<PAGE>
DEAN WITTER SHORT-TERM BOND FUND TWO WORLD TRADE CENTER, NEW YORK, NEW YORK
10048
LETTER TO THE SHAREHOLDERS
DEAR SHAREHOLDER:
The twelve-month period ended April 30, 1995, has been a challenging investment
climate for fixed-income investors. During the first half of the period, the
Federal Reserve Board, intent on slowing economic growth and restraining
inflation, continued to raise short-term interest rates. As a result of the
central bank's more restrictive monetary policy, the U.S. bond market had
registered one of the worst years in its history during 1994, with yields on
one-year U.S. Treasury securities doubling and yields on two-year and three-year
U.S. Treasury notes rising by as much as 3.5 percentage points by calendar
year-end 1994. On December 31, 1994, one-year U.S. Treasury securities were
yielding 7.12 percent and three-year U.S. Treasury Notes were yielding 7.76
percent.
By January 1995, it appeared as if the Federal Reserve's policies were beginning
to have an effect on the economy, as housing starts and new car sales declined
sharply. Although the labor market remained strong, there were no signs of
increases in labor costs and, as a result, inflation remained subdued. The bond
markets welcomed news of an economic slowdown, with bond prices rallying and
recouping more than half of the previous year's losses. As April came to a
close, few economists were predicting any action by the Federal Reserve in the
foreseeable future and interest rates continued to fall. On April 30, interest
rates on one-year U.S. Treasury securities had declined to 6.30 percent, while
three-year U.S. Treasury notes were yielding 6.68 percent.
PERFORMANCE AND PORTFOLIO
Dean Witter Short-Term Bond Fund's performance during the fiscal year ended
April 30, 1995, was impacted initially by rising interest rates during the first
half of the reporting period, the devaluation of the Mexican peso in December,
and finally by declining interest rates as the reporting period came to a close.
For the 12-month period ended April 30, 1995, the Fund returned 4.76 percent*,
compared to an average return of 4.78 percent for the average short-term
corporate
- ----------------
* THE INVESTMENT MANAGER WILL CONTINUE TO WAIVE/ASSUME ALL EXPENSES (EXCEPT
BROKERAGE FEES) UNTIL DECEMBER 31, 1995. HAD THESE EXPENSES NOT BEEN WAIVED,
THE FUND'S TOTAL RETURN WOULD HAVE BEEN APPROXIMATELY 3.39%.
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
LETTER TO THE SHAREHOLDERS, CONTINUED
bond fund, as measured by Lipper Analytical Services, Inc., and a return of 7.06
percent for the Lehman Brothers Mutual Fund Short (1-5) Investment Grade Debt
Index. The accompanying chart illustrates the growth of a $10,000 investment in
the Fund from inception (January 10, 1994) through April 30, 1995, to a
hypothetical investment in the Lehman Brothers Mutual Fund Short (1-5)
Investment Grade Debt Index.
During the fiscal year, the Fund paid distributions totaling $0.60 per share. On
April 30, 1995, the Fund's net assets totaled $29.8 million with approximately
53 percent of its assets in investment-grade corporate bonds, 32 percent in U.S.
government securities, 3 percent in non-investment grade corporate bonds, and 10
percent in money markets instruments.
MEXICAN CURRENCY CRISIS
The Fund's return was negatively impacted during the past six months by its
commitments to Mexican peso-denominated Cetes when the currency was devalued in
December, 1994. Although the portfolio had reduced its position in these
securities from
20 percent of its holdings at the end of
August 1994, to approximately 10 percent
at the time of the first devaluation, the
Fund still experienced a loss. At the
time of the initial devaluation, the Fund
disposed of all but 2 percent of its
Cetes, with the remainder maturing in the
first week of January. Proceeds from
sales were reinvested in U.S. Treasury
securities and investment-grade corporate
bonds.
[GRAPHIC]
As of April 30, 1995, the Fund is wholly
invested in U.S. dollar-denominated
securities. This action has been taken in
view of the recent instability in the
U.S. dollar versus world currencies and
the volatility of other North American
currencies in which the Fund has invested
during the past twelve months.
CORPORATE BOND SECTOR
[GRAPHIC]
The Fund's performance during the fiscal
year was aided by commitments to
corporate bonds, which were the best
performing fixed-income sector during the
second half of the reporting period.
Within this sector, the Fund increased
its commitments to industrials and banks,
while reducing investments in finance and
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
LETTER TO THE SHAREHOLDERS, CONTINUED
utilities. The average quality rating for this portion of the Fund improved
during the period, with BBB-rated bonds accounting for 49 percent of this
sector's assets, down from 59 percent on October 31, 1994.
U.S. GOVERNMENT SECURITIES SECTOR
During the past year, this sector of the Fund pursued a generally defensive
strategy. Consequently, purchases in U.S. Treasury securities were limited to
primarily short-term investments. As of April 30, 1995, this sector of the Fund
was diversified with approximately 6 percent in mortgage-backed securities
issued by the Federal Home Loan Mortgage Corporation (FHLMC), U.S. Government
agencies 16 percent, and the remaining 10 percent in U.S. Treasury securities.
As market conditions warrant, longer-term U.S. Treasury securities and
mortgage-backed investments may be purchased in order to enhance both the Fund's
current yield and total return potential.
LOOKING AHEAD
It now appears that a slowdown in the economy will keep interest rates from
rising significantly in the foreseeable future. Despite lower rates, retail
sales, especially for new autos, have failed to gain speed. The labor market
appears to be softening based on the most recent unemployment reports, with the
unemployment rate climbing to 5.8 percent in the most recent report, up from a
low of 5.5 percent. With inflation remaining subdued and fiscal tightening again
being discussed in Congress, some economists are beginning to call for the next
move by the Federal Reserve Board to be toward lower rates. However, we believe
this forecast is somewhat premature. We see the housing market beginning to show
signs of renewed life with sales of existing homes and new home sales up in the
latest reports and consumer sentiment remaining high despite the most recent
unemployment reports. While it does not appear that a return to the 4.1 percent
growth rate of 1994 is on the
immediate horizon, should signs of renewed economic vigor materialize, higher
interest rates may again be in the offing before the end of the year.
We appreciate your support of Dean Witter Short-Term Bond Fund and look forward
to continuing to serve your investment needs and objectives.
Very truly yours,
[LOGO]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS APRIL 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATES VALUE
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (55.8%)
AUTOMOTIVE FINANCE (5.0%)
$ 500 Ford Motor Credit Co........................ 6.25 % 02/26/98 $ 487,880
1,000 General Motors Acceptance Corp.............. 7.75 04/15/97 1,009,170
--------------
1,497,050
--------------
BANK HOLDING COMPANIES (11.1%)
593 Bank of Boston Corp......................... 10.30 09/01/00 599,476
1,000 Bankers Trust New York Corp................. 7.25 11/01/96 1,002,830
500 Home Savings America Co..................... 6.00 11/01/00 463,365
625 Integra Financial Corp...................... 6.50 04/15/00 596,356
608 Midlantic Corp.............................. 9.25 09/01/99 644,790
--------------
3,306,817
--------------
BANKS - COMMERCIAL (1.7%)
500 Chase Manhattan Bank........................ 7.50 12/01/97 503,820
--------------
BANKS - INTERNATIONAL (3.2%)
1,000 Kansallis-Osake Pankki (Finland)............ 6.125 05/15/98 963,750
--------------
BROKERAGE (3.3%)
500 Lehman Brothers Holdings, Inc............... 7.625 07/15/99 491,325
500 Smith Barney Shearson, Inc.................. 6.00 03/15/97 488,765
--------------
980,090
--------------
COMPUTER EQUIPMENT (1.9%)
500 Unisys Corp................................. 13.50* 07/01/97 550,000
--------------
FINANCIAL SERVICES (1.7%)
500 Golden West Financial Corp.................. 7.875 01/15/02 504,530
--------------
FOOD PROCESSING (1.7%)
500 Great Atlantic & Pacific Tea Inc............ 9.125 01/15/98 511,230
--------------
FOREST & PAPER PRODUCTS (1.7%)
500 Boise Cascade Corp.......................... 9.625 07/15/98 502,520
--------------
INDUSTRIALS (13.9%)
1,000 Chrysler Corp............................... 10.40 08/01/99 1,061,130
500 Comdisco, Inc............................... 9.75 01/15/97 519,440
500 Grand Metropolitan Investment Corp.......... 8.125 08/15/96 507,580
500 Hertz Corp.................................. 9.50 05/15/98 528,785
500 Mitchell Energy & Development Co............ 5.10 02/15/97 482,055
500 Reynolds Metals Co.......................... 9.375 06/15/99 531,865
500 Xerox Corp.................................. 9.20 07/15/99 513,125
--------------
4,143,980
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS APRIL 30, 1995, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATES VALUE
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PUBLISHING (1.6%)
$ 500 Time Warner, Inc............................ 11.00+ % 08/15/02 $ 485,000
--------------
TRANSPORTATION (1.0%)
300 AMR Corp.................................... 8.10 11/01/98 304,467
--------------
UTILITIES - ELECTRIC (8.0%)
500 Commonwealth Edison Co...................... 6.50 04/15/00 478,070
500 Consolidated Edison Co. of N.Y., Inc........ 5.90 12/15/96 492,215
370 Consumers Power Co.......................... 8.875 11/15/99 387,146
500 Long Island Lighting Co..................... 6.25 07/15/01 432,525
575 Public Service Co. of New Hampshire......... 8.875 05/15/96 583,182
--------------
2,373,138
--------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $17,323,829)........................................ 16,626,392
--------------
U.S. GOVERNMENT & AGENCIES OBLIGATIONS (32.3%)
MORTGAGE PASS-THROUGH SECURITY (6.3%)
1,894 Federal Home Loan Mortgage Corp. PC Gold.... 6.50 05/01/99- 1,863,783
--------------
06/01/99
U.S. GOVERNMENT AGENCIES (15.9%)
500 Federal Home Loan Mortgage Banks............ 5.75 06/20/96 493,750
2,000 Federal Home Loan Mortgage Corp............. 8.05 01/06/97 2,016,140
500 Federal National Mortgage Assoc............. 6.90 11/12/96 500,625
2,000 Federal National Mortgage Assoc............. 7.56+ 12/20/01 1,758,437
--------------
4,768,952
--------------
U.S. GOVERNMENT OBLIGATIONS (10.1%)
2,000 U.S. Treasury Note.......................... 5.875 05/15/95 1,999,375
1,000 U.S. Treasury Note.......................... 7.125 02/29/00 1,009,219
--------------
3,008,594
--------------
TOTAL U.S. GOVERNMENT & AGENCIES OBLIGATIONS
(IDENTIFIED COST $9,719,958)......................................... 9,641,329
--------------
SHORT-TERM INVESTMENTS (10.1%)
U.S. GOVERNMENT AGENCIES (a) (6.7%)
2,000 Federal Farm Credit Banks (Amortized Cost
$1,998,698)................................. 5.87 05/05/95 1,998,698
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS APRIL 30, 1995, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATES VALUE
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT (3.4%)
$ 1,013 The Bank of New York (dated 04/28/95;
proceeds $1,013,815, collateralized by
$859,916 Federal Home Loan Mortgage Corp
1604 IA 6.0% due 09/15/08 valued at $776,257
and $270,996 U.S. Treasury Note 6.75% due
02/28/97 valued at $274,639) (Identified
Cost $1,013,303)............................ 6.0625 % 05/01/95 $ 1,013,303
--------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $3,012,001)................. 3,012,001
-----------
TOTAL INVESTMENTS
(IDENTIFIED COST $30,055,788) (B)............ 98.2% 29,279,722
OTHER ASSETS IN EXCESS OF LIABILITIES........ 1.8 538,115
----- -----------
NET ASSETS................................... 100.0% $29,817,837
----- -----------
----- -----------
<FN>
- ---------------------
* Adjustable rate. Rate shown is the rate in effect at April 30, 1995.
+ Currently zero coupon bond and will pay interest at the rate shown at a
future specified date.
(a) Securities were purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost of investments for federal income tax purposes is
$30,055,788; the aggregate gross unrealized appreciation is $80,570 and
the aggregate gross unrealized depreciation is $856,636, resulting in net
unrealized depreciation of $776,066.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $30,055,788)............................. $29,279,722
Receivable for:
Interest................................................ 525,877
Shares of beneficial interest sold...................... 42,652
Deferred organizational expenses............................ 118,380
Receivable from affiliate (Note 2).......................... 100,420
-----------
TOTAL ASSETS........................................... 30,067,051
-----------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased............... 20,865
Dividends to shareholders............................... 10,352
Organizational expenses................................. 118,380
Accrued expenses and other payables......................... 99,617
-----------
TOTAL LIABILITIES...................................... 249,214
-----------
NET ASSETS:
Paid-in-capital............................................. 32,012,843
Net unrealized depreciation................................. (776,066)
Distributions in excess of net investment income............ (10,352)
Accumulated net realized loss............................... (1,408,588)
-----------
NET ASSETS............................................. $29,817,837
-----------
-----------
NET ASSET VALUE PER SHARE,
3,151,166 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$9.46
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $ 2,882,945
-----------
EXPENSES
Investment management fee................................... 264,109
Professional fees........................................... 52,294
Organizational expenses..................................... 31,981
Trustees' fees and expenses................................. 15,993
Registration fees........................................... 12,799
Custodian fees.............................................. 11,575
Shareholder reports and notices............................. 9,964
Transfer agent fees and expenses............................ 9,790
-----------
TOTAL EXPENSES BEFORE AMOUNTS ASSUMED/WAIVED........... 408,505
LESS: AMOUNTS ASSUMED/WAIVED........................... (408,505)
-----------
TOTAL EXPENSES AFTER AMOUNTS ASSUMED/WAIVED............ --
-----------
NET INVESTMENT INCOME.................................. 2,882,945
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss on:
Investments............................................. (664,638)
Foreign exchange transactions........................... (1,355,510)
-----------
TOTAL LOSS............................................. (2,020,148)
Net change in unrealized depreciation....................... 738,462
-----------
NET LOSS............................................... (1,281,686)
-----------
NET INCREASE................................................ $ 1,601,259
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JANUARY 10, 1994*
ENDED THROUGH
APRIL 30, 1995 APRIL 30, 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 2,882,945 $ 666,656
Net realized loss........................................... (2,020,148) (50,773)
Net change in unrealized depreciation....................... 738,462 (1,514,528)
-------------- -----------------
NET INCREASE (DECREASE)................................ 1,601,259 (898,645)
-------------- -----------------
Dividends and distributions to shareholders from:
Net investment income................................... (2,314,420) (583,200)
Paid-in-capital......................................... (46,360) --
-------------- -----------------
TOTAL.................................................. (2,360,780) (583,200)
-------------- -----------------
Net increase (decrease) from transactions in shares of
beneficial interest....................................... (12,825,279) 44,784,482
-------------- -----------------
TOTAL INCREASE (DECREASE).............................. (13,584,800) 43,302,637
NET ASSETS:
Beginning of period......................................... 43,402,637 100,000
-------------- -----------------
END OF PERIOD
(INCLUDING DISTRIBUTIONS IN EXCESS OF NET INVESTMENT
INCOME OF $10,352 AND UNDISTRIBUTED NET INVESTMENT
INCOME OF $83,456, RESPECTIVELY)........................ $ 29,817,837 $43,402,637
-------------- -----------------
-------------- -----------------
- ---------------------
* Commencement of operations.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1995
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Short-Term Bond Fund (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Fund was organized as a Massachusetts business trust on
October 22, 1993 and had no operations other than those relating to
organizational matters and the issuance of 10,000 shares of beneficial interest
for $100,000 to Dean Witter InterCapital, Inc. (the "Investment Manager). The
Fund commenced operations on January 10, 1994.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) all 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; (2) certain of the
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 evaluation by its staff, including review of broker-dealer market price
quotations, if available, in determining what it believes is the fair valuation
of the portfolio securities valued by such pricing service; (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) and (4) short-term debt securities
having a maturity date of more than sixty days at the 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.
Discounts on securities purchased are amortized over the life of the respective
securities. 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 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
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1995, CONTINUED
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
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.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
F. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $160,000 which will be
reimbursed by the Fund, exclusive of amounts waived. Such expenses have been
deferred and are being amortized on the straight-line method over a period not
to exceed five years from the commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays its Investment
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.70% 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, at its own expense, office
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1995, CONTINUED
space, facilities, equipment, clerical, bookkeeping and certain legal services
and pays the salaries of all personnel, including officers of the Fund who are
employees of the Investment Manager. The Investment Manager also bears the cost
of telephone services, heat, light, power and other utilities provided to the
Fund.
The Investment Manager had undertaken to assume all operating expenses (except
for any brokerage fees) and had agreed to waive the compensation provided for in
its Agreement until such time as the Fund had $50 million of net assets or until
six months from the date of commencement of the Fund's operations, whichever
occurred first. The Investment Manager will continue to assume all operating
expenses (except for any brokerage fees) and will continue to waive compensation
until such time as the Fund has $50 million of net assets or until December 31,
1995, whichever occurs first.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended April 30, 1995 were $23,203,896 and
$20,670,677, respectively. Included in the aforementioned are purchases and
sales of U.S. Government securities of $16,544,196 and $13,477,680,
respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the Fund's
transfer agent.
4. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 10, 1994*
FOR THE YEAR ENDED THROUGH
APRIL 30, 1995 APRIL 30, 1994
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 1,807,698 $ 17,153,744 5,562,083 $ 55,179,598
Reinvestment of dividends........................................ 215,629 2,044,701 52,040 505,222
----------- -------------- ----------- ------------
2,023,327 19,198,445 5,614,123 55,684,820
Repurchased...................................................... (3,382,816) (32,023,724) (1,113,468) (10,900,338)
----------- -------------- ----------- ------------
Net increase (decrease).......................................... (1,359,489) $ (12,825,279) 4,500,655 $ 44,784,482
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
<FN>
- ---------------------
* Commencement of operations.
</TABLE>
5. FEDERAL INCOME TAX STATUS
At April 30, 1995, the Fund had a net capital loss carryover of approximately
$378,000 which will be available through April 30, 2003 to offset future capital
gains to the extent provided by regulations.
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1995, CONTINUED
Capital and foreign currency 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 and foreign currency losses of approximately $369,000 and $662,000,
respectively during fiscal 1995. As of April 30, 1995, the Fund had temporary
book/tax differences primarily attributable to post-October losses and permanent
book/tax differences attributable to foreign currency losses. To reflect
reclassifications arising from permanent book/tax differences for the year ended
April 30, 1995, distributions in excess of net investment income was charged and
accumulated net realized loss was credited $662,333.
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 10,
FOR THE YEAR 1994*
ENDED APRIL 30, THROUGH
1995 APRIL 30, 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 9.62 $ 10.00
------ ------
Net investment income................................................. 0.77 0.21
Net realized and unrealized loss...................................... (0.33) (0.40)
------ ------
Total from investment operations...................................... 0.44 (0.19)
------ ------
Less dividends and distributions from:
Net investment income............................................... (0.59) (0.19)
Paid-in-capital..................................................... (0.01) --
------ ------
Total dividends and distributions..................................... (0.60) (0.19)
------ ------
Net asset value, end of period........................................ $ 9.46 $ 9.62
------ ------
------ ------
TOTAL INVESTMENT RETURN............................................... 4.76% (2.01)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. -- %(4) -- %(2)(3)
Net investment income................................................. 7.64%(4) 6.36%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $29,818 $43,403
Portfolio turnover rate............................................... 74% 9%(1)
<FN>
- ---------------------
* 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 and net investment income
ratios would have been 1.55% and 4.81%, respectively.
(4) If the Fund had borne all expenses that were assumed or waived by the
Investment Manager, the above expense and net investment income ratios
would have been 1.08% and 6.56%, respectively.
</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, 1995, the results of its operations for the year then
ended, and the changes in its net assets and the financial highlights for the
year then ended and 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 (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 owned at April 30, 1995 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
JUNE 8, 1995
<PAGE>
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
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
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
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of the
Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
DEAN WITTER SHORT-TERM BOND FUND
[Graphic]
ANNUAL REPORT
APRIL 30, 1995
<PAGE>
DEAN WITTER SHORT-TERM BOND FUND
GROWTH OF $10,000
LEHMAN MUTUAL FUND
SHORT(1-5) INV. GRADE
DATE TOTAL DEBT INDEX
January 10, 1994 $10,000 $10,000
March 31, 1994 $ 9,772 $ 9,890
June 30, 1994 $ 9,813 $ 9,875
September 30, 1994 $ 9,958 $ 9,994
December 31, 1994 $ 9,824 $ 9,970
March 31, 1995 $10,162 $10,403
April 30, 1995 $10,265 (2) $10,526
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR LIFE OF FUND
4.76 (1) 2.03 (1)
Fund Lehman (3)
------- ------
Past performance is not predictive of future returns.
________________________________________
(1) Figure shown assumes reinvestment of all distributions. There is no sales
charge.
(2) Closing value assuming a complete redemption on April 30, 1995.
(3) 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.
