<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND TWO WORLD TRADE CENTER, NEW YORK, NEW
YORK 10048
LETTER TO THE SHAREHOLDERS
DEAR SHAREHOLDER:
We are pleased to present the first annual report for Dean Witter International
SmallCap Fund for the fiscal year ended May 31, 1995. The Fund commenced
operations on July 29, 1994.
During the period under review, small non-U.S. companies underperformed their
larger counterparts significantly. Almost all world markets, with the exception
of the U.S., produced negative returns in local currency terms during the
reporting period. This reflected continued concerns about the U.S. interest rate
cycle (and therefore, global liquidity) and the substantial currency volatility
which typified the period. As a result of these factors, sentiment in
international equity markets was at a low ebb. This weighed heavily on small
capitalization stocks which underperformed steadily, in low volume, without
regard to their significant fundamental attractions. With growth steadily
returning in the global economy, small companies are currently producing
earnings growth superior to that of their larger counterparts and are trading at
significant discounts in terms of price/earnings ratio.
SLOW RECOVERY IN JAPAN
During 1994, investors in the Japanese equity market focused on cyclical
recovery stocks. This reflected the fact that, by mid-year, the economy began a
tentative recovery from what has been the most prolonged recession since World
War II. Industrial production had declined steadily for almost three years. This
cyclical theme was particularly strong in the small arena, with small growth
stocks significantly underperforming small cyclical stocks.
The Fund's portfolio is heavily skewed towards long-term growth stocks, which is
where the portfolio manager sees the best value. For example, at the end of the
reporting period, the Fund's Japanese position is trading at 25x March 1996
earnings, by comparison with 47x for the market as a whole. In addition, the
portfolio is showing earnings growth of 14 percent compared to 9 percent for the
market.
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
LETTER TO THE SHAREHOLDERS, CONTINUED
Unfortunately, these attractive portfolio characteristics were no defense
against the indiscriminate nature of the market in 1994. Many of the cyclical
stocks which performed strongly were already at premium multiples based even on
a recovery to peak cycle earnings, which the Fund viewed as highly unlikely. The
portfolio was substantially overweighted in the specialty retail sector, which
would normally be expected to lead any cyclical recovery. However, during the
past twelve months, this sector remained out of favor because the Japanese
consumer remained subdued due to concerns about the increasing threat to
"lifetime employment".
With respect to currencies, the Fund's investment adviser believes that the
Japanese yen is significantly overvalued on a purchasing power parity basis. As
the Japanese domestic recovery gathers momentum and the trade surplus falls, a
significant correction in the yen is anticipated. However, the timing of this is
difficult to assess as sentiment, rather than fundamentals, currently appears to
hold sway in the markets. When the correction does occur, it will be a
significant boost to Japanese profitability and its stock market. As a result,
the Fund has retained its hedging strategy out of the yen into the U.S. dollar.
UNCERTAINTY IN EUROPE
Small cap equity markets in continental Europe were negatively impacted by poor
liquidity, political uncertainty in France, Spain and Italy and currency
concerns in early 1995 (most notably the surge of the deutschmark and the
devaluation of the Spanish peseta and Portuguese escudo in the European Monetary
System.) However, there are signs that a re-rating of small companies is now
underway as investors recognize the sector's higher growth potential and lower
valuations. In the United Kingdom, the Fund's exposure to the smallest companies
in the investment universe proved to be particularly vulnerable to overheating
risk and political uncertainty. While inflation appears to have subsided,
political concerns remain.
EMERGING ECONOMIES AND THE MEXICAN CURRENCY CRISIS
The Mexican stock market was particularly turbulent in December 1994 and January
1995, as a result of the dramatic devaluation of the peso against the U.S.
dollar. The devaluation was in response to sustained pressure on the currency
and dwindling foreign exchange reserve, resulting from increased capital
outflows. Selling in the stock market was indiscriminate. As a result, the Fund
shifted exposure in favor of exporters and dollar-earning companies. The Mexican
market recouped some of its previous losses, following the announcement of an
international rescue package and the much improved current account.
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
LETTER TO THE SHAREHOLDERS, CONTINUED
The Far Eastern markets (excluding Japan) were adversely impacted by the
uncertainty of U.S. interest rates and the spillover of the Mexican crisis.
However, the Fund's investment adviser believes that much of the concern about
the Pacific Basin economies is unfounded given that many countries in the region
run current account surpluses and, those in deficit in the current account, tend
to finance it through long-term capital inflows from foreign direct investment,
rather than the short-term capital market flows which typified the Mexican
experience. Thus, the Fund remains bullish on the region given the sustainable
strong economic growth.
PERFORMANCE AND PORTFOLIO
[GRAPHIC]
Against this difficult investment
climate, Dean Witter International
Small Cap Fund posted a total return of
- -14.60 percent for the period from
inception through May 31, 1995. This
compares to a return of -5.25 percent
for the NatWest Market Small Cap
Euro-Pacific Index and a return of 2.70
percent for the Morgan Stanley Capital
International EAFE Index. As of May 31,
1995, the Fund's net assets totaled
$93.7 million.
[GRAPHIC]
The accompanying chart illustrates the
performance of a $10,000 investment in
the Fund from inception through May 31,
1995, versus a similar investment in
NatWest Market Small Cap Euro-Pacific
Index and the Morgan Stanley Capital
International EAFE Index. The Fund's
underperformance relative to the index
was largely attributable to negative
stock selection, particularly in Japan.
[GRAPHIC]
Reflecting the attractive fundamentals
mentioned above, and after a period of
poor relative performance, the Fund's
weighting in Continental Europe was
increased to broadly be in line with
that of its benchmark index. This
reweighting was funded from
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
LETTER TO THE SHAREHOLDERS, CONTINUED
all other regions. The Fund remains slightly underweight in Japan, reflecting
the poor sentiment and technical position in that market at present. The Fund
remains optimistic about the economic outlook for the Pacific Rim (excluding
Japan) and Latin America, and has therefore retained an overweighting in these
markets. The Fund's portfolio is slightly overweighted in the United Kingdom,
given the relative cheapness of that market on a global basis. On May 31, 1995,
the Fund's portfolio was allocated as follows: 24.2 percent in Continental
Europe, 39.5 percent in Japan, 6.8 percent in the Pacific Rim nations, 1.9
percent in Latin America, 18.3 percent in the United Kingdom, 1.7 percent in
Austral-Asia and the remaining 7.6 percent in cash, short term investment and
the value of currency hedges.
LOOKING AHEAD
Non-U.S. small cap stocks are, in the view of Fund management, particularly
attractive at present. The underperformance of the last twelve months, taken
together with the generally superior earnings growth being generated by small
cap companies at this stage of the economic cycle, has given rise to significant
valuation discounts in most areas of the non-U.S. world (e.g. 35-40 percent in
Japan, 15-20 percent in Continental Europe, 10 percent in the Pacific Basin and
5 percent in the United Kingdom). Historically, small companies have traded at
premiums to larger stocks, reflecting their superior long-term growth potential.
The poor sentiment in the international equity markets should improve now that
the U.S. interest rate and global liquidity outlook is becoming more benign. A
more stable currency environment would also significantly boost investor
sentiment.
We appreciate your support of Dean Witter International Small Cap Fund and look
forward to continuing to serve your investment needs.
Very truly yours,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
PORTFOLIO OF INVESTMENTS MAY 31, 1995
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------
<C> <S> <C>
COMMON AND PREFERRED STOCKS (91.8%)
ARGENTINA (0.6%)
AUTOMOTIVE
40,000 Ciadea S.A.*.................... $ 208,041
--------------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
115,000 Nobleza Piccardo S.A............ 346,219
--------------
TOTAL ARGENTINA................. 554,260
--------------
AUSTRALIA (1.1%)
BUILDING & CONSTRUCTION
700,000 Macmahon Holdings Ltd........... 210,798
--------------
MANUFACTURING
230,000 Pacific BBA Ltd................. 445,257
--------------
METALS & MINING
350,000 QCT Resources Ltd............... 341,292
--------------
TOTAL AUSTRALIA................. 997,347
--------------
AUSTRIA (0.6%)
CONSUMER PRODUCTS
6,495 Wolford AG...................... 333,512
--------------
ELECTRONIC COMPONENTS
1,600 Austria Mikro Systeme
International AG................ 209,585
--------------
TOTAL AUSTRIA................... 543,097
--------------
BELGIUM (0.4%)
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
4,050 Quick Restaurants S.A........... 353,278
--------------
DENMARK (0.2%)
MANUFACTURING
2,494 Oticon Holding AS............... 193,392
--------------
FINLAND (0.7%)
TELECOMMUNICATIONS
11,390 Benefon Oy...................... 410,071
--------------
TRANSPORTATION
31,000 Finnair Oy...................... 228,941
--------------
TOTAL FINLAND................... 639,012
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------
<C> <S> <C>
FRANCE (5.1%)
AUTO PARTS
4,000 Bertr Faure..................... $ 169,338
3,199 MGI Coutier..................... 303,100
3,983 Sylea........................... 411,910
--------------
884,348
--------------
CONSUMER PRODUCTS
3,000 Hermes International............ 410,039
--------------
FINANCIAL SERVICES
1,250 But S.A. ....................... 260,306
2,534 Union Financiere de Banque
S.A. ........................... 257,461
--------------
517,767
--------------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
944 Brioche Pasquier S.A. .......... 107,521
--------------
INSURANCE
4,500 Cardif S.A. .................... 598,730
--------------
MACHINERY & MACHINE TOOLS
2,666 Sidel S.A. ..................... 785,746
--------------
OFFICE EQUIPMENT
2,669 Airfeu S.A. .................... 130,262
4,850 Guilbert S.A. .................. 482,018
--------------
612,280
--------------
PUBLISHING
1,430 Filipacchi Medias............... 206,983
--------------
RETAIL - SPECIALTY
4,600 Grand Optical Photoservice...... 394,114
--------------
TEXTILES
2,650 Deveaux S.A. ................... 309,314
--------------
TOTAL FRANCE.................... 4,826,842
--------------
GERMANY (4.8%)
BUILDING MATERIALS
807 Sto AG (Preferred).............. 530,959
--------------
DISTRIBUTION
550 Hach AG (Preferred)............. 243,191
--------------
INSURANCE BROKERS
445 Marschollek, Lautenschlaeger &
Partner AG...................... 278,617
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
PORTFOLIO OF INVESTMENTS MAY 31, 1995, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------
<C> <S> <C>
MACHINERY & MACHINE TOOLS
1,898 Doerries Scharmann AG........... $ 190,673
1,000 Jungheinrich AG (Preferred)..... 219,314
--------------
409,987
--------------
MULTI-INDUSTRY
595 Hugo Boss AG (Preferred)........ 437,778
--------------
PHOTOGRAPHY
815 Cewe Color Holding AG........... 288,291
--------------
RETAIL - SPECIALTY
12,500 Fielmann AG (Preferred)......... 526,176
1,240 Moebel Walther AG............... 617,588
--------------
1,143,764
--------------
TEXTILES
1,190 Adolf Ahlers AG................. 294,659
2,850 Stoehr & Co. AG................. 468,783
--------------
763,442
--------------
TEXTILES - APPAREL MANUFACTURERS
1,909 Puma AG (Preferred)*............ 455,134
--------------
TOTAL GERMANY................... 4,551,163
--------------
HONG KONG (1.4%)
AEROSPACE & DEFENSE
40,000 Hong Kong Aircraft Engineering
Co. Ltd......................... 103,943
--------------
ELECTRONICS & ELECTRICAL
77,000 ASM Pacific Technology.......... 60,724
650,000 Gold Peak Industries............ 277,311
--------------
338,035
--------------
HOTELS/MOTELS
200,000 Grand Hotel Holdings Ltd.
(Series A)...................... 71,752
1,050,000 Regal Hotels International...... 219,910
--------------
291,662
--------------
MACHINERY & MACHINE TOOLS
300,000 Chen Hsong Holdings............. 187,136
--------------
MULTI-INDUSTRY
372,000 TVE Holdings Ltd................ 144,279
--------------
TEXTILES
150,000 Winsor Industrial Corp. Ltd..... 201,681
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------
<C> <S> <C>
TRANSPORTATION
50,000 Kowloon Motor Bus Co. Ltd....... $ 94,699
--------------
TOTAL HONG KONG................. 1,361,435
--------------
INDONESIA (0.9%)
CHEMICALS
60,000 PT Aneka Kimia Raya............. 154,987
--------------
DISTRIBUTION
100,000 PT Wicaksana Overseas
International*.................. 269,542
--------------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
142,000 PT Fast Food Indonesia.......... 153,100
--------------
MACHINERY & MACHINE TOOLS
80,000 PT United Tractors.............. 160,826
--------------
PHARMACEUTICALS
50,000 PT Enseval Putera Megatrading... 123,539
--------------
TOTAL INDONESIA................. 861,994
--------------
ITALY (1.7%)
ELECTRONICS & ELECTRICAL
76,000 Gewiss SpA...................... 663,087
--------------
FINANCIAL SERVICES
16,800 Banca Popolare Di Bergamo....... 217,303
--------------
MACHINERY & MACHINE TOOLS
7,500 Industria Macchine Automatic.... 28,371
--------------
MANUFACTURING
10,802 Industrie Natuzzi SpA (ADR)..... 365,918
30,000 Saes Getters Di Risp (ADR)...... 179,561
9,000 Saes Getters SpA................ 121,080
--------------
666,559
--------------
TOTAL ITALY..................... 1,575,320
--------------
JAPAN (39.3%)
AUTO RELATED
40,000 Mitsuba Electric Mfg. Co........ 388,442
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
PORTFOLIO OF INVESTMENTS MAY 31, 1995, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------
<C> <S> <C>
BUILDING & CONSTRUCTION
25,000 C-Cube Corp..................... $ 174,977
30,000 Fuji PS Corp.................... 508,054
20,500 Higashi Nihon House............. 388,442
10,000 Hosoda Corp..................... 107,178
40,000 Ichiken Co., Ltd................ 427,760
30,000 Kaneshita Construction.......... 401,469
18,000 Sankyo Frontier Co., Ltd........ 490,290
40,000 Takada Kiko..................... 483,184
35,000 Tohoku Misawa Homes Co.......... 382,580
--------------
3,363,934
--------------
BUILDING MATERIALS
10,000 Maezawa Kaisei Industries....... 493,842
--------------
BUSINESS SERVICES
25,000 Chuo Warehouse.................. 334,557
14,400 Nippon Kanzai................... 428,044
10,000 Takashimaya Kosakusho........... 65,135
40,000 Tanseisha....................... 454,287
--------------
1,282,023
--------------
CHEMICALS
13,000 SK Kaken Co., Ltd............... 441,852
--------------
COMPUTER SERVICES
20,000 Enix Corp....................... 620,559
25,000 Meitec Corp..................... 316,793
--------------
937,352
--------------
COMPUTERS
10,000 I-O Data Device, Inc............ 460,682
--------------
COMPUTERS - SYSTEMS
25,000 Daiwabo Information Systems
Co.............................. 532,923
22,000 Japan Digital Laboratory........ 461,156
11,000 TKC Corp........................ 283,989
--------------
1,278,068
--------------
ELECTRONIC & ELECTRICAL EQUIPMENT
30,000 Aiwa Co......................... 710,564
25,000 Mitsui High-Tec................. 500,355
40,000 Mitsumi Electric Co. Ltd........ 658,456
20,000 Nihon Dempa Kogyo............... 601,611
18,000 Nitto Electric Works............ 245,144
--------------
2,716,130
--------------
ENGINEERING & CONSTRUCTION
20,900 Meiden Engineering Co........... 264,839
--------------
ENTERTAINMENT
10,000 H.I.S. Co. Ltd.................. 450,024
--------------
FINANCIAL SERVICES
12,000 Nichiei Co., Ltd. (Kyoto)....... 753,198
10,000 Nissin Co., Ltd................. 639,507
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------
<C> <S> <C>
7,000 Sanyo Shinpan Finance Co.,
Ltd............................. $ 547,134
--------------
1,939,839
--------------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
9,000 Plenus Co., Ltd................. 457,248
30,000 Sanyo Coca Cola Bottling........ 476,078
30,000 Stamina Foods................... 333,965
20,000 Steak Miya Co., Ltd............. 246,329
16,500 Yonkyu Co., Ltd................. 381,040
400 Yoshinoya D & C Co., Ltd........ 540,028
20,100 Yukiguni Maitake Co., Ltd....... 395,144
--------------
2,829,832
--------------
HEALTH & PERSONAL CARE
22,000 Hitachi Medical Corp............ 304,832
30,000 Kawasumi Laboratories, Inc...... 387,257
--------------
692,089
--------------
HOUSEHOLD FURNISHINGS & APPLIANCES
14,000 Beltecno Corp................... 281,857
25,000 Noritz Corp..................... 518,119
--------------
799,976
--------------
MACHINERY & MACHINE TOOLS
45,000 Aichi Corp...................... 456,182
45,000 Comson Corp..................... 470,038
20,000 Fuji Machine Manufacturing
Co.............................. 594,505
85,000 Nippon Thompson Co.............. 533,515
13,000 Sankyo Engineering.............. 352,558
33,000 Sansei Yusoki Co., Ltd.......... 322,418
60,000 Sintokogio...................... 481,052
--------------
3,210,268
--------------
MANUFACTURING
25,000 Bridgestone Metalpha Corp....... 355,282
50,000 Itoki Crebio Corp............... 479,631
30,000 Nichiha Corp.................... 639,507
--------------
1,474,420
--------------
MISCELLANEOUS
10,000 Maruco Co., Ltd................. 657,271
22,000 Misumi Corp..................... 630,507
11,000 Y.A.C. Company, Ltd............. 241,000
11,000 Yagi Corp....................... 195,405
--------------
1,724,183
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
PORTFOLIO OF INVESTMENTS MAY 31, 1995, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------
<C> <S> <C>
MULTI-INDUSTRY
27,000 Trusco Nakayama Corp............ $ 645,902
30,000 Yamae Hisano.................... 408,574
--------------
1,054,476
--------------
PHARMACEUTICALS
22,000 Santen Pharmaceutical Co........ 534,107
15,000 Seikagaku Corp.................. 621,743
7,700 Towa Pharmaceutical Co., Ltd.... 379,346
--------------
1,535,196
--------------
REAL ESTATE
20,000 Chubu Sekiwa Real Estate,
Ltd............................. 225,012
24,000 Fuso Lexel, Inc................. 198,958
30,000 Kansai Sekiwa Real Estate....... 401,468
50,000 Sekiwa Real Estate.............. 467,788
--------------
1,293,226
--------------
RETAIL
25,000 Arcland Sakamoto................ 423,378
15,600 Belluna Co., Ltd................ 362,103
5,000 Fast Retailing Co., Ltd......... 393,771
18,700 Home Wide Corp.................. 210,165
25,000 Izumi Co., Ltd.................. 615,822
56,000 Juntendo........................ 364,756
11,700 Kahma Co., Ltd.................. 243,865
33,000 Kuroganeya Co................... 468,972
27,000 Ministop Co., Ltd............... 601,137
18,000 Nissen Co., Ltd................. 569,161
20,000 Shimachu Co., Ltd............... 542,397
10,000 Sumiya Co., Ltd................. 144,481
3,000 Sundrug Co., Ltd................ 119,730
10,000 Tsutsumi Jewelry Co., Ltd....... 435,812
21,000 Xebio Co. Ltd................... 651,587
--------------
6,147,137
--------------
RETAIL - DRUG STORES
12,000 Seijo Corp...................... 457,603
--------------
TELECOMMUNICATIONS
25,000 Uniden Corp..................... 438,181
--------------
TRANSPORTATION
10,000 Kanto Seino Transportation...... 396,731
--------------
WHOLESALE DISTRIBUTOR
21,000 Catena.......................... 261,132
30,000 Wakita & Co..................... 465,419
--------------
726,551
--------------
TOTAL JAPAN..................... 36,796,896
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------
<C> <S> <C>
MALAYSIA (2.2%)
AUTOMOTIVE
30,000 Cycle & Carriage Bintang
Berhad.......................... $ 127,789
--------------
BANKS - COMMERCIAL
100,000 Hock Hua Bank Berhad............ 344,828
--------------
BUILDING & CONSTRUCTION
60,000 Muhibbah Engineering Berhad..... 243,408
40,000 Road Builder Berhad............. 130,629
--------------
374,037
--------------
BUILDING MATERIALS
30,000 CI Holdings Berhad.............. 115,619
--------------
FINANCIAL SERVICES
73,333 Arab Malaysian Finance Berhad... 254,360
50,000 Public Finance Berhad........... 127,789
--------------
382,149
--------------
INSURANCE
105,000 Malaysia Assurance.............. 372,718
--------------
MANUFACTURING
40,000 George Kent Berhad.............. 76,268
--------------
REAL ESTATE
30,000 IOI Properties Berhad........... 104,665
160,000 Tan & Tan Development Berhad.... 186,288
--------------
290,953
--------------
TOTAL MALAYSIA.................. 2,084,361
--------------
MEXICO (1.3%)
BANKS - COMMERCIAL
25,000 Grupo Financiero GBM Atlantico
S.A. (GDS)*..................... 43,750
--------------
ENERGY TECHNOLOGY & EQUIPMENT
90,000 Tubos de Acero de Mexico
(ADR)*.......................... 438,750
--------------
INDUSTRIALS
25,000 Grupo Industrial Saltillo S.A.
de C.V. (Series A).............. 296,191
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
PORTFOLIO OF INVESTMENTS MAY 31, 1995, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------
<C> <S> <C>
TRANSPORTATION
60,000 Transportacion Maritima Mexicana
S.A. de C.V. (ADR).............. $ 405,000
--------------
TOTAL MEXICO.................... 1,183,691
--------------
NETHERLANDS (1.9%)
BUILDING MATERIALS
6,600 Koninklijke Sphinx.............. 233,211
--------------
BUSINESS SERVICES
3,600 Randstad Holdings NV............ 223,464
--------------
ELECTRONICS & ELECTRICAL
1,469 Otra NV......................... 291,571
--------------
OFFICE EQUIPMENT
6,307 Samas-Groep NV.................. 263,124
--------------
PHARMACEUTICALS
9,540 OPG Apotheker Coop UA........... 253,274
--------------
PUBLISHING
400 Verenigde Nederlandse
Uitgevbedri Verigd Bezit........ 47,510
--------------
TRANSPORTATION
16,500 IHC Caland NV................... 441,182
--------------
TOTAL NETHERLANDS............... 1,753,336
--------------
NEW ZEALAND (0.6%)
CHEMICALS
150,000 Fernz Corp. Ltd................. 567,720
--------------
NORWAY (2.7%)
ENERGY TECHNOLOGY & EQUIPMENT
66,000 Tomra Systems AS................ 252,269
--------------
MISCELLANEOUS
7,300 Multisoft AS.................... 130,212
28,000 Sagatex......................... 423,634
--------------
553,846
--------------
OIL RELATED
50,000 Transocean Drilling AS.......... 585,284
--------------
RETAIL - SPECIALTY
31,010 System Etikettering AS.......... 543,255
--------------
TRANSPORTATION
12,900 Storli AS....................... 254,754
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------
<C> <S> <C>
TRANSPORTATION - SHIPPING
38,325 Awilco AS (Series B)............ $ 366,221
--------------
TOTAL NORWAY.................... 2,555,629
--------------
PHILIPPINES (0.3%)
CONGLOMERATES
93,079 First Philippine Holdings Corp.
(B Shares)...................... 268,010
--------------
SINGAPORE (1.1%)
BUILDING MATERIALS
60,000 Ssang Yong Cement Ltd........... 176,052
--------------
COMPUTER SERVICES
467,000 Flextech Holdings Ltd........... 184,718
--------------
ENGINEERING & CONSTRUCTION
40,000 Jurong Engineering, Ltd......... 230,133
--------------
HOUSEHOLD FURNISHINGS & APPLIANCES
120,000 Courts Ltd...................... 183,818
--------------
SHIPBUILDING
100,000 Singapore Technologies
Shipbuilding & Engineering
Ltd............................. 241,640
--------------
TOTAL SINGAPORE................. 1,016,361
--------------
SPAIN (1.8%)
BUILDING MATERIALS
52,000 Energia e Indust Aragonesas..... 286,648
--------------
ELECTRONICS & ELECTRICAL
11,150 Electricas Reunidas de Zaragoza
S.A............................. 234,473
--------------
FINANCIAL SERVICES
5,000 Banco Pastor S.A................ 242,140
--------------
PAPER & FOREST PRODUCTS
12,900 Empresa Nacional de Celulosas
S.A............................. 334,483
--------------
RETAIL
21,000 Cortefiel S.A................... 626,827
--------------
TOTAL SPAIN..................... 1,724,571
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
PORTFOLIO OF INVESTMENTS MAY 31, 1995, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------
<C> <S> <C>
SWEDEN (1.3%)
ELECTRONIC & ELECTRICAL EQUIPMENT
14,300 Kanthal Hoganas AB (Series B)... $ 230,724
--------------
MISCELLANEOUS
45,568 Assa Abloy AB (Series B)........ 208,467
25,000 Kalmar Industries............... 350,602
--------------
559,069
--------------
PHARMACEUTICALS
18,000 Elekta Instrument (Series B).... 446,048
--------------
TOTAL SWEDEN.................... 1,235,841
--------------
SWITZERLAND (2.8%)
BUILDING MATERIALS
181 Sarna Kunststoff Holding AG..... 229,743
--------------
ELECTRONIC & ELECTRICAL EQUIPMENT
1,500 Swisslog Holding AG............. 450,257
--------------
HOUSEHOLD FURNISHINGS & APPLIANCES
1,604 Fust SA AG...................... 515,866
--------------
MACHINERY & MACHINE TOOLS
172 Bossard Holding AG.............. 287,650
--------------
MISCELLANEOUS
1,745 Kardex AG....................... 478,902
232 Phonak Holding AG (Series B).... 127,938
173 Zehnder Holdings................ 139,468
--------------
746,308
--------------
PUBLISHING
1,700 Edipresse S.A................... 393,654
--------------
TOTAL SWITZERLAND............... 2,623,478
--------------
THAILAND (0.8%)
ELECTRONICS & ELECTRICAL
30,000 KCE Electronics Co., Ltd........ 111,269
--------------
HOUSEHOLD PRODUCTS
40,000 Srithai Superware Co. Ltd....... 309,688
--------------
INDUSTRIALS
30,000 Thai Glass Industries........... 133,766
--------------
MANUFACTURING
150,000 Pan Asia Footwear Co............ 127,685
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------
<C> <S> <C>
PUBLISHING
10,000 Matichon Newspaper Group........ $ 50,668
--------------
TOTAL THAILAND.................. 733,076
--------------
UNITED KINGDOM (18.2%)
ADVERTISING
300,000 Shandwick PLC................... 178,650
--------------
AUTO PARTS - ORIGINAL EQUIPMENT
20,000 Avon Rubber PLC................. 160,388
167,000 BBA Group PLC................... 628,515
33,500 Laird Group PLC................. 191,513
--------------
980,416
--------------
BUILDING & CONSTRUCTION
75,000 Barratt Developments PLC........ 229,863
100,000 Havelock Europa PLC............. 338,244
--------------
568,107
--------------
BUILDING MATERIALS
110,000 Hepworth PLC.................... 532,774
340,000 Ibstock PLC..................... 415,738
65,000 Lilleshall PLC.................. 92,898
255,000 Rugby Group PLC................. 485,928
60,000 SIG PLC......................... 238,200
--------------
1,765,538
--------------
CHEMICALS
90,000 Albright & Wilson PLC........... 265,831
130,000 Allied Colloids Group PLC....... 270,436
--------------
536,267
--------------
COMPUTER SERVICES
170,000 ISA International PLC........... 278,059
--------------
CONTAINERS
100,000 Parkside International PLC...... 130,216
--------------
CONTAINERS - PAPER
52,200 David S. Smith PLC.............. 476,638
--------------
DISTRIBUTION
23,000 Tibbett and Britten Group PLC... 191,751
--------------
ELECTRONIC & ELECTRICAL EQUIPMENT
56,000 Diploma PLC..................... 439,304
50,000 Fairey Group PLC................ 353,330
--------------
792,634
--------------
FINANCIAL SERVICES
90,000 MAI PLC......................... 378,738
--------------
FOOD PROCESSING
95,000 Devro International PLC......... 351,504
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
PORTFOLIO OF INVESTMENTS MAY 31, 1995, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------
<C> <S> <C>
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
60,000 Boddington Group PLC............ $ 263,926
82,500 Dalgety PLC..................... 580,374
--------------
844,300
--------------
HEALTH & PERSONAL CARE
35,000 Community Hospitals Group PLC... 135,615
--------------
HOTELS/MOTELS
250,000 Stakis PLC...................... 345,390
--------------
HOUSEHOLD FURNISHINGS & APPLIANCES
245,000 MFI Furniture PLC............... 490,216
188,400 Walker Greenbank PLC............ 284,220
--------------
774,436
--------------
INDUSTRIALS
120,000 Staveley Industries PLC......... 352,536
--------------
INSURANCE
10,000 Domestic & General Group PLC.... 222,320
--------------
MACHINERY & MACHINE TOOLS
50,000 Crabtree Group PLC.............. 285,840
155,000 Metalrax Group PLC.............. 285,522
60,000 Spirax-Sarco Engineering PLC.... 502,126
--------------
1,073,488
--------------
MANUFACTURING
45,000 Bluebird Toys PLC............... 155,783
150,000 Bunzl PLC....................... 471,636
87,000 Glynwed International PLC....... 479,401
50,000 Halma PLC....................... 165,152
54,000 IMI PLC......................... 267,546
83,000 Protean PLC..................... 309,739
--------------
1,849,257
--------------
MISCELLANEOUS
80,000 Christies International PLC..... 204,534
--------------
OIL RELATED
35,000 Charter PLC..................... 491,883
--------------
PHARMACEUTICALS
18,000 Amersham International PLC...... 256,684
--------------
PUBLISHING
29,800 Daily Mail & General Trust...... 556,038
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------
<C> <S> <C>
REAL ESTATE
70,000 Bradford Property Trust PLC..... $ 197,865
50,000 Capital Shopping Centers PLC.... 170,710
63,000 Great Portland Estates PLC...... 186,082
40,000 Helical Bar PLC................. 201,994
--------------
756,651
--------------
RESTAURANTS
130,000 City Centre Restaurants PLC..... 179,603
66,000 Compass Group PLC............... 366,828
--------------
546,431
--------------
RETAIL
100,000 Goldsmiths Group................ 230,260
77,000 William Morrison Supermarkets
PLC............................. 173,632
--------------
403,892
--------------
RETAIL - SPECIALTY
20,000 Cowie Group PLC................. 88,610
20,000 Pendragon PLC................... 82,576
--------------
171,186
--------------
TELECOMMUNICATIONS
42,500 Security Services PLC........... 593,912
--------------
TEXTILES
57,500 Courtlaulds Textiles PLC........ 454,724
--------------
TRANSPORTATION
90,000 GRT Bus Group PLC............... 383,026
--------------
TOTAL UNITED KINGDOM............ 17,044,821
--------------
TOTAL COMMON AND PREFERRED
STOCKS
(IDENTIFIED COST $94,927,829)... 86,044,931
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT (a) (6.7%)
U.S. GOVERNMENT AGENCY
US$ 6,300 Federal Home Loan Mortgage Corp.
6.10% due 06/01/95 (Amortized
Cost $6,300,000)................ 6,300,000
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
PORTFOLIO OF INVESTMENTS MAY 31, 1995, CONTINUED
<TABLE>
<CAPTION>
CURRENCY
AMOUNT EXPIRATION DATE/
IN THOUSANDS EXERCISE PRICE VALUE
- -------------------------------------------------------------------
<C> <S> <C>
PURCHASED PUT OPTIONS ON FOREIGN CURRENCY (0.8%)
Y 2,525,700 June 10, 1995/Y 84.19........... $ 603,000
FRF 19,492 November 28, 1995/FRF 4.87...... 148,000
--------------
TOTAL PURCHASED PUT OPTIONS ON
FOREIGN CURRENCY
(IDENTIFIED COST $963,400)...... 751,000
--------------
TOTAL INVESTMENTS
(IDENTIFIED COST
$102,191,229)(B)............. 99.3 % 93,095,931
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES........ 0.7 633,348
----- -----------
NET ASSETS................... 100.0 % $93,729,279
----- -----------
----- -----------
<FN>
- ---------------------
ADR American Depository Receipt.
GDS Global Depository Shares.
* Non-income producing security.
(a) The U.S. Government agency 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 $102,471,309; the
aggregate gross unrealized appreciation is $5,293,352 and the aggregate
gross unrealized depreciation is $14,668,730, resulting in net unrealized
depreciation of $9,375,378.
</TABLE>
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT MAY 31, 1995:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO IN DELIVERY APPRECIATION/
DELIVER EXCHANGE FOR DATE (DEPRECIATION)
- ----------------------------------------------------
<S> <C> <C> <C>
US$ 20,979 HKD 162,270 06/01/95 -$-
US$ 30,292 ITL 48,891,227 06/02/95 (462)
US$ 28,301 ITL 46,500,000 06/08/95 70
-----
Net unrealized depreciation..... $(392)
-----
-----
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
SUMMARY OF INVESTMENTS MAY 31, 1995
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- --------------------------------------------------------------------------------
<S> <C> <C>
Advertising............................... $ 178,650 0.2%
Aerospace & Defense....................... 103,943 0.1
Auto Parts................................ 884,348 0.9
Auto Parts - Original Equipment........... 980,416 1.1
Auto Related.............................. 388,442 0.4
Automotive................................ 335,830 0.4
Banks - Commercial........................ 388,578 0.4
Building & Construction................... 4,516,876 4.8
Building Materials........................ 3,831,612 4.1
Business Services......................... 1,505,487 1.6
Chemicals................................. 1,700,826 1.8
Computer Services......................... 1,400,129 1.5
Computers................................. 460,682 0.5
Computers - Systems....................... 1,278,068 1.4
Conglomerates............................. 268,010 0.3
Consumer Products......................... 743,551 0.8
Containers................................ 130,216 0.1
Containers - Paper........................ 476,638 0.5
Distribution.............................. 704,484 0.7
Electronic & Electrical Equipment......... 4,189,745 4.5
Electronic Components..................... 209,585 0.2
Electronics & Electrical.................. 1,638,435 1.7
Energy Technology & Equipment............. 691,019 0.7
Engineering & Construction................ 494,972 0.5
Entertainment............................. 450,024 0.5
Financial Services........................ 3,677,936 3.9
Food Processing........................... 351,504 0.4
Food, Beverage, Tobacco & Household
Products................................ 4,634,250 4.9
Foreign Currency Put Options.............. 751,000 0.8
Health & Personal Care.................... 827,704 0.9
Hotels/Motels............................. 637,052 0.7
Household Furnishings & Appliances........ 2,274,096 2.4
Household Products........................ 309,688 0.3
Industrials............................... 782,493 0.8
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- --------------------------------------------------------------------------------
<S> <C> <C>
Insurance................................. $ 1,193,768 1.3%
Insurance Brokers......................... 278,617 0.3
Machinery & Machine Tools................. 6,143,472 6.6
Manufacturing............................. 4,832,838 5.2
Metals & Mining........................... 341,292 0.4
Miscellaneous............................. 3,787,940 4.0
Multi-Industry............................ 1,636,533 1.7
Office Equipment.......................... 875,404 0.9
Oil Related............................... 1,077,167 1.2
Paper & Forest Products................... 334,483 0.4
Pharmaceuticals........................... 2,614,741 2.8
Photography............................... 288,291 0.3
Publishing................................ 1,254,853 1.3
Real Estate............................... 2,340,830 2.5
Restaurants............................... 546,431 0.6
Retail.................................... 7,177,856 7.7
Retail - Drug Stores...................... 457,603 0.5
Retail - Specialty........................ 2,252,319 2.4
Shipbuilding.............................. 241,640 0.3
Telecommunications........................ 1,442,164 1.5
Textiles.................................. 1,729,161 1.8
Textiles - Apparel Manufacturers.......... 455,134 0.5
Transportation............................ 2,204,333 2.4
Transportation - Shipping................. 366,221 0.4
U.S. Government Agency.................... 6,300,000 6.7
Wholesale Distributor..................... 726,551 0.8
----------------- ---
$ 93,095,931 99.3%
----------------- ---
----------------- ---
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks............................. $ 83,632,379 89.2%
Foreign Currency Put Options.............. 751,000 0.8
Preferred Stocks.......................... 2,412,552 2.6
U.S. Government Agency.................... 6,300,000 6.7
----------------- ---
$ 93,095,931 99.3%
----------------- ---
----------------- ---
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $102,191,229)............................ $ 93,095,931
Cash (including $345,148 in foreign currency)............... 448,016
Receivable for:
Shares of beneficial interest sold...................... 430,353
Dividends............................................... 200,408
Foreign withholding taxes reclaimed..................... 40,314
Investments sold........................................ 25,765
Deferred organizational expenses............................ 143,412
Prepaid expenses and other assets........................... 64,158
------------
TOTAL ASSETS........................................... 94,448,357
------------
LIABILITIES:
Payable for:
Investments purchased................................... 243,592
Investment management fee............................... 106,689
Plan of distribution fee................................ 85,351
Shares of beneficial interest repurchased............... 24,913
Accrued expenses and other payables......................... 258,533
------------
TOTAL LIABILITIES...................................... 719,078
------------
NET ASSETS:
Paid-in-capital............................................. 108,269,985
Net unrealized depreciation................................. (9,093,543)
Net investment loss......................................... (259,957)
Net realized loss........................................... (5,187,206)
------------
NET ASSETS............................................. $ 93,729,279
------------
------------
NET ASSET VALUE PER SHARE,
10,980,289 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$8.54
------------
------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE PERIOD JULY 29, 1994* THROUGH MAY 31, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $131,578 foreign withholding tax)......... $ 946,711
Interest.................................................... 444,779
------------
TOTAL INCOME........................................... 1,391,490
------------
EXPENSES
Investment management fee................................... 977,193
Plan of distribution fee.................................... 781,755
Transfer agent fees and expenses............................ 169,490
Custodian fees.............................................. 126,814
Professional fees........................................... 85,892
Registration fees........................................... 39,722
Shareholder reports and notices............................. 39,521
Organizational expenses..................................... 28,876
Trustees' fees and expenses................................. 18,010
Other....................................................... 3,413
------------
TOTAL EXPENSES......................................... 2,270,686
------------
NET INVESTMENT LOSS.................................... (879,196)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss on:
Investments............................................. (3,952,364)
Foreign exchange transactions........................... (1,310,064)
------------
TOTAL LOSS............................................. (5,262,428)
------------
Net unrealized appreciation (depreciation) on:
Investments............................................. (9,095,298)
Translation of forward foreign currency contracts, other
assets and liabilities denominated in foreign
currencies............................................ 1,755
------------
TOTAL DEPRECIATION...................................... (9,093,543)
------------
NET LOSS............................................... (14,355,971)
------------
NET DECREASE................................................ $(15,235,167)
------------
------------
<FN>
- ---------------------
* Commencement of operations.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
PERIOD
JULY 29,
1994*
THROUGH MAY
31, 1995
- ---------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss........................................ $ (879,196)
Net realized loss.......................................... (5,262,428)
Net unrealized depreciation................................ (9,093,543)
-------------
NET DECREASE.......................................... (15,235,167)
Net increase from transactions in shares of beneficial
interest................................................. 108,864,446
-------------
TOTAL INCREASE........................................ 93,629,279
NET ASSETS:
Beginning of period........................................ 100,000
-------------
END OF PERIOD
(INCLUDING NET INVESTMENT LOSS OF $259,957)............ $ 93,729,279
-------------
-------------
<FN>
- ---------------------
* Commencement of operations.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
NOTES TO FINANCIAL STATEMENTS MAY 31, 1995
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter International SmallCap Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a non-diversified,
open-end management investment company. The Fund was organized as a
Massachusetts business trust on April 21, 1994 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 July 29, 1994.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York Stock Exchange, American Stock Exchange 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, including circumstances under which it is
determined by the Investment Manager that sale and bid prices are not reflective
of a security's market value, portfolio securities are valued at their fair
value as determined in good faith under procedures established by and under the
general supervision of the Trustees; (4) certain of the Fund's 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 portfolio 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 other distributions are recorded on the ex-
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
NOTES TO FINANCIAL STATEMENTS MAY 31, 1995, CONTINUED
dividend date except certain dividends from foreign securities which are
recorded as soon as the Fund is informed after the ex-dividend date. Interest
income is accrued daily and includes amortization of discounts of certain
short-term securities.
C. OPTION ACCOUNTING PRINCIPLES -- When the Fund writes a call option, an amount
equal to the premium received is included in the Statement of Assets and
Liabilities as a liability which is subsequently marked-to-market to reflect the
current market value of the option written. If a written option either expires
or the Fund enters into a closing purchase transaction, the Fund realizes a gain
or loss without regard to any unrealized gain or loss on the underlying security
or currency and the liability related to such option is extinguished. If a
written call option is exercised, the Fund realizes a gain or loss from the sale
of the underlying security or currency and the proceeds from such sale are
increased by the premium originally received.
When the Fund purchases a call or put option, the premium paid is recorded as an
investment and is subsequently marked-to-market to reflect the current market
value. If a purchased option expires, the Fund will realize a loss to the extent
of the premium paid. If the Fund enters into a closing sale transaction, a gain
or loss is realized for the difference between the proceeds from the sale and
the cost of the option. If a put option is exercised, the cost of the security
or currency sold upon exercise will be increased by the premium originally paid.
If a call option is exercised, the cost of the security purchased upon exercise
will be increased by the premium originally paid.
D. 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 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.
E. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund 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
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
NOTES TO FINANCIAL STATEMENTS MAY 31, 1995, CONTINUED
currencies gain or loss. The Fund records 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.
F. 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.
G. 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.
H. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $172,000 which have been
reimbursed for the full amount thereof. 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 AND SUB-ADVISORY AGREEMENTS
Pursuant to an Investment Management Agreement, the Fund pays its Investment
Manager a management fee, calculated daily and payable monthly, by applying the
annual rate of 1.25% 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 space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
NOTES TO FINANCIAL STATEMENTS MAY 31, 1995, CONTINUED
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.
Under a Sub-Advisory Agreement between Morgan Grenfell Investment Services
Limited (the "Sub-Advisor") and the Investment Manager, the Sub-Advisor provides
the Fund with investment advice and portfolio management relating to the Fund's
investments in securities, subject to the overall supervision of the Investment
Manager. As compensation for its services provided pursuant to the Sub-Advisory
Agreement, the Investment Manager pays the Sub-Advisor monthly compensation
equal to 40% of its monthly compensation.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act pursuant
to which the Fund pays the Distributor compensation, accrued daily and payable
monthly, at an annual rate of 1.0% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's shares since the Fund's inception (not
including reinvestment of dividend or capital gain distributions) less the
average daily aggregate net asset value of the Fund's shares redeemed since the
Fund's inception upon which a contingent deferred sales charge has been imposed
or upon which such charge has been waived; or (b) the Fund's average daily net
assets. Amounts paid under the Plan are paid to the Distributor to compensate it
for the services provided and the expenses borne by it and others in the
distribution of the Fund's shares, including the payment of commissions for
sales of the Fund's shares and incentive compensation to, and expenses of, the
account executives of Dean Witter Reynolds Inc. ("DWR"), an affiliate of the
Investment Manager and Distributor, and other employees or selected
broker-dealers who engage in or support distribution of the Fund's shares or who
service shareholder accounts, including overhead and telephone expenses,
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may be compensated under the Plan for
its opportunity costs in advancing such amounts which compensation would be in
the form of a carrying charge on any unreimbursed expenses incurred by the
Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred but
not yet recovered by the Distributor, may be recovered through future
distribution fees from the Fund and contingent deferred sales charges from the
Fund's shareholders.
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
NOTES TO FINANCIAL STATEMENTS MAY 31, 1995, CONTINUED
The Distributor has informed the Fund that for the period ended May 31, 1995, it
received approximately $241,000 in contingent deferred sales charges from
certain redemptions of the Fund's shares. The Fund's shareholders pay such
charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the period ended May 31, 1995 aggregated
$133,894,661 and $35,083,015, respectively.
For the period ended May 31, 1995, the Fund incurred $815 in brokerage
commissions with affiliates of Morgan Grenfell Investment Services Limited for
portfolio transactions executed on behalf of the Fund.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At May 31, 1995, the Fund had
transfer agent fees and expenses payable of approximately $21,000.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 29, 1994*
THROUGH MAY 31, 1995
----------------------------
SHARES AMOUNT
----------- --------------
<S> <C> <C>
Sold............................................................. 12,935,998 $ 126,064,242
Repurchased...................................................... (1,965,709) (17,199,796)
----------- --------------
Net increase..................................................... 10,970,289 $ 108,864,446
----------- --------------
----------- --------------
</TABLE>
<TABLE>
<S> <C>
<FN>
- ---------------------
* Commencement of operations.
</TABLE>
6. FEDERAL INCOME TAX STATUS
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 $3,935,000 and $1,232,000,
respectively during fiscal 1995. As of May 31, 1995, the Fund had temporary
book/tax differences primarily attributable to post-October losses and permanent
book/tax differences primarily attributable to foreign currency losses and a net
operating loss. To reflect reclassifications
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
NOTES TO FINANCIAL STATEMENTS MAY 31, 1995, CONTINUED
arising from permanent book/tax differences for the period ended May 31, 1995,
paid-in-capital was charged $694,461, net realized loss was credited $75,222 and
net investment loss was credited $619,239.
7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund 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. Additionally, as a hedge against adverse foreign
currency and market risk, the Fund may purchase and write options on foreign
currency ("derivative instruments").
At May 31, 1995, there were no outstanding forward contracts other than those
used to facilitate settlement of foreign currency denominated portfolio
transactions.
Derivative instruments involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Fund bears the risk of
an unfavorable change in the 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.
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout the period:
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 29, 1994*
THROUGH
MAY 31, 1995
- -----------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value,
beginning of
period.......... $ 10.00
------
Net investment
loss............ (0.08)
Net realized and
unrealized
loss............ (1.38)
------
Total from
investment
operations...... (1.46)
------
Net asset value,
end of period... $ 8.54
------
------
TOTAL INVESTMENT
RETURN+.......... (14.60)%(1)
RATIOS TO AVERAGE
NET ASSETS:
Expenses......... 2.90% (2)
Net investment
loss............ (1.12)%(2)
SUPPLEMENTAL
DATA:
Net assets, end
of period, in
thousands....... $93,729
Portfolio
turnover rate... 41% (1)
<FN>
- ---------------------
* Commencement of operations.
+ Does not reflect the deduction of sales charge.
(1) Not annualized.
(2) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER INTERNATIONAL SMALLCAP FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER INTERNATIONAL SMALLCAP 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 International SmallCap
Fund (the "Fund") at May 31, 1995, and the results of its operations, the
changes in its net assets and the financial highlights for the period July 29,
1994 (commencement of operations) through May 31, 1995, 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 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 at May 31, 1995 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provides
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
NEW YORK, NEW YORK
JULY 13, 1995
<PAGE>
TRUSTEES DEAN WITTER
INTERNATIONAL
Jack F. Bennett SMALLCAP FUND
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
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
SUB-ADVISOR
Morgan Grenfell Investment Services Limited
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.
[GRAPHIC]
ANNUAL REPORT
MAY 31, 1995
<PAGE>
<TABLE>
<CAPTION>
DEAN WITTER INTERNATIONAL SMALL CAP FUND
GROWTH OF $10,000
DATE TOTAL MSCI EAFE IX NATWEST IX
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
July 29, 1994 $10000 $10000 $10000
- -------------------------------------------------------------------------------
August 31, 1994 $ 9940 $10225 $10142
- -------------------------------------------------------------------------------
September 30, 1994 $ 9670 $ 9891 $ 9818
- -------------------------------------------------------------------------------
October 31, 1994 $ 9620 $10207 $10065
- -------------------------------------------------------------------------------
November 30, 1994 $ 8920 $ 9704 $ 9456
- -------------------------------------------------------------------------------
December 31, 1994 $ 8980 $ 9752 $ 9539
- -------------------------------------------------------------------------------
January 31, 1995 $ 8600 $ 9365 $ 9268
- -------------------------------------------------------------------------------
February 28, 1995 $ 8210 $ 9326 $ 9048
- -------------------------------------------------------------------------------
March 31, 1995 $ 8490 $ 9894 $ 9382
- -------------------------------------------------------------------------------
April 30, 1995 $ 8580 $10252 $ 9747
- -------------------------------------------------------------------------------
May 31, 1995 $ 8113(3) $10116 $ 9477
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS
LIFE OF FUND
----------------
----------------
-14.60 (1)
----------------
-18.87 (2)
----------------
----------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
____Fund _____MSCI EAFE IX (4) _____NATWEST MKTS EURO PACIFIC SMALL CAP IX (5)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<FN>
Past performance is not predictive of future returns.
________________________________________
(1) Figure shown does not reflect the deduction of any sales charges.
(2) Figure shown assumes the deduction of the maximum applicable contingent
deferred sales charge (CDSC) (Since inception 5%). See the Fund's current
prospectus for complete details on fees and sales charges.
(3) Closing value after the deduction of a 5% CDSC, assuming a complete
redemption on May 31, 1995.
(4) The Morgan Stanley Capital International (MSCI) EAFE Index measures
performance for a diverse range of global stock markets not including the U.S.,
Canada, and the South African gold mining component. The index does not include
any expenses, fees or charges or reinvestment of dividends.
(5) The NatWest Markets Euro-Pacific Small Cap Index was specifically designed
for use as a benchmark for non-US small cap portfolios. The index does not
include any expenses, fees or charges or reinvestment of dividends.
</TABLE>
