<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- - - - - --------------------------------------------------------------------------------
This is the first annual report to shareholders on the operations of Dean
Witter Short-Term Bond Fund. The Fund is designed to seek high current income
and capital preservation through a portfolio of investment-grade corporate and
government securities with an average dollar-weighted maturity of less than
three years.
Between the Fund's commencement of operations on January 10, 1994 and the
close of its first fiscal year on April 30, 1994, short-and intermediate-term
interest rates rose by more than 1.5 percentage points. Rates began to rise
during the fourth quarter of 1993 as signs of substantial economic strength and
heightened inflationary expectations became apparent. At the same time, consumer
spending increased as mortgage refinancings generated increased disposable
income. This scenario induced the Federal Reserve Board to change its stance on
monetary policy by raising the federal-funds rate -- the interest rate banks
charge each other for overnight loans -- from 3.00 percent to 3.75 percent in
three separate moves starting in early February 1994. (Subsequent to the period
under review, the Federal Reserve Board initiated another round of tightening
with a 50 basis point increase in both the federal-funds rate and the discount
rate -- the interest rate the Federal Reserve charges member banks for loans.)
These increases represented the first time in several years the central bank had
acted to raise short-term interest rates. Although these rate hikes were
presented as a series of "preemptive" strikes in a war against potential
inflationary pressure, the markets interpreted the moves as the beginning of a
trend toward higher interest rates. The markets reacted immediately, with both
stock and bond prices tumbling. On April 30 two-year U.S. Treasury notes were
yielding 5.73 percent and five-year notes were yielding 6.63 percent, versus
4.06 percent and 5.01 percent, respectively, on January 10.
Because interest rates were still
low when the Fund commenced operations,
investments were made gradually. On
February 4, 1994, when the Federal
Reserve began to tighten monetary
policy, investing was moderated even
further. At that time, we determined it
prudent to position the Fund defensively
in anticipation of further short-and
intermediate-term interest rate
increases. With the most recent 0.50
percentage point rise in both the
federal-funds and discount rates, we
expect to begin reducing the Fund's
temporary reserve position in favor of
the higher yields that are now
available.
Although the Fund invests in
shorter-term fixed-income securities
(U.S. government securities purchased
have maturities of two to three years,
while U.S. corporate bonds purchased
have an average maturity of 4.5 years),
the major impact on the Fund's
performance was rising interest rates.
The portfolio's 18 percent commitment to
Cetes (Mexican Treasury bills
denominated in pesos) purchased to yield
slightly more than 10 percent came under
pressure as the peso declined by
approximately five percent versus the
U.S. dollar as a result of both
uncertainty over the upcoming Mexican
Presidential election (the favored
<PAGE>
candidate was assassinated in March), and rising U.S. interest rates. Corporate
bonds also faltered as pending legislation and regulation in specific industries
negatively impacted perceptions of future creditworthiness for the debt of
tobacco (1.2 percent of the Fund's portfolio) and electric utilities (8.8
percent) companies.
For the four months ended April 30, 1994, 1-to 10-year corporate bonds
returned -2.70 percent, versus -2.49 percent for comparable maturity U.S.
government securities, as measured by Lehman Brothers. As measured by Lipper
Analytical Services, Inc., the median return for all short-term investment-grade
bond funds was -1.34 percent for the period. In contrast, since inception
through April 30, 1994, the Fund returned -2.01 percent. The accompanying chart
illustrates the growth of a $10,000 investment in the Fund from inception
through April 30, 1994, versus the performance of a similar hypothetical
investment in the unmanaged Lehman Brothers Mutual Fund Short (1-5) Investment
Grade Debt Index.
As of April 30, 1994, the Fund had net assets in excess of $43 million of
which 36.8 percent was invested in investment-grade corporate bonds with an
average quality rating of Baa1. The remaining assets were allocated to foreign
government securities (18.0 percent); U.S. government securities (15.1 percent);
non-investment grade corporate bonds (3.8 percent); and temporary cash reserves
(26.8 percent). The Fund's weighted average maturity was 2.2 years and its
average duration was 1.8 years. At the end of the period under review, the
Fund's net asset value per share was $9.62. Since inception, through April 30,
1994, the Fund paid dividends totaling $0.19 per share.
With the federal-funds rate currently at 4.25 percent, versus 3.00 percent
in January, the economy is beginning to show signs of moderating. Retail sales
have declined, as have housing starts and new-home sales. Even new automobile
sales are expanding at a slower rate than earlier in the year. On the inflation
front, although some commodity prices such as gold and oil have moved upward in
recent weeks, the Consumer and Producer Price Indexes have shown only modest
gains. As a result, we expect to see interest rates level off through the summer
months at today's yields. If, as we suspect, the economy stays on a 2.50 to 3.00
percent growth track, and inflation continues at current levels, today's
fixed-income investments could look quite attractive by year end.
We appreciate your support of Dean Witter Short-Term Bond Fund and look
forward to continuing to serve your investment needs.
Very truly yours,
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS APRIL 30, 1994
- - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
----------- -------- -------- ------------
<C> <S> <C> <C> <C>
BONDS (55.3%)
CORPORATE (40.2%)
AUTOMOTIVE FINANCE (3.5%)
US $ 500 Ford Motor Credit Corp. ...... 6.25% 2/26/98 $ 488,910
1,000 General Motors Acceptance
Corp. ........................ 7.75 4/15/97 1,023,770
------------
1,512,680
------------
BANK HOLDING COMPANIES (3.2%)
500 Home Savings America Co. ..... 6.00 11/ 1/00 458,205
625 Integra Financial Corp. ...... 6.50 4/15/00 600,018
314 Midlantic Corp................ 9.25 9/ 1/99 335,786
------------
1,394,009
------------
BANKS -- INTERNATIONAL (2.2%)
1,000 Kansalis -- Osake Pankki...... 6.125 5/15/98 957,813
------------
BROKERAGE (2.3%)
500 Lehman Brothers Holdings,
Inc........................... 7.625 7/15/99 500,726
500 Smith Barney Shearson, Inc.... 6.00 3/15/97 491,116
------------
991,842
------------
CHEMICALS (2.5%)
500 General Chemical Corp. ....... 14.00 11/ 1/98 545,000
500 Georgia Gulf Corp. ........... 15.00 4/15/00 533,750
------------
1,078,750
------------
COMPUTER EQUIPMENT (3.6%)
1,000 Digital Equipment Corp. ...... 7.00 11/15/97 989,740
500 Unisys Corp................... 13.50* 7/ 1/97 550,000
------------
1,539,740
------------
FOOD & TOBACCO (1.2%)
500 RJR Nabisco, Inc. ............ 10.50 4/15/98 523,690
------------
FOREST & PAPER PRODUCTS (2.3%)
500 Boise Cascade Corp. .......... 9.625 7/15/98 514,380
500 Champion International
Corp. ........................ 7.70 12/15/99 502,420
------------
1,016,800
------------
INDUSTRIALS (5.4%)
500 Comdisco, Inc. ............... 9.75 1/15/97 532,010
500 Hertz Corporation. ........... 9.50 5/15/98 539,645
500 Mitchell Energy & Development
Co. .......................... 5.10 2/15/97 478,820
500 Reynolds Metals, Inc. ........ 9.375 6/15/99 538,665
250 USX -- Marathon Corp. ........ 9.80 7/ 1/01 266,852
------------
2,355,992
------------
INSURANCE (2.4%)
1,000 Continental Corp. ............ 8.25 4/15/99 1,031,430
------------
PUBLISHING (1.0%)
500 Time Warner, Inc. ............ 11.00+ 8/15/02 454,375
------------
TELECOMMUNICATIONS (1.1%)
500 Telecommunications, Inc. ..... 7.375 2/15/00 484,805
------------
</TABLE>
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS APRIL 30, 1994 (CONTINUED)
- - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL TRANSPORTATION (0.7%)
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
----------- -------- -------- ------------
<C> <S> <C> <C> <C>
US$ 300 AMR Corp. .................... 8.10% 11/ 1/98 $ 306,477
------------
UTILITIES -- ELECTRIC (7.8%)
500 Commonwealth Edison Co. ...... 6.50 4/15/00 473,820
500 Consolidated Edison Co. ...... 5.90 12/15/96 493,670
370 Consumers Power Co. .......... 8.875 11/15/99 392,488
500 Long Island Lighting Co. ..... 6.25 7/15/01 440,595
500 Ohio Edison Co................ 8.75 2/15/98 526,185
575 Public Service Co. of New
Hampshire..................... 8.875 5/15/96 590,306
500 United Illuminating Co. ...... 6.20 1/15/99 470,615
------------
3,387,679
------------
UTILITIES -- INTERNATIONAL
(1.0%)
500 Korea Electric Power Corp. ... 6.375 12/ 1/03 437,700
------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $18,406,548)...................... 17,473,782
------------
MORTGAGE PASS-THROUGH CERTIFICATES
(6.1%)
1,000 Federal Home Loan Mortgage
Corp.......................... 6.50++ 5/16/99 994,375
2,000 Federal National Mortgage
Association. ................. 7.56+ 12/20/01 1,640,625
------------
TOTAL MORTGAGE PASS-THROUGH CERTIFICATES
(IDENTIFIED COST $2,735,062)....................... 2,635,000
------------
U.S. GOVERNMENT OBLIGATIONS
(9.0%)
2,000 U.S. Treasury Note............ 4.00 1/31/96 1,946,562
2,000 U.S. Treasury Note............ 4.625 2/29/96 1,963,437
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $3,991,024)....................... 3,909,999
------------
TOTAL BONDS (IDENTIFIED COST $25,132,634).......... 24,018,781
------------
SHORT-TERM INVESTMENTS(44.8%)
COMMERCIAL PAPER (A) (2.3%)
UTILITY--FINANCE (2.3%)
1,000 National Rural Utilities
Cooperative Finance Corp.
(AMORTIZED COST $998,311)..... 3.801 5/16/94 998,311
------------
U.S. GOVERNMENT AGENCIES (A)
(23.7%)
3,000 Federal Home Loan Banks....... 3.631 5/ 9/94 2,997,277
4,300 Federal Home Loan Mortgage
Corp. ........................ 3.501 5/ 2/94 4,299,165
3,000 Federal Home Loan Mortgage
Corp.......................... 3.651 5/ 4/94 2,998,784
------------
TOTAL U.S. GOVERNMENT AGENCIES (AMORTIZED COST
$10,295,226)....................................... 10,295,226
------------
</TABLE>
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS APRIL 30, 1994 (CONTINUED)
- - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MEXICAN GOVERNMENT SECURITIES
AMOUNT (IN (A) (18.0%) COUPON MATURITY
THOUSANDS) RATE DATE VALUE
----------- -------- -------- ------------
<C> <S> <C> <C> <C>
MXP 9,600 Cetes Series 0504............. 10.70% 5/ 4/94 $ 2,935,848
9,542 Cetes Series 0519............. 10.20 5/19/94 2,906,160
6,430 Cetes Series 0526............. 10.80 5/26/94 1,953,860
------------
TOTAL MEXICAN GOVERNMENT SECURITIES
(AMORTIZED COST $8,196,543)........................ 7,795,868
------------
REPURCHASE AGREEMENT (0.8%)
US$ 352 The Bank of New York (dated
4/29/94; proceeds $352,210;
collateralized by $372,797
Student Loan Marketing
Association 6.81% due 12/1/10
valued at $359,146)
(IDENTIFIED COST $352,104).... 3.625 5/ 2/94 352,104
------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $19,842,184)...................... 19,441,509
------------
TOTAL INVESTMENTS
(IDENTIFIED COST $44,974,818) (B)....... 100.1% 43,460,290
LIABILITIES IN EXCESS OF OTHER ASSETS... (0.1) (57,653)
-------- ------------
NET ASSETS.............................. 100.0% $ 43,402,637
-------- ------------
-------- ------------
<FN>
- - - - - ---------------
* Adjustable rate. Rate shown is the rate in effect at April 30, 1994.
+ Currently zero coupon under terms of the initial offering.
++ Security purchased on a when issue basis.
(a) Securities were purchased on a discount basis. The rates shown have been
adjusted to reflect a bond equivalent yield.
(b) The aggregate cost for federal income tax purposes is $44,974,818; the
aggregate gross unrealized appreciation is $312 and the aggregate gross
unrealized depreciation is $1,514,840, resulting in net unrealized
depreciation of $1,514,528.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
FINANCIAL STATEMENTS
- - - - - --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1994
- - - - - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $44,974,818) (Note 1)... $ 43,460,290
Receivable for:
Interest................................. 405,746
Shares of beneficial interest sold....... 563,704
Deferred organizational expenses (Note
1)....................................... 150,361
------------
TOTAL ASSETS......................... 44,580,101
------------
LIABILITIES:
Payable for:
Investments purchased.................... 996,771
Shares of beneficial interest
repurchased............................. 8,385
Dividends to shareholders................ 21,947
Organizational expenses payable (Note 1)... 150,361
------------
TOTAL LIABILITIES.................... 1,177,464
------------
NET ASSETS:
Paid-in-capital............................ 44,884,482
Accumulated net realized loss on
investments.............................. (50,773)
Net unrealized depreciation on
investments.............................. (1,514,528)
Accumulated undistributed net investment
income................................... 83,456
------------
NET ASSETS........................... $ 43,402,637
------------
------------
NET ASSET VALUE PER SHARE, 4,510,655 shares
outstanding (unlimited authorized of $.01
par value)............................... $9.62
------------
------------
</TABLE>
STATEMENT OF OPERATIONS FOR THE PERIOD
JANUARY 10, 1994 THROUGH APRIL 30, 1994 (NOTE 1)
<TABLE>
<S> <C>
INVESTMENT INCOME:
INTEREST.................................. $ 666,656
------------
EXPENSES
Investment management fee (Note 2)...... 73,373
Shareholder reports and notices......... 9,000
Trustees' fees and expenses............. 5,696
Professional fees....................... 42,311
Custodian fees.......................... 10,294
Registration fees....................... 16,267
Transfer agent fees..................... 4,532
Organizational expenses (Note 1)........ 9,638
------------
TOTAL EXPENSES BEFORE FEES WAIVED/
ASSUMED.............................. 171,111
Less: Expenses Waived/Assumed by
Investment Manager (Note 2)........... (171,111)
------------
TOTAL EXPENSES AFTER FEES WAIVED/
ASSUMED.............................. --
------------
NET INVESTMENT INCOME............... 666,656
------------
------------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS (Note 1):
Realized loss on investments.............. (50,773)
Unrealized depreciation on investments.... (1,514,528)
------------
NET LOSS ON INVESTMENTS............... (1,565,301)
------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS......... $ (898,645)
------------
------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 10, 1994
THROUGH
APRIL 30, 1994
(NOTE 1)
------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................................................................. $ 666,656
Net realized loss on investments...................................................................... (50,773)
Net unrealized depreciation on investments............................................................ (1,514,528)
------------------
Net decrease in net assets resulting from operations................................................ (898,645)
Dividends to shareholders from net investment income.................................................... (583,200)
Net increase from shares of beneficial interest (Note 4)................................................ 44,784,482
------------------
Total increase.................................................................................... 43,302,637
NET ASSETS:
Beginning of period..................................................................................... 100,000
------------------
END OF PERIOD (including undistributed net investment income of $83,456)................................ $ 43,402,637
------------------
------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS
- - - - - --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- Dean Witter Short-Term Bond Fund
(the "Fund") was organized on October 22, 1993 as a Massachusetts business trust
and is registered under the Investment Company Act of 1940, as amended, as a
diversified open-end management investment company and commenced operations on
January 10, 1994.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity portfolio security listed or
traded on the New York or American Stock Exchange is valued at its latest
sale price on that exchange (if there were no sales that day, the security
is valued at the closing bid price); (2) all other portfolio securities for
which over-the-counter market quotations are readily available are valued at
the latest bid price; (3) when market quotations are not readily available,
portfolio securities are valued at their fair value as determined in good
faith under procedures established by and under the general supervision of
the Trustees (valuation of securities for which market quotations are not
readily available may be based upon current market prices of securities
which are comparable in coupon, rating and maturity or an appropriate matrix
utilizing similar factors); (4) certain of the Fund's portfolio securities
may be valued by an outside pricing service approved by the Fund's 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, in determining what it believes is the fair valuation of the
portfolio securities valued by such pricing service; and (5) short-term debt
securities with remaining maturities of 60 days or less at time of purchase
are valued at amortized cost; other short-term securities are valued on a
mark-to-market basis until such time as they reach a remaining maturity of
60 days, whereupon they are valued at amortized cost using their value on
the 61st day. 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.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). In computing net
investment income, the Fund does not amortize premiums or accrue discounts
on fixed income securities in the portfolio, except those original issue
discounts for which amortization is required for federal income tax
purposes. Realized gains and losses on security transactions are determined
on the identified cost method. Interest income is accrued daily.
C. FOREIGN CURRENCY TRANSLATION -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value
of investment securities, other assets and liabilities and forward contracts
stated in foreign currencies are translated at the exchange rates at the end
of the period; and (2) purchases, sales, income and expenses are translated
at the rate of exchange 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 net foreign exchange gains/losses included in realized and
unrealized gain/loss in the Statement of Operations are included in or are a
reduction of ordinary income for federal income tax purposes. The Fund does
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.
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - - - - --------------------------------------------------------------------------------
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records
dividends and distributions to its shareholders on the 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 reclassifications.
Dividends and distributions which exceed net investment income and net
realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized capital gains. To the extent they
exceed net investment income and net realized capital gains for tax
purposes, they are reported as distributions of paid-in-capital.
F. ORGANIZATIONAL EXPENSES -- The Fund's Investment Manager paid the
organizational expenses of the Fund in the amount of approximately $160,000.
Organizational expenses will be reimbursed by the Fund for the full amount
exclusive of any amounts assumed by the Investment Manager. The Fund has
deferred and is amortizing the organizational expenses on the straight-line
method over a period not to exceed five years from the commencement of
operations.
G. REPURCHASE AGREEMENTS -- The Fund's custodian takes possession on behalf
of the Fund of the collateral pledged for investments in repurchase
agreements. It is the policy of the Fund to value the underlying collateral
daily on a mark-to-market basis to determine that the value, including
accrued interest, is at least equal to the repurchase price plus accrued
interest. In the event of default of the obligation to repurchase, the Fund
has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation.
2. INVESTMENT MANAGEMENT AGREEMENT -- Pursuant to an Investment Management
Agreement (the "Agreement"), with Dean Witter Intercapital Inc., (the
"Investment Manager"), the Fund pays its Investment Manager a management fee,
accrued daily and payable monthly, by applying the annual rate of .70% to the
net assets of the Fund determined as of the close of each business day.
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 office space and facilities, equipment, clerical,
bookkeeping and certain legal services, and pays the salaries of all personnel,
including officers of the Fund, who are employees of the Investment Manager. The
Investment Manager also bears the cost of telephone services, heat, light, power
and other utilities provided to the Fund.
The Investment Manager undertook to assume all expenses (except for
brokerage fees) and waive the compensation provided for in the Agreement until
such time as the Fund has $50 million of net assets or until December 31, 1994,
which ever comes first.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and the proceeds from sales of portfolio securities for the period
January 10, 1994 (commencement of operations) through April 30, 1994, excluding
short-term investments, aggregated $26,650,867 and $1,504,025, respectively,
including purchases of U.S. Government securities of $6,726,086.
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - - - - --------------------------------------------------------------------------------
4. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD JANUARY 10,
1994
THROUGH APRIL 30, 1994
(NOTE 1)
-----------------------------
SHARES AMOUNTS
------------ ---------------
<S> <C> <C>
Sold....................................................... 5,562,083 $ 55,179,598
Reinvestments of dividends................................. 52,040 505,222
------------ ---------------
5,614,123 55,684,820
Repurchased................................................ (1,113,468) (10,900,338)
------------ ---------------
Net increase............................................... 4,500,655 $ 44,784,482
------------ ---------------
------------ ---------------
</TABLE>
5. FEDERAL INCOME TAX STATUS -- Any net capital losses incurred after October
31 ("Post-October losses") within the taxable year are deemed to arise on the
first business day of the Fund's next taxable year. The Fund incurred and will
elect to defer net capital losses of approximately $51,000 during fiscal period
1994. To the extent that these losses are used to offset future capital gains,
it is probable that the gains so offset will not be distributed to shareholders.
The Fund has temporary book/tax differences primarily attributable to
Post-October losses.
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
FINANCIAL HIGHLIGHTS
- - - - - --------------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding for the period:
<TABLE>
<CAPTION>
JANUARY 10, 1994*
THROUGH
APRIL 30, 1994
-----------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............ $10.00
--------
Net investment income......................... 0.21
Net realized and unrealized loss on
investments.................................. (0.40)
--------
Total from investment operations................ (0.19)
Dividends from net investment income............ (0.19)
--------
Net asset value, end of period.................. $ 9.62
--------
--------
TOTAL INVESTMENT RETURN........................... (2.01)%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)........ $43,403
Ratio of net investment income to average net
assets......................................... 6.36% (2)(3)
Ratio of expenses to average net assets......... 0.00% (3)
Portfolio turnover rate......................... 9 %
<FN>
- - - - - ------------
* Date of commencement of operations.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all expenses that were assumed or waived by the
Investment Manager, the above annualized expense ratio would have been 1.55%
and the above annualized net investment income ratio would have been 4.81%.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- - - - - --------------------------------------------------------------------------------
To the Shareholders and Trustees of Dean Witter Short-Term Bond Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dean Witter Short-Term Bond Fund
(the "Fund") at April 30, 1994, and the results of its operations, the changes
in its net assets and the financial highlights for the period January 10, 1994
(commencement of operations) through April 30, 1994, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafer 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 audit. We conducted our audit
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
audit, which included confirmation of securities owned at April 30, 1994 by
correspondence with the custodian and broker, provides a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE
New York, New York
June 15, 1994
<PAGE>
TRUSTEES
- - - - - ---------------------------------------
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Edward R. Telling
OFFICERS
- - - - - ---------------------------------------
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Peter M. Avelar
Vice President
Rajesh K. Gupta
Vice President
Rochelle G. Siegel
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
- - - - - ---------------------------------------
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
LEGAL COUNSEL
- - - - - ---------------------------------------
Sheldon Curtis
Two World Trade Center
New York, New York 10048
INDEPENDENT ACCOUNTANTS
- - - - - ---------------------------------------
Price Waterhouse
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
- - - - - ---------------------------------------
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
This report is submitted for the general information of shareholders of
the Trust. For more detailed information about the Trust, its officers and
trustees, fees, expenses and other pertinent information, please see the
prospectus of the Trust.
This report is not authorized for distribution to prospective investors
in the Trust unless preceded or accompanied by an effective prospectus.
DEAN WITTER
SHORT-TERM
BOND FUND
ANNUAL REPORT
APRIL 30, 1994
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
GROWTH OF $10,000
($ IN THOUSANDS)
DATE TOTAL LEHMAN MUTUAL FUND
SHORT(1-5) INV. GRADE
DEBT INDEX
January 10, 1994 $10,000 $10,000
January 31, 1994 $10,034 $10,107
February 28, 1994 $9,950 $10,004
March 31, 1994 $9,772 $9,890
April 30, 1994 $9,799 (2) $9,831 (3)
AVERAGE ANNUAL TOTAL RETURNS
LIFE OF FUND
-6.52 (1)
_________Fund _________Lehman (4)
Past performance is not predictive of future returns.
________________________________________
(1) Assumes reinvestment of all distributions. There is no sales charge.
(2) Closing value assuming a complete redemption on April 30, 1994.
(3) Growth of $10,000 starting December 31, 1993.
(4) The Lehman Brothers Mutual Fund Short (1-5) Investment Grade Debt Index
measures all investment grade corporate debt securities with maturities of one
to five years.
