<PAGE>
Registration File No: 33-56851
DEAN WITTER BALANCED INCOME FUND
LETTER TO THE SHAREHOLDERS January 31, 1997
Two World Trade Center, New York, New York 10048
DEAR SHAREHOLDER:
During the twelve-month period ended January 31, 1997, interest rates on
intermediate-term U.S. Treasury securities were highly volatile. In early
1996, interest rates rose as economic data supported the perception that the
economy had begun to accelerate. Fueled by consumer demand and reinvigorated
by low mortgage rates, rebates and various incentives by the auto dealers,
retail sales and housing starts soared. Declining inventories, combined with
strong employment data, caused considerable consternation about a quickly
rebounding economy and a possible inflation surge. By September, however,
evidence of a moderating economy and the perception that the Federal Reserve
Board would not take any immediate action to slow the economy enabled
interest rates to decline rather sharply and quickly. This sentiment was
short-lived as the economy again displayed signs of strength in December,
resulting in rising interest rates.
Despite two minor stock market corrections, the first in June/July and the
second in October, the period under review was another impressive year for
the stock market, with the Dow Jones Industrial Average (DJIA) ending the
year over 6800. The Standard & Poor's 500 Composite Stock Index (S&P 500) was
also strong, advancing 29.34 percent for the year, with large-capitalization
stocks outperforming small-cap stocks by a wide margin.
PERFORMANCE AND PORTFOLIO STRATEGY
Against this backdrop, Dean Witter Balanced Income Fund produced a total
return of 7.82 percent for the twelve-month period ended January 31, 1997.
During the same period, the Lipper Income Funds Index produced a return of
12.08 percent, while the S&P 500 Index and Lehman Brothers
Government/Corporate Bond Index returned 29.34 percent and 2.39 percent,
respectively. The accompanying chart illustrates the growth of a hypothetical
$10,000 investment in the Fund from inception (March 28, 1995) through
January 31, 1997, versus a similar investment in the issues that comprise the
S&P 500 Index, Lehman Brothers Government/Corporate Bond Index and the Lipper
Income Funds Index.
<PAGE>
DEAN WITTER BALANCED INCOME FUND
LETTER TO THE SHAREHOLDERS January 31, 1997, continued
On January 31, 1997, the Fund's net assets totaled more than $48 million,
with approximately 67 percent invested in fixed-income securities and 35
percent in equities. Over the course of the past twelve months, and as cash
flows permitted, the Fund purchased current-coupon mortgage-backed securities
at attractive levels, enhancing the Fund's potential for higher total
returns. At the end of the fiscal year, approximately 70 percent of the
Fund's fixed-income component was invested in mortgage-backed securities, 16
percent in U.S. Treasury securities, 9 percent in U.S. agency obligations and
5 percent in money market instruments.
At the end of the period under review, the Fund's equity component was well
diversified among twenty-five stocks representing twenty-one different
industry groups. Six new common stock positions were added to the equity
portfolio during the year: General Motors Corp. (automotive), Banc One Corp.
(banking), May Department Stores Co. (retail), Timken Co. (manufacturing),
American Brands, Inc. (tobacco) and General Public Utilities Corp.
(utilities).
LOOKING AHEAD
We expect the U.S. economy to maintain a slow-to-moderate pace for 1997, with
inflation remaining at a level similar to 1996. Before taking action to slow
the economy, the Federal Reserve Board is likely to look for sustained
confirmation of rising inflation and a strong economy.
We appreciate your support of Dean Witter Balanced Income Fund and look
forward to continuing to serve your investment needs and objectives.
Very truly yours,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE>
DEAN WITTER BALANCED INCOME FUND
GROWTH OF $10,000
DATE TOTAL S&P 500 LEHMAN IX LIPPER
============================================================================
March 28, 1995 $10,000 $10,000 $10,000 $10,000
============================================================================
January 31, 1996 $11,693 $12,912 $11,429 $11,928
============================================================================
January 31, 1997 $12,608(2) $16,313 $11,702 $13,369
============================================================================
AVERAGE ANNUAL TOTAL RETURNS
ONE YEAR LIFE OF FUND
=================================================
7.82 (1) 13.36 (1)
=================================================
===========================================================================
_______ Fund ________ S&P 500 (3) ______ Lehman (4) _______ Lipper (5)
===========================================================================
Past performance is not predictive of future returns.
- ------------------------------------------------------
(1) Figure shown assumes reinvestment of all distributions. There is no
front-end or contingent deferred sales charge.
(2) Closing value, assuming a complete redemption on January 31, 1997.
(3) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a
broad-based index, the performance of which is based on the average
performance of 500 widely held common stocks. The performance of the
index does not include any expenses, fees or charges. The Index is
unmanaged and should not be considered an investment.
(4) The Lehman Brothers Government/Corporate Bond Index tracks the performance
of government and corporate obligations, including U.S. government agency
and U.S. treasury securities and corporate and yankee bonds, with
maturities of one to ten years. The performance of the index does not
include any expenses, fees or charges. The Index is unmanaged and should
not be considered an investment.
(5) The Lipper Income Funds Index is an equally-weighted performance
index of the largest qualifying funds (based on net assets) in the
Lipper Income Funds objective. The Index, which is adjusted for
capital gains distributions and income dividends, is unmanaged and
should not be considered an investment. There are currently 10 funds
represented in this Index.
<PAGE>
DEAN WITTER BALANCED INCOME FUND
PORTFOLIO OF INVESTMENTS January 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (34.5%)
Aerospace & Defense (1.4%)
14,900 Raytheon Co. ..................................... $ 683,537
-------------
Aluminum (1.4%)
9,500 Aluminum Co. of America .......................... 655,500
-------------
Automotive (2.6%)
20,000 Ford Motor Co. ................................... 642,500
10,800 General Motors Corp. ............................ 637,200
-------------
1,279,700
-------------
Banking (2.9%)
15,400 Banc One Corp. ................................... 698,775
6,300 BankAmerica Corp. ................................ 703,238
-------------
1,402,013
-------------
Beverages - Soft Drinks (1.4%)
19,200 PepsiCo Inc. .................................... 669,600
-------------
Chemicals (1.4%)
6,200 Du Pont (E.I.) de Nemours & Co., Inc. ........... 679,675
-------------
Computer Equipment (1.4%)
4,250 International Business Machines Corp. ............ 668,313
-------------
Conglomerates (1.3%)
16,300 Tenneco, Inc. .................................... 652,000
-------------
Drugs & Healthcare (1.4%)
5,400 Bristol-Myers Squibb Co. ......................... 685,800
-------------
Electric - Major (1.4%)
6,400 General Electric Co. ............................ 659,200
-------------
Foods (1.4%)
13,400 ConAgra, Inc. ................................... 676,700
-------------
Machinery - Agricultural (1.4%)
15,800 Deere & Co. ...................................... 675,450
-------------
Manufacturing - Diversified (1.5%)
13,700 Timken Co. ....................................... 705,550
-------------
Natural Gas (1.4%)
16,300 Enron Corp. ...................................... 672,375
-------------
Oil - Domestic (1.4%)
5,100 Atlantic Richfield Co. .......................... 674,475
-------------
Paper & Forest Products (1.4%)
14,600 Weyerhaeuser Co. ................................. 664,300
-------------
Railroads (1.4%)
13,900 CSX Corp. ........................................ 674,150
-------------
Retail (2.8%)
18,000 Dayton-Hudson Corp. ............................. 677,250
14,800 May Department Stores Co. ....................... 658,600
-------------
1,335,850
-------------
Telecommunications (1.4%)
17,100 Sprint Corp. ..................................... $ 696,825
-------------
Tobacco (1.4%)
13,000 American Brands, Inc. ............................ 663,000
-------------
Utilities - Electric (2.4%)
20,200 General Public Utilities Corp. .................. 676,700
21,900 PG & E Corp. ..................................... 498,225
-------------
1,174,925
-------------
TOTAL COMMON STOCKS
(Identified Cost $14,086,772) .................... 16,648,938
-------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- -----------
<S> <C> <C>
U.S. GOVERNMENT & AGENCY
OBLIGATIONS (64.1%)
Federal National Mortgage Assoc.
$ 968 6.00% due 02/01/11 ............................. 932,419
1,913 6.50% due 03/01/11 - 05/01/11 ................... 1,879,399
2,875 7.00% due 08/01/25 - 12/01/26 ................... 2,814,278
4,517 7.50% due 08/01/23 - 01/01/27 ................... 4,520,991
1,000 7.50%* .......................................... 1,000,937
1,816 8.00% due 05/01/24 - 07/01/26 ................... 1,852,453
Government National
Mortgage Assoc. I
1,877 7.00% due 09/15/23 - 08/15/25 ................... 1,838,079
3,959 7.50% due 08/15/25 - 10/15/26 ................... 3,967,698
1,952 8.00% due 06/15/26 - 07/15/26 ................... 1,995,458
Government National
Mortgage Assoc. II
1,999 7.00% due 02/20/26 .............................. 1,950,831
Resolution Funding Corp.
Coupon Strips
5,500 0.00% due 04/15/04 - 01/15/08 ................... 2,995,010
U.S. Treasury Notes
1,500 5.875% due 06/30/00 ............................. 1,487,655
500 6.875% due 03/31/00 ............................. 510,670
200 7.125% due 02/29/00 ............................. 205,622
U.S. Treasury Strips
1,000 0.00% due 11/15/97 .............................. 958,560
3,500 0.00% due 11/15/04 -02/15/07 .................... 2,030,585
------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Identified Cost $31,130,244) .................. 30,940,645
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER BALANCED INCOME FUND
PORTFOLIO OF INVESTMENTS January 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (3.1%)
U.S. GOVERNMENT AGENCY (a) (2.8%)
$1,400 Federal Home Loan
Mortgage Corp.
5.48% due 02/03/97
(Amortized Cost $1,399,574) ..................... $1,399,574
-------------
REPURCHASE AGREEMENT (0.3%)
137 The Bank of New York 5.25%
due 02/03/97 (dated 01/31/97;
proceeds $136,813;
collateralized by $138,437 U.S.
Treasury Note 5.375% due
11/30/97 valued at $139,488)
(Identified Cost $136,753) ...................... 136,753
-------------
TOTAL SHORT-TERM
INVESTMENTS
(Identified Cost $1,536,327) .................... 1,536,327
-------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $46,753,343)(b) . 101.7% 49,125,910
LIABILITIES IN EXCESS OF OTHER
ASSETS............................. (1.7) (841,969)
-------- ------------
NET ASSETS......................... 100.0% $48,283,941
======== ============
</TABLE>
- -------------------
* Security was purchased on a forward commitment basis with an
approximate principal amount and no definite maturity date; the actual
principal amount and maturity date will be determined upon settlement.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$2,896,685 and the aggregate gross unrealized depreciation is $524,118,
resulting in net unrealized appreciation of $2,372,567.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER BALANCED INCOME FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $46,753,343) ....................................... $49,125,910
Receivable for:
Shares of beneficial interest sold ................................. 224,801
Interest ........................................................... 160,763
Dividends .......................................................... 34,047
Deferred organizational expenses ..................................... 107,189
Receivable from affiliate ............................................ 7,360
Prepaid expenses ..................................................... 14,620
-------------
TOTAL ASSETS ....................................................... 49,674,690
-------------
LIABILITIES:
Payable for:
Investments purchased .............................................. 1,187,879
Shares of beneficial interest repurchased .......................... 84,649
Plan of distribution fee ........................................... 39,995
Investment management fee .......................................... 23,997
Accrued expenses ..................................................... 54,229
-------------
TOTAL LIABILITIES .................................................. 1,390,749
-------------
NET ASSETS:
Paid-in-capital ...................................................... 45,318,925
Net unrealized appreciation .......................................... 2,372,567
Accumulated undistributed net investment income ...................... 182,960
Accumulated undistributed net realized gain .......................... 409,489
-------------
NET ASSETS ......................................................... $48,283,941
=============
NET ASSET VALUE PER SHARE,
4,172,289 shares outstanding (unlimited shares authorized of $.01
par value) .......................................................... $ 11.57
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER BALANCED INCOME FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1997
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest .............................. $1,757,953
Dividends ............................. 402,925
------------
TOTAL INCOME ........................ 2,160,878
------------
EXPENSES
Plan of distribution fee .............. 402,411
Investment management fee ............. 241,446
Professional fees ..................... 55,997
Shareholder reports and notices ...... 53,384
Registration fees ..................... 36,140
Organizational expenses ............... 34,115
Transfer agent fees and expenses ..... 25,620
Custodian fees ........................ 17,131
Trustees' fees and expenses ........... 9,153
Other ................................. 4,408
------------
TOTAL EXPENSES ...................... 879,805
LESS: AMOUNTS WAIVED/REIMBURSED .... (124,322)
------------
NET EXPENSES ........................ 755,483
------------
NET INVESTMENT INCOME ............... 1,405,395
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ..................... 1,379,439
Net change in unrealized appreciation 524,495
------------
NET GAIN ............................ 1,903,934
------------
NET INCREASE .......................... $3,309,329
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER BALANCED INCOME FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR MARCH 28, 1995*
ENDED THROUGH
JANUARY 31, 1997 JANUARY 31, 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ............................ $ 1,405,395 $ 710,144
Net realized gain ................................ 1,379,439 42,559
Net change in unrealized appreciation ............ 524,495 1,848,072
----------- -----------
NET INCREASE ................................... 3,309,329 2,600,775
----------- -----------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income ............................ (1,398,284) (568,410)
Net realized gain ................................ (1,001,490) (11,019)
----------- -----------
TOTAL .......................................... (2,399,774) (579,429)
----------- -----------
Net increase from transactions in shares of
beneficial interest ............................. 16,122,042 29,130,998
----------- -----------
NET INCREASE ................................... 17,031,597 31,152,344
NET ASSETS:
Beginning of period .............................. 31,252,344 100,000
----------- -----------
END OF PERIOD
(Including undistributed net investment income
of $182,960 and $141,734, respectively) ....... $48,283,941 $31,252,344
=========== ===========
</TABLE>
- -------------------
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER BALANCED INCOME FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1997
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Balanced Income Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund's investment objective is to
provide current income and moderate capital growth. The Fund seeks to achieve
its objective by investing in investment grade fixed income securities and,
to a lesser extent, common stock of companies which have a record of paying
dividends and, have the potential for increasing dividends and securities
convertible into common stock. The Fund was organized as a Massachusetts
business trust on November 23, 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") to effect the Fund's initial capitalization. The Fund
commenced operations on March 28, 1995.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at
its latest sale price on that exchange prior to the time when assets are
valued; if there were no sales that day, the security is valued at the latest
bid price (in cases where securities are traded on more than one exchange;
the securities are valued on the exchange designated as the primary market
pursuant to procedures adopted by the Trustees); (2) all other portfolio
securities for which over-the-counter market quotations are readily available
are valued at the latest available bid price prior to the time of valuation;
(3) when market quotations are not readily available, including circumstances
under which it is determined by the Investment Manager that sale or bid
prices are not reflective of a security's market value, portfolio securities
are valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Trustees (valuation
of debt securities for which market quotations are not readily available may
be based upon current market prices of securities which are comparable in
coupon, rating and maturity or an appropriate matrix utilizing similar
factors); (4) certain portfolio securities may be valued by an outside
pricing service approved by the Trustees. The pricing service may utilize a
matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research and evaluations by staff,
including review of broker-dealer market price quotations, if available, in
determining what it believes is the fair valuation of the securities valued
by such pricing service; and (5) short-term debt
<PAGE>
DEAN WITTER BALANCED INCOME FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1997, continued
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. Discounts are accreted over the life of the respective securities.
Dividend income and other distributions are recorded on the ex-dividend date.
Interest income is accrued daily.
C. 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.
D. 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.
E. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $170,000 of which
approximately $136,000 have been reimbursed. 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 the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.60% to the net assets of the Fund determined as of the close
of each business day.
<PAGE>
DEAN WITTER BALANCED INCOME FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1997, continued
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities,
equipment, clerical, bookkeeping and certain legal services and pays the
salaries of all 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 assumed all operating expenses and waived the
compensation provided for in its Investment Management Agreement until April
1, 1996. The management fee waived and other expenses assumed by the
Investment Manager approximated $34,000 and $90,000, respectively, for the
period February 1, 1996 through March 31, 1996. At January 31, 1997, included
in the Statement of Assets and Liabilities is a receivable from an affiliate
which represents expense reimbursements due to the Fund.
3. PLAN OF DISTRIBUTION
Dean Witter Distributors Inc. (the "Distributor"), an affiliate of the
Investment Manager, is the distributor of the Fund's shares and, in
accordance with a Plan of Distribution (the "Plan") pursuant to Rule 12b-1
under the Act, finances certain expenses in connection therewith.
Under the Plan, the Distributor bears the expense of all promotional and
distribution related activities on behalf of the Fund, except for expenses
that the Trustees determine to reimburse, as described below. The following
activities and services may be provided by the Distributor, Dean Witter
Reynolds Inc. ("DWR"), an affiliate of the Distributor and Investment
Manager, its affiliates and other selected broker-dealers under the Plan: (1)
compensation to, and expenses of, account executives of DWR and other
selected broker-dealers and other employees, including overhead and telephone
expenses; (2) sales incentives and bonuses to sales representatives and to
marketing personnel in connection with promoting sales of the Fund's shares;
(3) expenses incurred in connection with promoting sales of the Fund's
shares; (4) preparing and distributing sales literature; and (5) providing
advertising and promotional activities, including direct mail solicitation
and television, radio, newspaper, magazine and other media advertisements.
The Fund is authorized to reimburse the Distributor for specific expenses the
Distributor incurs or plans to incur in promoting the distribution of the
Fund's shares. The amount of each monthly reimbursement payment may in no
event exceed an amount equal to a payment at the annual rate of 1.0% of the
Fund's average daily net assets during the month. Expenses incurred by the
Distributor pursuant to the Plan in any fiscal year in excess of 1.0% will
not be reimbursed by the Fund through payments accrued in any subsequent
fiscal year. For the year ended January 31, 1997, the distribution fee was
accrued at the annual rate of 1.0%.
<PAGE>
DEAN WITTER BALANCED INCOME FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1997, continued
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended January 31, 1997
aggregated $23,987,093 and $8,303,674, respectively. Included in the
aforementioned are purchases and sales of U.S. Government securities of
$14,544,915 and $2,030,132, respectively.
For the year ended January 31, 1997, the Fund incurred brokerage commissions
of $11,362 with DWR for portfolio transactions executed on behalf of the
Fund. At January 31, 1997, the Fund's payable for investments purchased
included unsettled trades with DWR of $151,965.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At January 31, 1997, the Fund had
transfer agent fees and expenses payable of approximately $2,100.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR MARCH 28, 1995*
ENDED THROUGH
JANUARY 31, 1997 JANUARY 31, 1996
----------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold ........................................ 3,385,851 $ 38,558,587 3,181,539 $33,881,688
Reinvestment of dividends and distributions . 172,485 1,958,907 42,146 454,527
------------- -------------- ----------- -------------
3,558,336 40,517,494 3,223,685 34,336,215
Repurchased ................................. (2,142,627) (24,395,452) (477,105) (5,205,217)
------------- -------------- ----------- -------------
Net increase ................................ 1,415,709 $ 16,122,042 2,746,580 $29,130,998
============= ============== =========== =============
</TABLE>
- -------------------
* Commencement of operations.
6. FEDERAL INCOME TAX STATUS
As of January 31, 1997, the Fund had permanent book/tax differences
attributable to nondeductible organizational expenses. To reflect
reclassifications arising from permanent book/tax differences for the year
ended January 31, 1997, paid-in-capital was charged and accumulated
undistributed net investment income was credited $34,115.
<PAGE>
DEAN WITTER BALANCED INCOME FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR MARCH 28, 1995*
ENDED THROUGH
JANUARY 31, 1997 JANUARY 31, 1996
- ---------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $ 11.34 $ 10.00
---------------- ----------------
Net investment income .................. 0.36 0.38
Net realized and unrealized gain ....... 0.50 1.30
---------------- ----------------
Total from investment operations ....... 0.86 1.68
---------------- ----------------
Less dividends and distributions from:
Net investment income.................. (0.38) (0.33)
Net realized gain...................... (0.25) (0.01)
---------------- ----------------
Total dividends and distributions ...... (0.63) (0.34)
---------------- ----------------
Net asset value, end of period ......... $ 11.57 $ 11.34
================ ================
TOTAL INVESTMENT RETURN+................ 7.82% 16.93%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses................................ 1.88%(3) --%(2)(3)
Net investment income................... 3.49%(3) 5.27%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands.............................. $48,284 $31,252
Portfolio turnover rate................. 21% 3%(1)
Average commission rate paid ........... $0.0515 --
</TABLE>
- --------------
* Commencement of operations.
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
(3) If the Investment Manager had not reimbursed expenses and waived the
management fee, the annualized expense and net investment income ratios
would have been 2.69% and 2.58%, respectively, for the period ended
January 31, 1996, and 2.19% and 3.18%, respectively, for the year ended
January 31, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER BALANCED INCOME FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER BALANCED INCOME 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
Balanced Income Fund (the "Fund") at January 31, 1997, 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 March 28,
1995 (commencement of operations) through January 31, 1996, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at January
31, 1997 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
March 10, 1997
1997 FEDERAL TAX NOTICE (unaudited)
During the year ended January 31, 1997, the Fund paid to its shareholders $0.09
per share from long-term capital gains. For such period, 19.40% of the income
paid qualified for the dividends received deduction available to corporations.
<PAGE>
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<PAGE>
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<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
Paul D. Vance
Vice President
Rajesh K. Gupta
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
BALANCED
INCOME FUND
ANNUAL REPORT
JANUARY 31, 1997
