37) (0.02) (0.39)
1996 11.25 0.38 0.61 0.99 (0.45) -- (0.45)
VALUE-ADDED MARKET
1993 (3) 10.00 0.05 0.02 0.07 (0.04) -- (0.04)
1994 10.03 0.24 0.65 0.89 (0.11) -- (0.11)
1995 10.81 0.21 2.16 2.37 (0.26) (0.12) (0.38)
1996 12.80 0.25 1.17 1.42 (0.22) (0.07) (0.29)
GLOBAL EQUITY
1993 (1) 10.00 0.07 (0.03) 0.04 -- -- --
1994 10.04 0.08 0.58 0.66 (0.05) -- (0.05)
1995 10.65 0.14 0.49 0.63 (0.11) -- (0.11)
1996 11.17 0.09 0.71 0.80 (0.18) -- (0.18)
STRATEGIST
1993 (2) 10.00 0.06 (0.23) (0.17) -- -- --
1994 9.83 0.23 (0.20) 0.03 (0.13) -- (0.13)
1995 9.73 0.24 1.49 1.73 (0.18) -- (0.18)
1996 11.28 0.25 1.63 1.88 (0.34) (0.22) (0.56)
</TABLE>
- ------------
* After application of the Fund's expense limitation.
+ Calculated based on the net asset value as of the last business day of the
period.
Commencement of operations:
(1) January 8, 1993.
(2) January 7, 1993.
(3) February 1, 1993.
(4) February 2, 1993.
(a) Not annualized.
(b) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
104
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET RATIOS TO AVERAGE NET
ASSETS (BEFORE EXPENSES ASSETS (AFTER EXPENSES
WERE ASSUMED)* WERE ASSUMED)
------------------------- -------------------------
NET ASSET NET ASSETS
VALUE TOTAL END OF NET NET PORTFOLIO AVERAGE
END OF INVESTMENT PERIOD INVESTMENT INVESTMENT TURNOVER COMMISSION
PERIOD RETURN+ (OOO'S) EXPENSES INCOME (LOSS) EXPENSES INCOME (LOSS) RATE RATE PAID
- ----------- ------------- ------------ ---------- ------------- ---------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8.88 (11.20)%(a) $ 135 2.50%(b) (1.01)%(b) 1.97%(b) (0.47)%(b) 2%(a) --
9.42 6.57 215 2.50 (0.98) -- 1.52 11 --
11.17 20.08 678 2.50 (1.07) -- 1.43 20 --
12.61 14.58 1,988 2.50 (1.24) 0.76 0.50 68 $0.0536
10.61 7.11 (a) 2,417 2.50 (b) 0.61 (b) 0.16 (b) 2.89 (b) 7 (a) --
11.02 6.13 12,821 1.51 1.78 -- 3.29 13 --
13.08 23.07 35,404 1.14 2.34 -- 3.48 29 --
14.61 16.09 69,763 1.00 2.07 0.63 2.44 18 0.0526
11.35 14.98 (a) 1,334 2.50 (b) 1.59 (b) 0.30 (b) 3.79 (b) 8 (a) --
10.42 (5.23) 3,860 2.50 1.62 -- 4.14 5 --
11.25 12.16 5,380 1.91 2.41 -- 4.32 24 --
11.79 8.76 7,593 1.52 2.31 0.62 3.20 17 0.0508
10.03 0.71 (a) 640 2.50 (b) (0.16) (b) 0.92 (b) 1.42 (b) 1 (a) --
10.81 8.89 5,133 1.82 0.70 -- 2.53 8 --
12.80 22.65 14,080 1.22 1.33 -- 2.55 7 --
13.93 11.19 20,379 0.78 1.58 0.47 1.89 8 0.0300
10.04 0.40 (a) 322 2.50 (b) (0.90) (b) 1.00 (b) 1.77 (b) -- --
10.65 6.54 2,020 2.50 0.09 -- 2.41 8 --
11.17 6.08 7,286 2.25 0.48 -- 2.73 55 --
11.79 7.26 11,685 1.73 (0.15) 0.66 0.92 95 0.0500
9.83 (1.70) (a) 551 2.50 (b) (0.19) (b) 0.64 (b) 1.67 (b) 26 (a) --
9.73 0.12 1,276 2.50 0.70 -- 3.20 57 --
11.28 18.21 6,759 2.14 1.97 -- 4.11 115 --
12.60 16.97 17,496 1.61 1.92 0.66 2.86 113 0.0525
</TABLE>
105
<PAGE>
DEAN WITTER RETIREMENT SERIES
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER RETIREMENT SERIES
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios 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 the Liquid Asset
Series, the U.S. Government Money Market Series, the U.S. Government
Securities Series, the Intermediate Income Securities Series, the American
Value Series, the Capital Growth Series, the Dividend Growth Series, the
Utilities Series, the Value-Added Market Series, the Global Equity Series,
and the Strategist Series (constituting Dean Witter Retirement Series,
hereafter referred to as the "Fund") at July 31, 1996, the results of each of
their operations for the year then ended, the changes in each of their net
assets for each of the two years in the period then ended and the financial
highlights for each of the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at July 31, 1996 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
September 13, 1996
1996 FEDERAL INCOME TAX NOTICE (unaudited)
During the year ended July 31, 1996, the Fund paid to shareholders
long-term capital gains per share as follows:
<TABLE>
<CAPTION>
AMERICAN CAPITAL DIVIDEND VALUE-ADDED
VALUE GROWTH GROWTH MARKET STRATEGIST
- ---------- --------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
$0.06 $0.07 $0.07 $0.02 $0.01
</TABLE>
Additionally, the following percentages of ordinary income dividends
(including short-term capital gain distributions, if applicable) paid to
shareholders qualified for the dividends received deduction available to
corporations:
<TABLE>
<CAPTION>
AMERICAN CAPITAL DIVIDEND VALUE-ADDED GLOBAL
VALUE GROWTH GROWTH UTILITIES MARKET EQUITY STRATEGIST
- ---------- --------- ---------- ----------- ------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
8.1% 74.5% 90.1% 87.2% 58.9% 6.3% 14.4%
</TABLE>
106
<PAGE>
APPENDIX
- -----------------------------------------------------------------------------
Description of the highest commercial paper, bond and other short-and
long-term rating categories assigned by Standard & Poor's Corporation
("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch Investors
Service, Inc. ("Fitch"), Duff and Phelps, Inc. ("Duff"), IBCA Limited and
IBCA Inc. ("IBCA") and Thomson BankWatch, Inc. ("Thomson"):
COMMERCIAL PAPER AND SHORT-TERM RATINGS
The designation A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined
to possess overwhelming safety characteristics are denoted with a plus sign
(+) designation. Capacity for timely payment on issues with an A-2
designation is strong. However, the relative degree of safety is not as high
as for issues designated A-1.
The rating Prime-1 (P-1) is the highest commercial paper rating assigned
by Moody's. Issuers of P-1 paper must have a superior capacity for repayment
of short-term promissory obligations and ordinarily will be evidenced by
leading market positions in well established industries, high rates of return
of funds employed, conservative capitalization structures with moderate
reliance on debt and ample asset protection, broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and
well established access to a range of financial markets and assured sources
of alternate liquidity. Issues rated Prime-2 (P-2) have a strong capacity for
repayment of short-term promissory obligations. This ordinarily will be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is
maintained.
The rating Fitch-1 (Highest Grade) is the highest commercial paper rating
assigned by Fitch. Paper rated Fitch-1 is regarded as having the strongest
degree of assurance for timely payment. The rating Fitch-2 (Very Good Grade)
is the second highest commercial paper rating assigned by Fitch which
reflects an assurance of timely payment only slightly less in degree than the
strongest issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely
payment with excellent liquidity factors which are supported by good
fundamental protection factors. Risk factors are minor. Duff applies the
modifiers (+) and (-) to the rating Duff-1 in recognition of significant
quality differences within the highest tier. Paper rated Duff-2 is regarded
as having good certainty of timely payment, good access to capital markets
and sound liquidity factors and company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a
very strong capacity for timely repayment. Those obligations rated A1+ are
supported by the highest capacity for timely repayment. The designation A2 by
IBCA indicates that the obligation is supported by a strong capacity for
timely repayment, although such capacity may be susceptible to adverse
changes in business, economic, or financial conditions.
The rating TBW-1 is the highest short-term rating assigned by Thomson and
indicates a very high degree of likelihood that principal and interest will
be paid on a timely basis. The rating TBW-2 by Thomson is its second highest
rating; while the degree of safety regarding timely repayment of principal
and interest is strong, the relative degree of safety is not as high as for
issues rated TBW-1.
BOND AND LONG-TERM RATINGS
Bonds rated AAA are considered by S&P to be the highest grade obligations
and possess an extremely strong capacity to pay interest and repay principal.
Bonds rated AA by S&P are judged by S&P to have a very strong capacity to pay
interest and repay principal, and differ only in small degrees from issues
rated AAA.
107
<PAGE>
Bonds which are rated Aaa by Moody's are judged to be of the best quality.
Bonds rated Aa by Moody's are judged by Moody's to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high-grade bonds. Aa bonds are rated lower than Aaa bonds because margins
of protection may not be as large or fluctuations of protective elements may
be of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa rated bonds. Moody's
applies numerical modifiers 1, 2 and 3 in the Aa rating category. The
modifier 1 indicates a ranking for the security in the higher end of this
rating category, the modifier 2 indicates a mid-range ranking, and the
modifier 3 indicates a ranking in the lower end of the rating category.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade,
broadly marketable, suitable for investment by trustees and fiduciary
institutions and liable to but slight market fluctuation other than through
changes in the money rate. The prime feature of an AAA bond is a showing of
earnings several times or many times interest requirements, with such
stability of applicable earnings that safety is beyond reasonable question
whatever changes occur in conditions. Bonds rated AA by Fitch are judged by
Fitch to be of safety virtually beyond question and are readily salable,
whose merits are not unlike those of the AAA class, but whose margin of
safety is less strikingly broad. The issue may be the obligation of a small
company, strongly secured but influenced as to rating by the lesser financial
power of the enterprise and more local type of market.
Bonds rated AAA by Duff are considered to be of the highest credit quality
with negligible risk factors that are only slightly more than for risk-free
U.S. Treasury debt. Bonds rated AA are judged by Duff to be of high credit
quality with strong protection factors; risk is modest but may vary slightly
from time to time because of economic conditions. Duff applies modifiers of
(+) and (-) to the AA category.
Obligations rated AAA by IBCA have the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk significantly. Obligations rated AA have
a very low expectation of investment risk. Capacity for timely repayment of
principal and interest is substantial. Adverse changes in business, economic
or financial conditions may increase investment risk albeit not very
significantly.
IBCA also assigns a rating to certain international and U.S. banks. An
IBCA bank rating represents IBCA's current assessment of the strength of the
bank and whether such bank would receive support should it experience
difficulties. In its assessment of a bank, IBCA uses a dual rating system
comprised of Legal Ratings and Individual Ratings. In addition, IBCA assigns
banks Long-and Short-Term Ratings as used in the corporate ratings discussed
above. Legal Ratings, which range in gradation from 1 through 5, address the
question of whether the bank would receive support by central banks or
shareholders if it experienced difficulties, and such ratings are considered
by IBCA to be a prime factor in its assessment of credit risk. Individual
Ratings, which range in gradations from A through E, represent IBCA's
assessment of a bank's economic merits and address the question of how the
bank would be viewed if it were entirely independent and could not rely on
support from state authorities or its owners.
Companies rated A are considered by Thomson to possess an exceptionally
strong balance sheet and earnings record, translating into an excellent
reputation and unquestioned access to their natural money markets; if
weakness or vulnerability exists in any aspect of a company's business, it is
entirely mitigated by the strengths of the organization. Companies rated
A/B-by Thomson are judged by Thomson to be financially very solid with a
favorable track record and no readily apparent weakness; their overall risk
profiles, while low, are not quite as favorable as for companies in the
highest rating category.
108
<PAGE>
DEAN WITTER RETIREMENT SERIES
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial statements and schedules, included in Prospectus
(Part A): Page in
Prospectus
Financial highlights for the period ended July 31, 1993 and for
the fiscal years ended July 31, 1994, 1995 and 1996
............................................................. 8
(2) Financial statements included in the Statement of Additional
Information (Part B): Page in
SAI
Portfolio of Investments at July 31, 1996 ................... 51
Statement of assets and liabilities at July 31,
1996 ........................................................ 87
Statement of operations for the year ended July 31,
1996 ........................................................ 89
Statement of changes in net assets for the fiscal years
ended July 31, 1995 and July 31, 1996 ...................... 91
Notes to Financial Statements ............................... 95
Financial highlights for the period ended July 31, 1993
and for the fiscal years ended July 31, 1994, 1995 and
1996 ........................................................102
(3) Financial statements included in Part C:
None
(b) Exhibits:
2. -- Amended and Restated By-Laws of the Registrant dated as of
October 25, 1996
8. -- Amendment to the Custody Agreement between the Registrant and The Bank
of New York
11. -- Consent of Independent Accountants
16. -- Schedules for Computations of Performance Quotations
27. -- Financial Data Schedules
1
<PAGE>
_____________________________
All other exhibits previously filed and incorporated by reference.
Item 25. Persons Controlled by or Under Common Control With Registrant.
None
Item 26. Number of Holders of Securities.
(1) (2)
Number of Record Holders
Title of Class at October 31, 1996
-------------- -----------------------
Shares of Beneficial Interest 33,219
Item 27. Indemnification.
Pursuant to Section 5.3 of the Registrant's Declaration of Trust and under
Section 4.8 of the Registrant's Amended and Restated By-Laws, the
indemnification of the Registrant's trustees, officers, employees and agents is
permitted if it is determined that they acted under the belief that their
actions were in or not opposed to the best interest of the Registrant, and, with
respect to any criminal proceeding, they had reasonable cause to believe their
conduct was not unlawful. In addition, indemnification is permitted only if it
is determined that the actions in question did not render them liable by reason
of willful misfeasance, bad faith or gross negligence in the performance of
their duties or by reason of reckless disregard of their obligations and duties
to the Registrant. Trustees, officers, employees and agents will be indemnified
for the expense of litigation if it is determined that they are entitled to
indemnification against any liability established in such litigation. The
Registrant may also advance money for these expenses provided that they give
their undertakings to repay the Registrant unless their conduct is later
determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the
Registrant shall be liable for any action or failure to act, except in the case
of bad faith, willful misfeasance, gross negligence or reckless disregard of
duties to the Registrant.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
2
<PAGE>
the Registrant of expenses incurred or paid by a trustee, officer, or
controlling person of the Registrant in connection with the successful defense
of any action, suit or proceeding) is asserted against the Registrant by such
trustee, officer or controlling person in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act, and will be governed by the
final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for
which Registrant itself is not permitted to indemnify him.
Item 28. Business and Other Connections of Investment Adviser.
See "The Fund and Its Management" in the Prospectus regarding the business
of the investment adviser. The following information is given regarding
officers of Dean Witter InterCapital Inc. InterCapital is a wholly-owned
subsidiary of Dean Witter, Discover & Co. The principal address of the Dean
Witter Funds is Two World Trade Center, New York, New York 10048.
The term "Dean Witter Funds" used below refers to the following registered
investment companies:
Closed-End Investment Companies
- -------------------------------
(1) InterCapital Income Securities Inc.
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) Municipal Income Trust
(6) Municipal Income Trust II
(7) Municipal Income Trust III
(8) Dean Witter Government Income Trust
3
<PAGE>
(9) Municipal Premium Income Trust
(10) Municipal Income Opportunities Trust
(11) Municipal Income Opportunities Trust II
(12) Municipal Income Opportunities Trust III
(13) Prime Income Trust
(14) InterCapital Insured Municipal Bond Trust
(15) InterCapital Quality Municipal Income Trust
(16) InterCapital Quality Municipal Investment Trust
(17) InterCapital Insured Municipal Income Trust
(18) InterCapital California Insured Municipal Income Trust
(19) InterCapital Insured Municipal Trust
(20) InterCapital Quality Municipal Securities
(21) InterCapital New York Quality Municipal Securities
(22) InterCapital California Quality Municipal Securities
(23) InterCapital Insured California Municipal Securities
(24) InterCapital Insured Municipal Securities
Open-end Investment Companies:
- ------------------------------
(1) Dean Witter Short-Term Bond Fund
(2) Dean Witter Tax-Exempt Securities Trust
(3) Dean Witter Tax-Free Daily Income Trust
(4) Dean Witter Dividend Growth Securities Inc.
(5) Dean Witter Convertible Securities Trust
(6) Dean Witter Liquid Asset Fund Inc.
(7) Dean Witter Developing Growth Securities Trust
(8) Dean Witter Retirement Series
(9) Dean Witter Federal Securities Trust
(10) Dean Witter World Wide Investment Trust
(11) Dean Witter U.S. Government Securities Trust
(12) Dean Witter Select Municipal Reinvestment Fund
(13) Dean Witter High Yield Securities Inc.
(14) Dean Witter Intermediate Income Securities
(15) Dean Witter New York Tax-Free Income Fund
(16) Dean Witter California Tax-Free Income Fund
(17) Dean Witter Health Sciences Trust
(18) Dean Witter California Tax-Free Daily Income Trust
(19) Dean Witter Global Asset Allocation Fund
(20) Dean Witter American Value Fund
(21) Dean Witter Strategist Fund
(22) Dean Witter Utilities Fund
(23) Dean Witter World Wide Income Trust
(24) Dean Witter New York Municipal Money Market Trust
(25) Dean Witter Capital Growth Securities
(26) Dean Witter Precious Metals and Minerals Trust
(27) Dean Witter European Growth Fund Inc.
(28) Dean Witter Global Short-Term Income Fund Inc.
(29) Dean Witter Pacific Growth Fund Inc.
(30) Dean Witter Multi-State Municipal Series Trust
(31) Dean Witter Premier Income Trust
(32) Dean Witter Short-Term U.S. Treasury Trust
(33) Dean Witter Diversified Income Trust
(34) Dean Witter U.S. Government Money Market Trust
(35) Dean Witter Global Dividend Growth Securities
(36) Active Assets California Tax-Free Trust
4
<PAGE>
(37) Dean Witter Natural Resource Development Securities Inc.
(38) Active Assets Government Securities Trust
(39) Active Assets Money Trust
(40) Active Assets Tax-Free Trust
(41) Dean Witter Limited Term Municipal Trust
(42) Dean Witter Variable Investment Series
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Mid-Cap Growth Fund
(49) Dean Witter Select Dimensions Investment Series
(50) Dean Witter Balanced Growth Fund
(51) Dean Witter Balanced Income Fund
(52) Dean Witter Hawaii Municipal Trust
(53) Dean Witter Capital Appreciation Fund
(54) Dean Witter Intermediate Term U.S. Treasury Trust
(55) Dean Witter Information Fund
(56) Dean Witter Japan Fund
(57) Dean Witter Income Builder Fund
(58) Dean Witter Special Value Fund
The term "TCW/DW Funds" refers to the following registered investment
companies:
Open-End Investment Companies
- -----------------------------
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10) TCW/DW Strategic Income Trust
Closed-End Investment Companies
- -------------------------------
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
(4) TCW/DW Emerging Markets Opportunities Trust
5
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Charles A. Fiumefreddo Executive Vice President and Director of Dean
Chairman, Chief Witter Reynolds Inc. ("DWR"); Chairman, Chief
Executive Officer and Executive Officer and Director of Dean Witter
Director Distributors Inc. ("Distributors") and Dean
Witter Services Company Inc. ("DWSC"); Chairman
and Director of Dean Witter Trust Company
("DWTC"); Chairman, Director or Trustee, President
and Chief Executive Officer of the Dean Witter
Funds and Chairman, Chief Executive Officer and
Trustee of the TCW/DW Funds; Formerly Executive
Vice President and Director of Dean Witter,
Discover & Co.("DWDC"); Director and/or officer of
various DWDC subsidiaries.
Philip J. Purcell Chairman, Chief Executive Officer and Director of
Director of DWDC and DWR; Director of DWSC and Distributors;
Director or Trustee of the Dean Witter Funds;
Director and/or officer of various DWDC
subsidiaries.
Richard M. DeMartini Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Capital;
Director of DWR, DWSC, Distributors and DWTC;
Trustee of the TCW/DW Funds; Member (since
January, 1993) and Chairman (since January, 1995)
of the Board of Directors of NASDAQ.
James F. Higgins Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Financial;
Director of DWR, DWSC, Distributors
and DWTC.
Thomas C. Schneider Executive Vice President and Chief Financial
Executive Vice Officer of DWDC, DWR, DWSC and Distributors;
President, Chief Director of DWR, DWSC and Distributors.
Financial Officer and
Director
Christine A. Edwards Executive Vice President, Secretary and General
Director Counsel of DWDC and DWR; Executive Vice President,
Secretary and Chief Legal Officer of Distributors;
Director of DWR, DWSC and Distributors.
Robert M. Scanlan President and Chief Operating Officer of DWSC;
President and Chief Executive Vice President of Distributors;
Operating Officer Executive Vice President and Director of DWTC;
Vice President of the Dean Witter Funds and the
TCW/DW Funds.
6
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
John Van Heuvelen President, Chief Operating Officer and Director
Executive Vice of DWTC.
President
Joseph J. McAlinden Vice President of the Dean Witter Funds and
Executive Vice President Director of DWTC.
and Chief Investment
Officer
Sheldon Curtis Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary and General Counsel of DWSC; Senior Vice
General Counsel and President, Assistant General Counsel and Assistant
Secretary Secretary of Distributors; Senior Vice President
and Secretary of DWTC; Vice President, Secretary
and General Counsel of the Dean Witter Funds and
the TCW/DW Funds.
Peter M. Avelar
Senior Vice President Vice President of various Dean Witter Funds.
Mark Bavoso
Senior Vice President Vice President of various Dean Witter Funds.
Richard Felegy
Senior Vice President
Edward Gaylor
Senior Vice President Vice President of various Dean Witter Funds.
Robert S. Giambrone Senior Vice President of DWSC, Distributors
Senior Vice President and DWTC and Director of DWTC; Vice
President of the Dean Witter Funds and the TCW/DW
Funds.
Rajesh K. Gupta
Senior Vice President Vice President of various Dean Witter Funds.
Kenton J. Hinchcliffe
Senior Vice President Vice President of various Dean Witter Funds.
Kevin Hurley
Senior Vice President Vice President of various Dean Witter Funds.
7
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Jenny Beth Jones Vice President of Dean Witter Special Value
Senior Vice President Fund.
John B. Kemp, III Director of the Provident Savings Bank, Jersey
Senior Vice President City, New Jersey.
Anita Kolleeny
Senior Vice President Vice President of various Dean Witter Funds.
Jonathan R. Page
Senior Vice President Vice President of various Dean Witter Funds.
Ira N. Ross
Senior Vice President Vice President of various Dean Witter Funds.
Rochelle G. Siegel
Senior Vice President Vice President of various Dean Witter Funds.
Paul D. Vance
Senior Vice President Vice President of various Dean Witter Funds.
Elizabeth A. Vetell
Senior Vice President
James F. Willison
Senior Vice President Vice President of various Dean Witter Funds.
Ronald J. Worobel
Senior Vice President Vice President of various Dean Witter Funds.
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President DWSC, Assistant Treasurer of Distributors;
and Assistant Treasurer and Chief Financial Officer of the
Treasurer Dean Witter Funds and the TCW/DW Funds.
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of DWSC; Assistant
and Assistant Secretary Secretary of the Dean Witter Funds and the TCW/DW
Funds.
Barry Fink First Vice President and Assistant Secretary of
First Vice President DWSC; Assistant Secretary of the Dean Witter
and Assistant Secretary Funds and the TCW/DW Funds.
Michael Interrante First Vice President and Controller of DWSC;
First Vice President Assistant Treasurer of Distributors;First Vice
and Controller President and Treasurer of DWTC.
Robert Zimmerman
First Vice President
8
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Joan Allman
Vice President
Joseph Arcieri
Vice President Vice President of various Dean Witter Funds.
Kirk Balzer
Vice President Vice President of various Dean Witter Funds.
Douglas Brown
Vice President
Philip Casparius
Vice President
Thomas Chronert
Vice President
Rosalie Clough
Vice President
Patricia A. Cuddy
Vice President Vice President of various Dean Witter Funds.
B. Catherine Connelly
Vice President
Salvatore DeSteno
Vice President Vice President of DWSC.
Frank J. DeVito
Vice President Vice President of DWSC.
Dwight Doolan
Vice President
Bruce Dunn
Vice President
Jeffrey D. Geffen
Vice President
Deborah Genovese
Vice President
Peter W. Gurman
Vice President
9
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
John Hechtlinger
Vice President
Peter Hermann
Vice President Vice President of various Dean Witter Funds.
Elizabeth Hinchman
Vice President
David Hoffman
Vice President
David Johnson
Vice President
Christopher Jones
Vice President
James Kastberg
Vice President
Stanley Kapica
Vice President
Michael Knox
Vice President Vice President of various Dean Witter Funds.
Konrad J. Krill
Vice President Vice President of various Dean Witter Funds.
Paula LaCosta
Vice President Vice President of various Dean Witter Funds.
Thomas Lawlor
Vice President
Gerard Lian
Vice President Vice President of various Dean Witter Funds.
LouAnne D. McInnis Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
10
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
David Myers
Vice President
James Nash
Vice President
Richard Norris
Vice President
Anne Pickrell
Vice President Vice President of Dean Witter Global Short-
Term Income Fund Inc.
Hugh Rose
Vice President
Robert Rossetti
Vice President
Ruth Rossi Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Carl F. Sadler
Vice President
Rafael Scolari
Vice President Vice President of Prime Income Trust.
Peter Seeley Vice President of Dean Witter World
Vice President Wide Income Trust.
Jayne M. Stevlingson
Vice President Vice President of various Dean Witter Funds.
Kathleen Stromberg
Vice President Vice President of various Dean Witter Funds.
Vinh Q. Tran
Vice President Vice President of various Dean Witter Funds.
Alice Weiss
Vice President Vice President of various Dean Witter Funds.
Katherine Wickham
Vice President
11
<PAGE>
Item 29. Principal Underwriters
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant.
Distributors is the principal underwriter of the following investment
companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Global Asset Allocation
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Short-Term Bond Fund
(15) Dean Witter Mid-Cap Growth Fund
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Limited Term Municipal Trust
(22) Dean Witter Natural Resource Development Securities Inc.
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Federal Securities Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Premier Income Trust
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Balanced Growth Fund
12
<PAGE>
(49) Dean Witter Balanced Income Fund
(50) Dean Witter Hawaii Municipal Trust
(51) Dean Witter Variable Investment Series
(52) Dean Witter Capital Appreciation Fund
(53) Dean Witter Intermediate Term U.S. Treasury Trust
(54) Dean Witter Information Fund
(55) Dean Witter Japan Fund
(56) Dean Witter Income Builder Fund
(57) Dean Witter Special Value Fund
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10) TCW/DW Strategic Income Trust
(b) The following information is given regarding directors and officers
of Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048.
None of the following persons has any position or office with the
Registrant.
Positions and
Office with
Name Distributors
- ---- ------------
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
Michael T. Gregg Vice President and Assistant
Secretary.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
are maintained by the Investment Manager at its offices, except records
relating to holders of shares issued by the Registrant, which are maintained by
the Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 31. Management Services
Registrant is not a party to any such management-related service contract.
Item 32. Undertakings
Registrant hereby undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York and State
of New York on the 29th day of November, 1996.
DEAN WITTER RETIREMENT SERIES
By /s/ Sheldon Curtis
---------------------------------
Sheldon Curtis
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 5 has been signed below by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo
---------------------- 11/29/96
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 11/29/96
----------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Sheldon Curtis 11/29/96
----------------------
Sheldon Curtis
Attorney-in-Fact
Michael Bozic
Edwin J. Garn
John R. Haire
Manuel H. Johnson
Michael E. Nugent
John L. Schroeder
By /s/ David M. Butowsky 11/29/96
----------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
DEAN WITTER RETIREMENT SERIES
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
2. - Amended and Restated By-Laws of the Registrant
dated as of October 25, 1996
8. - Amendment to the Custody Agreement between the
Registrant and The Bank of New York
11. - Consent of Independent Accountants
16. - Schedules for Computation of Performance
Quotations
27. - Financial Data Schedules
BY-LAWS
OF
DEAN WITTER RETIREMENT SERIES
AMENDED AND RESTATED AS OF OCTOBER 25, 1996
ARTICLE I
DEFINITIONS
The terms "Commission", "Declaration", "Distributor", "Investment
Adviser", "Majority Shareholder Vote", "1940 Act", "Shareholder", "Shares",
"Transfer Agent", "Trust", "Trust Property", and "Trustees" have the
respective meanings given them in the Declaration of Trust of Dean Witter
Retirement Series dated May 13, 1992.
ARTICLE II
OFFICES
SECTION 2.1. Principal Office. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be
in the City of Boston, County of Suffolk.
SECTION 2.2. Other Offices. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and
without the Commonwealth as the Trustees may from time to time designate or
the business of the Trust may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. Place of Meetings. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. Meetings. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the
provisions of Section 16(a) of the 1940 Act, for that purpose. Meetings of
Shareholders shall also be called by the Secretary upon the written request
of the holders of Shares entitled to vote not less than twenty-five percent
(25%) of all the votes entitled to be cast at such meeting, except to the
extent otherwise required by Section 16(c) of the 1940 Act, as made
applicable to the Trust by the provisions of Section 2.3 of the Declaration.
Such request shall state the purpose or purposes of such meeting and the
matters proposed to be acted on thereat. Except to the extent otherwise
required by Section 16(c) of the 1940 Act, as made applicable to the Trust by
the provisions of Section 2.3 of the Declaration, the Secretary shall inform
such Shareholders of the reasonable estimated cost of preparing and mailing
such notice of the meeting, and upon payment to the Trust of such costs, the
Secretary shall give notice stating the purpose or purposes of the meeting to
all entitled to vote at such meeting. No meeting need be called upon the
request of the holders of Shares entitled to cast less than a majority of all
votes entitled to be cast at such meeting, to consider any matter which is
substantially the same as a matter voted upon at any meeting of Shareholders
held during the preceding twelve months.
SECTION 3.3. Notice of Meetings. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes
thereof, shall be given by the Secretary not less than ten (10) nor more than
ninety (90) days before such meeting to each Shareholder entitled to vote at
such meeting. Such notice shall be deemed to be given when deposited in the
United States mail, postage prepaid, directed to the Shareholder at his
address as it appears on the records of the Trust.
<PAGE>
SECTION 3.4. Quorum and Adjournment of Meetings. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders the holders of a majority of the Shares issued and outstanding
and entitled to vote thereat, present in person or represented by proxy,
shall be requisite and shall constitute a quorum for the transaction of
business. In the absence of a quorum, the Shareholders present or represented
by proxy and entitled to vote thereat shall have power to adjourn the meeting
from time to time. Any adjourned meeting may be held as adjourned without
further notice. At any adjourned meeting at which a quorum shall be present,
any business may be transacted as if the meeting had been held as originally
called.
SECTION 3.5. Voting Rights, Proxies. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy, executed in writing by the Shareholder or his
duly authorized attorney-in-fact, for each Share of beneficial interest of
the Trust and for the fractional portion of one vote for each fractional
Share entitled to vote so registered in his name on the records of the Trust
on the date fixed as the record date for the determination of Shareholders
entitled to vote at such meeting. No proxy shall be valid after eleven months
from its date, unless otherwise provided in the proxy. At all meetings of
Shareholders, unless the voting is conducted by inspectors, all questions
relating to the qualification of voters and the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman of the
meeting. Pursuant to a resolution of a majority of the Trustees, proxies may
be solicited in the name of one or more Trustees or Officers of the Trust.
SECTION 3.6. Vote Required. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority
Shareholder Vote.
SECTION 3.7. Inspectors of Election. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the
request of any Shareholder or his proxy shall, appoint Inspectors of Election
of the meeting. In case any person appointed as Inspector fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made by the
Trustees in advance of the convening of the meeting or at the meeting by the
person acting as chairman. The Inspectors of Election shall determine the
number of Shares outstanding, the Shares represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies,
shall receive votes, ballots or consents, shall hear and determine all
challenges and questions in any way arising in connection with the right to
vote, shall count and tabulate all votes or consents, determine the results,
and do such other acts as may be proper to conduct the election or vote with
fairness to all Shareholders. On request of the chairman of the meeting, or
of any Shareholder or his proxy, the Inspectors of Election shall make a
report in writing of any challenge or question or matter determined by them
and shall execute a certificate of any facts found by them.
SECTION 3.8. Inspection of Books and Records. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as
are granted to Shareholders under Section 32 of the Corporations and
Associations Law of the State of Maryland.
SECTION 3.9. Action by Shareholders Without Meeting. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to
be taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting
of Shareholders.
SECTION 3.10. Presence at Meetings. Presence at meetings of shareholders
requires physical attendance by the shareholder or his or her proxy at the
meeting site and does not encompass attendance by telephonic or other
electronic means.
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ARTICLE IV
TRUSTEES
SECTION 4.1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the President and shall
be called by the President or the Secretary upon the written request of any
two (2) Trustees.
SECTION 4.2. Notice of Special Meetings. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed
to be given when deposited in the United States mail, postage prepaid,
directed to the Trustee at his address as it appears on the records of the
Trust. Subject to the provisions of the 1940 Act, notice or waiver of notice
need not specify the purpose of any special meeting.
SECTION 4.3. Telephone Meetings. Subject to the provisions of the 1940
Act, any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such
committee, as the case may be, by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at the meeting.
SECTION 4.4. Quorum, Voting and Adjournment of Meetings. At all meetings
of the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present,
the affirmative vote of a majority of the Trustees present shall be the act
of the Trustees, unless the concurrence of a greater proportion is expressly
required for such action by law, the Declaration or these By-Laws. If at any
meeting of the Trustees there be less than a quorum present, the Trustees
present thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall have been
obtained.
SECTION 4.5. Action by Trustees Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of the Trustees may be taken without a meeting if a consent in
writing setting forth the action shall be signed by all of the Trustees
entitled to vote upon the action and such written consent is filed with the
minutes of proceedings of the Trustees.
SECTION 4.6. Expenses and Fees. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and
each Trustee who is not an officer or employee of the Trust or of its
investment manager or underwriter or of any corporate affiliate of any of
said persons shall receive for services rendered as a Trustee of the Trust
such compensation as may be fixed by the Trustees. Nothing herein contained
shall be construed to preclude any Trustee from serving the Trust in any
other capacity and receiving compensation therefor.
SECTION 4.7. Execution of Instruments and Documents and Signing of Checks
and Other Obligations and Transfers. All instruments, documents and other
papers shall be executed in the name and on behalf of the Trust and all
checks, notes, drafts and other obligations for the payment of money by the
Trust shall be signed, and all transfer of securities standing in the name of
the Trust shall be executed, by the Chairman, the President, any Vice
President or the Treasurer or by any one or more officers or agents of the
Trust as shall be designated for that purpose by vote of the Trustees;
notwithstanding the above, nothing in this Section 4.7 shall be deemed to
preclude the electronic authorization, by designated persons, of the Trust's
Custodian (as described herein in Section 9.1) to transfer assets of the
Trust, as provided for herein in Section 9.1.
SECTION 4.8. Indemnification of Trustees, Officers, Employees and
Agents. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative
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(other than an action by or in the right of the Trust) by reason of the fact
that he is or was a Trustee, officer, employee, or agent of the Trust. The
indemnification shall be against expenses, including attorneys' fees,
judgments, fines, and amounts paid in settlement, actually and reasonably
incurred by him in connection with the action, suit, or proceeding, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or on behalf of the Trust to obtain a judgment or decree in its
favor by reason of the fact that he is or was a Trustee, officer, employee,
or agent of the Trust. The indemnification shall be against expenses,
including attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Trust; except that no indemnification shall be
made in respect of any claim, issue, or matter as to which the person has
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Trust, except to the extent that the court in which the
action or suit was brought, or a court of equity in the county in which the
Trust has its principal office, determines upon application that, despite the
adjudication of liability but in view of all circumstances of the case, the
person is fairly and reasonably entitled to indemnity for those expenses
which the court shall deem proper, provided such Trustee, officer, employee
or agent is not adjudged to be liable by reason of his willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsection (a) or (b) or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in
connection therewith.
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) or (b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists of
Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person shall
be entitled to indemnification for any liability, whether or not there is
an adjudication of liability, arising by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of duties as described
in Section 17(h) and (i) of the Investment Company Act of 1940
("disabling conduct"). A person shall be deemed not liable by reason of
disabling conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or
(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
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(A) a majority of a quorum of Trustees who are neither "interested
persons" of the Trust, as defined in Section 2(a)(19) of the
Investment Company Act of 1940, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit
or proceeding may be paid by the Trust in advance of the final disposition
thereof if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the Trustee,
officer, employee or agent of the Trust to repay the advance if it is not
ultimately determined that such person is entitled to be indemnified by
the Trust; and
(3) either, (i) such person provides a security for his undertaking,
or
(ii) the Trust is insured against losses by reason of any lawful
advances, or
(iii) a determination, based on a review of readily available
facts, that there is reason to believe that such person ultimately
will be found entitled to indemnification, is made by either--
(A) a majority of a quorum which consists of Trustees who are
neither "interested persons" of the Trust, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of Shareholders or disinterested Trustees or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding the office, and shall continue as to a person
who has ceased to be a Trustee, officer, employee, or agent and inure to the
benefit of the heirs, executors and administrators of such person; provided
that no person may satisfy any right of indemnity or reimbursement granted
herein or to which he may be otherwise entitled except out of the property of
the Trust, and no Shareholder shall be personally liable with respect to any
claim for indemnity or reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such. However, in no event will the Trust
purchase insurance to indemnify any officer or Trustee against liability for
any act for which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE V
COMMITTEES
SECTION 5.1. Executive and Other Committees. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the
Trustees of the Trust and may delegate to such committees, in the intervals
between meetings of the Trustees, any or all of the powers of the Trustees in
the management of the business and affairs of the Trust. In the absence of
any member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in
place of such absent member. Each such committee shall keep a record of its
proceedings.
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The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees
at the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. Advisory Committee. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in
any other capacity and which shall have advisory functions with respect to
the investments of the Trust but which shall have no power to determine that
any security or other investment shall be purchased, sold or otherwise
disposed of by the Trust. The number of persons constituting any such
advisory committee shall be determined from time to time by the Trustees. The
members of any such advisory committee may receive compensation for their
services and may be allowed such fees and expenses for the attendance at
meetings as the Trustees may from time to time determine to be appropriate.
SECTION 5.3. Committee Action Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of any Committee of the Trustees appointed pursuant to Section
5.1 of these By-Laws may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all members of the Committee
entitled to vote upon the action and such written consent is filed with the
records of the proceedings of the Committee.
ARTICLE VI
OFFICERS
SECTION 6.1. Executive Officers. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more
than one capacity. The executive officers of the Trust shall be elected
annually by the Trustees and each executive officer so elected shall hold
office until his successor is elected and has qualified.
SECTION 6.2. Other Officers and Agents. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers and may elect, or may delegate to the President the power to
appoint, such other officers and agents as the Trustees shall at any time or
from time to time deem advisable.
SECTION 6.3. Term and Removal and Vacancies. Each officer of the Trust
shall hold office until his successor is elected and has qualified. Any
officer or agent of the Trust may be removed by the Trustees whenever, in
their judgment, the best interests of the Trust will be served thereby, but
such removal shall be without prejudice to the contractual rights, if any, of
the person so removed.
SECTION 6.4. Compensation of Officers. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the President to
the extent provided by the Trustees with respect to officers appointed by the
President.
SECTION 6.5. Power and Duties. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to
these By-Laws, or to the extent not so provided, as may be prescribed by the
Trustees; provided, that no rights of any third party shall be affected or
impaired by any such By-Law or resolution of the Trustees unless he has
knowledge thereof.
SECTION 6.6. The Chairman. The Chairman shall preside at all meetings of
the Shareholders and of the Trustees, shall be a signatory on all Annual and
Semi-Annual Reports as may be sent to shareholders, and he shall perform such
other duties as the Trustees may from time to time prescribe.
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SECTION 6.7. The President. (a) The President shall be the chief executive
officer of the Trust; he shall have general and active management of the
business of the Trust, shall see that all orders and resolutions of the
Trustees are carried into effect, and, in connection therewith, shall be
authorized to delegate to one or more Vice Presidents such of his powers and
duties at such times and in such manner as he may deem advisable.
(b) In the absence of the Chairman, the President shall preside at all
meetings of the shareholders and the Board of Trustees; and he shall perform
such other duties as the Board of Trustees may from time to time prescribe.
SECTION 6.8. The Vice Presidents. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by
the Trustees. The Vice President, or, if there be more than one, the Vice
Presidents in the order of their seniority as may be determined from time to
time by the Trustees or the President, shall, in the absence or disability of
the President, exercise the powers and perform the duties of the President,
and he or they shall perform such other duties as the Trustees or the
President may from time to time prescribe.
SECTION 6.9. The Assistant Vice Presidents. The Assistant Vice President,
or, if there be more than one, the Assistant Vice Presidents, shall perform
such duties and have such powers as may be assigned them from time to time by
the Trustees or the President.
SECTION 6.10. The Secretary. The Secretary shall attend all meetings of
the Trustees and all meetings of the Shareholders and record all the
proceedings of the meetings of the Shareholders and of the Trustees in a book
to be kept for that purpose, and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the Shareholders and special meetings of the Trustees, and shall
perform such other duties and have such powers as the Trustees, or the
President, may from time to time prescribe. He shall keep in safe custody the
seal of the Trust and affix or cause the same to be affixed to any instrument
requiring it, and, when so affixed, it shall be attested by his signature or
by the signature of an Assistant Secretary.
SECTION 6.11. The Assistant Secretaries. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined by
the Trustees or the President, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and
shall perform such duties and have such other powers as the Trustees or the
President may from time to time prescribe.
SECTION 6.12. The Treasurer. The Treasurer shall be the chief financial
officer of the Trust. He shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Trust, and
he shall render to the Trustees and the President, whenever any of them
require it, an account of his transactions as Treasurer and of the financial
condition of the Trust; and he shall perform such other duties as the
Trustees, or the President, may from time to time prescribe.
SECTION 6.13. The Assistant Treasurers. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order
determined by the Trustees or the President, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such other powers
as the Trustees, or the President, may from time to time prescribe.
SECTION 6.14. Delegation of Duties. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in
Shares, from any sources permitted by law, all as the Trustees shall from
time to time determine.
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Inasmuch as the computation of net income and net profits from the sales
of securities or other properties for federal income tax purposes may vary
from the computation thereof on the records of the Trust, the Trustees shall
have power, in their discretion, to distribute as income dividends and as
capital gain distributions, respectively, amounts sufficient to enable the
Trust to avoid or reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. Certificates of Shares. Certificates for Shares of each
series or class of Shares shall be in such form and of such design as the
Trustees shall approve, subject to the right of the Trustees to change such
form and design at any time or from time to time, and shall be entered in the
records of the Trust as they are issued. Each such certificate shall bear a
distinguishing number; shall exhibit the holder's name and certify the number
of full Shares owned by such holder; shall be signed by or in the name of the
Trust by the President, or a Vice President, and countersigned by the
Secretary or an Assistant Secretary or the Treasurer and an Assistant
Treasurer of the Trust; shall be sealed with the seal; and shall contain such
recitals as may be required by law. Where any certificate is signed by a
Transfer Agent or by a Registrar, the signature of such officers and the seal
may be facsimile, printed or engraved. The Trust may, at its option,
determine not to issue a certificate or certificates to evidence Shares owned
of record by any Shareholder.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Trust, whether because of
death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the Trust, such certificate or certificates
shall, nevertheless, be adopted by the Trust and be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures shall appear therein had not ceased
to be such officer or officers of the Trust.
No certificate shall be issued for any share until such share is fully
paid.
SECTION 8.2. Lost, Stolen, Destroyed and Mutilated Certificates. The
Trustees may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the Trust alleged to
have been lost, stolen or destroyed, upon satisfactory proof of such loss,
theft, or destruction; and the Trustees may, in their discretion, require the
owner of the lost, stolen or destroyed certificate, or his legal
representative, to give to the Trust and to such Registrar, Transfer Agent
and/or Transfer Clerk as may be authorized or required to countersign such
new certificate or certificates, a bond in such sum and of such type as they
may direct, and with such surety or sureties, as they may direct, as
indemnity against any claim that may be against them or any of them on
account of or in connection with the alleged loss, theft or destruction of
any such certificate.
ARTICLE IX
CUSTODIAN
SECTION 9.1. Appointment and Duties. The Trust shall at times employ a
bank or trust company having capital, surplus and undivided profits of at
least five million dollars ($5,000,000) as custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
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all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote,
the custodian shall deliver and pay over all property of the Trust held by it
as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
the custodian and upon such terms and conditions as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees.
SECTION 9.2. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct
the custodian to deposit all or any part of the securities owned by the Trust
in a system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical delivery
of such securities, provided that all such deposits shall be subject to
withdrawal only upon the order of the Trust.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these
By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice and filed with the records of the meeting, whether
before or after the holding thereof, or actual attendance at the meeting of
shareholders, Trustees or committee, as the case may be, in person, shall be
deemed equivalent to the giving of such notice to such person.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Location of Books and Records. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 11.2. Record Date. The Trustees may fix in advance a date as the
record date for the purpose of determining Shareholders entitled to notice
of, or to vote at, any meeting of Shareholders, or Shareholders entitled to
receive payment of any dividend or the allotment of any rights, or in order
to make a determination of Shareholders for any other proper purpose. Such
date, in any case, shall be not more than ninety (90) days, and in case of a
meeting of Shareholders not less than ten (10) days, prior to the date on
which particular action requiring such determination of Shareholders is to be
taken. In lieu of fixing a record date the Trustees may provide that the
transfer books shall be closed for a stated period but not to exceed, in any
case, twenty (20) days. If the transfer books are closed for the purpose of
determining Shareholders entitled to notice of a vote at a meeting of
Shareholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting.
SECTION 11.3. Seal. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from
time to time provide. The seal of the Trust may be affixed to any document,
and the seal and its attestation may be lithographed, engraved or otherwise
printed on any document with the same force and effect as if it had been
imprinted and attested manually in the same manner and with the same effect
as if done by a Massachusetts business corporation under Massachusetts law.
SECTION 11.4. Fiscal Year. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time
to time.
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SECTION 11.5. Orders for Payment of Money. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer
or officers or such other person or persons as the Trustees may from time to
time designate, or as may be specified in or pursuant to the agreement
between the Trust and the bank or trust company appointed as Custodian of the
securities and funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees;
provided, however, that no By-Law may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to law, the
Declaration, or these By-Laws, a vote of the Shareholders. The Trustees shall
in no event adopt By-Laws which are in conflict with the Declaration, and any
apparent inconsistency shall be construed in favor of the related provisions
in the Declaration.
ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing Dean Witter Retirement Series, dated
May 13, 1992, a copy of which is on file in the office of the Secretary of
the Commonwealth of Massachusetts, provides that the name Dean Witter
Retirement Series refers to the Trustees under the Declaration collectively
as Trustees, but not as individuals or personally; and no Trustee,
Shareholder, officer, employee or agent of Dean Witter Retirement Series
shall be held to any personal liability, nor shall resort be had to their
private property for the satisfaction of any obligation or claim or
otherwise, in connection with the affairs of said Dean Witter Retirement
Series, but the Trust Estate only shall be liable.
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AMENDMENT TO CUSTODY AGREEMENT
Amendment made as of this 17th day of April, 1996 by and between Dean
Witter Retirement Series (the "Fund") and The Bank of New York (the "Custodian")
to the Custody Agreement between the Fund and the Custodian dated August 10,
1992 (the "Custody Agreement"). The Custody Agreement is hereby amended as
follows:
Article XV Section 8 of the Custody Agreement shall be deleted and be
replaced by Sections 8.(a), 8.(b) and 8.(c) as set forth below:
"8. (a) The Custodian will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of Securities and moneys
owned by the Fund. The Custodian shall indemnify the Fund against and save the
Fund harmless from all liability, claims, losses and demands whatsoever,
including attorneys' fees, howsoever arising or incurred as the result of the
failure of a subcustodian which is a banking institution located in a foreign
country and identified on Schedule A attached hereto (each, a "Subcustodian") to
exercise reasonable care with respect to the safekeeping of such Securities and
moneys to the same extent that the Custodian would be liable to the Fund if the
Custodian were holding such securities and moneys in New York. In the event of
any loss to the Fund by reason of the failure of the Custodian or a Subcustodian
to utilize reasonable care, the Custodian shall be liable to the Fund only to
the extent of the Fund's direct damages, to be determined based on the market
value of the Securities and moneys which are the subject of the loss at the date
of discovery of such loss and without reference to any special conditions or
circumstances.
8. (b) The Custodian shall not be liable for any loss which results from
(i) the general risk of investing, or (ii) investing or holding Securities and
moneys in a particular country including, but not limited to, losses resulting
from nationalization, expropriation or other governmental actions; regulation of
the banking or securities industry; currency restrictions, devaluations or
fluctuations; or market conditions which prevent the orderly execution of
securities transactions or affect the value of Securities or moneys.
8. (c) Neither party shall be liable to the other for any loss due to
forces beyond its control including, but not limited to, strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear fusion,
fission or radiation, or acts of God."
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
DEAN WITTER RETIREMENT SERIES
[SEAL] By: /s/ Sheldon Curtis
------------------
Sheldon Curtis
Attest:
/s/ Carsten Otto
- ----------------
Carsten Otto
THE BANK OF NEW YORK
[SEAL] By: /s/ S. Grunstan
---------------
S. Grunstan
Attest:
/s/ Vincent M. Blazewicz
- ------------------------
Vincent M. Blazewicz
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 5 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
September 13, 1996, relating to the financial statements and financial
highlights of Dean Witter Retirement Series, which appears in such Statement of
Additional Information, and to the incorporation by reference of our report into
the Prospectus which constitutes part of this Registration Statement. We also
consent to the references to us under the headings "Independent Accountants" and
"Experts" in such Statement of Additional Information and to the reference to us
under the heading "Financial Highlights" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
November 25, 1996
DEAN WITTER RETIREMENT SERIES- LIQUID ASSET FUND
Exhibit 16: Schedule for computation of each performance
quotation provided in the Statement of Additional Information.
16 (A) The Trust's current yield for the seven days ending
JULY 31, 1996.
(A-B) x 365/N
(1.000854-1) x 365/7 = 4.45%
The Trust's effective annualized yield for the seven days
ending JULY 31, 1996.
365/N
A - 1
365/7
1.000854 - 1 = 4.55%
16 (B) WITHOUT WAIVER OF FEES AND ASSUMPTION OF EXPENSES
The Trust's current yield for the seven days ending
JULY 31, 1996.
(A-B) x 365/N
(1.000825-1) x 365/7 = 4.30%
The Trust's effective annualized yield for the seven days
ending JULY 31, 1996.
365/N
A - 1
365/7
1.000825 - 1 = 4.39%
A = Value of a share of the Trust at end of period.
B = Value of a share of the Trust at beginning of period.
N = Number of days in the period.
<PAGE>
DEAN WITTER RETIREMENT SERIES - U.S. GOV'T MONEY MARKET SERIES
07/31/96
With Waiver of Fees and Assumption of Expenses.
Exhibit 16: Schedule for computation of each performance
quotation provided in the Statement of Additional Information.
(16) The Fund's current yield for the seven days ending
July 31, 1996
(A-B) x 365/N
(1.000823-1) x 365/7 = 4.29%
The Fund's effective annualized yield for the seven days ending
July 31, 1996
365/N
A - 1
365/7
1.000823 - 1 = 4.38%
A = Value of a share of the Trust at end of period.
B = Value of a share of the Trust at beginning of period.
N = Number of days in the period.
<PAGE>
DEAN WITTER RETIREMENT SERIES - U.S. GOV'T MONEY MARKET SERIES
07/31/96
Without Waiver of Fees and Assumption of Expenses.
Exhibit 16: Schedule for computation of each performance
quotation provided in the Statement of Additional Information.
(16) The Fund's current yield for the seven days ending
July 31, 1996
(A-B) x 365/N
(1.000814-1) x 365/7 = 4.24%
The Fund's effective annualized yield for the seven days ending
July 31, 1996
365/N
A - 1
365/7
1.000814 - 1 = 4.33%
A = Value of a share of the Trust at end of period.
B = Value of a share of the Trust at beginning of period.
N = Number of days in the period.
<PAGE>
DEAN WITTER RETIREMENT SERIES U.S. GOVERNMENT SECURITIES TRUST
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
30 DAYS AS OF 7/31/96
6
(A) YIELD = 2 { [ ((a-b) /cd) +1] -1}
WHERE: a = Dividends and interest earned during the period
b = Expenses accrued for the period
c = The average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = The maximum offering price per share on the last
day of the period
6
YIELD = 2 { [ ((48,023.34 - 9,320.64) /899,079.884 X 9.59) +1] -1}
= 5.45%
Without Waiver of Fees and Assumption of Expenses.
<PAGE>
DEAN WITTER RETIREMENT SERIES U.S. GOVERNMENT SECURITIES TRUST
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
30 DAYS AS OF 7/31/96
6
(A) YIELD = 2 { [ ((a-b) /cd) +1] -1}
WHERE: a = Dividends and interest earned during the period
b = Expenses accrued for the period
c = The average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = The maximum offering price per share on the last
day of the period
6
YIELD = 2 { [ ((14,859.49 - 3,832.01) /300,683.615 X 9.56) +1] -1}
= 5.77%
Without Waiver of Fees and Assumption of Expenses.
<PAGE>
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
DW RET SERIES INTERMEDIATE INCOME
30 day Yield
FOR THE 30 DAY PERIOD ENDING JULY 31, 1996
6
YIELD = 2{ [ ((a-b)/c * d) + 1] -1}
WHERE: a = Dividends and interest earned during the period
b = Expenses accrued for the period
c = The average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = The maximum offering price per share on the last
day of the period
WITH OUT EXPENSE LIMITATION EXCESS FACTORED IN 6
= 5.846369% = 2{ [(( 23,386.37-3,262.57))/444,266.742*9.41)+1] -1}
WITH EXPENSE LIMITATION EXCESS FACTORED IN 6
= 4.968130% = 2{ [(( 23,386.37-6,254.91))/444,266.742*9.41)+1] -1}
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER RETIREMENT SERIES LIQUID ASSET FUND INC.
(A) GROWTH OF $10,000
(B) GROWTH OF $50,000
(C) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
INVESTED - P TOTAL
$10,000, $50,000 & RETURN - TR (A) GROWTH OF (B) GROWTH OF (C) GROWTH OF
$100,000 31-Jul-96 $10,000 INVESTMENT -G $50,000 INVESTMENT - G $100,000 INVESTMENT -G
- --------------- ----------- --------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
30-Dec-92 17.59 $11,759 $58,795 $117,590
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER RETIREMENT SERIES U.S. GOVT. MONEY MARKET
(A) GROWTH OF $10,000
(B) GROWTH OF $50,000
(C) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
INVESTED - P TOTAL
$10,000, $50,000 & RETURN - TR (A) GROWTH OF (B) GROWTH OF (C) GROWTH OF
$100,000 31-Jul-96 $10,000 INVESTMENT -G $50,000 INVESTMENT - G $100,000 INVESTMENT -G
- --------------- ----------- --------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
02-Jan-93 15.81 $11,581 $57,905 $115,810
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER RETIREMENT SERIES U.S. GOVERNMENT SECURITIES TRUST
(A) AVERAGE ANNUAL TOTAL RETURNS (NO LOAD FUND)
(B) TOTAL RETURN (NO LOAD FUND)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
EV = ENDING VALUE
P = INITIAL INVESTMENT
TR = TOTAL RETURN
(B) (A)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-96 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ------------ --------- -------------------
31-Jul-95 $1,044.90 4.49% 1 4.49%
08-Jan-93 $1,146.70 14.67% 3.5519 3.92%
(C) AVERAGE ANNUAL TOTAL RETURNS (STANDARIZED COMPUTATIONS) WITHOUT WAIVER OF
FEES AND ASSUMPTION OF EXPENSES.
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EVb |
tb = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
tb = AVERAGE ANNUAL COMPOUND RETURN
(DEDUCTION FOR EXPENSES ASSUMED BY FUND MANAGER)
n = NUMBER OF YEARS
EVb = ENDING VALUE (DEDUCTION FOR EXPENSES
ASSUMED BY FUND MANAGER)
P = INITIAL INVESTMENT
(C)
$1,000 EVb AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-96 YEARS - n COMPOUND RETURN - tb
- ------------ --------- --------- --------------------
31-Jul-95 $1,037.20 1 3.72%
08-Jan-93 $1,118.00 3.5592 3.18%
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT- G $50,000 INVESTMENT- G $100,000 INVESTMENT- G
- ------------ ----------- ---------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
08-Jan-93 14.67 $11,467 $57,335 $114,670
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER RETIREMENT SERIES INTERMEDIATE INCOME
(A) AVERAGE ANNUAL TOTAL RETURNS (NO LOAD FUND)
(B) TOTAL RETURN (NO LOAD FUND)
| ---------------------- |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
EV = ENDING VALUE
P = INITIAL INVESTMENT
TR = TOTAL RETURN
(B) (A)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-96 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- --------- -------------------
31-Jul-95 $1,039.50 3.95% 1 3.95%
12-Jan-93 $1,157.40 15.74% 3.5483 4.20%
(C) AVERAGE ANNUAL TOTAL RETURNS (STANDARIZED COMPUTATIONS) WITHOUT WAIVER OF
FEES AND ASSUMPTION OF EXPENSES.
- -
| ---------------------- |
FORMULA: | | |
| /\ n | EVb |
tb = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
tb = AVERAGE ANNUAL COMPOUND RETURN
(DEDUCTION FOR EXPENSES ASSUMED BY FUND MANAGER)
n = NUMBER OF YEARS
EVb = ENDING VALUE (DEDUCTION FOR EXPENSES
ASSUMED BY FUND MANAGER)
P = INITIAL INVESTMENT
(C)
$1,000 EVb AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-96 YEARS - n COMPOUND RETURN - tb
- ------------ --------- --------- --------------------
31-Jul-95 $1,031.80 1 3.18%
12-Jan-93 $1,141.40 3.5483 3.80%
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT- G $50,000 INVESTMENT- G $100,000 INVESTMENT- G
- ------------ ----------- --------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
12-Jan-93 15.74 $11,574 $57,870 $115,740
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER RETIREMENT SERIES AMERICAN VALUE
(A) AVERAGE ANNUAL TOTAL RETURNS (NO LOAD FUND)
(B) TOTAL RETURN (NO LOAD FUND)
- -
| ---------------------- |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
EV = ENDING VALUE
P = INITIAL INVESTMENT
TR = TOTAL RETURN
(B) (A)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-96 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- --------- -------------------
31-Jul-95 $1,098.30 9.83% 1 9.83%
01-Feb-93 $1,464.50 46.45% 3.4935 11.54%
(C) AVERAGE ANNUAL TOTAL RETURNS (STANDARIZED COMPUTATIONS) WITHOUT WAIVER OF
FEES AND ASSUMPTION OF EXPENSES.
- -
| ---------------------- |
FORMULA: | | |
| /\ n | EVb |
tb = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
tb = AVERAGE ANNUAL COMPOUND RETURN
(DEDUCTION FOR EXPENSES ASSUMED BY FUND MANAGER)
n = NUMBER OF YEARS
EVb = ENDING VALUE (DEDUCTION FOR EXPENSES
ASSUMED BY FUND MANAGER)
P = INITIAL INVESTMENT
(C)
$1,000 EVb AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-96 YEARS - n COMPOUND RETURN - tb
- ------------ --------- --------- --------------------
31-Jul-95 $1,093.20 1 9.32%
01-Feb-93 $1,448.80 3.4935 11.20%
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT- G $50,000 INVESTMENT- G $100,000 INVESTMENT- G
- ------------ ----------- --------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
01-Feb-93 46.45 $14,645 $73,225 $146,450
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER RETIREMENT SERIES CAPITAL GROWTH
(A) AVERAGE ANNUAL TOTAL RETURNS (NO LOAD FUND)
(B) TOTAL RETURN (NO LOAD FUND)
- -
| ---------------------- |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
EV = ENDING VALUE
P = INITIAL INVESTMENT
TR = TOTAL RETURN
(B) (A)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-96 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- --------- -------------------
31-Jul-95 $1,145.80 14.58% 1 14.58%
02-Feb-93 $1,302.00 30.20% 3.4908 7.85%
(C) AVERAGE ANNUAL TOTAL RETURNS (STANDARIZED COMPUTATIONS) WITHOUT WAIVER OF
FEES AND ASSUMPTION OF EXPENSES.
- -
| ---------------------- |
FORMULA: | | |
| /\ n | EVb |
tb = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
tb = AVERAGE ANNUAL COMPOUND RETURN
(DEDUCTION FOR EXPENSES ASSUMED BY FUND MANAGER)
n = NUMBER OF YEARS
EVb = ENDING VALUE (DEDUCTION FOR EXPENSES
ASSUMED BY FUND MANAGER)
P = INITIAL INVESTMENT
(C)
$1,000 EVb AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-96 YEARS - n COMPOUND RETURN - tb
- ------------ --------- --------- --------------------
31-Jul-95 $1,133.10 1.00 13.31%
02-Feb-93 $1,281.40 3.4908 7.36%
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT- G $50,000 INVESTMENT- G $100,000 INVESTMENT- G
- ------------ ----------- ---------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
02-Feb-93 30.20 $13,020 $65,100 $130,200
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER RETIREMENT SERIES DIVIDEND GROWTH
(A) AVERAGE ANNUAL TOTAL RETURNS (NO LOAD FUND)
(B) TOTAL RETURN (NO LOAD FUND)
- -
| ---------------------- |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
EV = ENDING VALUE
P = INITIAL INVESTMENT
TR = TOTAL RETURN
(B) (A)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-96 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- --------- -------------------
31-Jul-95 $1,160.90 16.09% 1 16.09%
07-Jan-93 $1,624.20 62.42% 3.5619 14.59%
(C) AVERAGE ANNUAL TOTAL RETURNS (STANDARIZED COMPUTATIONS) WITHOUT WAIVER OF
FEES AND ASSUMPTION OF EXPENSES.
- -
| ---------------------- |
FORMULA: | | |
| /\ n | EVb |
tb = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
tb = AVERAGE ANNUAL COMPOUND RETURN
(DEDUCTION FOR EXPENSES ASSUMED BY FUND MANAGER)
n = NUMBER OF YEARS
EVb = ENDING VALUE (DEDUCTION FOR EXPENSES
ASSUMED BY FUND MANAGER)
P = INITIAL INVESTMENT
(C)
$1,000 EVb AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-96 YEARS - n COMPOUND RETURN - tb
- ------------ --------- --------- --------------------
31-Jul-95 $1,157.70 1 15.77%
07-Jan-93 $1,610.80 3.5619 14.32%
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT- G $50,000 INVESTMENT- G $100,000 INVESTMENT- G
- ------------ ----------- --------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
07-Jan-93 62.42 $16,242 $81,210 $162,420
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER RETIREMENT SERIES STRATEGIST
(A) AVERAGE ANNUAL TOTAL RETURNS (NO LOAD FUND)
(B) TOTAL RETURN (NO LOAD FUND)
- -
| ---------------------- |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
EV = ENDING VALUE
P = INITIAL INVESTMENT
TR = TOTAL RETURN
(B) (A)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-96 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- --------- -------------------
31-Jul-95 $1,169.70 16.97% 1 16.97%
07-Jan-93 $1,360.80 36.08% 3.5619 9.03%
(C) AVERAGE ANNUAL TOTAL RETURNS (STANDARIZED COMPUTATIONS) WITHOUT WAIVER OF
FEES AND ASSUMPTION OF EXPENSES.
- -
| ---------------------- |
FORMULA: | | |
| /\ n | EVb |
tb = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
tb = AVERAGE ANNUAL COMPOUND RETURN
(DEDUCTION FOR EXPENSES ASSUMED BY FUND MANAGER)
n = NUMBER OF YEARS
EVb = ENDING VALUE (DEDUCTION FOR EXPENSES
ASSUMED BY FUND MANAGER)
P = INITIAL INVESTMENT
(C)
$1,000 EVb AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-96 YEARS - n COMPOUND RETURN - tb
- ------------ --------- --------- --------------------
31-Jul-95 $1,163.20 1 16.32%
07-Jan-93 $1,345.70 3.5619 8.69%
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT- G $50,000 INVESTMENT- G $100,000 INVESTMENT- G
- ------------ ----------- --------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
07-Jan-93 36.08 $13,608 $68,040 $136,080
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER RETIREMENT SERIES UTILITIES
(A) AVERAGE ANNUAL TOTAL RETURNS (NO LOAD FUND)
(B) TOTAL RETURN (NO LOAD FUND)
- -
| ---------------------- |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
EV = ENDING VALUE
P = INITIAL INVESTMENT
TR = TOTAL RETURN
(B) (A)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-96 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- --------- -------------------
31-Jul-95 $1,087.60 8.76% 1 8.76%
08-Jan-93 $1,329.10 32.91% 3.5592 8.32%
(C) AVERAGE ANNUAL TOTAL RETURNS (STANDARIZED COMPUTATIONS) WITHOUT WAIVER OF
FEES AND ASSUMPTION OF EXPENSES.
- -
| ---------------------- |
FORMULA: | | |
| /\ n | EVb |
tb = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
tb = AVERAGE ANNUAL COMPOUND RETURN
(DEDUCTION FOR EXPENSES ASSUMED BY FUND MANAGER)
n = NUMBER OF YEARS
EVb = ENDING VALUE (DEDUCTION FOR EXPENSES
ASSUMED BY FUND MANAGER)
P = INITIAL INVESTMENT
(C)
$1,000 EVb AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-96 YEARS - n COMPOUND RETURN - tb
- ------------ --------- --------- --------------------
31-Jul-95 $1,079.30 1 7.93%
08-Jan-93 $1,299.80 3.5592 7.65%
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT- G $50,000 INVESTMENT- G $100,000 INVESTMENT- G
- ------------ ----------- ---------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
08-Jan-93 32.91 $13,291 $66,455 $132,910
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER RETIREMENT SERIES VALUE ADDED
(A) AVERAGE ANNUAL TOTAL RETURNS (NO LOAD FUND)
(B) TOTAL RETURN (NO LOAD FUND)
- -
| ---------------------- |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
EV = ENDING VALUE
P = INITIAL INVESTMENT
TR = TOTAL RETURN
(B) (A)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-96 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- --------- -------------------
31-Jul-95 $1,111.90 11.19% 1 11.19%
01-Feb-93 $1,495.50 49.55% 3.4935 12.21%
(C) AVERAGE ANNUAL TOTAL RETURNS (STANDARIZED COMPUTATIONS) WITHOUT WAIVER OF
FEES AND ASSUMPTION OF EXPENSES.
- -
| ---------------------- |
FORMULA: | | |
| /\ n | EVb |
tb = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
tb = AVERAGE ANNUAL COMPOUND RETURN
(DEDUCTION FOR EXPENSES ASSUMED BY FUND MANAGER)
n = NUMBER OF YEARS
EVb = ENDING VALUE (DEDUCTION FOR EXPENSES
ASSUMED BY FUND MANAGER)
P = INITIAL INVESTMENT
(C)
$1,000 EVb AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-96 YEARS - n COMPOUND RETURN - tb
- ------------ --------- --------- --------------------
31-Jul-95 $1,108.70 1 10.87%
01-Feb-93 $1,481.60 3.4935 11.91%
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT- G $50,000 INVESTMENT- G $100,000 INVESTMENT- G
- ------------ ----------- --------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
01-Feb-93 49.55 $14,955 $74,775 $149,550
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER RETIREMENT SERIES GLOBAL EQUITY
(A) AVERAGE ANNUAL TOTAL RETURNS (NO LOAD FUND)
(B) TOTAL RETURN (NO LOAD FUND)
- -
| ---------------------- |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
EV = ENDING VALUE
P = INITIAL INVESTMENT
TR = TOTAL RETURN
(B) (A)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-96 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- --------- -------------------
31-Jul-95 $1,072.60 7.26% 1 7.26%
08-Jan-93 $1,217.10 21.71% 3.5592 5.68%
(C) AVERAGE ANNUAL TOTAL RETURNS (STANDARIZED COMPUTATIONS) WITHOUT WAIVER OF
FEES AND ASSUMPTION OF EXPENSES.
- -
| ---------------------- |
FORMULA: | | |
| /\ n | EVb |
tb = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
tb = AVERAGE ANNUAL COMPOUND RETURN
(DEDUCTION FOR EXPENSES ASSUMED BY FUND MANAGER)
n = NUMBER OF YEARS
EVb = ENDING VALUE (DEDUCTION FOR EXPENSES
ASSUMED BY FUND MANAGER)
P = INITIAL INVESTMENT
(C)
$1,000 EVb AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-96 YEARS - n COMPOUND RETURN - tb
- ------------ --------- --------- --------------------
31-Jul-95 $1,063.50 1 6.35%
08-Jan-93 $1,194.40 3.5592 5.12%
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT- G $50,000 INVESTMENT- G $100,000 INVESTMENT- G
- ------------ ----------- ---------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
08-Jan-93 21.71 $12,171 $60,855 $121,710
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> LIQUID ASSETS
<CURRENCY> U.S. DOLLLARS
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 43,750,285
<INVESTMENTS-AT-VALUE> 43,750,285
<RECEIVABLES> 96,594
<ASSETS-OTHER> 19,710
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 43,866,589
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,113,951
<TOTAL-LIABILITIES> 1,113,951
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42,752,596
<SHARES-COMMON-STOCK> 42,752,596
<SHARES-COMMON-PRIOR> 35,631,144
<ACCUMULATED-NII-CURRENT> 42
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 42,752,638
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,628,008
<OTHER-INCOME> 0
<EXPENSES-NET> 211,952
<NET-INVESTMENT-INCOME> 3,416,056
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3,416,056
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,416,043)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 177,956,895
<NUMBER-OF-SHARES-REDEEMED> (174,251,486)
<SHARES-REINVESTED> 3,416,043
<NET-CHANGE-IN-ASSETS> 7,121,465
<ACCUMULATED-NII-PRIOR> 29
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 318,178
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 410,861
<AVERAGE-NET-ASSETS> 63,635,656
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> U.S. GOVERNMENT MONEY MARKET
<CURRENCY> U.S. DOLLLARS
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 6,628,215
<INVESTMENTS-AT-VALUE> 6,628,215
<RECEIVABLES> 23,516
<ASSETS-OTHER> 4,889
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,656,620
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28,843
<TOTAL-LIABILITIES> 28,843
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,627,775
<SHARES-COMMON-STOCK> 6,627,774
<SHARES-COMMON-PRIOR> 10,694,809
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6,627,777
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 778,612
<OTHER-INCOME> 0
<EXPENSES-NET> 51,490
<NET-INVESTMENT-INCOME> 727,122
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 727,122
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (727,125)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 27,880,399
<NUMBER-OF-SHARES-REDEEMED> (32,674,558)
<SHARES-REINVESTED> 727,125
<NET-CHANGE-IN-ASSETS> (4,067,037)
<ACCUMULATED-NII-PRIOR> 5
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 69,837
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 114,702
<AVERAGE-NET-ASSETS> 13,966,902
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.37
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> U.S. GOVERNMENT SECURITIES
<CURRENCY> U.S. DOLLARS
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 8,842,593
<INVESTMENTS-AT-VALUE> 8,614,965
<RECEIVABLES> 590,488
<ASSETS-OTHER> 68,222
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9,273,675
<PAYABLE-FOR-SECURITIES> 499,790
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 123,072
<TOTAL-LIABILITIES> 622,862
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,862,015
<SHARES-COMMON-STOCK> 901,751
<SHARES-COMMON-PRIOR> 433,478
<ACCUMULATED-NII-CURRENT> 24
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 16,402
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (227,628)
<NET-ASSETS> 8,650,813
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 484,486
<OTHER-INCOME> 0
<EXPENSES-NET> 49,549
<NET-INVESTMENT-INCOME> 434,937
<REALIZED-GAINS-CURRENT> 18,226
<APPREC-INCREASE-CURRENT> (149,772)
<NET-CHANGE-FROM-OPS> 303,391
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (434,913)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 971,490
<NUMBER-OF-SHARES-REDEEMED> (547,637)
<SHARES-REINVESTED> 44,420
<NET-CHANGE-IN-ASSETS> 468,273
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,824)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 50,913
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 116,315
<AVERAGE-NET-ASSETS> 7,832,711
<PER-SHARE-NAV-BEGIN> 9.71
<PER-SHARE-NII> .55
<PER-SHARE-GAIN-APPREC> (.12)
<PER-SHARE-DIVIDEND> (.55)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.59
<EXPENSE-RATIO> 1.48
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> INTERMEDIATE INCOME
<CURRENCY> U.S. DOLLLARS
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 4,169,804
<INVESTMENTS-AT-VALUE> 4,050,764
<RECEIVABLES> 105,971
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 43,203
<TOTAL-ASSETS> 4,199,938
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28,222
<TOTAL-LIABILITIES> 28,222
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,319,568
<SHARES-COMMON-STOCK> 443,442
<SHARES-COMMON-PRIOR> 103,235
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (28,812)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (119,040)
<NET-ASSETS> 4,171,716
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 245,172
<OTHER-INCOME> 0
<EXPENSES-NET> 26,680
<NET-INVESTMENT-INCOME> 218,492
<REALIZED-GAINS-CURRENT> (27,045)
<APPREC-INCREASE-CURRENT> (116,038)
<NET-CHANGE-FROM-OPS> 75,409
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (218,918)
<DISTRIBUTIONS-OF-GAINS> (4,854)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 499,259
<NUMBER-OF-SHARES-REDEEMED> (181,670)
<SHARES-REINVESTED> 22,618
<NET-CHANGE-IN-ASSETS> 3,177,937
<ACCUMULATED-NII-PRIOR> 426
<ACCUMULATED-GAINS-PRIOR> 3,087
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 24,158
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 26,680
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 9.63
<PER-SHARE-NII> .59
<PER-SHARE-GAIN-APPREC> (.21)
<PER-SHARE-DIVIDEND> (.59)
<PER-SHARE-DISTRIBUTIONS> (.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.41
<EXPENSE-RATIO> 1.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> AMERICAN VALUE
<CURRENCY> U.S. DOLLLARS
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 40,271,697
<INVESTMENTS-AT-VALUE> 41,348,703
<RECEIVABLES> 1,274,624
<ASSETS-OTHER> 37,642
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 42,660,969
<PAYABLE-FOR-SECURITIES> 2,241,377
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 98,228
<TOTAL-LIABILITIES> 2,339,605
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 36,475,819
<SHARES-COMMON-STOCK> 3,082,783
<SHARES-COMMON-PRIOR> 1,723,154
<ACCUMULATED-NII-CURRENT> 93,984
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,674,518
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,077,043
<NET-ASSETS> 40,321,364
<DIVIDEND-INCOME> 251,988
<INTEREST-INCOME> 203,082
<OTHER-INCOME> 0
<EXPENSES-NET> 210,466
<NET-INVESTMENT-INCOME> 244,604
<REALIZED-GAINS-CURRENT> 4,355,860
<APPREC-INCREASE-CURRENT> (2,487,467)
<NET-CHANGE-FROM-OPS> 2,112,997
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 299,827
<DISTRIBUTIONS-OF-GAINS> 2,309,181
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,603,955
<NUMBER-OF-SHARES-REDEEMED> 447,666
<SHARES-REINVESTED> 203,340
<NET-CHANGE-IN-ASSETS> 17,739,877
<ACCUMULATED-NII-PRIOR> 149,207
<ACCUMULATED-GAINS-PRIOR> 627,839
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 273,275
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 379,970
<AVERAGE-NET-ASSETS> 32,150,049
<PER-SHARE-NAV-BEGIN> 13.10
<PER-SHARE-NII> .09
<PER-SHARE-GAIN-APPREC> 1.17
<PER-SHARE-DIVIDEND> (.15)
<PER-SHARE-DISTRIBUTIONS> (1.13)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.08
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> CAPITAL GROWTH
<CURRENCY> U.S. DOLLLARS
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 1,973,590
<INVESTMENTS-AT-VALUE> 2,081,754
<RECEIVABLES> 15,774
<ASSETS-OTHER> 7,401
<OTHER-ITEMS-ASSETS> 2,111
<TOTAL-ASSETS> 2,107,040
<PAYABLE-FOR-SECURITIES> 37,443
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 81,744
<TOTAL-LIABILITIES> 119,187
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,852,813
<SHARES-COMMON-STOCK> 157,685
<SHARES-COMMON-PRIOR> 60,665
<ACCUMULATED-NII-CURRENT> 2,549
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 24,327
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 108,164
<NET-ASSETS> 1,987,853
<DIVIDEND-INCOME> 15,856
<INTEREST-INCOME> 1,783
<OTHER-INCOME> 0
<EXPENSES-NET> 10,640
<NET-INVESTMENT-INCOME> 6,999
<REALIZED-GAINS-CURRENT> 31,476
<APPREC-INCREASE-CURRENT> 45,817
<NET-CHANGE-FROM-OPS> 84,292
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8,123)
<DISTRIBUTIONS-OF-GAINS> (5,303)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 119,028
<NUMBER-OF-SHARES-REDEEMED> (23,095)
<SHARES-REINVESTED> 1,087
<NET-CHANGE-IN-ASSETS> 1,310,347
<ACCUMULATED-NII-PRIOR> 3,673
<ACCUMULATED-GAINS-PRIOR> (1,846)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11,858
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 39,573
<AVERAGE-NET-ASSETS> 1,395,008
<PER-SHARE-NAV-BEGIN> 11.17
<PER-SHARE-NII> .07
<PER-SHARE-GAIN-APPREC> 1.55
<PER-SHARE-DIVIDEND> (.11)
<PER-SHARE-DISTRIBUTIONS> (.07)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.61
<EXPENSE-RATIO> 2.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> DIVIDEND GROWTH
<CURRENCY> U.S. DOLLLARS
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 62,843,388
<INVESTMENTS-AT-VALUE> 70,144,312
<RECEIVABLES> 279,258
<ASSETS-OTHER> 34,941
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 70,458,511
<PAYABLE-FOR-SECURITIES> 500,879
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 195,020
<TOTAL-LIABILITIES> 695,899
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60,289,273
<SHARES-COMMON-STOCK> 4,773,848
<SHARES-COMMON-PRIOR> 2,706,023
<ACCUMULATED-NII-CURRENT> 350,190
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,822,225
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,300,924
<NET-ASSETS> 69,762,612
<DIVIDEND-INCOME> 1,520,953
<INTEREST-INCOME> 44,648
<OTHER-INCOME> 0
<EXPENSES-NET> 320,612
<NET-INVESTMENT-INCOME> 1,244,989
<REALIZED-GAINS-CURRENT> 2,317,010
<APPREC-INCREASE-CURRENT> 2,701,826
<NET-CHANGE-FROM-OPS> 6,263,825
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,199,564
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<NAME> UTILITIES
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<NAME> VALUE ADDED
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<TABLE> <S> <C>
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<NAME> GLOBAL EQUITY
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<NAME> STRATEGIST
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