<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 8, 1998
REGISTRATION NO. 33-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. [ ]
---------------
DEAN WITTER LIQUID ASSET FUND INC.
(Exact Name of Registrant as Specified in Charter)
TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048
(Address of Principal Executive Offices)
212-392-1600
(Registrant's Telephone Number)
BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(Name and Address of Agent for Service)
---------------
COPY TO:
STUART M. STRAUSS, ESQ.
GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE ON THE THIRTIETH DAY
AFTER THE DATE OF FILING, PURSUANT TO RULE 488.
The Exhibit Index is located on page [ ]
No filing fee is due because the Registrant has previously registered an
indefinite number of shares pursuant to Section (a)(1) of Rule 24f-2 under
the Investment Company Act of 1940, as amended. The Registrant filed the Rule
24f-2 Notice, for its fiscal year ended August 31, 1997, with the Securities
and Exchange Commission on October 27, 1997.
Pursuant to Rule 429, this Registration Statement relates to shares
previously registered by the Registrant on Form N-1A (Registration Nos.
2-53856; 811-2575).
===============================================================================
<PAGE>
FORM N-14
DEAN WITTER LIQUID ASSET FUND INC.
Cross Reference Sheet
Pursuant to Rule 481(a) under the Securities Act of 1933
<TABLE>
<CAPTION>
PART A OF FORM N-14
ITEM NO. PROXY STATEMENT AND PROSPECTUS HEADING
- ----------------------- ------------------------------------------------------
<S> <C>
1(a) Cross Reference Sheet
(b) Front Cover Page
(c) *
2(a) *
(b) Table of Contents
3(a) Fee Table
(b) Synopsis
(c) Principal Risk Factors
4(a) The Reorganization
(b) The Reorganization--Capitalization Table (Unaudited)
5(a) Registrant's Prospectus
(b) *
(c) *
(d) *
(e) Available Information
(f) Available Information
6(a) Prospectus of Liquid Asset Series
(b) Available Information
(c) *
(d) *
7(a) Introduction--Proxies
(b) *
(c) Introduction; The Reorganization--Appraisal Rights
8(a) The Reorganization
(b) *
9 *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART B OF FORM N-14
ITEM NO. STATEMENT OF ADDITIONAL INFORMATION HEADING
- ----------------------- ----------------------------------------------------------------------------------
<S> <C>
10(a) Cover Page
(b) *
11 Table of Contents
12(a) Additional Information about Registrant
(b) *
(c) *
13(a) Additional Information about Liquid Asset Series
(b) *
(c) *
14 Registrant's Prospectus for the fiscal year ended August 31, 1997; Registrant's
Semi-Annual Report for the six-month period ended February 28, 1998; Annual Report
for Liquid Asset Series for the fiscal year ended July 31, 1997; Semi-Annual
Report for the six-month period ended January 31, 1998.
</TABLE>
<TABLE>
<CAPTION>
PART C OF FORM N-14
ITEM NO. OTHER INFORMATION HEADING
- ----------------------- -----------------------------
<S> <C>
15 Indemnification
16 Exhibits
17 Undertakings
</TABLE>
- ------------
* Not Applicable or negative answer
<PAGE>
DEAN WITTER RETIREMENT SERIES
LIQUID ASSET SERIES
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-1600
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 19, 1998
TO SHAREHOLDERS OF THE LIQUID ASSET SERIES,
A SERIES OF DEAN WITTER RETIREMENT SERIES:
Notice is hereby given of a Special Meeting of the Shareholders of the
Liquid Asset Series ("Liquid Asset"), one of eleven portfolios of Dean Witter
Retirement Series ("Retirement Series"), to be held at the Career Development
Room, 61st Floor, Two World Trade Center, New York, New York 10048, at 9:00
A.M., New York time, on August 19, 1998, and any adjournments thereof (the
"Meeting"), for the following purposes:
1. To consider and vote upon an Agreement and Plan of Reorganization,
dated April 30, 1998 (the "Reorganization Agreement"), between Retirement
Series, on behalf of Liquid Asset, and Dean Witter Liquid Asset Fund Inc.
(the "Acquiring Fund"), pursuant to which substantially all of the assets
of Liquid Asset would be combined with those of the Acquiring Fund and
shareholders of Liquid Asset would become shareholders of the Acquiring
Fund receiving shares of the Acquiring Fund with a value equal to the
value of their holdings in Liquid Asset (the "Reorganization"); and
2. To act upon such other matters as may properly come before the
Meeting.
The Reorganization is more fully described in the accompanying Proxy
Statement and Prospectus and a copy of the Reorganization Agreement is
attached as Exhibit A thereto. Shareholders of record at the close of
business on June 2, 1998 are entitled to notice of, and to vote at, the
Meeting. Please read the Proxy Statement and Prospectus carefully before
telling us, through your proxy or in person, how you wish your shares to be
voted. The Board of Trustees of Retirement Series recommends you vote in
favor of the Reorganization. WE URGE YOU TO SIGN, DATE AND MAIL THE ENCLOSED
PROXY PROMPTLY.
By Order of the Board of Trustees,
BARRY FINK,
Secretary
June , 1998
YOU CAN HELP AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP LETTERS
TO ENSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY. IF YOU ARE
UNABLE TO BE PRESENT IN PERSON, PLEASE FILL IN, SIGN AND RETURN THE ENCLOSED
PROXY IN ORDER THAT THE NECESSARY QUORUM BE REPRESENTED AT THE MEETING. THE
ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048
(212) 392-1600
ACQUISITION OF THE ASSETS OF THE LIQUID ASSET SERIES,
A SERIES OF DEAN WITTER RETIREMENT SERIES
BY AND IN EXCHANGE FOR SHARES OF
DEAN WITTER LIQUID ASSET FUND INC.
This Proxy Statement and Prospectus is being furnished to shareholders of
the Liquid Asset Series ("Liquid Asset"), one of eleven portfolios of Dean
Witter Retirement Series ("Retirement Series"), in connection with an
Agreement and Plan of Reorganization, dated April 30, 1998 (the
"Reorganization Agreement"), pursuant to which substantially all the assets
of Liquid Asset will be combined with those of Dean Witter Liquid Asset Fund
Inc. (the "Acquiring Fund") in exchange for shares of the Acquiring Fund. As
a result of this transaction, shareholders of Liquid Asset will become
shareholders of the Acquiring Fund and will receive shares of the Acquiring
Fund with a value equal to the value of their holdings in Liquid Asset. The
terms and conditions of this transaction are more fully described in this
Proxy Statement and Prospectus and in the Reorganization Agreement between
Retirement Series, on behalf of Liquid Asset, and the Acquiring Fund,
attached hereto as Exhibit A. The address of Liquid Asset is that of the
Acquiring Fund set forth above. This Proxy Statement also constitutes a
Prospectus of the Acquiring Fund, which is dated June , 1998, filed by the
Acquiring Fund with the Securities and Exchange Commission (the "Commission")
as part of its Registration Statement on Form N-14 (the "Registration
Statement").
The Acquiring Fund is an open-end diversified management investment
company whose investment objectives are high current income, preservation of
capital and liquidity. The Acquiring Fund seeks to achieve its objectives by
investing in the following money market instruments: United States Government
securities, obligations of U.S. regulated banks and savings and loan
associations having assets of $1 billion or more, high grade commercial
paper, certificates of deposit of $100,000 or less of U.S. regulated banks
and savings institutions having total assets of less than $1 billion which
are fully federally insured as to principal (the interest may not be insured)
and high grade corporate obligations maturing in thirteen months or less.
This Proxy Statement and Prospectus sets forth concisely information about
the Acquiring Fund that shareholders of Liquid Asset should know before
voting on the Reorganization Agreement. A copy of the Prospectus for the
Acquiring Fund, dated October 24, 1997, is attached as Exhibit B and is
incorporated herein by reference. Also incorporated herein by reference is
the Acquiring Fund's Semi-Annual Report for the six month period ended
February 28, 1998. A Statement of Additional Information relating to the
Reorganization, described in this Proxy Statement and Prospectus (the
"Additional Statement"), dated June , 1998, has been filed with the
Commission and is also incorporated herein by reference. Also incorporated
herein by reference are the Prospectus for Retirement Series dated October
31, 1997, the Annual Report for Retirement Series for the fiscal year ended
July 31, 1997 and the Semi-Annual Report for Retirement Series for the six
months ended January 31, 1998. Such documents are available without charge by
calling Nina Maceda at Dean Witter Trust Company at (800) 869-NEWS.
Investors are advised to read and retain this Proxy Statement and Prospectus
for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement and Prospectus is dated June , 1998.
1
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
INTRODUCTION ................................................................................. 2
General ..................................................................................... 2
Record Date; Share Information .............................................................. 2
Proxies ..................................................................................... 3
Expenses of Solicitation .................................................................... 3
Vote Required ............................................................................... 4
SYNOPSIS ..................................................................................... 5
The Reorganization .......................................................................... 5
Fee Table ................................................................................... 5
Tax Consequences of the Reorganization ...................................................... 7
Comparison of Liquid Asset and the Acquiring Fund ........................................... 7
PRINCIPAL RISK FACTORS ....................................................................... 9
THE REORGANIZATION ........................................................................... 9
The Proposal ................................................................................ 9
The Board's Consideration ................................................................... 9
The Reorganization Agreement ................................................................10
Tax Aspects of the Reorganization ...........................................................11
Description of Shares .......................................................................12
Capitalization Table (unaudited) ............................................................13
Appraisal Rights ............................................................................13
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS ...............................13
Investment Objectives and Policies ..........................................................13
Investment Restrictions .....................................................................13
ADDITIONAL INFORMATION ABOUT LIQUID ASSET AND THE ACQUIRING FUND .............................14
General .....................................................................................14
Financial Information .......................................................................14
Management ..................................................................................14
Description of Securities and Shareholder Inquiries .........................................14
Dividends, Distributions and Taxes ..........................................................14
Purchases, Repurchases and Redemptions ......................................................14
FINANCIAL STATEMENTS AND EXPERTS .............................................................15
LEGAL MATTERS ................................................................................15
AVAILABLE INFORMATION ........................................................................15
OTHER BUSINESS ...............................................................................15
Exhibit A--Agreement and Plan of Reorganization, dated as of April 30, 1998, by and
between Dean Witter Retirement Series, on behalf of the Liquid Asset Series, and Dean
Witter Liquid Asset Fund Inc. ..............................................................A-1
- ---------------------------------------------------------------------------------------- --------
Exhibit B--Prospectus of Dean Witter Liquid Asset Fund Inc., dated October 24, 1997..........B-1
- ---------------------------------------------------------------------------------------- --------
</TABLE>
<PAGE>
DEAN WITTER RETIREMENT SERIES
LIQUID ASSET SERIES
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-1600
PROXY STATEMENT AND PROSPECTUS
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 19, 1998
INTRODUCTION
GENERAL
This Proxy Statement and Prospectus is being furnished to the shareholders
of the Liquid Asset Series ("Liquid Asset"), one of eleven portfolios of Dean
Witter Retirement Series ("Retirement Series"), an open-end diversified
no-load management investment company, in connection with the solicitation by
the Board of Trustees of Retirement Series (the "Board") of proxies to be
used at the Special Meeting of Shareholders of Liquid Asset to be held at the
Career Development Room, 61st Floor, Two World Trade Center, New York, New
York 10048 at 9:00 A.M., New York time, on August 19, 1998, and any
adjournments thereof (the "Meeting"). It is expected that the mailing of this
Proxy Statement and Prospectus will be made on or about June , 1998.
At the Meeting, Liquid Asset shareholders ("Shareholders") will consider
and vote upon an Agreement and Plan of Reorganization, dated April 30, 1998
(the "Reorganization Agreement"), between Retirement Series, on behalf of
Liquid Asset, and Dean Witter Liquid Asset Fund Inc. (the "Acquiring Fund")
pursuant to which substantially all of the assets of Liquid Asset will be
combined with those of the Acquiring Fund in exchange for shares of the
Acquiring Fund. As a result of this transaction, Shareholders will become
shareholders of the Acquiring Fund and will receive shares of the Acquiring
Fund equal to the value of their holdings in Liquid Asset on the date of such
transaction (the "Reorganization"). The shares to be issued by the Acquiring
Fund pursuant to the Reorganization will be issued at net asset value without
a charge (the "Acquiring Fund Shares"). Further information relating to the
Acquiring Fund is set forth herein and in the Acquiring Fund's current
Prospectus, dated October 24, 1997 (the "Acquiring Fund's Prospectus"),
attached to this Proxy Statement and Prospectus and incorporated herein by
reference.
The information concerning Liquid Asset contained herein has been supplied
by Retirement Series and the information concerning the Acquiring Fund
contained herein has been supplied by the Acquiring Fund.
RECORD DATE; SHARE INFORMATION
The Board has fixed the close of business on June 2, 1998 as the record
date (the "Record Date") for the determination of the Shareholders entitled
to notice of, and to vote at, the Meeting. As of the Record Date, there were
shares of Liquid Asset issued and outstanding. Shareholders on the Record
Date are entitled to one vote per share on each matter submitted to a vote at
the Meeting. A majority of the outstanding shares entitled to vote,
represented in person or by proxy, will constitute a quorum at the Meeting.
To the knowledge of the Board, as of the Record Date, [no person owned of
record or beneficially 5% or more of the outstanding shares of Liquid Asset.
As of the Record Date, the trustees and officers of Liquid Asset, as a group,
owned less than 1% of the outstanding shares of Liquid Asset.]
2
<PAGE>
[Add 5% owners of Acquiring Fund] As of the Record Date, the directors and
officers of the Acquiring Fund, as a group, owned less than 1% of the
outstanding shares of the Acquiring Fund.
PROXIES
The enclosed form of proxy, if properly executed and returned, will be
voted in accordance with the choice specified thereon. The proxy will be
voted in favor of the Reorganization Agreement unless a choice is indicated
to vote against or to abstain from voting on the Reorganization Agreement.
The Board knows of no business, other than that set forth in the Notice of
Special Meeting of Shareholders, to be presented for consideration at the
Meeting. However, the proxy confers discretionary authority upon the persons
named therein to vote as they determine on other business, not currently
contemplated, which may come before the Meeting. Abstentions and, if
applicable, broker "non-votes" will not count as votes in favor of the
Reorganization Agreement, and broker "non-votes" will not be deemed to be
present at the meeting for purposes of determining whether the Reorganization
Agreement has been approved. Broker "non-votes" are shares held in street
name for which the broker indicates that instructions have not been received
from the beneficial owners or other persons entitled to vote and for which
the broker does not have discretionary voting authority. The proxy may be
revoked at any time prior to the voting thereof by: (i) delivering written
notice of revocation to the Secretary of Retirement Series at Two World Trade
Center, New York, New York 10048; (ii) attending the Meeting and voting in
person; or (iii) signing and returning a new proxy (if returned and received
in time to be voted). Attendance at the Meeting will not in and of itself
revoke a proxy.
In the event that the necessary quorum to transact business or the vote
required to approve or reject the Reorganization Agreement is not obtained at
the Meeting, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. Any
such adjournment will require the affirmative vote of the holders of a
majority of Liquid Asset's shares present in person or by proxy at the
Meeting. The persons named as proxies will vote in favor of such adjournment
those proxies which they are entitled to vote in favor of the Reorganization
Agreement and will vote against any such adjournment those proxies required
to be voted against the Reorganization Agreement.
EXPENSES OF SOLICITATION
All expenses of this solicitation, including the cost of preparing and
mailing this Proxy Statement and Prospectus, will be borne by Dean Witter
InterCapital Inc. ("InterCapital"). In addition to the solicitation of
proxies by mail, proxies may be solicited by officers and regular employees
or certain affiliates of Retirement Series, including InterCapital and/or
Dean Witter Trust FSB ("DWTFSB"), without compensation other than regular
compensation, personally or by mail, telephone, telegraph or otherwise.
Brokerage houses, banks and other fiduciaries may be requested to forward
soliciting material to the beneficial owners of shares and to obtain
authorization for the execution of proxies.
DWTFSB may call Shareholders to ask if they would be willing to have their
votes recorded by telephone. The telephone voting procedure is designed to
authenticate Shareholders' identities, to allow Shareholders to authorize the
voting of their shares in accordance with their instructions and to confirm
that their instructions have been recorded properly. No recommendation will
be made as to how a Shareholder should vote on the Reorganization Agreement
other than to refer to the recommendation of the Board. Liquid Asset has been
advised by counsel that these procedures are consistent with the requirements
of applicable law. Shareholders voting by telephone will be asked for their
social security number or other identifying information and will be given an
opportunity to authorize proxies to vote their shares in accordance with
their instructions. To ensure that the Shareholders' instructions have been
recorded correctly they will receive a confirmation of their instructions in
the mail. A special toll-free number will be available in case the
information contained in the
3
<PAGE>
confirmation is incorrect. Although a Shareholder's vote may be taken by
telephone, each Shareholder will receive a copy of this Proxy Statement and
Prospectus and may vote by mail using the enclosed proxy card.
VOTE REQUIRED
Approval of the Reorganization Agreement by the Shareholders requires the
affirmative vote of a majority (i.e., more than 50%) of the outstanding
shares of Liquid Asset represented in person or by proxy and entitled to vote
at the Meeting, provided a quorum is present at the Meeting. If the
Reorganization Agreement is not approved by Shareholders, Liquid Asset will
continue in existence and the Board will consider alternative actions.
4
<PAGE>
SYNOPSIS
The following is a synopsis of certain information contained in or
incorporated by reference in this Proxy Statement and Prospectus. This
synopsis is only a summary and is qualified in its entirety by the more
detailed information contained or incorporated by reference in this Proxy
Statement and Prospectus and the Reorganization Agreement. Shareholders
should carefully review this Proxy Statement and Prospectus and the
Reorganization Agreement in their entirety and, in particular, the Acquiring
Fund's Prospectus, which is attached to this Proxy Statement and incorporated
herein by reference.
THE REORGANIZATION
The Reorganization Agreement provides for the transfer of substantially
all the assets of Liquid Asset, subject to stated liabilities, to the
Acquiring Fund in exchange for the Acquiring Fund Shares. The aggregate net
asset value of the Acquiring Fund Shares issued in the exchange will equal
the aggregate value of the net assets of Liquid Asset received by the
Acquiring Fund. On or after the closing date scheduled for the Reorganization
(the "Closing Date"), Liquid Asset will distribute the Acquiring Fund Shares
received by Liquid Asset to Shareholders as of the Valuation Date (as defined
below under "The Reorganization Agreement") in complete liquidation of Liquid
Asset. If all other portfolios of Retirement Series effect similar
reorganizations or otherwise liquidate, Retirement Series will take all
necessary steps to dissolve and deregister under the Investment Company Act
of 1940, as amended (the "1940 Act"). As a result of the Reorganization, each
Shareholder will receive that number of full and fractional Acquiring Fund
Shares equal in value to such Shareholder's pro rata interest in the net
assets transferred to the Acquiring Fund. Shareholders holding certificates
representing their shares will not be required to surrender their
certificates in connection with the Reorganization. However, such
Shareholders will have to surrender such certificates in order to receive
certificates representing the Acquiring Fund Shares or to redeem, transfer or
exchange the Acquiring Fund Shares received. The Board has determined that
the interests of Shareholders will not be diluted as a result of the
Reorganization.
FOR THE REASONS SET FORTH BELOW UNDER "THE REORGANIZATION--THE BOARD'S
CONSIDERATION," THE BOARD, INCLUDING THE TRUSTEES WHO ARE NOT "INTERESTED
PERSONS" OF LIQUID ASSET ("INDEPENDENT TRUSTEES"), AS THAT TERM IS DEFINED IN
THE 1940 ACT, HAS CONCLUDED THAT THE REORGANIZATION IS IN THE BEST INTERESTS
OF LIQUID ASSET AND ITS SHAREHOLDERS AND RECOMMENDS APPROVAL OF THE
REORGANIZATION AGREEMENT.
FEE TABLE
Liquid Asset and the Acquiring Fund each pay expenses for management of
their assets and for other services. In addition, the Acquiring Fund pays for
distribution of its shares. Those expenses are reflected in the net asset
value per share of each such fund. The following table illustrates expenses
and fees incurred during Liquid Asset's fiscal year ended July 31, 1997. The
following table also illustrates expenses and fees incurred during the
Acquiring Fund's fiscal year ended August 31, 1997. The table below also sets
forth pro forma fees for the surviving combined fund (the Acquiring Fund)
reflecting what the fee schedule would have been at August 31, 1997, if the
Reorganization had been consummated twelve (12) months prior to that date.
Further information on the fees and expenses applicable to the Acquiring Fund
Shares is set forth herein and in the Acquiring Fund's Prospectus, attached
hereto and incorporated herein by reference.
5
<PAGE>
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
PRO FORMA
LIQUID ASSET ACQUIRING FUND COMBINED
---------------- ------------------ -------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a
percentage of offering price)..................... None None None
Maximum Sales Charge Imposed on Reinvested .......
Dividends ......................................... None None None
Maximum Contingent Deferred Sales Charge (as a
percentage of the lesser of original purchase
price or redemption proceeds) .................... None None None
Redemption Fees.................................... None None None
Exchange Fee ...................................... None None None
</TABLE>
Annual Fund Operating Expenses (As a Percentage of Average Net Assets)
<TABLE>
<CAPTION>
PRO FORMA
LIQUID ASSET ACQUIRING FUND COMBINED
-------------- -------------- -----------
<S> <C> <C> <C>
Management Fees .............. 0.50% 0.27% 0.27%
12b-1 Fees ................... 0.00% 0.10% 0.10%
Other Expenses ............... 0.54% 0.25% 0.25 %
Total Fund Operating
Expenses..................... 1.04%(1) 0.62% 0.62 %
</TABLE>
- ------------
(1) Pursuant to an undertaking, InterCapital has agreed to assume all
expenses relating to the operations of Liquid Asset (except for any
brokerage fees) and has agreed to waive the compensation provided for
in its Management Agreement with respect to Liquid Asset until June 30,
1998 to the extent that such expenses and compensation on an annualized
basis exceed 1.00% of the daily net assets of Liquid Asset. Taking into
account such waiver, Liquid Asset's total fund operating expenses were
1.00%. After June 30, 1998, Liquid Asset, if it continues in operation,
will bear all fees and expenses. The actual expenses (before any
waiver) of Liquid Asset for the period ended July 31, 1997 are set
forth in the table.
Example
To attempt to show the effect of these expenses on an investment over
time, the hypotheticals shown below have been created. Assuming that an
investor makes a $1,000 investment in either Liquid Asset or the Acquiring
Fund or the new combined fund, that the annual return is 5% and that the
operating expenses for each fund are the ones shown in the chart above; if
the investment was redeemed at the end of each period shown below, the
investor would incur the following expenses by the end of each period shown:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ----------
<S> <C> <C> <C> <C>
Liquid Asset ...... $11 $33 $57 $127
Acquiring Fund..... $ 6 $20 $34 $ 77
Pro Forma
Combined.......... $ 6 $20 $34 $ 77
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL OPERATING EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
6
<PAGE>
TAX CONSEQUENCES OF THE REORGANIZATION
As a condition to the Reorganization, Liquid Asset will receive an opinion
of Gordon Altman Butowsky Weitzen Shalov & Wein to the effect that the
Reorganization will constitute a tax-free reorganization for federal income
tax purposes, and that no gain or loss will be recognized by Liquid Asset or
the shareholders of Liquid Asset for Federal income tax purposes as a result
of the transactions included in the Reorganization. For further information
about the tax consequences of the Reorganization, see "The
Reorganization--Tax Aspects of the Reorganization" below.
COMPARISON OF LIQUID ASSET AND THE ACQUIRING FUND
INVESTMENT OBJECTIVES AND POLICIES. Liquid Asset and the Acquiring Fund
have identical investment objectives, which are high current income,
preservation of capital and liquidity. Liquid Asset and the Acquiring Fund
each seek to achieve their respective objectives by investing in the
following money market instruments: United States Government securities,
obligations of U.S. regulated banks and savings and loan associations having
assets of $1 billion or more, high grade commercial paper, certificates of
deposit of $100,000 or less of U.S. regulated banks and savings institutions
having total assets of less than $1 billion which are fully federally insured
as to principal (the interest may not be insured) and high grade corporate
obligations maturing in thirteen months or less.
The investment policies of both funds are identical; additional
information is provided under "Comparison of Investment Objectives, Policies
and Restrictions" below.
The investment policies of both Liquid Asset and the Acquiring Fund are
not fundamental and may be changed by their respective Boards of
Trustees/Directors.
INVESTMENT MANAGEMENT AND DISTRIBUTION PLAN FEES. Liquid Asset and the
Acquiring Fund obtain investment management services from InterCapital. With
respect to Liquid Asset, the fund pays InterCapital monthly compensation
calculated daily by applying the annual rate of 0.50% to the fund's net
assets. With respect to the Acquiring Fund, the fund pays InterCapital
monthly compensation calculated daily by applying the annual rate of: 0.50%
of the daily net assets of the fund up to $500 million, scaled down at
various asset levels to 0.248% on assets over $17.5 billion.
The Acquiring Fund has adopted a distribution plan (the "Plan") pursuant
to Rule 12b-1 under the 1940 Act. Although pursuant to the Plan, the
Acquiring Fund may pay to Dean Witter Distributors Inc. (the "Distributor") a
fee, which is accrued daily and payable monthly, at the annual rate of up to
0.15% of the Acquiring Fund's average daily net assets, the Board of
Directors of the Acquiring Fund has limited the amount payable under the Plan
to 0.10% of the Acquiring Fund's average daily net assets. Rule 12b-1 fees
compensate the Distributor for the services provided and the expenses borne
by the Distributor and others in distribution of the shares of the Acquiring
Fund. By contrast, shares of Liquid Asset are not subject to a Rule 12b-1
plan.
OTHER SIGNIFICANT FEES. Both Liquid Asset and the Acquiring Fund pay
additional fees in connection with their operations, including legal,
auditing, transfer agent and custodial fees. See "Synopsis--Fee Table" above
for the percentage of average net assets represented by such "Other
Expenses."
PURCHASES, EXCHANGES AND REDEMPTIONS. Liquid Asset and the Acquiring Fund
continuously issue their shares to investors at a price equal to net asset
value next determined after receipt of a purchase order and acceptance by
DWTFSB in proper form and accompanied by payment in Federal Funds (i.e.,
monies of member banks within the Federal Reserve System held on deposit at a
Federal Reserve Bank) available to the respective fund for investment. Each
of the funds utilize the amortized cost method in valuing their portfolio
securities, which method involves valuing a security at its cost adjusted by
a constant amortization to maturity
7
<PAGE>
of any discount or premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument. The purpose of the method of
calculation is to facilitate the maintenance of a constant net asset value
per share of $1.00 although there can be no assurance that the $1.00 net
asset value will be maintained. Shares of each fund commence earning income
on the day following the date of their purchase.
Shares of Liquid Asset may be exchanged only for shares of the other
portfolios of Retirement Series. Although shares of the Acquiring Fund may
only be exchanged for shares of any other open-end investment company for
which InterCapital serves as investment manager (collectively, the "Dean
Witter Funds") if such Acquiring Fund shares were acquired in exchange for
shares of another Dean Witter Fund, shares of Dean Witter Funds that are
multiple class funds ("Dean Witter Multi-Class Funds"), or which are sold
with either a front-end sales charge or a contingent deferred sales charge,
may be exchanged for shares of the Acquiring Fund. In connection with the
Reorganization, all shares of the Acquiring Fund issued to Liquid Asset
Shareholders may be exchanged for Class D shares of any Dean Witter
Multi-Class Fund. Both Liquid Asset and the Acquiring Fund provide telephone
exchange privileges to their shareholders. For greater details relating to
exchange privileges involving the Acquiring Fund, see the section entitled
"Shareholder Services--Exchange Privilege" in the Acquiring Fund's
Prospectus.
Shareholders of Liquid Asset and the Acquiring Fund may redeem their
shares for cash at any time at the net asset value per share next determined
after the receipt of a redemption request meeting certain requirements, which
are the same for both funds. The Acquiring Fund may, on sixty days' notice,
redeem involuntarily, at net asset value, accounts (other than shares held in
an Individual Retirement Account or custodial account under Section 403(b)(7)
of the Internal Revenue Code) valued at less than $1,000 or such lesser
amount as may be fixed by the fund's board; whereas, Liquid Asset does not
involuntarily redeem shares.
DIVIDENDS. Both Liquid Asset and the Acquiring Fund declare dividends,
payable on each day the New York Stock Exchange is open for business, of
substantially all of their daily net income. Both funds pay all dividends
from net investment income to shareholders of record as of the close of
business the preceding business day. Both funds pay dividends from short-term
capital gains, if any, to shareholders of record as of the close of business
the preceding business day; such dividends, if any, are paid periodically.
The amount of dividends for both funds may fluctuate from day to day and may
be omitted on some days if net realized losses on portfolio securities exceed
the respective fund's net investment income. The Acquiring Fund pays
dividends from net long-term capital gains, if any, at least annually.
Dividends and capital gains distributions of both Liquid Asset and the
Acquiring Fund are automatically reinvested in additional shares at net asset
value unless the shareholder elects to receive cash.
FORM OF ORGANIZATION. Liquid Asset is organized under the laws of the
Commonwealth of Massachusetts whereas the Acquiring Fund is incorporated
under the laws of Maryland. Both types of organizations allow the Board of
Trustees/Directors to take certain action without obtaining shareholder
approval. In addition, routine annual shareholder meetings are not required
for either structure. For additional information about the Acquiring Fund's
form of organization, see the section entitled "Additional Information" in
the Acquiring Fund's Prospectus.
SHAREHOLDER SERVICES. The shareholder services provided by both funds are
similar. The material differences are as follows: Both funds provide for a
Systematic Withdrawal Plan but for Liquid Asset it is only available to
shareholders who own or purchase shares of the fund having a minimum value of
$10,000; with respect to the Acquiring Fund, the requisite minimum value is
$5,000. Shareholders of the Acquiring Fund may subscribe to EasyInvest|PS, an
automatic purchase plan which provides for the automatic transfer of funds
from a checking or savings account to DWTFSB for the purchase of fund shares;
Liquid Asset does not offer this arrangement. The Acquiring Fund has a
Targeted Dividends arrangement whereby, in states where it is legally
8
<PAGE>
permissible, shareholders may elect to have all shares of the fund earned as
a result of dividends paid in any given month redeemed as of the end of the
month and invested in shares of other Dean Witter Funds, subject to certain
conditions; Liquid Asset does not offer this arrangement. For additional
information about the Acquiring Fund's shareholder services, see the section
entitled "Shareholder Services" in the Acquiring Fund's Prospectus.
PRINCIPAL RISK FACTORS
The risks of each fund are similar. Each fund seeks to maintain a constant
net asset value per share of $1 but there is no assurance that the constant
price will be maintained.
For a more complete discussion of the risks of each fund, see "Investment
Objectives and Policies--General Investment Techniques and Risk
Considerations" in the Retirement Series Prospectus and "Investment
Objectives and Policies" in the Acquiring Fund's Prospectus.
THE REORGANIZATION
THE PROPOSAL
The Board of Trustees of Retirement Series, including the Independent
Trustees, having reviewed Liquid Asset's economic position, determined that
the Reorganization is in the best interests of Liquid Asset and its
Shareholders and that the interests of Shareholders will not be diluted as a
result thereof, recommends approval of the Reorganization by Liquid Asset
Shareholders.
THE BOARD'S CONSIDERATION
At a meeting held on April 30, 1998, the Board, including all of the
Independent Trustees, unanimously approved the Reorganization Agreement and
determined to recommend that Shareholders of Liquid Asset approve the
Reorganization Agreement. At a meeting on January 29, 1998, the Board made an
extensive inquiry into a number of factors, particularly the comparative
expenses to be incurred in the operations of Liquid Asset and the Acquiring
Fund. The Board also considered other factors, including, but not limited to:
the comparative investment performance and past growth in assets of Liquid
Asset and the Acquiring Fund; the compatibility of the investment objectives,
policies, restrictions and portfolios of Liquid Asset and the Acquiring Fund;
the terms and conditions of the Reorganization which would affect the price
of shares to be issued in the Reorganization; the tax-free nature of the
Reorganization; and any direct or indirect costs to be incurred by Liquid
Asset and the Acquiring Fund in connection with the Reorganization. At its
meeting on April 30, 1998, the Board was informed and considered that there
had been no material changes to the factors considered by it at the January
29, 1998 meeting.
In recommending the Reorganization to Shareholders, the Board of
Retirement Series considered that the Reorganization would have the following
benefits for Shareholders:
1. Once the Reorganization is consummated, the expenses which would be
borne by shareholders of the "combined fund" should be substantially lower on
a percentage basis than the actual expenses per share of Liquid Asset.
Furthermore, to the extent that the Reorganization would result in
Shareholders becoming shareholders of a combined larger fund, further
economies of scale could be achieved since various fixed expenses (e.g.,
auditing and legal) can be spread over a larger number of shares. The Board
noted that Liquid Asset's expense ratio, for its fiscal year ended July 31,
1997, was 1.04% (absent the waiver of management fees and assumption of
expenses), whereas the expense ratio for the Acquiring Fund was 0.62% (based
on the fiscal year ended August 31, 1997).
9
<PAGE>
2. Shareholders would have a continued participation in money market
instruments through investment in the Acquiring Fund, which has identical
investment objectives and identical investment policies and substantially
similar investment restrictions to those of Liquid Asset.
3. Shareholders would have expanded exchange privileges. Rather than being
able to exchange their shares of Liquid Asset only among the various
portfolios of Retirement Series, Shareholders will be permitted to exchange
their shares of the Acquiring Fund for Class D shares of any other Dean
Witter Fund and any Dean Witter money market fund for which the Dean Witter
Funds exchange privilege is available (the exchange privilege is subject to
termination or revision at any time.)
4. The Reorganization will constitute a tax-free reorganization for
federal income tax purposes, and no gain or loss will be recognized by Liquid
Asset or its Shareholders for federal income tax purposes as a result of
transactions included in the Reorganization.
The Board of Directors of the Acquiring Fund, including a majority of such
Directors who are not "interested persons" of the Acquiring Fund, also
determined that the Reorganization is in the best interests of the Acquiring
Fund and its shareholders and that the interests of existing shareholders of
the Acquiring Fund will not be diluted as a result thereof.
THE REORGANIZATION AGREEMENT
The terms and conditions under which the Reorganization would be
consummated, as summarized below, are set forth in the Reorganization
Agreement. This summary is qualified in its entirety by reference to the
Reorganization Agreement, a copy of which is attached as Exhibit A to this
Proxy Statement and Prospectus.
The Reorganization Agreement provides that (i) Liquid Asset will transfer
all of its assets, including portfolio securities, cash, cash equivalents and
receivables to the Acquiring Fund on the Closing Date in exchange for the
assumption by the Acquiring Fund of Liquid Asset's stated liabilities,
including all expenses, costs, charges and reserves, as reflected on an
unaudited statement of assets and liabilities of Liquid Asset prepared by the
Treasurer of Retirement Series as of the Valuation Date (as defined below) in
accordance with generally accepted accounting principles consistently applied
from the prior audited period, and the delivery of the Acquiring Fund Shares;
(ii) such Acquiring Fund Shares would be distributed to the Shareholders of
Liquid Asset on the Closing Date or as soon as practicable thereafter; (iii)
Liquid Asset would be dissolved; and (iv) the outstanding shares of Liquid
Asset would be canceled.
The number of Liquid Asset shares issued and outstanding and the number of
Acquiring Fund Shares to be delivered to Liquid Asset Shareholders, in each
case, will be determined as of 4:00 p.m. New York City time on the third day
that the New York Stock Exchange is open for business following the receipt
of the requisite approval by the shareholders of Liquid Asset of the
Reorganization Agreement or at such other time as Liquid Asset and the
Acquiring Fund may agree (the "Valuation Date"), after the declaration and
payment of any dividend on that date.
On the Closing Date or as soon as practicable thereafter, Liquid Asset
will distribute pro rata to its Shareholders of record as of the close of
business on the Valuation Date, the Acquiring Fund Shares it receives. The
Acquiring Fund will cause its transfer agent to credit and confirm an
appropriate number of the Acquiring Fund Shares to each Shareholder.
Certificates for the Acquiring Fund Shares will be issued upon written
request of a Shareholder but only for whole shares, with fractional shares
credited to the name of the Shareholder on the books of the Acquiring Fund.
Such Shareholders who wish certificates representing their Acquiring Fund
Shares must, after receipt of their confirmations, make a written request to
the Acquiring Fund's transfer agent, Dean Witter Trust FSB, Harborside
Financial Center, Jersey City, New Jersey 07311. Shareholders holding
certificates representing their shares will not be required to surrender
their certificates in
10
<PAGE>
connection with the Reorganization. However, such Shareholders will have to
surrender such certificates (or provide indemnities reasonably acceptable to
the Acquiring Fund in respect of lost certificates) in order to receive
certificates representing the Acquiring Fund Shares or to redeem, transfer or
exchange the Acquiring Fund Shares received.
The Closing Date will be the Valuation Date. The consummation of the
Reorganization is contingent upon the approval of the Reorganization by the
shareholders of Liquid Asset and the receipt of the other opinions and
certificates set forth in Sections 6, 7 and 8 of the Reorganization Agreement
and the occurrence of the events described in those Sections, certain of
which may be waived by Retirement Fund, on behalf of Liquid Asset or the
Acquiring Fund. The Reorganization Agreement may be amended in any mutually
agreeable manner, except that no amendment may be made subsequent to the
Meeting which would detrimentally affect the value of the shares of the
Acquiring Fund to be distributed. InterCapital will bear all of the expenses
associated with the Reorganization. Management estimates that such expenses
associated with the Reorganization will not exceed $ .
The Reorganization Agreement may be terminated and the Reorganization
abandoned at any time, before or after approval by Shareholders, by mutual
consent of Retirement Series, on behalf of Liquid Asset, and the Acquiring
Fund. In addition, either party may terminate the Reorganization Agreement
upon the occurrence of a material breach of the Reorganization Agreement by
the other party or if, by December 31, 1998, any condition set forth in the
Reorganization Agreement has not been fulfilled or waived by the party
entitled to its benefits. If all other portfolios of Retirement Series effect
similar reorganizations or otherwise liquidate, Retirement Series will take
all necessary steps to effect its dissolution and its deregistration under
the 1940 Act.
The effect of the Reorganization is that Shareholders who vote their
shares in favor of the Reorganization Agreement are electing to sell their
shares of Liquid Asset (at net asset value on the Valuation Date) and
reinvest the proceeds in the Acquiring Fund Shares at net asset value and
without recognition of taxable gain or loss for federal income tax purposes.
See "Tax Aspects of the Reorganization" below. As noted in "Tax Aspects of
the Reorganization" below, if Liquid Asset recognizes net gain from the sale
of securities prior to the Closing Date, such gain, to the extent not offset
by capital loss carryovers, will be distributed to Shareholders prior to the
Closing Date.
Shareholders will continue to be able to redeem their shares of Liquid
Asset at net asset value next determined after receipt of the redemption
request meeting certain requirements until the close of business on the
business day next preceding the Closing Date. Redemption requests received by
Liquid Asset thereafter will be treated as requests for redemption of shares
of the Acquiring Fund.
TAX ASPECTS OF THE REORGANIZATION
At least one but not more than 20 business days prior to the Valuation
Date, Liquid Asset will declare and pay a dividend or dividends which,
together with all previous such dividends, will have the effect of
distributing to Shareholders all of Liquid Asset's investment company taxable
income for all periods since inception of Liquid Asset through and including
the Valuation Date (computed without regard to any dividends paid deduction),
and all of Liquid Asset's net capital gain, if any, realized in such periods
(after reduction for any capital loss carryforward).
The Reorganization is intended to qualify for Federal income tax purposes
as a tax-free reorganization under Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended (the "Code"). Liquid Asset and the Acquiring
Fund have represented that, to their best knowledge, there is no plan or
intention by Shareholders to redeem, sell, exchange or otherwise dispose of a
number of the Acquiring Fund Shares received in the transaction that would
reduce Shareholders' ownership of the Acquiring Fund Shares to a
11
<PAGE>
number of shares having a value, as of the Closing Date, of less than 50% of
the value of all of the formerly outstanding Liquid Asset shares as of the
same date. Liquid Asset and the Acquiring Fund have each further represented
that, as of the Closing Date, Liquid Asset and the Acquiring Fund will
qualify as regulated investment companies.
As a condition to the Reorganization, Liquid Asset and the Acquiring Fund
will receive an opinion of Gordon Altman Butowsky Weitzen Shalov & Wein that,
based on certain assumptions, facts, the terms of the Reorganization
Agreement and additional representations set forth in the Reorganization
Agreement or provided by Liquid Asset and the Acquiring Fund:
1. The transfer of substantially all of Liquid Asset's assets in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund of
certain stated liabilities of Liquid Asset followed by the distribution by
Liquid Asset of the Acquiring Fund Shares to Shareholders in exchange for
their Liquid Asset shares will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code, and Liquid Asset and the
Acquiring Fund will each be a "party to a reorganization" within the meaning
of Section 368 (b) of the Code;
2. No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of Liquid Asset solely in exchange for the Acquiring
Fund Shares and the assumption by the Acquiring Fund of the stated
liabilities of Liquid Asset;
3. No gain or loss will be recognized by Liquid Asset upon the transfer of
the assets of Liquid Asset to the Acquiring Fund in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of the stated
liabilities or upon the distribution of the Acquiring Fund Shares to
Shareholders in exchange for their Liquid Asset shares;
4. No gain or loss will be recognized by Shareholders upon the exchange of
the shares of Liquid Asset for the Acquiring Fund Shares;
5. The aggregate tax basis for the Acquiring Fund Shares received by each
of the Shareholders pursuant to the reorganization will be the same as the
aggregate tax basis of the shares in Liquid Asset held by each such
Shareholder immediately prior to the reorganization;
6. The holding period of the Acquiring Fund Shares to be received by each
Shareholder will include the period during which the shares in Liquid Asset
surrendered in exchange therefor were held (provided such shares in Liquid
Asset were held as capital assets on the date of the Reorganization);
7. The tax basis of the assets of Liquid Asset acquired by the Acquiring
Fund will be the same as the tax basis of such assets to Liquid Asset
immediately prior to the Reorganization; and
8. The holding period of the assets of Liquid Asset in the hands of the
Acquiring Fund will include the period during which those assets were held by
Liquid Asset.
SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE EFFECT, IF
ANY, OF THE PROPOSED TRANSACTION IN LIGHT OF THEIR INDIVIDUAL CIRCUMSTANCES.
BECAUSE THE FOREGOING DISCUSSION ONLY RELATES TO THE FEDERAL INCOME TAX
CONSEQUENCES OF THE PROPOSED TRANSACTION, SHAREHOLDERS SHOULD ALSO CONSULT
THEIR TAX ADVISORS AS TO STATE AND LOCAL TAX CONSEQUENCES, IF ANY, OF THE
PROPOSED TRANSACTION.
DESCRIPTION OF SHARES
Shares of the Acquiring Fund to be issued pursuant to the Reorganization
Agreement will, when issued, be fully paid and non-assessable by the
Acquiring Fund and transferable without restrictions and will have no
preemptive rights.
12
<PAGE>
CAPITALIZATION TABLE (UNAUDITED)
The following table sets forth the capitalization of the Acquiring Fund
and Liquid Asset as of March 31, 1998 and on a pro forma combined basis as if
the Reorganization had occurred on that date:
<TABLE>
<CAPTION>
NET ASSET
SHARES VALUE
NET ASSETS OUTSTANDING PER SHARE
--------------- -------------- -----------
<S> <C> <C> <C>
Liquid Asset.............. $ 18,291,541 18,291,541 $1.00
Acquiring Fund............ $14,124,586,211 14,124,586,211 $1.00
Combined Fund (pro
forma)................... $14,142,877,752 14,142,877,752 $1.00
</TABLE>
APPRAISAL RIGHTS
Shareholders will have no appraisal rights in connection with the
Reorganization.
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES AND POLICIES
Liquid Asset and the Acquiring Fund have identical investment objectives,
which are high current income, preservation of capital and liquidity. Liquid
Asset and the Acquiring Fund seeks to achieve their objectives by investing
in the following money market instruments: United States Government
securities, obligations of U.S. regulated banks and savings and loan
associations having assets of $1 billion or more, high grade commercial
paper, certificates of deposit of $100,000 or less of U.S. regulated banks
and savings institutions having total assets of less than $1 billion which
are fully federally insured as to principal (the interest may not be insured)
and high grade corporate obligations maturing in thirteen months or less.
The investment policies of both Liquid Asset and the Acquiring Fund, which
are identical, are not fundamental and may be changed by their respective
Boards. For a more complete discussion of each fund's policies see
"Investment Objectives and Policies" in each fund's respective Prospectus and
"Investment Practices and Policies" in each fund's respective Statement of
Additional Information.
INVESTMENT RESTRICTIONS
The investment restrictions adopted by Liquid Asset and the Acquiring Fund
as fundamental are substantially similar and are summarized under the caption
"Investment Restrictions" in their respective Prospectuses and Statements of
Additional Information. A fundamental investment restriction cannot be
changed without the vote of a majority of the outstanding voting securities
of a fund, as defined in the 1940 Act. The material differences are set forth
herein. The Acquiring Fund has a fundamental restriction that it may not
purchase more than 10% of the outstanding voting securities of any one
issuer, whereas Liquid Asset is subject to a similar limitation with respect
to only 75% of its total assets. The Acquiring Fund may not purchase
securities of any one issuer, except securities issued by U.S. Government
agencies or instrumentalities, having a record, together with predecessors,
of less than three years' continuous operation, if, immediately after such
purchase, more than 5% of the fund's total assets taken at market value would
be invested in such securities, whereas Liquid Asset is not subject to such
restriction. Liquid Asset may not make loans to others, except through the
purchase of debt obligations and repurchase agreements and loans of portfolio
securities in excess of 10% of the value of the fund's total assets,
including maintaining collateral from the borrower equal at all times to the
current market value of the securities loaned, whereas the Acquiring Fund is
not subject to such restriction.
13
<PAGE>
The Acquiring Fund reserves the right to seek to achieve its investment
objectives by investing all of its investable assets in a diversified,
open-end management investment company having the same investment objectives
and policies and substantially the same investment restrictions as those
applicable to the Acquiring Fund; Liquid Asset does not have this investment
flexibility.
Finally, the Acquiring Fund has a fundamental restriction that it may not
invest in securities of any issuer if, to the knowledge of such fund, any
officer, or director of the fund or of InterCapital, owns more than 1/2 of 1%
of the outstanding securities of such issuer, and such officers and directors
who own more than 1/2 of 1% own in the aggregate more than 5% of the
outstanding securities of such issuer; whereas, Liquid Asset is subject to
such limitation on a non-fundamental basis.
ADDITIONAL INFORMATION ABOUT LIQUID ASSET
AND THE ACQUIRING FUND
GENERAL
For a discussion of the organization and operation of the Acquiring Fund
and Liquid Asset, see "The Fund and its Management," "Investment Objectives
and Policies," "Investment Restrictions" and "Prospectus Summary" in, and the
cover page of, their respective Prospectuses.
FINANCIAL INFORMATION
For certain financial information about the Acquiring Fund and Liquid
Asset, see "Financial Highlights" in their respective Prospectuses and
"Performance Information" in the Prospectus of Liquid Asset and "Dividends,
Distributions and Taxes--Current and Effective Yield" in the prospectus of
the Acquiring Fund.
MANAGEMENT
For information about the Acquiring Fund's and Liquid Asset's Board of
Directors/Trustees, the Investment Manager and the Distributor, see "The Fund
and its Management" and "Investment Objectives and Policies" in, and the back
cover of, their respective Prospectuses.
DESCRIPTION OF SECURITIES AND SHAREHOLDER INQUIRIES
For a description of the nature and most significant attributes of shares
of Liquid Asset and the Acquiring Fund, and information regarding shareholder
inquiries, see "Additional Information" in their respective Prospectuses.
DIVIDENDS, DISTRIBUTIONS AND TAXES
For a discussion of the Acquiring Fund's and Liquid Asset's policies with
respect to dividends, distributions and taxes, see "Dividends, Distributions
and Taxes" in their respective Prospectuses as well as the discussion herein
under "Synopsis--Purchases, Exchanges and Redemptions."
PURCHASES, REPURCHASES AND REDEMPTIONS
For a discussion of how the Acquiring Fund's and Liquid Asset's shares may
be purchased, repurchased and redeemed, see "Purchase of Fund Shares" and
"Shareholder Services" in their respective Prospectuses and "Redemption of
Fund Shares" in the Prospectus of Liquid Asset and "Redemptions and
Repurchases" in the Prospectus of the Acquiring Fund.
14
<PAGE>
FINANCIAL STATEMENTS AND EXPERTS
The financial statements of the Acquiring Fund and Retirement Series as of
August 31, 1997 and July 31, 1997, respectively, which are incorporated by
reference in the Statement of Additional Information relating to the
Registration Statement on Form N-14 of which this Proxy Statement and
Prospectus forms a part, have been audited by Price Waterhouse LLP,
independent accountants, for the periods indicated in its respective reports
thereon. Such financial statements have been incorporated by reference in
reliance upon such reports given upon the authority of Price Waterhouse LLP
as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of the Acquiring
Fund will be passed upon by Gordon Altman Butowsky Weitzen Shalov & Wein, New
York, New York. Such firm will rely on Piper & Marbury LLP as to matters of
Maryland law.
AVAILABLE INFORMATION
Additional information about Liquid Asset and the Acquiring Fund is
available, as applicable, in the following documents which are incorporated
herein by reference: (i) the Acquiring Fund's Prospectus dated October 24,
1997, attached to this Proxy Statement and Prospectus, which Prospectus forms
a part of Post-Effective Amendment No. 34 to the Acquiring Fund's
Registration Statement on Form N-1A (File Nos. 2-53856; 811-2575); (ii) the
Acquiring Fund's Semi-Annual Report for the six month period ended February
28, 1998; (iii) the Prospectus for Retirement Series dated October 31, 1997,
which Prospectus forms a part of Post-Effective Amendment No. 6 to the
Registration Statement for Retirement Series on Form N-1A (File Nos.
33-48172; 811-6682); and (iv) the Annual Report for Retirement Series for the
fiscal year ended July 31, 1997 and its Semi-Annual Report for the six months
ended January 31, 1998. The foregoing documents may be obtained without charge
by calling Nina Maceda at Dean Witter Trust Company at (800) 869-NEWS.
Retirement Series and the Acquiring Fund are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended, and in
accordance therewith, file reports and other information with the Commission.
Proxy material, reports and other information about Liquid Asset and the
Acquiring Fund which are of public record can be inspected and copied at
public reference facilities maintained by the Commission at Room 1204,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and certain
of its regional offices, and copies of such materials can be obtained at
prescribed rates from the Public Reference Branch, Office of Consumer Affairs
and Information Services, Securities and Exchange Commission, Washington,
D.C. 20549.
OTHER BUSINESS
Management of the Retirement Series knows of no business other than the
matters specified above which will be presented at the Meeting. Since matters
not known at the time of the solicitation may come before the Meeting, the
proxy as solicited confers discretionary authority with respect to such
matters as properly come before the Meeting, including any adjournment or
adjournments thereof, and it is the intention of the persons named as
attorneys-in-fact in the proxy to vote this proxy in accordance with their
judgment on such matters.
By Order of the Board of
Trustees,
Barry Fink,
Secretary
June , 1998
15
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as of this
30th day of April, 1998, by and between DEAN WITTER LIQUID ASSET FUND INC., a
Maryland Corporation (the "Acquiring Fund") and DEAN WITTER RETIREMENT
SERIES, a Massachusetts business trust ("Retirement Series"), on behalf of
the Liquid Asset Series ("Liquid Asset").
This Agreement is intended to be and is adopted as a "plan of
reorganization" within the meaning of Treas. Reg. 1.368-2(g), for a
reorganization under Section 368(a) (1) of the Internal Revenue Code of 1986,
as amended (the "Code"). The reorganization ("Reorganization") will consist
of the transfer to the Acquiring Fund of substantially all of the assets of
Liquid Asset in exchange for the assumption by the Acquiring Fund of all
stated liabilities of Liquid Asset and the issuance by the Acquiring Fund of
shares of common stock (the "Acquiring Fund Shares"), to be distributed,
after the Closing Date hereinafter referred to, to the shareholders of Liquid
Asset in liquidation of Liquid Asset as provided herein, all upon the terms
and conditions hereinafter set forth in this Agreement.
In consideration of the premises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:
1. THE REORGANIZATION AND LIQUIDATION OF LIQUID ASSET
1.1 Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, Retirement Series
agrees to assign, deliver and otherwise transfer the Liquid Asset Assets (as
defined in paragraph 1.2) to the Acquiring Fund and the Acquiring Fund agrees
in exchange therefor to assume all of Liquid Asset's stated liabilities on
the Closing Date as set forth in paragraph 1.3(a) and to deliver to Liquid
Asset the number of the Acquiring Fund Shares, including fractional Acquiring
Fund Shares, equal to the number of Liquid Asset shares issued and
outstanding on the Valuation Date (as defined in paragraph 2.1). Such
transactions shall take place at the closing provided for in paragraph 3.1
("Closing").
1.2 (a) The "Liquid Asset Assets" shall consist of all property, including
without limitation, all cash, cash equivalents, securities and dividend and
interest receivables owned by Liquid Asset, and any deferred or prepaid
expenses shown as an asset on Liquid Asset's books on the Valuation Date.
(b) On or prior to the Valuation Date, Retirement Series will provide the
Acquiring Fund with a list of all of Liquid Asset's assets to be assigned,
delivered and otherwise transferred to the Acquiring Fund and of the stated
liabilities to be assumed by the Acquiring Fund pursuant to this Agreement.
Liquid Asset reserves the right to sell any of the securities on such list
but will not, without the prior approval of the Acquiring Fund, acquire any
additional securities other than securities of the type in which the
Acquiring Fund is permitted to invest and in amounts agreed to in writing by
the Acquiring Fund. The Acquiring Fund will, within a reasonable time prior
to the Valuation Date, furnish Liquid Asset with a statement of the Acquiring
Fund's investment objectives, policies and restrictions and a list of the
securities, if any, on the list referred to in the first sentence of this
paragraph that do not conform to the Acquiring Fund's investment objective,
policies and restrictions. In the event that Liquid Asset holds any
investments that the Acquiring Fund is not permitted to hold, Liquid Asset
will dispose of such securities on or prior to the Valuation Date. In
addition, if it is determined that the portfolios of Liquid Asset and the
Acquiring Fund, when aggregated, would contain investments exceeding certain
percentage limitations imposed upon the Acquiring Fund with respect to such
investments, Liquid Asset, if requested by the Acquiring Fund will, on or
prior to the Valuation Date, dispose of and/or reinvest a sufficient amount
of such investments as may be necessary to avoid violating such limitations
as of the Closing Date (as defined in paragraph 3.1).
A-1
<PAGE>
1.3 Liquid Asset will endeavor to discharge all of its liabilities and
obligations on or prior to the Valuation Date. The Acquiring Fund will assume
all stated liabilities, which includes, without limitation, all expenses,
costs, charges and reserves reflected on an unaudited Statement of Assets and
Liabilities of Liquid Asset prepared by the Treasurer of Liquid Asset as of
the Valuation Date in accordance with generally accepted accounting
principles consistently applied from the prior audited period.
1.4 In order for Liquid Asset to comply with Section 852(a)(1) of the Code
and to avoid having any investment company taxable income or net capital gain
(as defined in Sections 852(b)(2) and 1222(11) of the Code, respectively) (to
the extent there is any) in the short taxable year ending with its
dissolution, Liquid Asset will on or before the Valuation Date (a) declare a
dividend in an amount large enough so that it will have declared dividends of
all of its investment company taxable income and net capital gain, if any,
for such taxable year (determined without regard to any deduction for
dividends paid) and (b) distribute such dividend.
1.5 On the Closing Date or as soon as practicable thereafter, Liquid Asset
will distribute the Acquiring Fund Shares received by Liquid Asset pursuant
to paragraph 1.1 pro rata to its shareholders of record determined as of the
close of business on the Valuation Date ("Liquid Asset Shareholders"). Such
distribution will be accomplished by an instruction, signed by the Secretary
of Retirement Series, to transfer the Acquiring Fund Shares then credited to
Liquid Asset's account on the books of the Acquiring Fund to open accounts on
the books of the Acquiring Fund in the names of the Liquid Asset Shareholders
and representing the respective pro rata number of the Acquiring Fund Shares
due such Liquid Asset Shareholders. All issued and outstanding shares of
Liquid Asset simultaneously will be canceled on Liquid Asset's books;
however, share certificates representing interests in Liquid Asset will
represent a number of the Acquiring Fund Shares after the Closing Date as
determined in accordance with paragraph 2.3. The Acquiring Fund will issue
certificates representing the Acquiring Fund Shares in connection with such
exchange only upon the written request of a Liquid Asset Shareholder.
1.6 Ownership of the Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. The Acquiring Fund Shares will be issued
in the manner described in the Acquiring Fund's current Prospectus and
Statement of Additional Information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund Shares
in a name other than the registered holder of the Acquiring Fund Shares on
Liquid Asset's books as of the close of business on the Valuation Date shall,
as a condition of such issuance and transfer, be paid by the person to whom
the Acquiring Fund Shares are to be issued and transferred.
1.8 Any reporting responsibility of Retirement Series, on behalf of Liquid
Assets, is and shall remain the responsibility of Retirement Series up to and
including the date on which Retirement Series is dissolved and deregistered
pursuant to paragraph 1.9.
1.9 Retirement Series shall be dissolved as a Massachusetts business trust
and deregistered as an investment company under the Investment Company Act of
1940, as amended ("1940 Act"), promptly following the making of all
distributions pursuant to paragraph 1.5 and the reorganization or liquidation
of each of its portfolios.
1.10 Copies of all books and records maintained on behalf of Liquid Asset
in connection with its obligations under the 1940 Act, the Code, state blue
sky laws or otherwise in connection with this Agreement will promptly after
the Closing be delivered to officers of the Acquiring Fund or their designee
and the Acquiring Fund or its designee shall comply with applicable record
retention requirements to which Liquid Asset is subject under the 1940 Act.
A-2
<PAGE>
2. VALUATION
2.1 The number of Liquid Asset shares issued and outstanding and the
number of Acquiring Fund Shares (including fractional shares, if any) to be
issued hereunder shall, in each case be computed as of 4:00 p.m. New York
City time on the third day that the New York Stock Exchange is open for
business following the receipt of the requisite approval by shareholders of
Liquid Asset of this Agreement or at such time on such earlier or later date
after such approval as may be mutually agreed upon in writing (such time and
date being hereinafter called the "Valuation Date"), after the declaration of
any payment of any dividend on that date.
3. CLOSING AND CLOSING DATE
3.1 The Closing shall take place on the Valuation Date (the "Closing
Date"). The Closing shall be held as of 9:00 a.m. Eastern time, or at such
other time as the parties may agree. The Closing shall be held in a location
mutually agreeable to the parties hereto. All acts taking place at the
Closing shall be deemed to take place simultaneously as of 9:00 a.m. Eastern
time on the Closing Date unless otherwise provided.
3.2 Portfolio securities held by Liquid Asset and represented by a
certificate or other written instrument shall be presented by it or on its
behalf to The Bank of New York (the "Custodian"), as custodian for the
Acquiring Fund, for examination no later than five business days preceding
the Valuation Date. Such portfolio securities (together with any cash or
other assets) shall be delivered by Liquid Asset to the Custodian for the
account of the Acquiring Fund on or before the Closing Date in conformity
with applicable custody provisions under the 1940 Act and duly endorsed in
proper form for transfer in such condition as to constitute good delivery
thereof in accordance with the custom of brokers. The portfolio securities
shall be accompanied by all necessary federal and state stock transfer stamps
or a check for the appropriate purchase price of such stamps. Portfolio
securities and instruments deposited with a securities depository (as defined
in Rule 17f-4 under the 1940 Act) shall be delivered on or before the Closing
Date by book-entry in accordance with customary practices of such depository
and the Custodian. The cash delivered shall be in the form of a Federal Funds
wire, payable to the order of "The Bank of New York, Custodian for Dean
Witter Liquid Asset Fund Inc."
3.3 In the event that on the Valuation Date, (a) the New York Stock
Exchange shall be closed to trading or trading thereon shall be restricted or
(b) trading or the reporting of trading on such Exchange or elsewhere shall
be disrupted so that, in the judgment of both the Acquiring Fund and Liquid
Asset, accurate appraisal of the value of the net assets of the Acquiring
Fund or the Liquid Asset Assets is impracticable, the Valuation Date shall be
postponed until the first business day after the day when trading shall have
been fully resumed without restriction or disruption and reporting shall have
been restored.
3.4 If requested, Retirement Series shall deliver to the Acquiring Fund or
its designee (a) at the Closing, a list, certified by its Secretary, of the
names, addresses and taxpayer identification numbers of the Liquid Asset
Shareholders and the number and percentage ownership of outstanding Liquid
Asset shares owned by each such Liquid Asset Shareholder, all as of the
Valuation Date, and (b) as soon as practicable after the Closing, all
original documentation (including Internal Revenue Service forms,
certificates, certifications and correspondence) relating to the Liquid Asset
Shareholders' taxpayer identification numbers and their liability for or
exemption from back-up withholding. The Acquiring Fund shall issue and
deliver to such Secretary a confirmation evidencing delivery of the Acquiring
Fund Shares to be credited on the Closing Date to Liquid Asset or provide
evidence satisfactory to Liquid Asset that such Acquiring Fund Shares have
been credited to Liquid Asset's account on the books of the Acquiring Fund.
At the Closing, each party shall deliver to the other such bills of sale,
checks, assignments, share certificates, if any, receipts or other documents
as such other party or its counsel may reasonably request.
A-3
<PAGE>
4. COVENANTS OF THE ACQUIRING FUND AND LIQUID ASSET
4.1 Except as otherwise expressly provided herein with respect to Liquid
Asset, the Acquiring Fund and Liquid Asset each will operate its business in
the ordinary course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include customary
dividends and other distributions.
4.2 The Acquiring Fund will prepare and file with the Securities and
Exchange Commission ("Commission") a registration statement on Form N-14
under the Securities Act of 1933, as amended ("1933 Act"), relating to the
Acquiring Fund Shares ("Registration Statement"). Retirement Series will
provide the Acquiring Fund with the Proxy Materials as described in paragraph
4.3 below, for inclusion in the Registration Statement. Liquid Asset will
further provide the Acquiring Fund with such other information and documents
relating to Liquid Asset as are reasonably necessary for the preparation of
the Registration Statement.
4.3 Retirement Series will call a meeting of the Liquid Asset shareholders
to consider and act upon this Agreement and to take all other action
necessary to obtain approval of the transactions contemplated herein.
Retirement Series will prepare the notice of meeting, form of proxy and proxy
statement (collectively, "Proxy Materials") to be used in connection with
such meeting; provided that the Acquiring Fund will furnish Retirement Series
with its currently effective prospectus for inclusion in the Proxy Materials
and with such other information relating to the Acquiring Fund as is
reasonably necessary for the preparation of the Proxy Materials.
4.4 Retirement Series will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the
beneficial ownership of Liquid Asset shares.
4.5 Subject to the provisions of this Agreement, the Acquiring Fund and
Retirement Series, on behalf of Liquid Asset, will each take, or cause to be
taken, all action, and do or cause to be done, all things reasonably
necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement.
4.6 Retirement Series shall furnish or cause to be furnished to the
Acquiring Fund within 30 days after the Closing Date a statement of Liquid
Asset's assets and liabilities as of the Closing Date, which statement shall
be certified by the Treasurer of Retirement Series and shall be in accordance
with generally accepted accounting principles consistently applied. As
promptly as practicable, but in any case within 60 days after the Closing
Date, Retirement Series shall furnish the Acquiring Fund, in such form as is
reasonably satisfactory to the Acquiring Fund, a statement certified by the
Treasurer of Retirement Series of Liquid Asset's earnings and profits for
federal income tax purposes that will be carried over to the Acquiring Fund
pursuant to Section 381 of the Code.
4.7 As soon after the Closing Date as is reasonably practicable,
Retirement Series (a) shall prepare and file all federal and other tax
returns and reports on behalf of Liquid Asset required by law to be filed
with respect to all periods ending on or before the Closing Date but not
theretofore filed and (b) shall pay all federal and other taxes shown as due
thereon and/or all federal and other taxes that were unpaid as of the Closing
Date, including without limitation, all taxes for which the provision for
payment was made as of the Closing Date (as represented in paragraph 5.2(k)).
4.8 The Acquiring Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act and the 1940 Act and to
make such filings required by the state Blue Sky and securities laws as it
may deem appropriate in order to continue its operations after the Closing
Date.
A-4
<PAGE>
5. REPRESENTATIONS AND WARRANTIES
5.1 The Acquiring Fund represents and warrants to Retirement Series, on
behalf of Liquid Asset, as follows:
(a) The Acquiring Fund is a validly existing Maryland corporation with
full power to carry on its business as presently conducted;
(b) The Acquiring Fund is a duly registered, open-end, management
investment company, and its registration with the Commission as an
investment company under the 1940 Act and the registration of its shares
under the 1933 Act are in full force and effect;
(c) All of the issued and outstanding shares of the Acquiring Fund have
been offered and sold in compliance in all material respects with
applicable registration requirements of the 1933 Act and state securities
laws. Shares of the Acquiring Fund are registered in all jurisdictions in
which they are required to be registered under state securities laws and
other laws, and said registrations, including any periodic reports or
supplemental filings, are complete and current, all fees required to be
paid have been paid, and the Acquiring Fund is not subject to any stop
order and is fully qualified to sell its shares in each state in which its
shares have been registered;
(d) The current Prospectus and Statement of Additional Information of the
Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the regulations
thereunder and do not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading;
(e) The Acquiring Fund is not in, and the execution, delivery and
performance of this Agreement will not result in a, material violation of
any provision of the Acquiring Fund's Articles of Incorporation or By-Laws
or of any agreement, indenture, instrument, contract, lease or other
undertaking to which the Acquiring Fund is a party or by which it is
bound;
(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or, to its
knowledge, threatened against the Acquiring Fund or any of its properties
or assets which, if adversely determined, would materially and adversely
affect its financial condition or the conduct of its business; and the
Acquiring Fund knows of no facts that might form the basis for the
institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects, or is reasonably likely to
materially and adversely effect, its business or its ability to consummate
the transactions herein contemplated;
(g) The Statement of Assets and Liabilities, Statement of Operations,
Statement of Changes in Net Assets and Financial Highlights as of August
31, 1997, and for the year then ended, of the Acquiring Fund certified by
Price Waterhouse LLP (copies of which have been furnished to Liquid
Asset), fairly present, in all material respects, the Acquiring Fund's
financial condition as of such date in accordance with generally accepted
accounting principles, and its results of such operations, changes in its
net assets and financial highlights for such period, and as of such date
there were no known liabilities of the Acquiring Fund (contingent or
otherwise) not disclosed therein that would be required in accordance with
generally accepted accounting principles to be disclosed therein;
(h) All issued and outstanding Acquiring Fund Shares are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid
and nonassessable with no personal liability attaching to the
A-5
<PAGE>
ownership thereof, except as set forth under the caption "Additional
Information" in the Acquiring Fund's current Prospectus incorporated by
reference in the Registration Statement. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of its shares;
(i) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of the Acquiring Fund,
and this Agreement constitutes a valid and binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors rights and to general equity
principles. No other consents, authorizations or approvals are necessary
in connection with the Acquiring Fund's performance of this Agreement;
(j) The Acquiring Fund Shares to be issued and delivered to Retirement
Series, for the account of the Liquid Asset Shareholders, pursuant to the
terms of this Agreement will at the Closing Date have been duly authorized
and, when so issued and delivered, will be duly and validly issued
Acquiring Fund Shares, and will be fully paid and non-assessable with no
personal liability attaching to the ownership thereof, except as set forth
under the caption "Additional Information" in the Acquiring Fund's current
Prospectus incorporated by reference in the Registration Statement;
(k) All material Federal and other tax returns and reports of the
Acquiring Fund required by law to be filed on or before the Closing Date
have been filed and are correct, and all Federal and other taxes shown as
due or required to be shown as due on said returns and reports have been
paid or provision has been made for the payment thereof, and to the best
of the Acquiring Fund's knowledge, no such return is currently under audit
and no assessment has been asserted with respect to any such return;
(l) For each taxable year since its inception, the Acquiring Fund has met
the requirements of Subchapter M of the Code for qualification and
treatment as a "regulated investment company" and neither the execution or
delivery of nor the performance of its obligations under this Agreement
will adversely affect, and no other events are reasonably likely to occur
which will adversely affect the ability of the Acquiring Fund to continue
to meet the requirements of Subchapter M of the Code;
(m) Since August 31, 1997 there has been no change by the Acquiring Fund
in accounting methods, principles, or practices, including those required
by generally accepted accounting principles;
(n) The information furnished or to be furnished by the Acquiring Fund
for use in registration statements, proxy materials and other documents
which may be necessary in connection with the transactions contemplated
hereby shall be accurate and complete in all material respects and shall
comply in all material respects with Federal securities and other laws and
regulations applicable thereto; and
(o) The Proxy Materials to be included in the Registration Statement
(only insofar as they relate to the Acquiring Fund) will, on the effective
date of the Registration Statement and on the Closing Date, not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which such statements were made, not
materially misleading.
5.2 Retirement Series, on behalf of Liquid Asset, represents and warrants
to the Acquiring Fund as follows:
(a) Retirement Series is a validly existing Massachusetts business trust
with full power to carry on its business as presently conducted;
(b) Retirement Series is a duly registered, open-end, management
investment company, and its registration with the Commission as an
investment company under the 1940 Act and the registration of its shares
under the 1933 Act are in full force and effect;
A-6
<PAGE>
(c) All of the issued and outstanding shares of beneficial interest of
Liquid Asset have been offered and sold in compliance in all material
respects with applicable requirements of the 1933 Act and state securities
laws. Shares of Liquid Asset are registered in all jurisdictions in which
they are required to be registered and said registrations, including any
periodic reports or supplemental filings, are complete and current, all
fees required to be paid have been paid, and Retirement Series is not
subject to any stop order and is fully qualified to sell its shares in
each state in which its shares have been registered;
(d) The current Prospectus and Statement of Additional Information of
Retirement Series conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the regulations
thereunder and do not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading;
(e) Retirement Series is not, and the execution, delivery and performance
of this Agreement will not result, in a material violation of any
provision of the Declaration of Trust of Retirement Series or By-Laws of
Retirement Series or of any agreement, indenture, instrument, contract,
lease or other undertaking to which Retirement Series is a party or by
which it is bound;
(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or, to its
knowledge, threatened against Retirement Series or any of its properties
or assets which, if adversely determined, would materially and adversely
affect its financial condition or the conduct of its business; and
Retirement Series knows of no facts that might form the basis for the
institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects, or is reasonably likely to
materially and adversely effect, its business or its ability to consummate
the transactions herein contemplated;
(g) The Statement of Assets and Liabilities, Statement of Operations,
Statement of Changes in Net Assets and Financial Highlights of Retirement
Series as of July 31, 1997 and for the year then ended, certified by Price
Waterhouse LLP (copies of which have been or will be furnished to the
Acquiring Fund) fairly present, in all material respects, Liquid Asset's
financial condition as of such date, and its results of operations,
changes in its net assets and financial highlights for such period in
accordance with generally accepted accounting principles, and as of such
date there were no known liabilities of Liquid Asset (contingent or
otherwise) not disclosed therein that would be required in accordance with
generally accepted accounting principles to be disclosed therein;
(h) Retirement Series has no material contracts or other commitments
(other than this Agreement) that will be terminated with liability to it
prior to the Closing Date;
(i) All issued and outstanding shares of Liquid Asset are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid
and nonassessable with no personal liability attaching to the ownership
thereof, except as set forth under the caption "Additional Information" in
Liquid Asset's current Prospectus incorporated by reference in the
Registration Statement. Liquid Asset does not have outstanding any
options, warrants or other rights to subscribe for or purchase any of its
shares, nor is there outstanding any security convertible to any of its
shares. All such shares will, at the time of Closing, be held by the
persons and in the amounts set forth in the list of shareholders submitted
to the Acquiring Fund pursuant to paragraph 3.4;
(j) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action on
the part of Retirement Series, and subject to the approval
A-7
<PAGE>
of Liquid Asset's shareholders, this Agreement constitutes a valid and
binding obligation of Retirement Series, on behalf of Liquid Asset,
enforceable in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization, moratorium and other laws relating
to or affecting creditors rights and to general equity principles. No
other consents, authorizations or approvals are necessary in connection
with the performance of this Agreement by Retirement Series, on behalf of
Liquid Asset;
(k) All material federal and other tax returns and reports of Retirement
Series required by law to be filed on or before the Closing Date shall
have been filed and are correct and all Federal and other taxes shown as
due or required to be shown as due on said returns and reports have been
paid or provision has been made for the payment thereof, and to the best
knowledge of Retirement Series, no such return is currently under audit
and no assessment has been asserted with respect to any such return;
(l) For each taxable year since its inception, Liquid Asset has met all
the requirements of Subchapter M of the Code for qualification and
treatment as a "regulated investment company" and neither the execution or
delivery of nor the performance of its obligations under this Agreement
will adversely affect, and no other events are reasonably likely to occur
which will adversely affect the ability of Liquid Asset to continue to
meet the requirements of Subchapter M of the Code;
(m) At the Closing Date, Retirement Series will have good and valid title
to the Liquid Asset Assets, subject to no liens (other than the
obligation, if any, to pay the purchase price of portfolio securities
purchased by Liquid Asset which have not settled prior to the Closing
Date), security interests or other encumbrances, and full right, power and
authority to assign, deliver and otherwise transfer such assets hereunder,
and upon delivery and payment for such assets, the Acquiring Fund will
acquire good and marketable title thereto, subject to no restrictions on
the full transfer thereof, including any restrictions as might arise under
the 1933 Act;
(n) On the effective date of the Registration Statement, at the time of
the meeting of Liquid Asset's shareholders and on the Closing Date, the
Proxy Materials (exclusive of the currently effective Acquiring Fund's
Prospectus contained therein) will (i) comply in all material respects
with the provisions of the 1933 Act, the Securities Exchange Act of 1934,
as amended ("1934 Act") and the 1940 Act and the regulations thereunder
and (ii) not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading. Any other information furnished by
Retirement Series for use in the Registration Statement or in any other
manner that may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete and shall comply in all
material respects with applicable federal securities and other laws and
regulations thereunder;
(o) Liquid Asset will, on or prior to the Valuation Date, declare one or
more dividends or other distributions to shareholders that, together with
all previous dividends and other distributions to shareholders, shall have
the effect of distributing to the shareholders all of its investment
company taxable income and net capital gain, if any, through the Valuation
Date (computed without regard to any deduction for dividends paid);
(p) Retirement Series has maintained or has caused to be maintained on
its behalf all books and accounts as required of a registered investment
company in compliance with the requirements of Section 31 of the 1940 Act
and the Rules thereunder; and
(q) Liquid Asset is not acquiring the Acquiring Fund Shares to be issued
hereunder for the purpose of making any distribution thereof other than in
accordance with the terms of this Agreement.
A-8
<PAGE>
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF LIQUID ASSET
The obligations of Retirement Series to consummate the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquiring Fund of all the obligations to be performed by it hereunder on
or before the Closing Date and, in addition thereto, the following
conditions:
6.1 All representations and warranties of the Acquiring Fund contained in
this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date;
6.2 The Acquiring Fund shall have delivered to Liquid Asset a certificate
of its President and Treasurer, in a form reasonably satisfactory to
Retirement Series and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquiring Fund made in this Agreement
are true and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement, and as to such
other matters as Retirement Series shall reasonably request;
6.3 Liquid Asset shall have received a favorable opinion from Gordon
Altman Butowsky Weitzen Shalov & Wein, counsel to the Acquiring Fund, dated
as of the Closing Date, to the effect that:
(a) The Acquiring Fund is a validly existing Maryland corporation, and
has the power to own all of its properties and assets and to carry on its
business as presently conducted (Maryland counsel may be relied upon in
delivering such opinion); (b) the Acquiring Fund is a duly registered,
open-end, management investment company, and its registration with the
Commission as an investment company under the 1940 Act is in full force
and effect; (c) this Agreement has been duly authorized, executed and
delivered by the Acquiring Fund and, assuming that the Registration
Statement complies with the 1933 Act, the 1934 Act and the 1940 Act and
regulations thereunder and assuming due authorization, execution and
delivery of this Agreement by Liquid Asset, is a valid and binding
obligation of the Acquiring Fund enforceable against the Acquiring Fund in
accordance with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors rights and to general equity principles; (d) the
Acquiring Fund Shares to be issued to Liquid Asset Shareholders as
provided by this Agreement are duly authorized and upon such delivery will
be validly issued and outstanding and fully paid and non-assessable
(except as set forth under the caption "Additional Information" in the
Acquiring Fund's Prospectus), and no shareholder of the Acquiring Fund has
any preemptive rights to subscription or purchase in respect thereof
(Maryland counsel may be relied upon in delivering such opinion); (e) the
execution and delivery of this Agreement did not, and the consummation of
the transactions contemplated hereby will not, violate the Acquiring
Fund's Articles of Incorporation or By-Laws; and (f) to the knowledge of
such counsel, no consent, approval, authorization or order of any court or
governmental authority of the United States or any state is required for
the consummation by the Acquiring Fund of the transactions contemplated
herein, except such as have been obtained under the 1933 Act, the 1934 Act
and the 1940 Act and such as may be required under state securities laws;
and
6.4 As of the Closing Date, there shall have been no material change in
the investment objective, policies and restrictions nor any increase in the
investment management fees or annual fees payable pursuant to the Acquiring
Fund's 12b-1 plan of distribution from those described in the Acquiring
Fund's Prospectus and Statement of Additional Information dated October 24,
1997.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by
Retirement Series of all the obligations to be performed by it hereunder on
or before the Closing Date and, in addition thereto, the following
conditions:
A-9
<PAGE>
7.1 All representations and warranties of Retirement Series contained in
this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date;
7.2 Retirement Series shall have delivered to the Acquiring Fund at the
Closing a certificate of its President and its Treasurer, in form and
substance satisfactory to the Acquiring Fund and dated as of the Closing
Date, to the effect that the representations and warranties of Retirement
Series made in this Agreement are true and correct at and as of the Closing
Date, except as they may be affected by the transactions contemplated by this
Agreement, and as to such other matters as the Acquiring Fund shall
reasonably request;
7.3 Retirement Series shall have delivered to the Acquiring Fund a
statement of the Liquid Asset Assets and its liabilities, together with a
list of Liquid Asset's portfolio securities and other assets showing the
respective adjusted bases and holding periods thereof for income tax
purposes, as of the Closing Date, certified by the Treasurer of Retirement
Series;
7.4 Retirement Series shall have delivered to the Acquiring Fund within
three business days after the Closing a letter from Price Waterhouse LLP
dated as of the Closing Date stating that (a) such firm has performed a
limited review of the federal and state income tax returns of Retirement
Series for each of the last three taxable years and, based on such limited
review, nothing came to their attention that caused them to believe that such
returns did not properly reflect, in all material respects, the federal and
state income tax liabilities of Liquid Asset for the periods covered thereby,
(b) for the period from July 31, 1997 to and including the Closing Date, such
firm has performed a limited review (based on unaudited financial data) to
ascertain the amount of applicable federal, state and local taxes and has
determined that same either have been paid or reserves have been established
for payment of such taxes, and, based on such limited review, nothing came to
their attention that caused them to believe that the taxes paid or reserves
set aside for payment of such taxes were not adequate in all material
respects for the satisfaction of all federal, state and local tax liabilities
for the period from July 31, 1997 to and including the Closing Date and (c)
based on such limited reviews, nothing came to their attention that caused
them to believe that Liquid Asset would not qualify as a regulated investment
company for federal income tax purposes for any such year or period;
7.5 The Acquiring Fund shall have received at the Closing a favorable
opinion from Gordon Altman Butowsky Weitzen Shalov & Wein, counsel to
Retirement Series, dated as of the Closing Date to the effect that:
(a) Retirement Series is a validly existing Massachusetts business trust
and has the power to own all of its properties and assets and to carry on
its business as presently conducted (Massachusetts counsel may be relied
upon in delivering such opinion); (b) Retirement Series is a duly
registered, open-end, management investment company under the 1940 Act,
and its registration with the Commission as an investment company under
the 1940 Act is in full force and effect; (c) this Agreement has been duly
authorized, executed and delivered by Retirement Series and, assuming that
the Registration Statement complies with the 1933 Act, the 1934 Act and
the 1940 Act and the regulations thereunder and assuming due
authorization, execution and delivery of this Agreement by the Acquiring
Fund, is a valid and binding obligation of Retirement Series enforceable
against Retirement Series in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors rights and to general equity
principles; (d) the execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, violate
the Declaration of Trust or By-Laws of Retirement Series; and (e) to the
knowledge of such counsel, no consent, approval, authorization or order of
any court or governmental authority of the United States or any state is
required
A-10
<PAGE>
for the consummation by Retirement Series of the transactions contemplated
herein, except such as have been obtained under the 1933 Act, the 1934 Act
and the 1940 Act and such as may be required under state securities laws;
and
7.6 On the Closing Date, the Liquid Asset Assets shall include no assets
that the Acquiring Fund, by reason of limitations of the fund's Articles of
Incorporation or otherwise, may not properly acquire.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND
LIQUID ASSET
The obligations of Retirement Series and the Acquiring Fund hereunder are
each subject to the further conditions that on or before the Closing Date:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares
of Liquid Asset in accordance with the provisions of the Declaration of Trust
of Retirement Series, and certified copies of the resolutions evidencing such
approval shall have been delivered to the Acquiring Fund;
8.2 On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those
of the Commission and of state Blue Sky and securities authorities, including
"no-action" positions of and exemptive orders from such federal and state
authorities) deemed necessary by the Acquiring Fund or Retirement Series to
permit consummation, in all material respects, of the transactions
contemplated herein shall have been obtained, except where failure to obtain
any such consent, order or permit would not involve risk of a material
adverse effect on the assets or properties of the Acquiring Fund or Liquid
Asset;
8.4 The Registration Statement shall have become effective under the 1933
Act, no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act;
8.5 Liquid Asset shall have declared and paid a dividend or dividends
and/or other distribution or distributions that, together with all previous
such dividends or distributions, shall have the effect of distributing to the
Liquid Asset Shareholders all of Liquid Asset's investment company taxable
income (computed without regard to any deduction for dividends paid) and all
of its net capital gain (after reduction for any capital loss carry-forward
and computed without regard to any deduction for dividends paid) for all
taxable years ending on or before the Closing Date; and
8.6 The parties shall have received a favorable opinion of the law firm of
Gordon Altman Butowsky Weitzen Shalov & Wein (based on such representations
as such law firm shall reasonably request), addressed to the Acquiring Fund
and Liquid Asset, which opinion may be relied upon by the shareholders of
Liquid Asset, substantially to the effect that, for federal income tax
purposes:
(a) The transfer of substantially all of Liquid Asset's assets in
exchange for the Acquiring Fund Shares and the assumption by the Acquiring
Fund of certain stated liabilities of Liquid Asset followed by the
distribution by Liquid Asset of the Acquiring Fund Shares to the Liquid
Asset Shareholders in exchange for their Liquid Asset shares will
constitute a "reorganization" within the meaning of Section 368(a)(1)(C)
of the Code, and Liquid Asset and the Acquiring Fund will each be a "party
to a reorganization" within the meaning of Section 368(b) of the Code;
A-11
<PAGE>
(b) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of Liquid Asset solely in exchange for the Acquiring
Fund Shares and the assumption by the Acquiring Fund of the stated
liabilities of Liquid Asset;
(c) No gain or loss will be recognized by Liquid Asset upon the transfer
of the assets of Liquid Asset to the Acquiring Fund in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of the
stated liabilities or upon the distribution of the Acquiring Fund Shares
to the Liquid Asset Shareholders in exchange for their Liquid Asset
shares;
(d) No gain or loss will be recognized by the Liquid Asset Shareholders
upon the exchange of the Liquid Asset shares for the Acquiring Fund
Shares;
(e) The aggregate tax basis for the Acquiring Fund Shares received by
each Liquid Asset Shareholder pursuant to the reorganization will be the
same as the aggregate tax basis of the Liquid Asset Shares held by each
such Liquid Asset Shareholder immediately prior to the Reorganization;
(f) The holding period of the Acquiring Fund Shares to be received by
each Liquid Asset Shareholder will include the period during which the
Liquid Asset Shares surrendered in exchange therefor were held (provided
such Liquid Asset Shares were held as capital assets on the date of the
Reorganization);
(g) The tax basis of the assets of Liquid Asset acquired by the Acquiring
Fund will be the same as the tax basis of such assets to Liquid Asset
immediately prior to the Reorganization; and
(h) The holding period of the assets of Liquid Asset in the hands of the
Acquiring Fund will include the period during which those assets were held
by Liquid Asset.
Notwithstanding anything herein to the contrary, neither the Acquiring
Fund nor Liquid Asset may waive the conditions set forth in this paragraph
8.6.
9. FEES AND EXPENSES
9.1 (a) Dean Witter InterCapital Inc. ("InterCapital"), the investment
manager to both Liquid Asset and the Acquiring Fund, shall bear all expenses
incurred in connection with the carrying out of the provisions of this
Agreement, including legal, accounting, Commission registration fees and Blue
Sky expenses, printing, filing and portfolio transfer taxes (if any) incurred
in connection with the consummation of the transactions contemplated herein.
(b) In the event the transactions contemplated herein are not consummated
by reason of the Acquiring Fund's or Liquid Asset's being either unwilling or
unable to go forward, the funds' only respective obligations hereunder shall
be to reimburse InterCapital for all reasonable out-of-pocket fees and
expenses incurred by InterCapital in connection with those transactions.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 This Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection
herewith shall survive the consummation of the transactions contemplated
herein, except that the representations, warranties and covenants of
Retirement Series hereunder shall not survive the dissolution and complete
liquidation of Liquid Asset in accordance with Section 1.9.
A-12
<PAGE>
11. TERMINATION
11.1 This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing:
(a) by the mutual written consent of Retirement Series, on behalf of
Liquid Asset, and the Acquiring Fund;
(b) by either the Acquiring Fund or Retirement Series, on behalf of
Liquid Asset, by notice to the other, without liability to the terminating
party on account of such termination (providing the termination party is
not otherwise in material default or breach of this Agreement) if the
Closing shall not have occurred on or before December 31, 1998; or
(c) by either the Acquiring Fund or Retirement Series, on behalf of
Liquid Asset, in writing without liability to the terminating party on
account of such termination (provided the terminating party is not
otherwise in material default or breach of this Agreement), if (i) the
other party shall fail to perform in any material respect its agreements
contained herein required to be performed on or prior to the Closing Date,
(ii) the other party materially breaches any of its representations,
warranties or covenants contained herein, (iii) the Liquid Asset
shareholders fail to approve this Agreement at any meeting called for such
purpose at which a quorum was present or (iv) any other condition herein
expressed to be precedent to the obligations of the terminating party has
not been met and it reasonably appears that it will not or cannot be met.
11.2 (a) Termination of this Agreement pursuant to paragraphs 11.1 (a) or
(b) shall terminate all obligations of the parties hereunder and there shall
be no liability for damages on the part of the Acquiring Fund or Retirement
Series or the trustees or officers of the Acquiring Fund or Retirement
Series, to any other party or its trustees or officers.
(b) Termination of this Agreement pursuant to paragraph 11.1 (c) shall
terminate all obligations of the parties hereunder and there shall be no
liability for damages on the part of the Acquiring Fund or Retirement Series
or the directors or officers of the Acquiring Fund or Retirement Series,
except that any party in breach of this Agreement shall, upon demand,
reimburse InterCapital for all reasonable out-of-pocket fees and expenses
incurred in connection with the transactions contemplated by this Agreement,
including legal, accounting and filing fees.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the parties; provided, however,
that following the meeting of Liquid Asset's shareholders called by
Retirement Series pursuant to paragraph 4.3, no such amendment may have the
effect of changing the provisions for determining the number of the Acquiring
Fund Shares to be issued to the Liquid Asset Shareholders under this
Agreement to the detriment of such Liquid Asset Shareholders without their
further approval.
13. MISCELLANEOUS
13.1 The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
A-13
<PAGE>
13.3 This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
13.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by
any party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason
of this Agreement.
13.5 The obligations and liabilities of the Acquiring Fund hereunder are
solely those of the Acquiring Fund. It is expressly agreed that no
shareholder, nominee, director, officer, agent, or employee of the Acquiring
Fund shall be personally liable hereunder. The execution and delivery of this
Agreement have been authorized by the directors of the Acquiring Fund and
signed by authorized officers of the Acquiring Fund acting as such, and
neither such authorization by such directors nor such execution and delivery
by such officers shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally.
13.6 The obligations and liabilities of Retirement Series hereunder are
solely those of Retirement Series. lt is expressly agreed that no
shareholder, nominee, trustee, officer, agent, or employee of Retirement
Series shall be personally liable hereunder. The execution and delivery of
this Agreement have been authorized by the trustees of Retirement Series and
signed by authorized officers of Retirement Series acting as such, and
neither such authorization by such trustees nor such execution and delivery
by such officers shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by a duly authorized officer.
DEAN WITTER LIQUID ASSET FUND INC.
By: /s/ Charles A. Fiumefreddo
..............................
Name: Charles A. Fiumefreddo
Title: Chairman
DEAN WITTER RETIREMENT SERIES,
on behalf of Liquid Asset Series
By: /s/ Barry Fink
..............................
Name: Barry Fink
Title: Vice President
A-14
<PAGE>
Exhibit B
PROSPECTUS
OCTOBER 24, 1997
Dean Witter Liquid Asset Fund Inc. (the "Fund") is a no-load,
open-end diversified management investment company investing in the following
money market instruments: United States Government securities, obligations of
U.S. regulated banks and savings and loan associations having assets of $1
billion or more, high grade commercial paper, certificates of deposit of
$100,000 or less of U.S. regulated banks and savings institutions having total
assets of less than $1 billion which are fully federally insured as to principal
(the interest may not be insured) and high grade corporate obligations maturing
in thirteen months or less. The Fund has a 12b-1 Plan (see below). The
investment objectives of the Fund are high current income, preservation of
capital and liquidity (see "Investment Objectives and Policies").
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
In accordance with a Plan of Distribution pursuant to Rule 12b-1
under the Investment Company Act of 1940 with Dean Witter Distributors Inc., the
Fund is authorized to reimburse for specific expenses incurred in promoting the
distribution of the Fund's shares. Reimbursement may in no event exceed an
amount equal to payments at the annual rate of 0.15% of the average daily net
assets of the Fund.
This Prospectus sets forth concisely the information you should
know before investing in the Fund. It should be read and retained for future
reference. Additional information about the Fund is contained in the Statement
of Additional Information, dated October 24, 1997, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at its address or at one of its telephone numbers listed on
this cover page. The Statement of Additional Information is incorporated herein
by reference.
Minimum initial investment ...... $5,000
Minimum additional investment.... $ 100
Dean Witter
Liquid Asset Fund Inc.
Two World Trade Center
New York, New York 10048
TABLE OF CONTENTS
Prospectus Summary/2
Summary of Fund Expenses/3
Financial Highlights/3
The Fund and its Management/4
Investment Objectives and Policies/4
Investment Restrictions/6
Purchase of Fund Shares/7
Shareholder Services/9
Redemption of Fund Shares/12
Dividends, Distributions and Taxes/14
Additional Information/15
Report of Independent Accountants/18
Financial Statements -- August 31, 1997/23
For information about the Fund, including information on opening an account,
registration of shares, and other information relating to a specific account,
call:
- 800-869-NEWS (toll-free) or
- 212-392-2550
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Dean Witter Distributors Inc.
Distributor
<PAGE>
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
The Fund An open-end diversified management investment company
investing in money market instruments.
- --------------------------------------------------------------------------------
Shares Offered Common Stock (see page 15).
- --------------------------------------------------------------------------------
Purchase Investments may be made:
of Shares - By wire
- By mail
- By EasyInvest-SM-
- Through Dean Witter Reynolds Inc. account executives and
other Selected Broker-Dealers.
Purchases are at net asset value, without a sales charge.
Minimum initial investment: $5,000. Subsequent investments:
$100 or more (by wire or by mail), $1,000 or more (through
account executives) or $100 to $5,000 (by EasyInvest).
Orders for purchase of shares are effective on day of receipt
of payment in Federal Funds if payment is received by the
Fund's transfer agent before 12:00 noon New York time (see
page 7).
- --------------------------------------------------------------------------------
Investment High current income, preservation of capital and liquidity
Objectives (see page 4).
- --------------------------------------------------------------------------------
Authorized Money market instruments (see page 4):
Investments - United States Government securities
- Obligations of U.S. regulated banks having assets of $1
billion or more
- High grade commercial paper
- High grade corporate obligations maturing in thirteen months
or less
- Certificates of deposit of savings banks and savings and
loan associations having assets of $1 billion or more
- Certificates of deposit of $100,000 or less, of U.S.
regulated banks and savings institutions, having total
assets of less than $1 billion, which are fully federally
insured as to principal. The interest may not be insured.
- Repurchase agreements and reverse repurchase agreements (see
pages 5 and 6).
- --------------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc., the Investment Manager of the
Manager Fund, and its wholly-owned subsidiary, Dean Witter Services
Company Inc., serve in various investment management,
advisory, management and administrative capacities to 102
investment companies and other portfolios with assets of
approximately $102.3 billion at September 30, 1997
(see page 4).
- --------------------------------------------------------------------------------
Management Monthly fee at an annual rate of 0.50% of average daily net
Fee assets up to $500 million, scaled down at various levels of
net assets to 0.248% on assets over $17.5 billion
(see page 4).
- --------------------------------------------------------------------------------
Distributor Dean Witter Distributors Inc. (the "Distributor") sells shares
of the Fund through Dean Witter Reynolds Inc. and other
Selected Broker-Dealers pursuant to selected dealer
agreements. Other than the reimbursement to the Distributor
pursuant to the Rule 12b-1 Distribution Plan, the Distributor
receives no distribution fees (see pages 7 and 9).
- --------------------------------------------------------------------------------
Plan of The Fund is authorized to reimburse specific expenses incurred
Distribution in promoting the distribution of the Fund's shares pursuant to
a Plan of Distribution with the Distributor pursuant to Rule
12b-1 under the Investment Company Act of 1940. Reimbursement
may in no event exceed an amount equal to payments at the
annual rate of 0.15 of 1% of average daily net assets of the
Fund (see page 9).
- --------------------------------------------------------------------------------
Dividends Declared and automatically reinvested daily in additional
shares; cash payments of dividends available monthly (see page
14).
- --------------------------------------------------------------------------------
Reports Individual periodic account statements; annual and semi-annual
Fund financial statements.
- --------------------------------------------------------------------------------
Redemption Shares are redeemable at net asset value without any charge
(see page 12):
of Shares - By check
- By telephone or wire instructions, with proceeds wired or
mailed to a predesignated bank account.
- By mail
A shareholder's account is subject to possible involuntary
redemption if its value falls below $1,000 (see page 14).
- --------------------------------------------------------------------------------
Risks The Fund's investments are limited to U.S. Government
securities, high grade corporate obligations and obligations
of banks and savings and loan associations having assets of $1
billion or more and certificates of deposit which are fully
federally insured as to principal; consequently, the portfolio
securities of the Fund are subject to minimal risk of loss of
income and principal. However, the investor is directed to the
discussion of "Repurchase Agreements" and "Reverse Repurchase
Agreements" (see page 5) concerning any risk associated with
such portfolio securities and management techniques.
- --------------------------------------------------------------------------------
THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE IN THE PROSPECTUS
AND IN THE STATEMENT OF ADDITIONAL INFORMATION.
2
<PAGE>
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are for the
fiscal year ended August 31, 1997.
SHAREHOLDER TRANSACTION EXPENSES
- ----------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases............................. None
Maximum Sales Charge Imposed on Reinvested Dividends.................. None
Deferred Sales Charge................................................. None
Redemption Fees....................................................... None
Exchange Fee.......................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
- ----------------------------------------------------------------------
Management Fees....................................................... 0.27%
12b-1 Fees............................................................ 0.10%
Other Expenses........................................................ 0.25%
Total Fund Operating Expenses......................................... 0.62%
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ------------------------------------------------------------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end
of each time period:....................................... $6 $20 $34 $77
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Purchase of Fund Shares" and "Shareholder
Services."
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following ratios and per share data for a share of capital stock
outstanding throughout each year have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in conjunction
with the financial statements, notes thereto and the unqualified report of
independent accountants which are contained in this Prospectus commencing on
page 18.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED AUGUST 31,
--------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
-------- ------- ------- ------- -------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period....................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- ------- ------- ------- -------- -------- -------- ------- ------- -------
Net investment income......... 0.050 0.050 0.053 0.030 0.027 0.040 0.064 0.079 0.086 0.068
Less dividends from net
investment income............ (0.050) (0.050) (0.053) (0.030) (0.027) (0.040) (0.064) (0.079) (0.086) (0.068)
-------- ------- ------- ------- -------- -------- -------- ------- ------- -------
Net asset value, end of
period....................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- ------- ------- ------- -------- -------- -------- ------- ------- -------
-------- ------- ------- ------- -------- -------- -------- ------- ------- -------
TOTAL INVESTMENT RETURN+...... 5.13% 5.15% 5.41% 3.07% 2.72% 4.10% 6.61% 8.27% 8.96% 7.01%
RATIOS TO AVERAGE NET ASSETS:
Expenses...................... 0.62% 0.63% 0.65% 0.70% 0.69% 0.67% 0.62% 0.56% 0.56% 0.61%
Net investment income......... 5.01% 5.02% 5.28% 3.02% 2.67% 4.03% 6.41% 7.91% 8.66% 6.77%
SUPPLEMENTAL DATA:
Net assets, end of period, in
millions..................... $13,166 $11,389 $10,359 $8,492 $7,959 $9,214 $10,811 $11,902 $10,734 $8,056
</TABLE>
- ------------
+ Calculated based on the net asset value as of the last business day of the
period.
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
Dean Witter Liquid Asset Fund Inc. (the "Fund") is an open-end diversified
management investment company incorporated in Maryland on September 3, 1974.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment Manager"),
whose address is Two World Trade Center, New York, New York 10048, is the Fund's
Investment Manager. The Investment Manager, which was incorporated in July,
1992, is a wholly-owned subsidiary of Morgan Stanley, Dean Witter, Discover &
Co., a preeminent global financial services firm that maintains leading market
positions in each of its three primary businesses--securities, asset management
and credit services.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to 102 investment companies, thirty of which are
listed on the New York Stock Exchange, with combined assets of approximately
$98.6 billion as of September 30, 1997. The Investment Manager also manages and
advises portfolios of pension plans, other institutions and individuals which
aggregated approximately $3.7 billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of portfolio
securities. InterCapital has retained Dean Witter Services Company Inc. to
provide the aforementioned administrative services to the Fund. The Fund's Board
of Directors reviews the various services provided by or under the direction of
the Investment Manager to ensure that the Fund's general investment policies and
programs are being properly carried out and that administrative services are
being provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily at an annual rate of
0.50% of the daily net assets of the Fund up to $500 million, scaled down at
various asset levels to 0.248% on assets over $17.5 billion. For the fiscal year
ended August 31, 1997, the Fund accrued total compensation to the Investment
Manager amounting to 0.27% of the Fund's average daily net assets and the Fund's
total expenses amounted to 0.62% of the Fund's average daily net assets.
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
The investment objectives of the Fund are high current income, preservation
of capital and liquidity. The investment objectives may not be changed without
approval of the Fund's shareholders. The Fund seeks to achieve its objectives by
investing in the following money market instruments:
U.S. GOVERNMENT SECURITIES. Obligations issued or guaranteed as to principal
and interest by the United States or its agencies (such as the Export-Import
Bank of the United States, Federal Housing Administration, and Government
National Mortgage Association) or its instrumentalities (such as the Federal
Home Loan Bank, Federal Intermediate Credit Banks and Federal Land Bank),
including Treasury bills, notes and bonds;
BANK OBLIGATIONS. Obligations (including certificates of deposit and
bankers' acceptances) of banks subject to regulation by the U.S. Government and
having total assets of $1 billion or more, and instruments secured by such
obligations, not including obligations of foreign branches of domestic banks;
OBLIGATIONS OF SAVINGS INSTITUTIONS. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more;
FULLY INSURED CERTIFICATES OF DEPOSIT. Certificates of deposit of banks and
savings institutions having total assets of less than $1 billion, if the
principal amount of the obligation is federally insured by the Bank Insurance
Fund or the Savings Association Insurance Fund (each of which is administered by
the Federal Deposit Insurance Corporation), limited to $100,000 principal amount
per certificate and
4
<PAGE>
to 10% or less of the Fund's total assets in all such obligations and in all
illiquid assets, in the aggregate;
COMMERCIAL PAPER AND CORPORATE OBLIGATIONS. Commercial paper and corporate
debt obligations maturing in thirteen months or less which are rated in one of
the two highest rating categories for short-term debt obligations or, if not
rated, have been issued by issuers which have another short-term debt obligation
that is comparable in priority and security to such non-rated securities and is
so rated, by at least two nationally recognized statistical rating organizations
("NRSROs") (or one NRSRO if the instrument was rated by only one such
organization) or which, if unrated, are of comparable quality as determined in
accordance with procedures established by the Board of Directors. The NRSROs
currently rating instruments of the type the Fund may purchase are Moody's
Investors Service, Inc., Standard & Poor's Corporation, Duff and Phelps, Inc.,
Fitch Investors Service, Inc., IBCA Limited and IBCA Inc., and Thomson
Bankwatch, Inc. Their rating criteria are described in the Appendix to the
Fund's Statement of Additional Information.
The foregoing rating limitations apply at the time of acquisition of a
security. Any subsequent change in any rating by a rating service will not
require elimination of any security from the Fund's portfolio. However, in
accordance with procedures adopted by the Fund's Board of Directors pursuant to
federal securities regulations governing money market funds, if the Investment
Manager becomes aware that a portfolio security has received a new rating from
an NRSRO that is below the second highest rating, then, unless the security is
disposed of within five days, the Investment Manager will perform a
creditworthiness analysis of any such downgraded securities, which analysis will
be reported to the Directors who will, in turn, determine whether the securities
continue to present minimal credit risks to the Fund.
The ratings assigned by the NRSROs represent their opinions as to the
quality of the securities they undertake to rate. It should be emphasized,
however, that the ratings are general and not absolute standards of quality.
Subject to the foregoing requirements, the Fund may invest in commercial
paper which has been issued pursuant to the "private placement" exemption
afforded by Section 4(2) of the Securities Act of 1933 (the "Securities Act")
and which may be sold to other institutional investors pursuant to Rule 144A
under the Securities Act. Management considers such legally restricted but
readily marketable commercial paper to be liquid. However, pursuant to
procedures approved by the Board of Directors of the Fund, if a particular
investment in such commercial paper is determined to be illiquid, that
investment will be included within the 10% limitation on illiquid investments
(see "Investment Restrictions"). If at any time the Fund's investments in
illiquid securities exceed 10% of the Fund's total assets, the Fund will attempt
to dispose of illiquid securities in an orderly fashion to reduce the Fund's
holdings in such securities to less than 10% of its total assets.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which
may be viewed as a type of secured lending by the Fund, and which typically
involve the acquisition by the Fund of debt securities from a selling financial
institution such as a bank, savings and loan association or broker-dealer. The
agreement provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security ("collateral") at a
specified price and at a fixed time in the future. The Fund will accrue interest
from the institution until the time when the repurchase is to occur. Although
such date is deemed by the Fund to be the maturity date of a repurchase
agreement, the maturities of securities subject to repurchase agreements are not
subject to any limits and may exceed thirteen months. While repurchase
agreements involve certain risks not associated with direct investments in debt
securities, the Fund follows procedures designed to minimize such risks. These
procedures include effecting repurchase transactions only with large, well
capitalized and well established financial institutions and specifying the
required value of the collateral underlying the agreement.
REVERSE REPURCHASE AGREEMENTS. The Fund may also use reverse repurchase
agreements as part of its investment strategy. Reverse repurchase agreements
involve sales by the Fund of portfolio assets concurrently with an agreement by
the Fund to repurchase the same assets at a later date at a fixed price.
5
<PAGE>
VARIABLE RATE AND FLOATING RATE OBLIGATIONS. Certain of the types of
investments described above may be variable rate or floating rate obligations.
The interest rates payable on variable rate or floating rate obligations are not
fixed and may fluctuate based upon changes in market rates. The interest rate
payable on a variable rate obligation may be adjusted at predesignated periodic
intervals and on a floating rate obligation whenever there is a change in the
market rate of interest on which the interest rate payable is based.
Although the Fund will generally not seek profits through short-term
trading, it may dispose of any portfolio security prior to its maturity if, on
the basis of a revised credit evaluation of the issuer or other circumstances or
considerations, it believes such disposition advisable.
The Fund is expected to have a high portfolio turnover due to the short
maturities of securities purchased, but this should not affect income or net
asset value as brokerage commissions are not normally charged on the purchase or
sale of money market instruments.
The Fund will attempt to balance its objectives of high income, capital
preservation and liquidity by investing in securities of varying maturities and
risks. The Fund will not, however, invest in securities that mature in more than
thirteen months from the date of purchase (see "Purchase of Fund Shares --
Determination of Net Asset Value"). The amounts invested in obligations of
various maturities of thirteen months or less will depend on management's
evaluation of the risks involved. Longer-term issues, while generally paying
higher interest rates, are subject, as a result of general changes in interest
rates, to greater fluctuations in value than shorter-term issues. Thus, when
rates on new debt securities increase, the value of outstanding securities may
decline, and vice versa. Such changes may also occur, but to a lesser degree,
with short-term issues. These changes, if realized, may cause fluctuations in
the amount of daily dividends and, in extreme cases, could cause the net asset
value per share to decline (see "Purchase of Fund Shares--Determination of Net
Asset Value"). Longer-term issues also increase the risk that the issuer may be
unable to pay an installment of interest or principal at maturity. Also, in the
event of unusually large redemption demands, such securities may have to be sold
at a loss prior to maturity, or the Fund might have to borrow money and incur
interest expense. Either occurrence would adversely impact the amount of daily
dividend and could result in a decline in the daily net asset value per share.
The Fund will attempt to minimize these risks by investing in longer-term
securities when it appears to management that interest rates on such securities
are not likely to increase substantially during the period of expected holding,
and then only in securities of high quality which are readily marketable.
However, there can be no assurance that the Fund will be successful in achieving
this or its other objectives.
The foregoing investment policies are not fundamental and may be changed by
the Board of Directors without shareholder vote.
BROKERAGE ALLOCATION. Brokerage commissions are not normally charged on the
purchase or sale of money market instruments, but such transactions may involve
transaction costs in the form of spreads between bid and asked prices. Pursuant
to an order of the Securities and Exchange Commission, the Fund may effect
principal transactions in certain money market instruments with Dean Witter
Reynolds Inc. ("DWR"), a broker-dealer affiliate of InterCapital. In addition,
the Fund may incur brokerage commissions on transactions conducted through DWR
and other broker-dealer affiliates of InterCapital.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions that
have been adopted by the Fund as fundamental policies. Under the Investment
Company Act of 1940, as amended (the "Act"), a fundamental policy may not be
changed without the vote of a majority of the outstanding voting securities of
the Fund, as defined in the Act. For purposes of the following limitations: (i)
all percentage limitations apply immediately after a purchase or initial
investment, and (ii) any subsequent change in any applicable percentage
resulting from market fluctuations or other changes in total or net assets does
not require elimination of any security from the portfolio.
6
<PAGE>
The Fund may not:
1. Borrow money, except from banks for temporary or emergency purposes or
to meet redemption requests which might otherwise require the untimely
disposition of securities, and not for investment or leveraging, provided that
borrowing in the aggregate may not exceed 10% of the value of the Fund's total
assets (including the amount borrowed) at the time of such borrowing; or
mortgage, pledge or hypothecate any assets except in connection with any such
borrowing and in amounts not in excess of 10% of the value of the Fund's total
assets at the time of such borrowing.
2. Purchase securities of any issuer, except for securities issued by U.S.
Government agencies or instrumentalities, having a record, together with
predecessors, of less than three years' continuous operation, if, immediately
after such purchase, more than 5% of the Fund's total assets taken at market
value would be invested in such securities.
3. With respect to 75% of its total assets, purchase any securities, other
than obligations of the U.S. Government, or its agencies or instrumentalities,
if, immediately after such purchase, more than 5% of the value of the Fund's
total assets would be invested in securities of any one issuer. (However, as a
non-fundamental policy, the Fund will not invest more than 10% of its total
assets in the securities of any one issuer. Futhermore, pursuant to current
regulatory requirements, the Fund may only invest more than 5% of its total
assets in the securities of a single issuer (and only with respect to one issuer
at a time) for a period of not more than three business days and only if the
securities have received the highest quality rating by at least two NRSROs.)
4. Purchase any securities, other than obligations of the U.S. Government,
or its agencies or instrumentalities, if, immediately after such purchase, more
than 10% of the outstanding securities of one issuer would be owned by the Fund
(for this purpose all indebtedness of an issuer shall be deemed a single class
of security).
5. Purchase any securities, other than obligations of banks or of the U.S.
Government, or its agencies or instrumentalities, if, immediately after such
purchase, more than 25% of the value of the Fund's total assets would be
invested in the securities of issuers in the same industry; however, there is no
limitation as to investments in bank obligations or in obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities.
6. Invest more than 10% of its total assets in illiquid securities,
including repurchase agreements which have a maturity of longer than seven days.
For purposes of this restriction, securities eligible for sale pursuant to Rule
144A under the Securities Act are not considered illiquid if they are determined
to be liquid under procedures adopted by the Fund's Board of Directors.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objectives by investing all or substantially all
of its assets in another investment company having substantially the same
investment objectives and policies as the Fund.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
The Fund offers its shares for sale to the public on a continuous basis,
without a sales charge. Pursuant to a Distribution Agreement between the Fund
and Dean Witter Distributors Inc. (the "Distributor"), an affiliate of the
Investment Manager, shares of the Fund are distributed by the Distributor and
offered by DWR and other dealers who have entered into selected dealer
agreements with the Distributor ("Selected Broker-Dealers"). The principal
executive office of the Distributor is located at Two World Trade Center, New
York, New York 10048. The offering price of the shares will be at their net
asset value next determined (see "Determination of Net Asset Value" below) after
receipt of a purchase order and acceptance by the Fund's transfer agent, Dean
Witter Trust FSB (the "Transfer Agent"), in proper form and accompanied by
payment in Federal Funds (i.e., monies of member banks within the Federal
Reserve System held on deposit at a Federal Reserve Bank) available to the Fund
for investment. Shares commence earning income on the day following the date of
their purchase. Stock certificates will not be issued unless requested in
writing by the shareholder.
To initiate purchase by mail or wire, a completed Investment Application
(contained in the Prospectus) must be sent to the Transfer Agent at
7
<PAGE>
P.O. Box 1040, Jersey City, NJ 07303. Checks should be made payable to Dean
Witter Liquid Asset Fund Inc. and sent to Dean Witter Trust FSB at the above
address. Purchases by wire must be preceded by a call to the Transfer Agent
advising it of the purchase (see Investment Application or the front cover of
this Prospectus for the telephone number) and must be wired to The Bank of New
York, for credit to account of Dean Witter Trust FSB, Harborside Financial
Center, Plaza Two, Jersey City, New Jersey, Account No. 8900188413. Wire
purchase instructions must include the name of the Fund and the shareholder's
account number. Purchases made by check are normally effective within two
business days for checks drawn on Federal Reserve System member banks, and
longer for most other checks. Wire purchases received by the Transfer Agent
prior to 12:00 noon, New York time, are normally effective that day and wire
purchases received after 12:00 noon, New York time, are normally effective the
next business day. Initial investments must be at least $5,000, although the
Fund, at its discretion, may accept initial investments of smaller amounts, not
less than $1,000. The minimum initial investment under an Individual Retirement
Account or Qualified Retirement Plan for which the Transfer Agent acts as
custodian or trustee is $1,000. The minimum initial purchase in the case of an
"Education IRA" is $500, if the Distributor has reason to believe that
additional investments will increase the investment in the account to $1,000
within three years. Subsequent investments must be $100 or more and may be made
through the Transfer Agent. In case of investments pursuant to (i) Systematic
Payroll Deduction Plans (including Individual Retirement Plans), (ii) the
InterCapital mutual fund asset allocation program and (iii) fee-based programs
approved by the Distributor, pursuant to which participants pay an asset based
fee for services in the nature of investment advisory or administrative
services, the Fund, in its discretion, may accept investments without regard to
any minimum amounts which would otherwise be required, provided, in the case of
Systematic Payroll Deduction Plans, that the Distributor has reason to believe
that additional investments will increase the investment in all accounts under
such Plans to at least $5,000. The Fund and the Distributor reserve the right to
reject any purchase order.
Sales personnel of a Selected Broker-Dealer are compensated for shares of
the Fund sold by them by the Distributor or any of its affiliates and/or the
Selected Broker-Dealer. In addition, some sales personnel of the Selected
Broker-Dealer will receive various types of non-cash compensation as special
sales incentives, including trips, educational and/or business seminars and
merchandise.
Orders for the purchase of Fund shares placed by customers through DWR or
another Selected Broker-Dealer with payment in clearing house funds will be
transmitted to the Fund with payment in Federal Funds on the business day
following the day the order is placed by the customer with DWR or another
Selected Broker-Dealer. Investors desiring same day effectiveness should wire
Federal Funds directly to the Transfer Agent. An order procedure exists pursuant
to which customers of DWR or other Selected Broker-Dealers can, upon request:
(a) have the proceeds from the sale of listed securities invested in shares of
the Fund on the day following the day the customer receives such proceeds in his
or her DWR or other Selected Broker-Dealer securities account; and (b) pay for
the purchase of certain listed securities by automatic liquidation of Fund
shares owned by the customer. In addition, there is an automatic purchase
procedure whereby consenting DWR or other Selected Broker-Dealer customers who
are shareholders of the Fund will have free credit cash balances in their DWR or
other Selected Broker-Dealer securities accounts as of the close of business
(4:00 p.m., New York time) on the last business day of each week (where such
balances do not exceed $5,000) automatically invested in shares of the Fund the
next following business day. Investors with free cash credit balances (i.e.,
immediately available funds) in securities accounts at DWR or other Selected
Broker-Dealers will not have any of such funds invested in the Fund until the
business day after the customer places an order with DWR or other Selected
Broker-Dealer to purchase shares of the Fund and will not receive the daily
dividend which would have been received had such funds been invested in the Fund
on the day the order was placed with DWR or other Selected Broker-Dealer.
Accordingly, DWR or other Selected Broker-Dealers may have the use of such free
credit balances during such period.
8
<PAGE>
PLAN OF DISTRIBUTION
In accordance with a Plan of Distribution between the Fund and the
Distributor pursuant to Rule 12b-1 under the Act, certain services and
activities in connection with the distribution of the Fund's shares are
reimbursable expenses. The principal activities and services which may be
provided by the Distributor, DWR, its affiliates and other Selected
Broker-Dealers under the Plan include: (1) compensation to, and expenses of,
DWR's and other Selected Broker-Dealers' account executives 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. Reimbursements for these services will be made in monthly
payments by the Fund, which will in no event exceed an amount equal to a payment
at the annual rate of 0.15 of 1% of the Fund's average daily net assets. For the
fiscal year ended August 31, 1997, the fee paid was accrued at the annual rate
of 0.10 of 1% of the Fund's average daily net assets. Expenses incurred pursuant
to the Plan in any fiscal year will not be reimbursed by the Fund through
payments accrued in any subsequent fiscal year.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined as of 4:00 p.m., New
York time (or, on days when the New York Stock Exchange closes prior to 4:00
p.m., at such earlier time), on each day that the New York Stock Exchange is
open by taking the value of all assets of the Fund, subtracting its liabilities
and dividing by the number of shares outstanding. The net asset value per share
will not be determined on Good Friday and on such other federal and non-federal
holidays as are observed by the New York Stock Exchange.
The Fund utilizes the amortized cost method in valuing its portfolio
securities, which method involves valuing a security at its cost adjusted by a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument. The
purpose of this method of calculation is to facilitate the maintenance of a
constant net asset value per share of $1.00 although there can be no assurance
that the $1.00 net asset value will be maintained.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan is available for
shareholders who own or purchase shares of the Fund having a minimum value of at
least $5,000. The plan provides for monthly or quarterly (March, June,
September, December) checks in any dollar amount, not less than $25, or in any
whole percentage of the account balance, on an annualized basis. The shares will
be redeemed at their net asset value determined, at the shareholder's option, on
the tenth or twenty-fifth day (or next business day) of the relevant month or
quarter and normally a check for the proceeds will be mailed by the Transfer
Agent, or amounts credited to a shareholders' DWR or other Selected Broker-
Dealer brokerage account, within five days after the date of the redemption. A
shareholder wishing to make this election should do so on the Investment
Application. The withdrawal plan may be terminated at any time by the Fund.
TARGETED DIVIDENDS. In states where it is legally permissible, shareholders
may elect to have all shares of the Fund earned as a result of dividends paid in
any given month redeemed as of the end of the month and invested in shares of
any other open-end investment company for which InterCapital serves as
investment manager (collectively, with the Fund, the "Dean Witter Funds"), other
than Dean Witter Liquid Asset Fund Inc., at the net asset value per share of the
selected Dean Witter Fund determined as of the last business day of the month,
without the imposition of any applicable front-end sales charge or without the
imposition of any applicable contingent deferred sales charge upon ultimate
redemption. All such shares invested will begin to earn dividends, if any, in
the selected Dean Witter Fund on the first business day of the succeeding month.
Shareholders of the Fund must be shareholders of the selected Class of the Dean
9
<PAGE>
Witter Fund targeted to receive investments from dividends at the time they
enter the Targeted Dividends program. Investors should review the prospectus of
the targeted Dean Witter Fund before entering the program.
EASYINVEST-SM-. Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund. Shares purchased through EasyInvest will be added to the shareholder's
existing account at the net asset value calculated the same business day the
transfer of funds is effected.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of the
above services.
TAX SHELTERED RETIREMENT PLANS. Retirement plans are available for use by
the self-employed, Individual Retirement Accounts and Custodial Accounts under
Section 403(b)(7) of the Internal Revenue Code. Adoption of such plans should be
on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their DWR or other Selected Broker-
Dealer account executive or the Transfer Agent.
SYSTEMATIC PAYROLL DEDUCTION PLAN. There is also available to employers a
Systematic Payroll Deduction Plan by which their employees may invest in the
Fund. For further information, investors should contact their DWR or other
Selected Broker-Dealer account executive or the Transfer Agent.
EXCHANGE PRIVILEGE
An "Exchange Privilege," that is, the privilege of exchanging shares of
certain Dean Witter Funds for shares of the Fund, exists whereby shares of Dean
Witter Funds that are multiple class funds ("Dean Witter Multi-Class Funds") and
Dean Witter Funds that are not multiple class funds but which are sold with
either a front-end (at time of purchase) sales charge ("FSC funds") or a
contingent deferred (at time of redemption) sales charge ("CDSC funds") may be
exchanged for shares of the Fund, Dean Witter U.S. Government Money Market
Trust, Dean Witter Tax-Free Daily Income Trust, Dean Witter California Tax-Free
Daily Income Trust and Dean Witter New York Municipal Money Market Trust (which
five funds are hereinafter called "money market funds"), and for shares of Dean
Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal Trust,
Dean Witter Short-Term Bond Fund and Dean Witter Intermediate Term U.S. Treasury
Trust (which nine Funds, including the Fund, are referred to herein as the
"Exchange Funds"). Shares of the Exchange Funds received in an exchange for
shares of a Dean Witter Multi-Class Fund may be redeemed and exchanged only for
shares of the corresponding Class of a Dean Witter Multi-Class Fund or for
shares of one of the other Exchange Funds, provided that shares of the Exchange
Funds received in an exchange for Class A shares of a Dean Witter Multi-Class
Fund may also be redeemed and exchanged for shares of a FSC fund, and shares of
the Exchange Funds received in an exchange for Class B shares of a Dean Witter
Multi-Class Fund may also be redeemed and exchanged for shares of a CDSC fund.
In addition, shares of the Exchange Funds received in an exchange for shares of
a FSC fund may be redeemed and exchanged for Class A shares of a Dean Witter
Multi-Class Fund or for shares of one of the other Exchange Funds, and shares of
the Exchange Funds received in an exchange for shares of a CDSC fund may be
redeemed and exchanged for Class B shares of a Dean Witter Multi-Class Fund or
for shares of one of the other Exchange Funds.
An exchange to an Exchange Fund that is not a money market fund is on the
basis of the next calculated net asset value per share of each fund after the
exchange order is received. When exchanging into a money market fund, shares of
the Multi-Class Fund, the FSC fund, the CDSC fund or the Exchange Fund are
redeemed at their next calculated net asset value exchanged for shares of the
money market fund at their net asset value determined the following business
day. Ultimately, any applicable contingent deferred sales charge ("CDSC") will
have to be paid upon redemption of shares originally purchased from a CDSC fund
or a Class of a Dean Witter Multi-Class Fund that imposes a CDSC. (If shares of
an Exchange Fund received in exchange for shares originally
10
<PAGE>
purchased from a CDSC fund or Class B of a Dean Witter Multi-Class Fund are
exchanged for shares of another CDSC fund or a Dean Witter Multi-Class Fund
having a different CDSC schedule than that of the CDSC fund or the Dean Witter
Multi-Class Fund from which the Exchange Fund shares were acquired, the shares
will be subject to the higher CDSC schedule.) During the period of time the
shares originally purchased from a CDSC fund or from a Class of a Dean Witter
Multi-Class Fund that imposes a CDSC remain in the Exchange Fund, the holding
period (for the purpose of determining the rate of CDSC) is frozen. If those
shares are subsequently re-exchanged for shares of a CDSC fund or a Dean Witter
Multi-Class Fund, the holding period previously frozen when the first exchange
was made resumes on the last day of the month in which shares of a CDSC fund or
shares of a Dean Witter Multi-Class Fund are reacquired. Thus, the CDSC is based
upon the time (calculated as described above) the shareholder was invested in
shares of a CDSC fund or in shares of a Dean Witter Multi-Class Fund. In the
case of exchanges of Class A shares of a Dean Witter Multi-Class Fund which are
subject to a CDSC, the holding period also includes the time (calculated as
described above) the shareholder was invested in shares of a FSC fund. In the
case of shares exchanged into an Exchange Fund on or after April 23, 1990, upon
a redemption of shares which results in a CDSC being imposed, a credit (not to
exceed the amount of the CDSC) will be given in an amount equal to the Exchange
Fund 12b-1 distribution fees, if any, incurred on or after that date which are
attributable to those shares (see "Purchase of Fund Shares -- Plan of
Distribution" in the respective Exchange Funds Prospectuses for a description of
Exchange Fund distribution fees). Exchanges may be made after the shares of the
fund acquired by purchase (not by exchange or dividend reinvestment) have been
held for thirty days. There is no waiting period for exchanges of shares
acquired by exchange or dividend reinvestment.
Exchange Privilege accounts may also be maintained for shareholders of the
money market funds who acquired their shares in exchange for shares of various
TCW/DW Funds, a group of funds distributed by the Distributor for which TCW
Funds Management, Inc. serves as Adviser, under the terms and conditions
described in the Prospectus and Statement of Additional Information of each
TCW/DW Fund.
ADDITIONAL INFORMATION REGARDING EXCHANGES. Purchases and exchanges should
be made for investment purposes only. A pattern of frequent exchanges may be
deemed by management to be abusive and contrary to the best interests of the
Fund's other shareholders and, at management's discretion, may be limited by the
Fund's refusal to accept additional purchases and/or exchanges from the
investor. Although the Fund does not have any specific definition of what
constitutes a pattern of frequent exchanges, and will consider all relevant
factors in determining whether a particular situation is abusive and contrary to
the best interests of the Fund and its other shareholders, investors should be
aware that the Fund and each of the other Funds may in their discretion limit or
otherwise restrict the number of times this Exchange Privilege may be exercised
by any investor. Any such restriction will be made by the Fund on a prospective
basis only, upon notice to the shareholder not later than ten days following
such shareholder's most recent exchange.
The Exchange Privilege may be terminated or revised at any time by the Fund
and/or any of such Funds for which shares of the Fund may be exchanged, upon
such notice as may be required by applicable regulatory agencies (presently
sixty days' prior written notice for termination or material revision), provided
that six months' prior written notice of termination will be given to the
shareholders who hold shares of the Exchange Funds or TCW/DW North American
Government Income Trust pursuant to the Exchange Privilege, and provided further
that the Exchange Privilege may be terminated or materially revised without
notice under certain unusual circumstances described in the Statement of
Additional Information. Shareholders maintaining margin accounts with DWR are
referred to their account executive regarding restrictions on exchanges of
shares of the Fund pledged in their margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain one and read it carefully before
investing. Exchanges are subject to the minimum investment requirement of each
Class of shares and any other conditions imposed by each
11
<PAGE>
fund. In the case of any shareholder holding a share certificate or
certificates, no exchanges may be made until all applicable share certificates
have been received by the Transfer Agent and deposited in the shareholder's
account. An exchange will be treated for federal income tax purposes the same as
a repurchase or redemption of shares, on which the shareholder may realize a
capital gain or loss. However, the ability to deduct capital losses on an
exchange may be limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. The Exchange Privilege is
only available in states where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record and
its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the above Funds
pursuant to this Exchange Privilege by contacting their account executive (no
Exchange Privilege Authorization Form is required). Other shareholders (and
those shareholders who are clients of DWR or another Selected Broker-Dealer but
who wish to make exchanges directly by writing or telephoning the Transfer
Agent) must complete and forward to the Transfer Agent an Exchange Privilege
Authorization Form, copies of which may be obtained from the Transfer Agent, to
initiate an exchange. If the Authorization Form is used, exchanges may be made
in writing or by contacting the Transfer Agent at (800) 869-NEWS (toll-free).
The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures may
include requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number and DWR or other
Selected Broker-Dealer account number (if any). Telephone instructions may also
be recorded. If such procedures are not employed, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions.
Telephone exchange instructions will be accepted if received by the Transfer
Agent between 9:00 a.m. and 4:00 p.m., New York time, on any day the New York
Stock Exchange is open. Any shareholder wishing to make an exchange who has
previously filed an Exchange Privilege Authorization Form and who is unable to
reach the Fund by telephone should contact his or her DWR or other Selected
Broker-Dealer account executive, if appropriate, or make a written exchange
request. Shareholders are advised that during periods of drastic economic or
market changes it is possible that the telephone exchange procedures may be
difficult to implement, although this has not been the experience of the Dean
Witter Funds in the past.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about the
Exchange Privilege.
REDEMPTION OF FUND SHARES
- --------------------------------------------------------------------------------
A shareholder may withdraw all or any of his or her investments at any time,
without penalty or charge, by redeeming shares through the Transfer Agent at the
net asset value per share next determined (see "Purchase of Fund
Shares--Determination of Net Asset Value") after the receipt of a redemption
request meeting the applicable requirements as follows (all of which are subject
to the General Redemption Requirements set forth below):
1. BY CHECK
The Transfer Agent will supply blank checks to any shareholder who has
requested them on an Investment Application. The shareholder may make checks
payable to the order of anyone in any amount not less than $500 (checks written
in amounts under $500 will not be honored by the Transfer Agent). Shareholders
must sign checks exactly as their shares are registered. If the account is a
joint account, the check may contain one signature unless the joint owners have
specifically specified on an Investment Application that all owners are required
to sign checks. Only shareholders having accounts in which no stock certificates
have been issued will be permitted to redeem shares by check.
Shares will be redeemed at their net asset value next determined (see
"Purchase of Fund Shares -- Determination of Net Asset Value") after receipt by
12
<PAGE>
the Transfer Agent of a check which does not exceed the value of the account.
Payment of the proceeds of a check will normally be made on the next business
day after receipt by the Transfer Agent of the check in proper form. Shares
purchased by check (including a certified or bank cashier's check) are not
normally available to cover redemption checks until fifteen days after receipt
of the check used for investment by the Transfer Agent. The Transfer Agent will
not honor a check in an amount exceeding the value of the account at the time
the check is presented for payment.
2. BY TELEPHONE OR WIRE INSTRUCTIONS WITH
PAYMENT TO PREDESIGNATED BANK ACCOUNT
A shareholder may redeem shares by telephoning or sending wire instructions
to the Transfer Agent. Payment will be made by the Transfer Agent to the
shareholder's bank account at any commercial bank designated by the shareholder
in an Investment Application, by wire if the amount is $1,000 or more and the
shareholder so requests, and otherwise by mail. Normally, the Transfer Agent
will transmit payment the next business day following receipt of a request for
redemption in proper form. Only shareholders having accounts in which no stock
certificates have been issued will be permitted to redeem shares by wire
instructions.
DWR and any other participating Selected Broker-Dealers have informed the
Distributor and the Fund that, on behalf of and as agent for their customers who
are shareholders of the Fund, they will transmit to the Fund requests for
redemption of shares owned by their customers. In such cases, the Transfer Agent
will wire proceeds of redemptions to DWR's or another Selected Broker-Dealer's
bank account for credit to the shareholders' accounts the following business
day. DWR and other participating Selected Broker-Dealers have also informed the
Distributor and the Fund that they do not charge for this service.
Redemption instructions must include the shareholder's name and account
number and be wired or called to the Transfer Agent:
-- 800-869-NEWS (toll-free)
-- Telex No. 125076
3. BY MAIL
A shareholder may redeem shares by sending a letter to Dean Witter Trust
FSB, P.O. Box 983, Jersey City, NJ 07303, requesting redemption and surrendering
stock certificates if any have been issued.
Redemption proceeds will be mailed to the shareholder at his or her
registered address or mailed or wired to his or her predesignated bank account,
as he or she may request. Proceeds of redemption may also be sent to some other
person, as requested by the shareholder.
GENERAL REDEMPTION REQUIREMENTS
Written requests for redemption must be signed by the registered
shareholder(s). If the proceeds are to be paid to anyone other than the
registered shareholder(s) or sent to any address other than the shareholder's
registered address or predesignated bank account, signatures must be guaranteed
by an eligible guarantor acceptable to the Transfer Agent (shareholders should
contact the Transfer Agent for a determination as to whether a particular
institution is such an eligible guarantor), except in the case of redemption by
check. Additional documentation may be required where shares are held by a
corporation, partnership, trustee or executor. With regard to shares of the Fund
acquired pursuant to the Exchange Privilege, any applicable CDSC will be imposed
upon the redemption of such shares (see "Purchase of Fund Shares--Exchange
Privilege").
If shares to be redeemed are represented by a stock certificate, the request
for redemption must be accompanied by the stock certificate and a stock
assignment form signed by the registered shareholder(s) exactly as the account
is registered. Shareholders are advised, for their own protection, to send the
stock certificate and assignment form in separate envelopes (if they are being
mailed and not hand delivered) to the Transfer Agent. Signatures must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent (see
above). Additional documentation may be required where shares are held by a
corporation, partnership, trustee or executor.
All requests for redemption should be sent to Dean Witter Trust FSB, P.O.
Box 983, Jersey City, NJ 07303.
13
<PAGE>
Generally, the Fund will attempt to make payment for all redemptions within
one business day, and in no event later than seven days after receipt of such
redemption request in proper form. However, if the shares being redeemed were
purchased by check (including a certified or bank cashier's check), payment may
be delayed for the minimum time needed to verify that the check used for
investment has been honored (not more than fifteen days from the time of
investment of the check by the Transfer Agent). In addition, the Fund may
postpone redemptions at certain times when normal trading is not taking place
on the New York Stock Exchange.
The Fund reserves the right, on sixty days' notice, to redeem at net asset
value the shares of any shareholder (other than shares held in an Individual
Retirement Account or custodial account under Section 403(b)(7) of the Internal
Revenue Code) whose shares due to redemptions by the shareholder have a value
of less than $1,000, or such lesser amount as may be fixed by the Board of
Directors.
AUTOMATIC REDEMPTION PROCEDURE
The Distributor has instituted an automatic redemption procedure which it
may utilize to satisfy amounts due by the shareholder maintaining a brokerage
account with DWR or another Selected Broker-Dealer as a result of purchases of
securities or other transactions in the shareholder's brokerage account. Under
this procedure, unless the shareholder elects not to participate by so notifying
DWR or other Selected Broker-Dealer, the shareholder's DWR or other Selected
Broker-Dealer brokerage account will be scanned each business day prior to the
close of business (4:00 p.m., New York time). After application of any cash
balances in the account, a sufficient number of Fund shares may be redeemed at
the close of business to satisfy any amounts for which the shareholder is
obligated to make payment to DWR or another Selected Broker-Dealer. Redemptions
will be effected on the business day preceding the date the shareholder is
obligated to make such payment, and DWR or other Selected Broker-Dealer will
receive the redemption proceeds on the day following the redemption date.
Shareholders will receive all dividends declared and reinvested through the date
of redemption.
EASYINVEST-SM---AUTOMATIC REDEMPTION
Shareholders may invest in shares of certain other Dean Witter Funds by
subscribing to EasyInvest, an automatic purchase plan which provides for the
automatic investment of any amount from $100 to $5,000 in shares of the
specified fund. Under EasyInvest, a shareholder may direct that a sufficient
number of shares of the Fund be automatically redeemed and the proceeds
transferred automatically to the Dean Witter Funds' Transfer Agent, on a
semi-monthly, monthly or quarterly basis, for investment in shares of the
specified fund. Redemptions will be effected on the business day preceding the
investment date and the Transfer Agent will receive the proceeds for investment
on the day following the redemption date.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund declares dividends, payable on each
day the New York Stock Exchange is open for business, of all of its daily net
investment income to shareholders of record as of the close of business the
preceding business day. Dividends from net short-term capital gains, if any,
will be paid periodically. The amount of dividend may fluctuate from day to day
and may be omitted on some days if net realized losses on portfolio securities
exceed the Fund's net investment income. Dividends from net long-term capital
gains, if any, will be paid at least annually. Dividends are declared and
automatically reinvested daily in additional full and fractional shares of the
Fund (rounded to the last 1/100 of a share) at the net asset value per share at
the close of business on that day. Any dividends declared in the last quarter of
any calendar year which are paid in the following year prior to February 1 will
be deemed received by the shareholder in the prior year.
Shareholders may instruct the Transfer Agent (in writing) to have their
dividends paid out monthly in cash. For such shareholders the shares
rein-
14
<PAGE>
vested and credited to their account during the month will be redeemed as of the
close of business on the monthly payment date (which will be no later than the
last business day of the month) and the proceeds will be paid to them by check.
Shareholders who have requested to receive dividends in cash will normally
receive their monthly dividend check during the first ten days of the following
month.
Stock certificates for dividends or distributions will not be issued unless
a shareholder requests in writing that a certificate be issued for a specific
number of shares.
TAXES. Because the Fund intends to distribute all of its net investment
income and net capital gains, if any, to shareholders and intends to otherwise
comply with all of the provisions of Subchapter M of the Internal Revenue Code
to continue to qualify as a regulated investment company, it is not expected
that the Fund will be required to pay any federal income tax.
Distributions of net investment income and realized net short-term capital
gains, if any, are taxable to shareholders who are required to pay taxes on
their income as ordinary income, whether such distributions are taken in cash or
reinvested in additional shares. Distributions of realized net long-term capital
gains, if any, are taxable as long-term capital gains, regardless of how long
the shareholder has held the Fund shares. No portion of such distributions will
be eligible for the federal dividends received deduction for corporations.
The Fund advises its shareholders annually as to the federal income tax
status of distributions paid during each calendar year. To avoid being subject
to a 31% federal withholding tax on taxable dividends, capital gains
distributions and proceeds of redemptions, shareholders' taxpayer identification
numbers must be furnished and certified as to accuracy.
Shareholders are urged to consult their own tax advisers regarding specific
questions as to federal, state or local taxes.
CURRENT AND EFFECTIVE YIELD
From time to time the Fund advertises its "yield" and "effective yield."
Both yield figures are based on historical earnings and are not intended to
indicate future performance. The "yield" of the Fund refers to the income
generated by an investment in the Fund over a given period (which period will be
stated in the advertisement). This income is then annualized. The "effective
yield" for a seven-day period is calculated similarly but, when annualized, the
income earned by an investment in the Fund is assumed to be reinvested each week
within a 365-day period. The "effective yield" will be slightly higher than the
"yield" because of the compounding effect of this assumed reinvestment. The
Fund's current yield for the seven days ended August 31, 1997 was 5.13%. The
effective annual yield on 5.13% is 5.26%, assuming daily compounding. The Fund
may also advertise the growth of hypothetical investments of $10,000, $50,000
and $100,000 in shares of the Fund.
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS. All shares of the Fund are of common stock of $0.01 par value
and are equal as to earnings, assets and voting privileges. There are no
conversion, pre-emptive or other subscription rights. In the event of
liquidation, each share of common stock of the Fund is entitled to its portion
of all of the Fund's assets after all debts and expenses have been paid. The
shares do not have cumulative voting rights.
Under ordinary circumstances, the Fund is not required, nor does it intend,
to hold Annual Meetings of Stockholders. The Directors may call Special Meetings
of Stockholders for action by stockholder vote as may be required by the Act or
the Fund's By-Laws.
CODE OF ETHICS. Directors, officers and employees of InterCapital, Dean
Witter Services Company Inc. and the Distributor are subject to a strict Code of
Ethics adopted by those companies. The Code of Ethics is intended to ensure that
the interests of shareholders and other clients are placed ahead of any personal
interest, that no undue personal benefit is obtained from a person's employment
activities and that actual and potential conflicts of interest are avoided. To
achieve these goals and comply with regulatory requirements, the Code of Ethics
re-
15
<PAGE>
quires, among other things, that personal securities transactions by employees
of the companies be subject to an advance clearance process to monitor that no
Dean Witter Fund is engaged at the same time in a purchase or sale of the same
security. The Code of Ethics bans the purchase of securities in an initial
public offering, and also prohibits engaging in futures and options transactions
and profiting on short-term trading (that is, a purchase within sixty days of a
sale or a sale within sixty days of a purchase) of a security. In addition,
investment personnel may not purchase or sell a security for their personal
account within thirty days before or after any transaction in any Dean Witter
Fund managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the 1994 report by the Investment Company Institute Advisory
Group on Personal Investing.
MASTER/FEEDER CONVERSION. The Fund reserves the right to seek to achieve its
investment objectives by investing all of its investable assets in a
diversified, open-end management investment company having the same investment
objectives and policies and substantially the same investment restrictions as
those applicable to the Fund.
STOCKHOLDER INQUIRIES. All inquiries regarding the Fund should be directed
to the Fund at one of the telephone numbers or at the address set forth on the
front cover of this Prospectus.
16
<PAGE>
DEAN WITTER LIQUID ASSET FUND
RESULTS OF SPECIAL MEETING (UNAUDITED)
On May 21, 1997, a special meeting of the shareholders of Dean Witter Liquid
Asset Fund was held for the purpose of voting on four separate matters, the
results of which are as follows:
1) APPROVAL OF A NEW INVESTMENT MANAGEMENT AGREEMENT BETWEEN THE FUND AND DEAN
WITTER INTERCAPITAL INC., IN CONNECTION WITH THE MERGER OF MORGAN STANLEY
GROUP INC. WITH DEAN WITTER, DISCOVER & CO.
VOTE NO. OF SHARES
- ---------------------------------------- ------------------------
For..................................... 5,707,224,869
Against................................. 230,463,004
Abstain................................. 576,088,920
2) ELECTION OF DIRECTORS:
Michael Bozic
For..................................... 6,069,403,987
Withheld................................ 444,372,806
Charles A. Fiumefreddo
For..................................... 6,071,535,672
Withheld................................ 442,241,121
Edwin J. Garn
For..................................... 6,070,468,933
Withheld................................ 443,307,860
John R. Haire
For..................................... 6,059,487,018
Withheld................................ 454,289,775
Wayne E. Hedien
For..................................... 6,058,648,449
Withheld................................ 455,128,344
Dr. Manuel H. Johnson
For..................................... 6,076,349,660
Withheld................................ 437,427,133
Michael E. Nugent
For..................................... 6,081,000,478
Withheld................................ 432,776,315
Philip J. Purcell
For..................................... 6,084,129,623
Withheld................................ 429,647,170
John L. Schroeder
For..................................... 6,080,688,824
Withheld................................ 433,087,969
3) APPROVAL OF A NEW INVESTMENT POLICY WITH RESPECT TO INVESTMENTS IN CERTAIN
OTHER INVESTMENT COMPANIES:
VOTE NO. OF SHARES
- ---------------------------------------- ------------------------
For..................................... 5,401,391,020
Against................................. 396,344,363
Abstain................................. 716,041,410
4) RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP AS THE FUND'S
INDEPENDENT ACCOUNTANTS:
VOTE NO. OF SHARES
- ---------------------------------------- ------------------------
For..................................... 5,918,835,379
Against................................. 141,111,125
Abstain................................. 453,830,289
17
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD
OF DIRECTORS OF DEAN WITTER LIQUID ASSET FUND INC.
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 (appearing on page 3 of this
Prospectus) present fairly, in all material respects, the financial position of
Dean Witter Liquid Asset Fund Inc. (the "Fund") at August 31, 1997, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended and the financial highlights for
each of the ten years in the period then ended, 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 August 31, 1997 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
OCTOBER 7, 1997
18
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL DESCRIPTION YIELD
AMOUNT IN AND ON DATE OF
THOUSANDS MATURITY DATE PURCHASE VALUE
-----------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (81.0%)
AUTOMOTIVE - FINANCE (9.7%)
<S> <C> <C> <C>
$ 285,000 Chrysler Financial Corp.
09/02/97 -12/30/97.............................. 5.56 - 5.67% $ 282,942,706
363,000 Ford Motor Credit Co.
10/29/97 - 01/08/98............................. 5.57 - 5.87 358,352,248
647,000 General Motors Acceptance Corp.
09/08/97 - 02/18/98............................. 5.55 - 6.03 639,014,104
----------------
1,280,309,058
----------------
BANK HOLDING COMPANIES (8.0%)
75,000 BankAmerica Corp.
12/29/97 - 01/26/98............................. 6.01 - 6.02 73,345,392
445,000 Bankers Trust New York Corp.
11/12/97 - 01/30/98............................. 5.70 - 5.79 435,966,318
150,000 Chase Manhattan Corp. 10/08/97.................... 5.54 149,109,500
80,000 Corestates Capital Corp.
09/30/97 - 10/15/97............................. 5.63 - 5.67 79,547,525
45,000 Morgan (J.P.) & Co., Inc.
09/25/97........................................ 5.64 44,819,300
80,000 PNC Funding Corp. 09/17/97 - 10/09/97............. 5.58 - 5.59 79,677,083
150,000 Republic New York Corp.
11/25/97 - 02/06/98............................. 5.57 - 5.64 146,901,069
40,000 SunTrust Banks, Inc. 10/28/97..................... 5.63 39,637,478
----------------
1,049,003,665
----------------
BANKS - COMMERCIAL (32.7%)
450,000 Abbey National North America Corp.
09/25/97 - 01/23/98............................. 5.64 - 5.85 446,152,794
520,000 ABN-AMRO North America Finance Inc.
09/12/97 - 12/18/97............................. 5.59 - 5.91 514,232,775
145,000 ANZ (Delaware) Inc.
09/12/97 - 12/23/97............................. 5.57 - 5.79 143,157,674
185,000 Barclays U.S. Funding Corp.
09/04/97 - 10/03/97............................. 5.56 - 5.75 184,189,875
530,000 Canadian Imperial Holdings Inc. 10/06/97 -
10/27/97........................................ 5.59 - 5.68 525,926,842
585,000 Deutsche Bank Financial Inc.
09/05/97 - 02/23/98............................. 5.57 - 5.68 574,413,481
50,000 Dresdner U.S. Finance Inc. 02/13/98............... 5.85 48,694,153
300,000 Internationale Nederlanden (U.S.) Funding Corp.
09/02/97 - 11/10/97............................. 5.53 - 5.92 297,928,924
25,000 KfW International Finance Inc. 10/20/97........... 5.54 24,805,562
195,000 National Australia Funding (DE) Inc.
10/01/97 - 12/17/97............................. 5.59 - 5.85 192,443,606
425,000 Societe Generale N.A., Inc.
09/08/97 - 02/05/98............................. 5.58 - 5.69 419,001,174
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997, CONTINUED
ANNUALIZED
PRINCIPAL DESCRIPTION YIELD
AMOUNT IN AND ON DATE OF
THOUSANDS MATURITY DATE PURCHASE VALUE
-----------------------------------------------------------------------------------------------------
$ 555,000 Toronto-Dominion Holdings USA Inc.
09/25/97 - 02/26/98............................. 5.61 - 5.78% $ 545,206,124
395,000 Westpac Capital Corp.
09/17/97 - 12/08/97............................. 5.63 - 5.83 391,854,183
----------------
4,308,007,167
----------------
BROKERAGE (1.8%)
235,000 Goldman Sachs Group L.P.
09/02/97 - 09/11/97............................. 5.69 - 5.71 234,667,900
----------------
CHEMICALS (0.7%)
100,000 Du Pont (E.I.) De Nemours & Co. 12/03/97.......... 5.68 98,538,055
----------------
FINANCE - COMMERCIAL (2.7%)
360,000 CIT Group Holdings, Inc.
09/18/97 - 12/23/97............................. 5.56 - 5.63 355,622,925
----------------
FINANCE - CONSUMER (10.0%)
428,000 American Express Credit Corp. 10/21/97 -
12/26/97........................................ 5.59 - 5.66 421,862,700
75,000 American General Finance Corp. 11/20/97 -
11/24/97........................................ 5.58 - 5.61 74,027,472
200,000 Avco Financial Services Inc.
09/05/97 - 11/14/97............................. 5.58 - 5.69 198,570,036
290,000 Beneficial Corp.
09/23/97 - 11/14/97............................. 5.57 - 5.65 287,359,456
40,000 Commercial Credit Co. 11/03/97.................... 5.57 39,602,778
220,000 Household Finance Corp.
09/26/97 - 12/29/97............................. 5.53 - 5.67 217,039,800
75,000 Norwest Financial, Inc.
12/04/97 - 12/12/97............................. 5.61 - 5.66 73,852,000
----------------
1,312,314,242
----------------
FINANCE - CORPORATE (3.3%)
440,000 Ciesco, L.P.
09/26/97 - 12/11/97............................. 5.55 - 5.62 435,497,306
----------------
FINANCE - DIVERSIFIED (6.5%)
263,000 Associates Corp. of
North America
09/09/97 - 12/29/97............................. 5.53 - 5.66 260,867,226
605,000 General Electric Capital Corp. 09/15/97 -
04/02/98........................................ 5.58 - 5.94 597,632,490
----------------
858,499,716
----------------
FINANCE - ENERGY (0.4%)
50,000 Chevron Oil Finance Co. 09/09/97.................. 5.56 49,922,917
----------------
FINANCE - EQUIPMENT (0.8%)
105,000 Deere (John) Capital Corp.
10/30/97 - 12/29/97............................. 5.61 - 5.89 103,676,883
----------------
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997, CONTINUED
ANNUALIZED
PRINCIPAL DESCRIPTION YIELD
AMOUNT IN AND ON DATE OF
THOUSANDS MATURITY DATE PURCHASE VALUE
-----------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (0.2%)
$ 30,000 Procter & Gamble Co. 12/19/97..................... 5.60% $ 29,492,175
----------------
INDUSTRIALS (0.6%)
75,000 Caterpillar Financial Services Corp. 10/03/97 -
10/22/97........................................ 5.89 - 5.90 74,436,550
----------------
OFFICE EQUIPMENT (2.0%)
270,000 IBM Credit Corp.
09/22/97 - 12/19/97............................. 5.58 - 5.63 267,091,075
----------------
RETAIL (1.0%)
135,000 Sears Roebuck Acceptance Corp. 11/07/97 -
12/24/97........................................ 5.57 - 5.62 133,141,972
----------------
TELEPHONE (0.3%)
35,000 Ameritech Corp. 12/04/97.......................... 5.59 34,488,067
----------------
TELECOMMUNICATIONS(0.1%)
10,000 GTE Funding Inc. 09/05/97......................... 5.55 9,990,800
----------------
UTILITIES - FINANCE (0.2%)
20,000 National Rural Utilities Cooperative Finance Corp.
09/04/97........................................ 5.63 19,984,556
----------------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST $10,654,685,029).................................. 10,654,685,029
----------------
CERTIFICATES OF DEPOSIT (9.9%)
170,000 Bankers Trust Co.
12/30/97 - 12/31/97............................. 5.75 170,000,000
435,000 Chase Manhattan Bank (USA) 09/04/97 - 02/09/98.... 5.59 - 5.75 435,000,000
115,000 Mellon Bank, N.A.
09/02/97 - 11/05/97............................. 5.75 - 5.88 115,000,000
100,000 SunTrust Bank, Atlanta
09/29/97 - 10/07/97............................. 5.63 - 5.84 100,000,000
485,000 Union Bank of California, N.A. 09/09/97 -
02/04/98........................................ 5.59 - 5.75 485,000,000
----------------
TOTAL CERTIFICATES OF DEPOSIT
(AMORTIZED COST $1,305,000,000)................................... 1,305,000,000
----------------
SHORT-TERM BANK NOTES (5.5%)
195,000 BankBoston, N.A.
09/17/97 - 11/04/97............................. 5.57 - 5.69 195,000,000
265,000 F.C.C. National Bank
09/12/97 - 12/29/97............................. 5.69 - 5.89 265,000,000
100,000 First Union National Bank 10/14/97................ 5.80 100,000,000
120,000 La Salle National Bank
09/03/97 - 10/31/97............................. 5.56 - 5.77 120,000,000
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997, CONTINUED
ANNUALIZED
PRINCIPAL DESCRIPTION YIELD
AMOUNT IN AND ON DATE OF
THOUSANDS MATURITY DATE PURCHASE VALUE
-----------------------------------------------------------------------------------------------------
$ 50,000 NationsBank, N.A. 09/30/97........................ 5.63% $ 50,000,000
----------------
TOTAL SHORT-TERM BANK NOTES
(AMORTIZED COST $730,000,000)..................................... 730,000,000
----------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (3.3%)
73,000 Federal Farm Credit Bank
11/12/97 - 07/23/98............................. 5.57 - 5.67 70,995,636
75,000 Federal Home Loan Banks
06/19/98 - 08/14/98............................. 5.67 - 5.75 71,290,153
130,000 Federal National Mortgage Association 05/27/98 -
06/22/98........................................ 5.67 - 5.75 124,357,583
175,000 U.S. Treasury Bills 02/05/98 - 05/28/98........... 5.52 - 5.96 168,822,180
----------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(AMORTIZED COST $435,465,552)..................................... 435,465,552
----------------
BANKERS' ACCEPTANCES (0.9%)
50,000 Bank of America NT & SA
09/19/97........................................ 5.76 49,844,444
41,000 Corestates Bank, N.A.
09/05/97 - 09/23/97............................. 5.54 - 5.76 40,905,626
30,000 Wachovia Bank, N.A. 07/24/98...................... 5.83 28,493,933
----------------
TOTAL BANKERS' ACCEPTANCES
(AMORTIZED COST $119,244,003)..................................... 119,244,003
----------------
REPURCHASE AGREEMENT (0.1%)
8,203 The Bank of New York due 09/02/97 (dated 08/29/97;
proceeds $8,207,956) (IDENTIFIED COST
$8,203,171) (a)................................. 5.25 8,203,171
----------------
TOTAL INVESTMENTS
(AMORTIZED COST $13,252,597,755) (B)................................ 100.7% 13,252,597,755
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS...................... (0.7) (86,687,590)
------- ----------------
NET ASSETS.......................................................... 100.0% $ 13,165,910,165
======= ================
</TABLE>
- ---------------------
(a) Collateralized by $8,585,475 U.S. Treasury Bill 0.00% due 02/26/98 valued
at $8,367,234.
(b) Cost is the same for federal income tax purposes.
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1997
ASSETS:
Investments in securities, at value
(amortized cost $13,252,597,755).......................... $ 13,252,597,755
Cash........................................................ 90,000
Receivable for:
Interest................................................ 28,253,677
Capital stock sold...................................... 664,291
Prepaid expenses and other assets........................... 237,118
----------------
TOTAL ASSETS........................................... 13,281,842,841
----------------
LIABILITIES:
Payable for:
Capital stock repurchased............................... 111,214,413
Investment management fee............................... 2,840,713
Plan of distribution fee................................ 1,042,929
Accrued expenses and other payables......................... 834,621
----------------
TOTAL LIABILITIES...................................... 115,932,676
----------------
NET ASSETS............................................. $ 13,165,910,165
----------------
----------------
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $ 13,165,224,818
Accumulated undistributed net investment income............. 685,347
----------------
NET ASSETS............................................. $ 13,165,910,165
================
NET ASSET VALUE PER SHARE,
13,165,896,012 SHARES OUTSTANDING (25,000,000,000 SHARES
AUTHORIZED OF $.01 PAR VALUE).............................
$1.00
================
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1997
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $ 690,250,758
-------------
EXPENSES
Investment management fee................................... 33,616,072
Transfer agent fees and expenses............................ 27,678,745
Plan of distribution fee.................................... 11,872,496
Registration fees........................................... 1,358,503
Shareholder reports and notices............................. 713,197
Custodian fees.............................................. 342,424
Professional fees........................................... 76,411
Directors' fees and expenses................................ 15,786
Other....................................................... 87,323
-------------
TOTAL EXPENSES......................................... 75,760,957
-------------
NET INVESTMENT INCOME AND NET INCREASE...................... $ 614,489,801
=============
SEE NOTES TO FINANCIAL STATEMENTS
24
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
AUGUST 31, 1997 AUGUST 31, 1996
- -----------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C>
Net investment income....................................... $ 614,489,801 $ 556,631,606
Dividends from net investment income........................ (614,493,201) (556,625,540)
Net increase from capital stock transactions................ 1,776,444,915 1,029,986,565
--------------- ---------------
NET INCREASE........................................... 1,776,441,515 1,029,992,631
NET ASSETS:
Beginning of period......................................... 11,389,468,650 10,359,476,019
--------------- ---------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$685,347 AND $688,747, RESPECTIVELY).................... $13,165,910,165 $11,389,468,650
=============== ===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
25
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Liquid Asset Fund Inc. (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 objectives are
high current income, preservation of capital and liquidity. The Fund was
incorporated in Maryland on September 3, 1974 and commenced operations on
September 22, 1975.
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 -- Portfolio securities are valued at amortized
cost, which approximates market value.
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 and premiums are amortized over the life of the
respective securities. 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 as of the close of each business day.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Fund pays the Investment Manager a
management fee, accrued daily and payable monthly, by applying the following
annual rates to the net assets of the Fund determined as of the close of each
business day: 0.50% to the portion of the daily net assets not exceeding $500
million; 0.425% to the portion of the daily net assets exceeding $500 million
but not exceeding $750 million; 0.375% to the portion of the daily net assets
exceeding $750 million but not exceeding $1 billion; 0.35% to the portion of the
daily net assets exceeding $1 billion but not exceeding
26
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997, CONTINUED
$1.35 billion; 0.325% to the portion of the daily net assets exceeding $1.35
billion but not exceeding $1.75 billion; 0.30% to the portion of the daily net
assets exceeding $1.75 billion but not exceeding $2.15 billion; 0.275% to the
portion of the daily net assets exceeding $2.15 billion but not exceeding $2.5
billion; 0.25% to the portion of the daily net assets exceeding $2.5 billion but
not exceeding $15 billion; 0.249% to the portion of the daily net assets
exceeding $15 billion but not exceeding $17.5 billion; and 0.248% to the portion
of the daily net assets exceeding $17.5 billion.
Under the terms of the Agreement, 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.
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 Directors 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 Investment Manager and Distributor, its
affiliates and other selected broker-dealers under the Plan: (1) compensation
to, and expenses of, DWR's and other selected broker-dealers' account executives
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) preparation, printing
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 0.15% of the Fund's average
daily net assets during the month. Expenses incurred by the Distributor
27
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997, CONTINUED
pursuant to the Plan in any fiscal year will not be reimbursed by the Fund
through payments accrued
in any subsequent fiscal year. For the year ended August 31, 1997, the
distribution fee was accrued at the annual rate of 0.10%.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/maturities of portfolio securities
for the year ended August 31, 1997 aggregated $41,929,348,009 and
$40,711,109,361, respectively.
Dean Witter Trust FSB, an affiliate of the Investment Manager and Distributor,
is the Fund's transfer agent. At August 31, 1997, the Fund had transfer agent
fees and expenses payable of approximately $150,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Directors of the Fund who will have served as independent
Directors for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended August 31, 1997 included
in Directors' fees and expenses in the Statement of Operations amounted to
$2,192. At August 31, 1997, the Fund had an accrued pension liability of $48,330
which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. CAPITAL STOCK
Transactions in capital stock, at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
AUGUST 31, 1997 AUGUST 31, 1996
--------------- ---------------
<S> <C> <C>
Shares sold...................................................... 35,926,788,140 31,284,601,651
Shares issued in reinvestment of dividends....................... 612,893,395 554,968,386
--------------- ---------------
36,539,681,535 31,839,570,037
Shares repurchased............................................... (34,763,236,620) (30,809,583,472)
--------------- ---------------
Net increase..................................................... 1,776,444,915 1,029,986,565
=============== ===============
</TABLE>
6. FINANCIAL HIGHLIGHTS
See the "Financial Highlights" table on page 3 of this Prospectus.
28
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
<TABLE>
<CAPTION>
<S> <C>
MONEY MARKET FUNDS FIXED-INCOME FUNDS
Dean Witter Liquid Asset Fund Inc. Dean Witter High Yield Securities Inc.
Dean Witter Tax-Free Daily Income Trust Dean Witter Tax-Exempt Securities Trust
Dean Witter New York Municipal Money Market Trust Dean Witter U.S. Government Securities Trust
Dean Witter California Tax-Free Daily Income Trust Dean Witter California Tax-Free Income Fund
Dean Witter U.S. Government Money Market Trust Dean Witter New York Tax-Free Income Fund
EQUITY FUNDS Dean Witter Convertible Securities Trust
Dean Witter American Value Fund Dean Witter Federal Securities Trust
Dean Witter Natural Resource Development Dean Witter World Wide Income Trust
Securities Inc. Dean Witter Intermediate Income Securities
Dean Witter Dividend Growth Securities Inc. Dean Witter Global Short-Term Income Fund Inc.
Dean Witter Developing Growth Securities Trust Dean Witter Multi-State Municipal Series Trust
Dean Witter World Wide Investment Trust Dean Witter Short-Term U.S. Treasury Trust
Dean Witter Value-Added Market Series Dean Witter Diversified Income Trust
Dean Witter Utilities Fund Dean Witter Limited Term Municipal Trust
Dean Witter Precious Metals and Minerals Trust Dean Witter Short-Term Bond Fund
Dean Witter Capital Growth Securities Dean Witter High Income Securities
Dean Witter European Growth Fund Inc. Dean Witter National Municipal Trust
Dean Witter Pacific Growth Fund Inc. Dean Witter Balanced Income Fund
Dean Witter Health Sciences Trust Dean Witter Hawaii Municipal Trust
Dean Witter Global Dividend Growth Securities Dean Witter Intermediate Term U.S. Treasury
Dean Witter Global Utilities Fund Trust
Dean Witter International SmallCap Fund DEAN WITTER RETIREMENT SERIES
Dean Witter Mid-Cap Growth Fund Liquid Asset Series
Dean Witter Balanced Growth Fund U.S. Government Money Market Series
Dean Witter Capital Appreciation Fund U.S. Government Securities Series
Dean Witter Information Fund Intermediate Income Securities Series
Dean Witter Special Value Fund American Value Series
Dean Witter Financial Services Trust Capital Growth Series
Dean Witter Market Leader Trust Dividend Growth Series
Dean Witter S&P 500 Index Fund Strategist Series
Dean Witter Fund of Funds Utilities Series
ASSET ALLOCATION FUNDS Value-Added Market Series
Dean Witter Strategist Fund Global Equity Series
Dean Witter Global Asset Allocation Fund
ACTIVE ASSETS ACCOUNT PROGRAM
Active Assets Money Trust
Active Assets Tax-Free Trust
Active Assets Government Securities Trust
Active Assets California Tax-Free Trust
</TABLE>
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
Prospectus
October 24, 1997
REMOVE APPLICATION CAREFULLY
-------------------
160 --
-------------------
for office use only
DEAN WITTER
LIQUID
ASSET
FUND [LOGO]
APPLICATION
DEAN WITTER LIQUID ASSET FUND INC.
Send to: Dean Witter Trust FSB (the "Transfer Agent"), P.O. Box 1040, Jersey
City, NJ 07303
<TABLE>
<CAPTION>
<S> <C>
INSTRUCTIONS For assistance in completing this application, telephone Dean Witter Trust FSB at (800) 869-NEWS (toll-free).
TO REGISTER
SHARES 1.
(please print) ---------------------------------------------------------------------------------------------------------
First Name Last Name
- -As joint tenants,
use line 1 & 2 2.
---------------------------------------------------------------------------------------------------------
First Name Last Name
(Joint tenants with rights of survivorship unless otherwise specified)
------------------------------
Social Security Number
- -As custodian
for a minor, 3.
use lines 1 & 3
---------------------------------------------------------------------------------------------------------
Minor's Name
Under the Uniform Gifts to Minors Act
----------------------------------------
------------------------------
Minor's Social Security Number
State of Residence of Minor
- -In the name of a
corporation, 4.
trust, ---------------------------------------------------------------------------------------------------------
partnership
or other Name of Corporation, Trust (including trustee name(s)) or Other Organization
institutional
investors, use
line 4
If Trust, Date of Trust Instrument:
------------------------------------------------------------
------------------------------
Tax Identification Number
ADDRESS
---------------------------------------------------------------------------------------------------------
City State Zip Code
TO PURCHASE [ ] CHECK (enclosed) $ (Make Payable to Dean Witter Liquid Asset Fund Inc.)
SHARES: -----------------------
Minimum Initial [ ] WIRE* On MF*
Investment: -------------------------------- --------------------------------
$5,000 (Date) (Control number this transaction)
--------------------------------------------------------------------------
Name of Bank Branch
--------------------------------------------------------------------------
Address
--------------------------------------------------------------------------
Telephone Number
* For an initial investment made by wiring funds, obtain a control number by calling: (800) 869-NEWS
(toll-free).
Your bank should wire to:
Bank of New York for credit to account of Dean Witter Trust FSB
Account Number: 8900188413
Re: Dean Witter Liquid Asset Fund Inc.
Account Of:
----------------------------------------------------------------------------
(Investor's Account as Registered at the Transfer Agent)
Control or Account Number:
------------------------------------------------------------
(Assigned by Telephone)
OPTIONAL SERVICES
NOTE: If you are a current shareholder of Dean Witter
Liquid Asset Fund Inc., please indicate your fund
account number here.
[1][6][0] -
DIVIDENDS All dividends will be reinvested daily in additional shares, unless the following option is
selected:
[ ] Pay income dividends by check at the end of each month.
WRITE YOUR OWN [ ] Send an initial supply of checks.
CHECK FOR JOINT ACCOUNTS:
[ ] Check this box if all owners are required to sign checks.
SYSTEMATIC [ ] Systematic Withdrawal Plan ($25 minimum)
WITHDRAWAL $ [ ] Monthly or [ ] Quarterly
PLAN [ ] 10th or [ ] 25th of Month/Quarter
Minimum [ ] Pay shareholder(s) at address of record.
Account Value: [ ] Pay to the following: (If this payment option is selected a signature guarantee is required)
$5,000
------------------------------------------------------------
Name
------------------------------------------------------------
Address
------------------------------------------------------------
City State Zip Code
<PAGE>
[ ] Dean Witter Trust FSB is hereby authorized to honor telephonic or other instructions, without
PAYMENT TO signature guarantee, from any person for the redemption of any or all shares of Dean Witter Liquid Asset
PREDESIGNATED Fund Inc. held in my (our) account provided that proceeds are transmitted only to the following bank
BANK ACCOUNT account. (Absent its own negligence, neither Dean Witter Liquid Asset Fund Inc. nor Dean Witter Trust
FSB shall be liable for any redemption caused by unauthorized instruction(s)):
Bank Account must be ---------------------------------------- --------------------------------
in same name as NAME & BANK ACCOUNT NUMBER BANK'S ROUTING TRANSMIT CODE
shares (ASK YOUR BANK)
are registered
Minimum Amount: ----------------------------------------
$1,000 NAME OF BANK
----------------------------------------
ADDRESS OF BANK
( )
----------------------------------------
TELEPHONE NUMBER OF BANK
</TABLE>
SIGNATURE AUTHORIZATION
<TABLE>
<CAPTION>
<S> <C>
I. FOR ALL ACCOUNTS NOTE: RETAIN A COPY OF THIS DOCUMENT FOR YOUR RECORDS. ANY MODIFICATION OF THE INFORMATION BELOW WILL
REQUIRE AN AMENDMENT TO THIS FORM. THIS DOCUMENT IS IN FULL FORCE AND EFFECT UNTIL ANOTHER DULY EXECUTED
FORM IS RECEIVED BY THE TRANSFER AGENT.
The Transfer Agent is hereby authorized to act as agent for the registered owner of shares of Dean Witter
Liquid Asset Fund Inc. (the "Fund") in effecting redemptions of shares and is authorized to recognize the
signature(s) below in payment of funds resulting from such redemptions on behalf of the registered owners
of such shares. The Transfer Agent shall be liable only for its own negligence and not for default or
negligence of its correspondents or for losses in transit. The Fund shall not be liable for any default or
negligence of the Transfer Agent.
I (we) certify to my (our) legal capacity, or the capacity of the investor named above, to invest in and
redeem shares of, and I (we) acknowledge receipt of a current prospectus of, Dean Witter Liquid Asset Fund
Inc. and I(we) further certify my (our) authority to sign and act for and on behalf of the investor.
Under penalties of perjury, I certify (1) that the number shown on this form is my correct taxpayer
identification number and (2) that I am not subject to backup withholding either because I have not been
notified that I am subject to backup withholding as a result of a failure to report all interest or
dividends, or the Internal Revenue Service has notified me that I am no longer subject to backup
withholding. (Note: You must cross out item (2) above if you have been notified by IRS that you are
currently subject to backup withholding because of underreporting interest or dividends on your tax
return.)
Check Applicable Box:
[ ] I am a United States Citizen. [ ] I am not a United States Citizen.
SIGNATURE(S) (IF JOINT TENANTS, ALL MUST SIGN)
Name(s) must be
signed exactly the
same as shown on
lines 1 to 4 on the
reverse side of this
application
SIGNED THIS DAY OF
--------------------------------
, 19 .
--------------------------------------- --
In addition complete
Section A or B below
FOR CORPORATIONS, TRUSTS, PARTNERSHIPS AND OTHER ORGANIZATIONS
The following named persons are currently officers/trustees/general partners/other
authorized signatories of the Registered Owner, and any of them ("Authorized
Person(s)") is/are currently authorized under the applicable governing document to
act with full power to sell, assign or transfer securities of the Fund for the
Registered Owner and to execute and deliver any instrument necessary to effectuate
the authority hereby conferred:
NAME/TITLE SIGNATURE
SIGNED THIS DAY OF
--------------------------------
, 19 .
--------------------------------------- --
The Transfer Agent may, without inquiry, act only upon the instruction of ANY
PERSON(S) purporting to be (an) Authorized Person(s) as named in the Certification
Form last received by the Transfer Agent. The Transfer Agent and the Fund shall
not be liable for any claims, expenses (including legal fees) or losses resulting
from the Transfer Agent having acted upon any instruction reasonably believed
genuine.
*INSERT A NUMBER. UNLESS OTHERWISE INDICATED, THE TRANSFER AGENT MAY HONOR
INSTRUCTIONS OF ANY ONE OF THE PERSONS NAMED ABOVE.
SECTION (A) NOTE: EITHER A SIGNATURE GUARANTEE OR CORPORATE SEAL IS REQUIRED.
CORPORATIONS AND
INCORPORATED
ASSOCIATIONS ONLY. I, -------------------------------------------------, Secretary of the
SIGN ABOVE AND Registered Owner, do hereby certify that at a meeting on ----------------- at
COMPLETE THIS which a quorum was present throughout, the Board of Directors of the
SECTION corporation/the officers of the association duly adopted a resolution, which is
in full force and effect and in accordance with the Registered Owner's charter
and by-laws, which resolution did the following: (1) empowered the above-named
Authorized Person(s) to effect securities transactions for the Registered Owner
on the terms described above; (2) authorized the Secretary to certify, from time
to time, the names and titles of the officers of the Registered Owner and to
notify the Transfer Agent when changes in office occur; and (3) authorized the
Secretary to certify that such a resolution has been duly adopted and will
remain in full force and effect until the Transfer Agent receives a duly
executed amendment to the Certification Form.
SIGNATURE Witness my hand on behalf of the corporation/association this day
GUARANTEED** of , 19 .
(or Corporate Seal)
--------------------------------------------------------------------------------
Secretary**
The undersigned officer (other than the Secretary) hereby certifies that the
foregoing instrument has been signed by the Secretary of the corporation/
association.
SIGNATURE
GUARANTEED** --------------------------------------------------------------------------------
(or Corporate Seal) Certifying Officer of the Corporation or Incorporated Association**
SECTION (B) NOTE: A SIGNATURE GUARANTEE IS REQUIRED.
ALL OTHER
INSTITUTIONAL
INVESTORS
SIGNATURE ----------------------------------------------------------
GUARANTEED** Certifying
Trustee(s)/General Partner(s)/Other(s)**
SIGN ABOVE AND ----------------------------------------------------------
COMPLETE THIS Certifying
SECTION Trustee(s)/General Partner(s)/Other(s)**
Signed this
--------------------------------------------------------------------------------
day of
--------------------------------------------------------------------------------,
19 ------------------------
--------------------------------------------------------------------------------
**SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR
DEALER Above signature(s) guaranteed. Prospectus has been delivered by undersigned to
(if any) above-named applicant(s).
Completion by dealer
only
---------------------------------------- ----------------------------------------
Firm Name Office Number-Account Number at
Dealer--A/E Number
---------------------------------------- ----------------------------------------
Address Account Executive's Last Name
---------------------------------------- ----------------------------------------
City, State, Zip Code Branch Office
(Registered Trademark) 1997 Dean Witter Distributors Inc.
</TABLE>
<PAGE>
Dean Witter
Liquid Asset Fund Inc.
Two World Trade Center
New York, New York 10048
BOARD OF DIRECTORS
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
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
Jonathan R. Page
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust FSB
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.
Dean Witter
Liquid Asset Fund
PROSPECTUS
OCTOBER 24, 1997
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048
LETTER TO THE SHAREHOLDERS FEBRUARY 28, 1998
DEAR SHAREHOLDER:
We are pleased to present the semiannual letter to shareholders of Dean Witter
Liquid Asset Fund for the six-month period ended February 28, 1998.
As of the close of the period under review, the Fund had net assets totaling
$13.7 billion. For the six-month period under review, the Fund's annualized net
investment income was 5.17 percent. The Fund's 30-day annualized yield for
February was 5.22 percent.
A STABLE INTEREST-RATE ENVIRONMENT
After rising by about 25 basis points late in the first quarter of 1997,
money-market yields held remarkably stable during the remainder of 1997 and
through the first two months of 1998. The target rate for federal funds has
remained steady at 5.50 percent from March 25, 1997, through February 28, 1998.
Overall economic conditions in the United States continue to be very good,
while inflation has remained quite moderate. Unemployment rates remain close to
the lows of the past 25 years.
Aided by favorable demographic trends, cash flows into financial assets were
robust in 1997 and early 1998. Money-market mutual funds are no exception, as
total assets in all such portfolios surpassed $1 trillion for the first time
early in August 1997.
PORTFOLIO COMPOSITION AND STRUCTURE
On February 28, 1998, approximately 81 percent of the Fund's portfolio was
invested in high-quality commercial paper, 7 percent in certificates of deposit
and bankers' acceptances of financially strong commercial banks, 6 percent in
the bank notes of such institutions and 6 percent in federal agency and U.S.
Treasury obligations. At the end of February, approximately 89 percent of the
Fund's holdings were due to mature in less than four months. Therefore, we
believe the Fund is well positioned for stability of principal with a high
degree of liquidity.
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
LETTER TO THE SHAREHOLDERS FEBRUARY 28, 1998, CONTINUED
We continue to operate the Fund in a straightforward, conservative style
without structured notes or derivatives that could fluctuate excessively with
changing interest rates. In addition, the Fund has avoided making any direct
investments in Asian financial institutions, because of their relatively slim
levels of capital strength. As a result the Fund's exposure to credit-rating
downgrades, which some other money market funds have experienced recently, has
been limited.
LOOKING AHEAD
At this time we anticipate a slight moderation in the pace of economic activity
during 1998, with no major adverse surprises in the rate of inflation. We do
not expect investment yields available to the Fund during the months
immediately ahead to differ dramatically from those available during the fiscal
period just ended.
As always, the Fund serves as a useful investment for liquidity, preservation
of capital and a yield that reflects prevailing money market conditions.
We appreciate your ongoing support of Dean Witter Liquid Asset 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 LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER (81.2%)
AUTOMOTIVE - FINANCE (11.2%)
$495,000 Chrysler Financial Corp................................ 5.52-5.86% 03/25/98-06/15/98 $ 491,307,938
410,000 Ford Motor Credit Co................................... 5.53-5.81 03/09/98-05/04/98 407,593,736
649,000 General Motors Acceptance Corp......................... 5.51-5.85 03/06/98-08/31/98 640,388,153
---------------
1,539,289,827
---------------
BANK HOLDING COMPANIES (13.6%)
100,000 Bank of New York Co., Inc.............................. 5.56 04/13/98 99,330,222
100,000 BankAmerica Corp....................................... 5.51 06/30/98 98,173,389
585,000 Bankers Trust New York Corp............................ 5.52-5.88 04/29/98-07/08/98 575,935,482
670,000 Morgan (J.P.) & Co., Inc............................... 5.50-5.81 04/06/98-07/16/98 663,527,061
90,000 NationsBank Corp....................................... 5.54 08/28/98 87,561,025
230,000 PNC Funding Corp....................................... 5.56-5.85 04/06/98-04/22/98 228,534,620
110,000 SunTrust Banks, Inc.................................... 5.71-5.81 03/09/98-04/14/98 109,445,250
---------------
1,862,507,049
---------------
BANKS - COMMERCIAL (31.0%)
300,000 Abbey National North America Corp...................... 5.53-5.76 05/04/98-08/24/98 294,014,000
200,000 ABN-AMRO North America Finance Inc..................... 5.51-5.78 03/26/98-07/09/98 198,402,903
710,000 Barclays U.S. Funding Corp............................. 5.52-5.81 03/10/98-05/08/98 704,500,583
535,000 Canadian Imperial Holdings Inc......................... 5.52-5.81 03/09/98-05/06/98 531,555,836
405,000 Deutsche Bank Financial Inc............................ 5.49-5.79 03/05/98-04/28/98 403,617,006
200,000 Dresdner U.S. Finance Inc.............................. 5.70-5.81 03/12/98-04/13/98 199,118,222
395,000 Internationale Nederlanden (U.S.) Funding Corp......... 5.59-5.82 04/15/98-07/10/98 390,505,676
330,000 National Australia Funding (DE) Inc.................... 5.48-5.77 03/11/98-04/28/98 328,252,044
520,000 Societe Generale N.A., Inc............................. 5.53-5.82 03/16/98-06/01/98 517,225,739
340,000 Toronto-Dominion Holdings U.S.A. Inc................... 5.53-5.83 04/14/98-06/17/98 336,225,322
100,000 UnionBanCal Commercial Funding Corp.................... 5.56 05/11/98 98,904,000
240,000 Westpac Capital Corp................................... 5.75-5.79 03/25/98-04/20/98 238,848,459
---------------
4,241,169,790
---------------
BROKERAGE (0.8%)
110,000 Goldman Sachs Group L.P................................ 5.51-5.53 04/27/98-04/29/98 109,024,283
---------------
FINANCE - COMMERCIAL (1.7%)
240,000 CIT Group Holdings, Inc................................ 5.52-5.64 03/27/98-05/11/98 238,404,842
---------------
FINANCE - CONSUMER (8.0%)
190,000 American Express Credit Corp........................... 5.51-5.52 03/30/98-04/03/98 189,041,000
40,000 American General Finance Corp.......................... 5.49 04/27/98 39,651,356
234,000 Avco Financial Services Inc............................ 5.52-5.82 03/18/98-06/17/98 231,710,410
390,000 Beneficial Corp........................................ 5.51-5.81 03/20/98-05/20/98 386,158,858
105,000 Commercial Credit Co................................... 5.50-5.52 04/20/98-04/22/98 104,171,439
90,000 Household Finance Corp................................. 5.52 03/06/98 89,917,650
60,000 Norwest Financial Inc.................................. 5.58 03/27/98 59,750,250
---------------
1,100,400,963
---------------
FINANCE - CORPORATE (3.6%)
500,000 Ciesco, L.P............................................ 5.50-5.79 03/13/98-05/07/98 497,475,119
---------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1998 (UNAUDITED) CONTINUED
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------
FINANCE - DIVERSIFIED (6.5%)
$240,000 Associates Corp. of North America...................... 5.53-5.81% 03/17/98-05/27/98 $ 237,297,565
662,000 General Electric Capital Corp.......................... 5.48-5.84 03/02/98-09/08/98 654,184,256
---------------
891,481,821
---------------
FOODS & BEVERAGES (0.5%)
25,000 Coca-Cola Co........................................... 5.48 04/14/98 24,831,250
50,000 Sara Lee Corp.......................................... 5.59 03/06/98 49,953,500
---------------
74,784,750
---------------
HOUSEHOLD PRODUCTS (0.4%)
50,000 Procter & Gamble Co.................................... 5.70 04/17/98 49,629,333
---------------
INSURANCE (0.8%)
35,000 American General Corp.................................. 5.49 04/24/98 34,710,715
75,000 MetLife Funding Inc.................................... 5.76-5.81 03/04/98-03/05/98 74,946,736
---------------
109,657,451
---------------
INDUSTRIALS (0.2%)
27,000 Emerson Electric Co.................................... 5.62 03/02/98 26,991,570
---------------
OFFICE EQUIPMENT (1.5%)
200,000 IBM Credit Corp........................................ 5.50-5.69 03/06/98-03/11/98 199,739,861
---------------
RETAIL (1.4%)
190,000 Sears Roebuck Acceptance Corp.......................... 5.53-5.83 03/09/98-03/23/98 189,444,269
---------------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST $11,130,000,928)...................................................... 11,130,000,928
---------------
SHORT-TERM BANK NOTES (6.5%)
250,000 F.C.C. National Bank................................... 5.77-5.81 03/24/98-04/14/98 250,000,000
100,000 BankBoston, N.A........................................ 5.82 05/29/98 100,000,000
45,000 La Salle National Bank................................. 5.72 04/20/98 45,000,000
150,000 Wachovia Bank, N.A..................................... 5.51 04/22/98 150,000,000
350,000 NationsBank, N.A....................................... 5.58-5.62 03/04/98-04/23/98 350,000,000
---------------
TOTAL SHORT-TERM BANK NOTES
(AMORTIZED COST $895,000,000)......................................................... 895,000,000
---------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1998 (UNAUDITED) CONTINUED
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (6.4%)
$302,000 Federal Farm Credit Bank............................... 5.60-5.76% 06/30/98-12/18/98 $ 291,915,748
160,000 Federal Home Loan Banks................................ 5.66-5.75 06/19/98-12/04/98 155,236,271
40,000 Federal Home Loan Mortgage Corp........................ 5.74 10/30/98 38,527,867
255,000 Federal National Mortgage Assoc........................ 5.64-5.75 03/30/98-09/02/98 250,638,650
145,000 U.S. Treasury Bills.................................... 5.87-5.96 04/02/98-05/28/98 143,608,954
---------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(AMORTIZED COST $879,927,490)......................................................... 879,927,490
---------------
CERTIFICATES OF DEPOSIT (5.9%)
70,000 Chase Manhattan Bank (USA)............................. 5.75 03/02/98 70,000,000
100,000 First Tennessee Bank N.A............................... 5.50 04/30/98 100,000,000
100,000 Fleet National Bank.................................... 5.53 05/14/98 100,000,000
200,000 Mellon Bank, N.A....................................... 5.69-5.76 03/31/98-04/01/98 200,000,000
345,000 Union Bank of California, N.A.......................... 5.56-5.82 04/07/98-05/21/98 345,000,000
---------------
TOTAL CERTIFICATES OF DEPOSIT
(AMORTIZED COST $815,000,000)......................................................... 815,000,000
---------------
BANKERS' ACCEPTANCES (0.8%)
50,000 Bank of America NT & SA................................ 5.70 04/21/98 49,599,167
25,000 SunTrust Bank, Atlanta................................. 5.57 03/09/98 24,965,500
30,000 Wachovia Bank, N.A..................................... 5.83 07/24/98 29,329,616
---------------
TOTAL BANKERS' ACCEPTANCES
(AMORTIZED COST $103,894,283)......................................................... 103,894,283
---------------
REPURCHASE AGREEMENT (0.1%)
12,596 The Bank of New York (dated 02/27/98; proceeds
$12,601,622) (a) (IDENTIFIED COST $12,595,915)....... 5.44 03/02/98 12,595,915
---------------
TOTAL INVESTMENTS
(AMORTIZED COST $13,836,418,616) (b)................................................... 100.9 % 13,836,418,616
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS......................................... (0.9) (128,166,985)
------ ----------------
NET ASSETS............................................................................. 100.0 % $ 13,708,251,631
------ ----------------
------ ----------------
</TABLE>
- ---------------------
(a) Collateralized by $8,720,550 Federal Farm Credit Bank 0.00% due 02/01/01
valued at $8,720,550 and by $4,097,804 U.S. Treasury Bill 5.875% due
01/31/99 valued at $4,127,283.
(b) Cost is the same for federal income tax purposes.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(amortized cost $13,836,418,616)......................................................... $13,836,418,616
Cash....................................................................................... 90,001
Receivable for:
Interest............................................................................... 19,530,475
Capital stock sold..................................................................... 133,622
Prepaid expenses and other assets.......................................................... 899,215
---------------
TOTAL ASSETS.......................................................................... 13,857,071,929
---------------
LIABILITIES:
Payable for:
Capital stock repurchased.............................................................. 144,405,950
Investment management fee.............................................................. 2,894,783
Plan of distribution fee............................................................... 1,067,776
Accrued expenses and other payables........................................................ 451,789
---------------
TOTAL LIABILITIES..................................................................... 148,820,298
---------------
NET ASSETS............................................................................ $13,708,251,631
---------------
---------------
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................ $13,707,561,843
Accumulated undistributed net investment income............................................ 689,788
---------------
NET ASSETS............................................................................ $13,708,251,631
---------------
---------------
NET ASSET VALUE PER SHARE,
13,708,233,037 SHARES OUTSTANDING (25,000,000,000 SHARES AUTHORIZED OF $.01 PAR VALUE)... $1.00
---------------
---------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1998 (UNAUDITED)
NET INVESTMENT INCOME:
INTEREST INCOME............................................................................... $385,570,361
------------
EXPENSES
Investment management fee..................................................................... 18,169,662
Transfer agent fees and expenses.............................................................. 14,937,187
Plan of distribution fee...................................................................... 6,222,267
Registration fees............................................................................. 502,643
Shareholder reports and notices............................................................... 327,424
Custodian fees................................................................................ 180,539
Professional fees............................................................................. 37,866
Directors' fees and expenses.................................................................. 9,643
Other......................................................................................... 49,752
------------
TOTAL EXPENSES........................................................................... 40,436,983
------------
NET INVESTMENT INCOME AND NET INCREASE........................................................ $345,133,378
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
FEBRUARY 28, 1998 AUGUST 31, 1997
- ------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income and net increase.................................. $ 345,133,378 $ 614,489,801
Dividends from net investment income.................................... (345,128,937) (614,493,201)
Net increase from capital stock transactions............................ 542,337,025 1,776,444,915
----------------- ---------------
NET INCREASE....................................................... 542,341,466 1,776,441,515
NET ASSETS:
Beginning of period..................................................... 13,165,910,165 11,389,468,650
----------------- ---------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $689,788 AND
$685,347, RESPECTIVELY)............................................. $ 13,708,251,631 $13,165,910,165
----------------- ---------------
----------------- ---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1998 (UNAUDITED)
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Liquid Asset Fund Inc. (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 objectives are
high current income, preservation of capital and liquidity. The Fund was
incorporated in Maryland on September 3, 1974 and commenced operations on
September 22, 1975.
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 -- Portfolio securities are valued at amortized
cost, which approximates market value.
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 and premiums are amortized over the life of the
respective securities. 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 as of the close of each business day.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Fund pays the Investment Manager a
management fee, accrued daily and payable monthly, by applying the following
annual rates to the net assets of the Fund determined as of the close of each
business day: 0.50% to the portion of the daily net assets not exceeding $500
million; 0.425% to the portion of the daily net assets exceeding $500 million
but not exceeding $750 million; 0.375% to the portion of the daily net assets
exceeding $750 million but not exceeding $1 billion; 0.35% to the portion of
the daily net assets exceeding $1 billion but not exceeding $1.35 billion;
0.325% to the portion of the daily net assets exceeding $1.35 billion but not
exceeding
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1998 (UNAUDITED) CONTINUED
$1.75 billion; 0.30% to the portion of the daily net assets exceeding $1.75
billion but not exceeding $2.15 billion; 0.275% to the portion of the daily net
assets exceeding $2.15 billion but not exceeding $2.5 billion; 0.25% to the
portion of the daily net assets exceeding $2.5 billion but not exceeding $15
billion; 0.249% to the portion of the daily net assets exceeding $15 billion
but not exceeding $17.5 billion; and 0.248% to the portion of the daily net
assets exceeding $17.5 billion.
Under the terms of the Agreement, 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.
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 Directors 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 Investment Manager and Distributor,
its affiliates and other selected broker-dealers under the Plan: (1)
compensation to, and expenses of, DWR's and other selected broker-dealers'
account executives 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) preparation, printing 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 0.15% of the Fund's
average daily net assets during the month. Expenses incurred by the Distributor
pursuant to the Plan in any fiscal year will not be reimbursed by the Fund
through payments accrued in any subsequent fiscal year. For the six months
ended February 28, 1998, the distribution fee was accrued at the annual rate of
0.09%.
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1998 (UNAUDITED) CONTINUED
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/maturities of portfolio
securities for the six months ended February 28, 1998 aggregated
$23,721,389,575 and $23,477,540,496, respectively.
Dean Witter Trust FSB, an affiliate of the Investment Manager and Distributor,
is the Fund's transfer agent.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Directors of the Fund who will have served as independent
Directors for at least five years at the time of retirement. Benefits under
this plan are based on years of service and compensation during the last five
years of service. Aggregate pension costs for the six months ended February 28,
1998 included in Directors' fees and expenses in the Statement of Operations
amounted to $1,833. At February 28, 1998, the Fund had an accrued pension
liability of $48,531 which is included in accrued expenses in the Statement of
Assets and Liabilities.
5. CAPITAL STOCK
Transactions in capital stock, at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
FEBRUARY 28, 1998 AUGUST 31, 1997
------------------- ----------------
(UNAUDITED)
<S> <C> <C>
Shares sold...................................................... 19,901,696,910 35,926,788,140
Shares issued in reinvestment of dividends....................... 344,280,116 612,893,395
------------------- ----------------
20,245,977,026 36,539,681,535
Shares repurchased............................................... (19,703,640,001) (34,763,236,620)
------------------- ----------------
Net increase..................................................... 542,337,025 1,776,444,915
------------------- ----------------
------------------- ----------------
</TABLE>
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of capital stock outstanding
throughout each period:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED
FEBRUARY FOR THE YEAR ENDED AUGUST 31,
28, 1998 -----------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- --------- --------- --------- --------- ---------
Net investment income.............. 0.026 0.050 0.050 0.053 0.030 0.027
Less dividends from net investment
income............................ (0.026) (0.050) (0.050) (0.053) (0.030) (0.027)
---------- --------- --------- --------- --------- ---------
Net asset value, end of period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN+........... 2.61%(1) 5.13% 5.15% 5.41% 3.07% 2.72%
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 0.61%(2) 0.62% 0.63% 0.65% 0.70% 0.69%
Net investment income.............. 5.17%(2) 5.01% 5.02% 5.28% 3.02% 2.67%
SUPPLEMENTAL DATA:
Net assets, end of period, in
millions.......................... $13,708 $13,166 $11,389 $10,359 $8,492 $7,959
</TABLE>
- ---------------------
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
BOARD OF DIRECTORS
- ---------------------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
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
Jonathan R. Page
VICE PRESIDENT
Thomas F. Caloia
TREASURER
TRANSFER AGENT
- ---------------------------------------------
Dean Witter Trust FSB
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
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and directors,
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
LIQUID ASSET FUND
[GRAPHIC]
SEMIANNUAL REPORT
FEBRUARY 28, 1998
<PAGE>
[DEAN WITTER LOGO]
D E A N W I T T E R
-------------------------------------
R E T I R E M E N T S E R I E S
-------------------------------------
O C T O B E R 3 1 , 1 9 9 7
-------------------------------------
P R O S P E C T U S E N C L O S E D
-------------------------------------
<PAGE>
DEAN WITTER RETIREMENT SERIES
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
PART A
ITEM CAPTION PROSPECTUS
- ---- ------------------
<S> <C>
1. .............. Cover Page
2. .............. Summary of Fund Expenses; Prospectus Summary
3. .............. Performance Information; Financial Highlights
4. .............. Investment Objectives and Policies; The Fund and its
Management; Cover Page; Investment Restrictions;
Prospectus Summary; Financial Highlights
5. .............. The Fund and Its Management; Back Cover;
Investment Objectives and Policies
6. .............. Dividends, Distributions and Taxes; Additional
Information
7. .............. Purchase of Fund Shares; Shareholder
Services; Repurchases and Redemptions;
Determination of Net Asset Value; Prospectus Summary
8. .............. Repurchases and Redemptions; Shareholder Services
9. .............. Not Applicable
PART B
ITEM STATEMENT OF ADDITIONAL INFORMATION
- ---- -----------------------------------
10. .............. Cover Page
11. .............. Table of Contents
12. .............. The Fund and Its Management
13. .............. Investment Practices and Policies; Investment
Restrictions; Portfolio Transactions and Brokerage
14. .............. The Fund and Its Management; Trustees and
Officers
15. .............. The Fund and Its Management; Trustees and
Officers
16. .............. The Fund and Its Management; Custodian and
Transfer Agent; Independent Accountants
17. .............. Portfolio Transactions and Brokerage
18. .............. Description of Shares; Principal Securities Holders
19. .............. Repurchases and Redemptions; Shareholder Services;
Determination of Net Asset Value; Financial Statements
20. .............. Dividends, Distributions and Taxes; Financial Statements
21. .............. Purchase of Fund Shares
22. .............. Performance Information
23. .............. Experts; Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
PROSPECTUS DATED OCTOBER 31, 1997
DEAN WITTER RETIREMENT SERIES
TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048 (212) 392-2550 OR (800)
869-NEWS (TOLL-FREE)
DEAN WITTER RETIREMENT SERIES (the "Fund") is an open-end, no-load,
management investment company which provides a selection of investment
portfolios for institutional and individual investors participating in
various employee benefit plans and Individual Retirement Account rollover
plans. Each Series has its own investment objective and policies. Shares of
the Fund are sold and redeemed at net asset value without the imposition of a
sales charge. Dean Witter Distributors Inc., the Fund's Distributor (the
"Distributor"), and any of its affiliates are authorized, in accordance with
a Plan of Distribution pursuant to Rule 12b-1 under the Investment Company
Act of 1940, as amended, entered into by the Fund with the Distributor and
Dean Witter Reynolds Inc., to make payments, out of their own resources, for
expenses incurred in connection with the promotion of distribution of shares
of the Fund.
The LIQUID ASSET SERIES seeks high current income, preservation of capital
and liquidity by investing in corporate and government money market
instruments.
The U.S. GOVERNMENT MONEY MARKET SERIES seeks security of principal, high
current income and liquidity by investing primarily in money market
instruments which are issued and/or guaranteed, as to principal and interest,
by the U.S. Government, its agencies or instrumentalities.
The U.S. GOVERNMENT SECURITIES SERIES seeks high current income consistent
with safety of principal by investing in a diversified portfolio of
obligations issued and/or guaranteed by the U.S. Government or its
instrumentalities.
The INTERMEDIATE INCOME SECURITIES SERIES seeks high current income
consistent with safety of principal by investing primarily in intermediate
term, investment grade fixed-income securities.
The AMERICAN VALUE SERIES seeks long-term growth consistent with an effort
to reduce volatility by investing principally in common stock of companies in
industries which, at the time of the investment, are believed to be
attractively valued given their above average relative earnings growth
potential at that time.
The CAPITAL GROWTH SERIES seeks long-term capital growth by investing
primarily in common stocks selected through utilization of a computerized
screening process.
The DIVIDEND GROWTH SERIES seeks to provide reasonable current income and
long-term growth of income and capital by investing primarily in the common
stock of companies with a record of paying dividends and the potential for
increasing dividends.
The STRATEGIST SERIES seeks to maximize its total return by actively
allocating its assets among the major asset categories of equity securities,
fixed-income securities and money market instruments.
The UTILITIES SERIES seeks to provide current income and long-term growth
of income and capital by investing in equity and fixed-income securities of
companies in the public utilities industry.
The VALUE-ADDED MARKET SERIES' investment objective is to achieve a high
level of total return on its assets through a combination of capital
appreciation and current income. It seeks to achieve this objective by
investing, on an equally-weighted basis, in a diversified portfolio of common
stocks of the companies which are represented in the Standard & Poor's 500
Composite Stock Price Index.
The GLOBAL EQUITY SERIES' investment objective is to achieve a high level
of total return on its assets, primarily through long-term capital growth
and, to a lesser extent, from income. It seeks to achieve this objective
through investments in all types of common stocks and equivalents, preferred
stocks and bonds and other debt obligations of domestic and foreign companies
and governments and international organizations.
AN INVESTMENT IN THE LIQUID ASSET, U.S. GOVERNMENT MONEY MARKET AND/OR
U.S. GOVERNMENT SECURITIES SERIES IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT THE LIQUID ASSET OR U.S.
GOVERNMENT MONEY MARKET SERIES WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
SHARES OF SERIES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR
ANY OTHER AGENCY.
The availability of the various methods of purchase and redemption of
shares of the Fund and other shareholder services will be governed by the
parameters set forth in the investor's employee benefit plan.
This Prospectus sets forth concisely the information you should know
before investing in the Fund. It should be read and retained for future
reference. Additional information about the Fund is contained in the
Statement of Additional Information, dated October 31, 1997, which has been
filed with the Securities and Exchange Commission, and which is available at
no charge upon request of the Fund at the address or telephone numbers listed
above. The Statement of Additional Information is incorporated herein by
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Prospectus Summary/2
Summary of Fund Expenses/6
Financial Highlights/8
The Fund and its Management/12
Investment Objectives and Policies/13
Liquid Asset Series/13
U.S. Government Money Market Series/15
U.S. Government Securities Series/16
Intermediate Income Securities Series/19
American Value Series/20
Capital Growth Series/21
Dividend Growth Series/22
Strategist Series/23
Utilities Series/24
Value-Added Market Series/26
Global Equity Series/27
General Investment Techniques/28
Investment Restrictions/37
Determination of Net Asset Value/39
Purchase of Fund Shares/40
Shareholder Services/41
Redemptions and Repurchases/43
Dividends, Distributions and Taxes/45
Performance Information/46
Additional Information/47
<TABLE>
<CAPTION>
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------------------------------------
<S> <C>
The The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is an
Fund open-end management investment company. The Fund is comprised of eleven separate Series: the
Liquid Asset Series, the U.S. Government Money Market Series, the U.S. Government Securities
Series, the Intermediate Income Securities Series, the American Value Series, the Capital Growth
Series, the Dividend Growth Series, the Strategist Series, the Utilities Series, the Value-Added
Market Series, and the Global Equity Series (see page 12). The Trustees of the Fund may establish
additional Series at any time.
- -----------------------------------------------------------------------------------------------------------------
Shares Each Series is managed for investment purposes as if it were a separate fund issuing a separate
Offered class of shares of beneficial interest, with $0.01 par value. The assets of each Series are
segregated, so that an interest in the Fund is limited to the assets of the Series in which shares
are held and shareholders are each entitled to a pro rata share of all dividends and distributions
arising from the net income and capital gains, if any, on the investments of such Series (see page
47).
- -----------------------------------------------------------------------------------------------------------------
Offering The price of the shares of each Series of the Fund offered by this Prospectus is determined once
Price daily as of 4:00 p.m., New York time (or, on days when the New York Stock Exchange closes prior to
4:00 p.m., at such earlier time), on each day that the New York Stock Exchange is open, and is
equal to the net asset value per share without a sales charge (see page 39). Purchases are limited
to institutional and individual investors participating in various employee benefit plans and
Individual Retirement Account ("IRA") rollover plans; there is no minimum initial or subsequent
purchase. The Fund and/or the Distributor reserve the right to permit purchases by non-employee
benefit plan investors.
2
<PAGE>
- -----------------------------------------------------------------------------------------------------------------
Investment Each Series has distinct investment objectives and policies, and is subject to various investment
Objectives and restrictions, some of which apply to all Series. The Liquid Asset Series seeks high current
Policies income, preservation of capital and liquidity by investing in the following money market
instruments: U.S. Government securities, obligations of U.S. regulated banks and savings
institutions having total assets of more than $1 billion, or less than $1 billion if such are
fully federally insured as to principal (the interest may not be insured) and high grade corporate
debt obligations maturing in thirteen months or less (see pages 13-15). The U.S. Government Money
Market Series seeks security of principal, high current income and liquidity by investing
primarily in money market instruments maturing in thirteen months or less which are issued and/or
guaranteed, as to principal and interest, by the U.S. Government, its agencies or
instrumentalities (see pages 15-16). The U.S. Government Securities Series seeks high current
income consistent with safety of principal by investing in a diversified portfolio of obligations
issued and/or guaranteed by the U.S. Government or its instrumentalities (see pages 16-19). The
Intermediate Income Securities Series seeks high current income consistent with safety of
principal by investing primarily in intermediate term, investment grade fixed-income securities
(see pages 19-20). The American Value Series seeks long-term growth consistent with an effort to
reduce volatility by investing primarily in common stock of companies in industries which, at the
time of the investment, are believed to be attractively valued given their above average relative
earnings growth potential at that time (see pages 20-21). The Capital Growth Series seeks
long-term capital growth by investing primarily in common stocks selected through utilization of a
computerized screening process (see pages 21-22). The Dividend Growth Series seeks to provide
reasonable current income and long-term growth of income and capital by investing primarily in the
common stock of companies with a record of paying dividends and the potential for increasing
dividends (see pages 22-23). The Strategist Series seeks to maximize its total return by actively
allocating its assets among the major asset categories of equity securities, fixed-income
securities and money market instruments (see pages 23-24). The Utilities Series seeks to provide
current income and long-term growth of income and capital by investing in equity and fixed-income
securities of companies in the public utilities industry. The Utilities Series will concentrate
its investments in the electric utilities industry (see pages 24-26). The Value-Added Market
Series' investment objective is to achieve a high level of total return on its assets through a
combination of capital appreciation and current income. It seeks to achieve this objective by
investing, on an equally-weighted basis, in a diversified portfolio of common stocks of the
companies which are represented in the Standard & Poor's 500 Composite Stock Price Index (see
pages 26-27). The Global Equity Series' investment objective is a high level of total return on
its assets primarily through long-term capital growth and, to a lesser extent, from income. It
seeks to achieve this objective through investments in all types of common stocks and equivalents
(such as convertible securities and warrants), preferred stocks and bonds and other debt
obligations of domestic and foreign companies and governments and international organizations
(see pages 27-28).
- -----------------------------------------------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc. ("InterCapital" or the "Investment Manager"), the Investment Manager
Manager of the Fund, and its wholly-owned subsidiary, Dean Witter Services Company Inc., serve in various
investment management, advisory, management and administrative capacities to one hundred and two
investment companies and other portfolios with assets of approximately $102.3 billion at September
30, 1997 (see page 12).
- -----------------------------------------------------------------------------------------------------------------
Management The Investment Manager receives monthly fees at the following annual rates of the daily net assets
Fees of the respective Series of the Fund: Liquid Asset Series--0.50%; U.S. Government Money Market
Series--0.50%; U.S. Government Securities Series--0.65%; Intermediate Income Securities
Series--0.65%; American Value Series--0.85%; Capital Growth Series--0.85%; Dividend Growth
Series--0.75%; Strategist Series--0.85%; Utilities Series--0.75%; Value-Added Market
Series--0.50%; and Global Equity Series--1.0%. The management fees for the American Value, Capital
Growth, Dividend Growth, Strategist, Utilities and Global Equity Series are higher than those paid
by most investment companies.
3
<PAGE>
- -----------------------------------------------------------------------------------------------------------------
Dividends and The Liquid Asset Series and the U.S. Government Money Market Series declare and reinvest all
Capital Gains dividends daily and pay cash dividends monthly; the U.S. Government Securities Series and the
Distributions Intermediate Income Securities Series declare dividends from net investment income daily and pay
such dividends monthly; the Dividend Growth Series and the Utilities Series declare and pay
dividends from net investment income quarterly; the American Value Series, the Capital Growth
Series, the Strategist Series, the Value-Added Market Series and the Global Equity Series declare
and pay dividends from net investment income at least once each year. Each Series of the Fund
makes capital gains distributions, if any, at least annually. All dividends and distributions are
automatically reinvested in additional shares at net asset value unless the shareholder elects to
receive cash (see pages 45-46).
- -----------------------------------------------------------------------------------------------------------------
Distributor Dean Witter Distributors Inc. is the distributor of the Fund's shares. The Distributor and Dean
Witter Reynolds Inc. have entered into a Plan of Distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "Act"), with the Fund, authorizing the Distributor
and any of its affiliates to make payments, out of their resources, for expenses incurred in
connection with the promotion of distribution of the Fund's shares (see pages 40-41).
- -----------------------------------------------------------------------------------------------------------------
Redemption Shares of the Fund may be redeemed at their net asset value (see pages 43-45).
- -----------------------------------------------------------------------------------------------------------------
Shareholder Automatic Investment of Dividends and Distributions (unless otherwise requested); Systematic
Services Payroll Deduction Plan; Exchange Privilege; Systematic Withdrawal Plan (see pages 41-43).
- -----------------------------------------------------------------------------------------------------------------
Risks The Liquid Asset Series invests solely in U.S. Government securities, high quality corporate debt
obligations and obligations of banks and savings and loan associations having assets of $1 billion
or more and certificates of deposit which are fully insured as to principal; consequently, the
portfolio securities of the Series are subject to minimal risk of loss of income and principal.
However, the investor is directed to the discussions of "repurchase agreements" (page 28) and
"reverse repurchase agreements" (page 28) concerning any risks associated with these investment
techniques. The U.S. Government Money Market Series invests principally in high quality,
short-term fixed-income securities issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities. Such securities are subject to minimal risk of loss
of income and principal. However, shareholders should also refer to the discussions of "repurchase
agreements" (page 28), "when-issued and delayed delivery securities and forward commitments" (page
28) and "reverse repurchase agreements" (page 28). The U.S. Government Securities Series invests
only in obligations issued or guaranteed by the U.S. Government which are subject to minimal risk
of loss of income and principal. The value of the securities holdings of the U.S. Government
Securities Series and, thereby, the net asset value of its shares, may increase or decrease due to
various factors, principally changes in prevailing interest rates. Generally, a rise in interest
rates will result in a decrease in the net asset value per share. In addition, the average life of
certain of the securities held in the U.S. Government Securities Series (e.g., GNMA Certificates)
may be shortened by prepayments or refinancings of the mortgage pools underlying such securities
(pages 16-19). Such prepayments may have an impact on dividends paid by the U.S. Government
Securities Series. Shareholders should also refer to the discussions of "repurchase agreements,"
"when-issued and delayed delivery securities and forward commitments" and "zero coupon securities"
(pages 28-29). The net asset value of the shares of the Intermediate Income Securities Series will
fluctuate with changes in the market value of its securities holdings. The Series may invest in
securities rated "BBB" by Standard & Poor's Corporation or "Baa" by Moody's Investors Service,
Inc., which securities have speculative characteristics. Shareholders should also refer to the
discussions of "when-issued and delayed delivery securities and forward commitments" (page 28),
"when, as and if issued securities" (page 29), "zero coupon securities" (page 29) and "reverse
repurchase agreements" (page 28). The American Value Series' emphasis on attractive industries may
run contrary to general market assessments and may involve risks associated with departure from
typical S&P 500 industry weightings. It should be recognized that the American Value Series'
investments in small and medium-capitalization companies involves greater risk than is customarily
associated with
4
<PAGE>
- -----------------------------------------------------------------------------------------------------------------
investing in larger, more established companies. Shareholders should also refer to the discussions
of "repurchase agreements" (page 28), "when, as and if issued securities" (page 29) and "warrants"
(page 29). The net asset value of the shares of the Capital Growth Series will fluctuate with
changes in the market value of its portfolio securities. The Capital Growth Series may purchase
foreign, when-issued and delayed delivery, and when, as and if issued securities, and futures and
options, which may be considered speculative in nature and may involve greater risks than those
customarily assumed by other investment companies which do not invest in such instruments (pages
28-36). The net asset value of the shares of the Dividend Growth Series will fluctuate with
changes in the market value of its securities holdings. Dividends payable by the Dividend Growth
Series will vary in relation to the amounts of dividends and interest paid by its securities
holdings. Shareholders should also refer to the discussions of "repurchase agreements" (page 28),
"when, as and if issued securities" (page 29) and "warrants" (page 29). The net asset value of the
shares of Strategist Series will fluctuate with changes in the market value of its portfolio
securities. The level of income payable to the investor will vary depending upon the market
allocation determined by the Investment Manager and with various market determinants such as
interest rates. The Series may make various investments and may engage in various investment
strategies including options and futures transactions (pages 28-36), when-issued and delayed
delivery securities and forward commitments (page 28), when, as and if issued securities (page 28)
and repurchase agreements (page 28). The Strategist Series is "non-diversified" and is therefore
not subject to the diversification requirements of the Act. This non-diversified status allows the
Strategist Series to increase its investment in the securities of an individual issuer, and,
thereby, subjects the Series to greater exposure to any risks pertaining to investment in the
issuer's securities (page 23). The net asset value of the shares of the Utilities Series
fluctuates with changes in the market value of its securities holdings. The public utilities
industry has certain characteristics and risks, and developments within that industry will have an
impact on the Utilities Series. The value of public utility debt securities (and, to a lesser
extent, equity securities) tends to have an inverse relationship to the movement of interest
rates. Shareholders should also refer to the discussions of "repurchase agreements" (page 28),
"when-issued and delayed delivery securities and forward commitments" (page 28), "when, as and if
issued securities" (page 28), "zero coupon securities" (page 29), and "foreign securities" (pages
31-32). The net asset value of the shares of the Value-Added Market Series will fluctuate with
changes in the market value of its securities holdings. Dividends payable by the Value-Added
Market Series will vary in relation to the amounts of income paid by its securities holdings.
Shareholders should also refer to the discussion of "repurchase agreements" (page 28) and "options
and futures transactions" (pages 33-36). The Global Equity Series is intended for long-term
investors who can accept the risks involved in investments in the securities of companies and
countries located throughout the world. It should be recognized that investing in such securities
involves different and perhaps greater risks than are customarily associated with securities of
domestic companies or trading in domestic markets. In addition, shareholders should consider risks
inherent in an international portfolio, including exchange fluctuations and exchange controls, and
certain of the investment policies which the Global Equity Series may employ, including
transactions in forward foreign currency exchange contracts (see pages 31-33). Moreover, the
expenses of the Global Equity Series are likely to be greater than those incurred by other Series
in the Fund and other investment companies which invest primarily in securities of domestic
issuers. The Intermediate Income Securities, American Value, Capital Growth, Strategist,
Utilities, Value-Added Market and Global Equity Series may write call options on securities held
in their portfolios without limit (see pages 33-35). Certain of the Series of the Fund may
experience high portfolio turnover rates with corresponding higher transaction expenses and
potentially adverse tax consequences. See "Portfolio Trading" (pages 36-37).
</TABLE>
5
<PAGE>
SUMMARY OF FUND EXPENSES
- -----------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are for the
fiscal year ended July 31, 1997.
Shareholder Transaction Expenses (for each Series)
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge Imposed on Purchases................ None
Maximum Sales Charge Imposed on Reinvested Dividends .... None
Deferred Sales Charge.................................... None
Redemption Fees.......................................... None
Exchange Fee............................................. None
</TABLE>
Annual Operating Expenses (as a Percentage of Average Net Assets for the year
ended July 31, 1997)*
<TABLE>
<CAPTION>
Intermediate
U.S. Government U.S. Government Income American Capital
Liquid Asset Money Market Securities Securities Value Growth
Series Series Series Series Series Series
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Management Fees*
(after fee waiver) ... 0.46% 0.30% 0.10% 0.00% 0.64% 0.0 %
12b-1 Fees............. 0.0 0.0 0.0 0.0 0.0 0.0
Other Expenses*
(after expense
assumption)........... 0.54 0.70 0.90 1.00 0.36 1.00
Total Series Operating
Expenses.............. 1.00 1.00 1.00 1.00 1.00 1.00
</TABLE>
<TABLE>
<CAPTION>
Dividend Value-Added
Growth Strategist Utilities Market Global Equity
Series Series Series Series Series
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Management Fees*
(after fee waiver) ... 0.75% 0.45% 0.00% 0.48% 0.15%
12b-1 Fees............. 0.0 0.0 0.0 0.0 0.0
Other Expenses*
(after expense
assumption)........... 0.22 0.55 1.00 0.52 0.85
Total Series Operating
Expenses.............. 0.97 1.00 1.00 1.00 1.00
</TABLE>
*Pursuant to an undertaking, the Investment Manager assumed all expenses
relating to each Series' operations (except for any brokerage fees and a
portion of organizational expenses) and waived the compensation provided for
in its Management Agreement with respect to each Series until December 31,
1995. The Investment Manager has undertaken to continue to assume, until
December 31, 1997, such expenses and to waive the compensation provided for
in its Management Agreement with respect to each Series to the extent that
such expenses and compensation on an annualized basis exceed 1.00% of the
daily net assets of the Series.
6
<PAGE>
Example
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Intermediate
U.S. Government U.S. Government Income American Capital
Liquid Asset Money Market Securities Securities Value Growth
Series Series Series Series Series Series
-------------- --------------- --------------- -------------- ---------- ---------
<C> <C> <C> <C> <C> <C> <C>
1 year..... $ 10 $ 10 $ 10 $ 10 $ 10 $ 10
3 years.... 32 32 32 32 32 32
5 years.... 55 55 55 55 55 55
10 years .. 122 122 122 122 122 122
</TABLE>
<TABLE>
<CAPTION>
Dividend Value-Added
Growth Strategist Utilities Market Global Equity
Series Series Series Series Series
---------- ------------ ----------- ------------- ---------------
<C> <C> <C> <C> <C> <C>
1 year..... $ 10 $ 10 $ 10 $ 10 $ 10
3 years.... 31 32 32 32 32
5 years.... 54 55 55 55 55
10 years .. 119 122 122 122 122
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR LESS
THAN THOSE SHOWN.
"Management Fees" (after fee waiver) and "Other Expenses" (after expense
assumption) have been restated to reflect current fees and expenses.
If administrative services are performed by Dean Witter Trust FSB ("DWT"),
the Fund's Transfer and Dividend Disbursing Agent and an affiliate of the
Investment Manager, on behalf of an employee benefit plan, it may charge fees
for such services which are negotiated between each employee benefit plan and
DWT.
It is estimated that total operating expenses for each Series for the
fiscal year ending July 31, 1998, assuming no waiver of management fees or
assumption of expenses, and calculated using average net assets for the year
ended July 31, 1997, would be:
<TABLE>
<CAPTION>
Intermediate
U.S. Government U.S. Government Income American Capital
Liquid Asset Money Market Securities Securities Value Growth
Series Series Series Series Series Series
-------------- --------------- --------------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Management Fees........ 0.50% 0.50% 0.65% 0.65% 0.85% 0.85%
12b-1 Fees............. 0.0 0.0 0.0 0.0 0.0 0.0
Other Expenses......... 0.54 0.70 0.90 1.35 0.36 2.31
Total Series Operating
Expenses.............. 1.04 1.20 1.55 2.00 1.21 3.16
</TABLE>
<TABLE>
<CAPTION>
Dividend Value-Added
Growth Strategist Utilities Market Global Equity
Series Series Series Series Series
---------- ------------ ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Management Fees........ 0.75% 0.85% 0.75% 0.50% 1.00%
12b-1 Fees............. 0.0 0.0 0.0 0.0 0.0
Other Expenses......... 0.22 0.55 1.03 0.52 0.85
Total Series Operating
Expenses.............. 0.97 1.40 1.78 1.02 1.85
</TABLE>
The purpose of these tables is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management."
7
<PAGE>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in
conjunction with the financial statements, notes thereto, and the unqualified
report of independent accountants which are contained in the Statement of
Additional Information. Further information about the performance of the
Fund's Series is contained in the Fund's Annual Report to Shareholders, which
may be obtained without charge upon request to the Fund.
<TABLE>
<CAPTION>
NET
NET ASSET REALIZED TOTAL
YEAR VALUE NET AND TOTAL FROM DIVIDENDS DISTRIBUTIONS DIVIDENDS
ENDED BEGINNING INVESTMENT UNREALIZED INVESTMENT TO TO AND
JULY 31 OF PERIOD INCOME GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS
- ---------- ----------- ------------ ------------ ------------ -------------- --------------- ---------------
<C> <C> <C> <C> <C> <C> <C>
LIQUID ASSET
1993 (1) $ 1.00 $0.02 -- $ 0.02 $(0.02) -- $(0.02)
1994 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1995 1.00 0.06 -- 0.06 (0.06) -- (0.06)
1996 1.00 0.05 -- 0.05 (0.05) -- (0.05)
1997 1.00 0.05 -- 0.05 (0.05) -- (0.05)
U.S. GOVERNMENT MONEY MARKET
1993 (2) 1.00 --++ -- -- -- -- --
1994 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1995 1.00 0.06 -- 0.06 (0.06) -- (0.06)
1996 1.00 0.05 -- 0.05 (0.05) -- (0.05)
1997 1.00 0.04 -- 0.04 (0.04) -- (0.04)
U.S. GOVERNMENT SECURITIES
1993 (3) 10.00 0.19 $ 0.07 0.26 (0.20) -- (0.20)
1994 10.06 0.44 (0.50) (0.06) (0.44) -- (0.44)
1995 9.56 0.56 0.15 0.71 (0.56) -- (0.56)
1996 9.71 0.55 (0.12) 0.43 (0.55) -- (0.55)
1997 9.59 0.56 0.34 0.90 (0.56) $(0.02) (0.58)
INTERMEDIATE INCOME SECURITIES
1993 (4) 10.00 0.19 (0.02) 0.17 (0.19) -- (0.19)
1994 9.98 0.60 (0.57) 0.03 (0.60) -- (0.60)
1995 9.41 0.61 0.22 0.83 (0.61) -- (0.61)
1996 9.63 0.59 (0.21) 0.38 (0.59) (0.01) (0.60)
1997 9.41 0.53 0.26 0.79 (0.53) -- (0.53)
AMERICAN VALUE
1993 (5) 10.00 0.06 (0.01) 0.05 -- -- --
1994 10.05 0.03 (0.09) (0.06) (0.02) (0.04) (0.06)
1995 9.93 0.14 3.15 3.29 (0.12) -- (0.12)
1996 13.10 0.09 1.17 1.26 (0.15) (1.13) (1.28)
1997 13.08 0.02 5.12 5.14 (0.04) (1.22) (1.26)
</TABLE>
- ------------
* After application of the Fund's expense limitation.
+ Calculated based on the net asset value as of the last business day
of the period.
++ Includes dividends from net investment income of $0.004 per share.
(a) Not annualized.
(b) Annualized.
Commencement of operations:
(1) December 30, 1992. (4) January 12, 1993.
(2) January 20, 1993. (5) February 1, 1993.
(3) January 8, 1993.
8
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE RATIOS TO AVERAGE NET
NETASSETS ASSETS
(BEFORE EXPENSES WERE (AFTER EXPENSES WERE
ASSUMED) ASSUMED)
-------------------------- --------------------------
NET ASSET NET ASSETS
VALUE TOTAL END OF NET NET PORTFOLIO AVERAGE
END OF INVESTMENT PERIOD INVESTMENT INVESTMENT TURNOVER COMMISSION
PERIOD RETURN+ (000'S) EXPENSES INCOME (LOSS) EXPENSES INCOME (LOSS) RATE RATE PAID
- ----------- ------------ ------------ ----------- ------------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1.00 1.77%(a) $ 1,081 1.30%(b) 0.53%(b) 0.14%(b) 3.02%(b) N/A N/A
1.00 3.48 1,524 2.50* 0.99 -- 3.49 N/A N/A
1.00 5.90 35,631 1.16 4.96 -- 6.12 N/A N/A
1.00 5.44 42,753 0.65 5.05 0.33 5.37 N/A N/A
1.00 4.57 21,213 1.04 4.43 1.00 4.47 N/A N/A
1.00 0.42 (a) 125 2.50* (b) (0.95)(b) 2.13 (b) 0.83 (b) N/A N/A
1.00 3.52 555 2.50* 0.82 -- 3.32 N/A N/A
1.00 5.86 10,695 2.50* 3.62 -- 6.12 N/A N/A
1.00 5.23 6,628 0.82 4.75 0.37 5.21 N/A N/A
1.00 4.51 4,041 1.20 4.17 1.00 4.37 N/A N/A
10.06 2.60 (a) 1,756 1.81 (b) 0.33 (b) 0.18 (b) 3.66 (b) -- N/A
9.56 (0.69) 2,954 2.50* 1.96 -- 4.46 29 % N/A
9.71 7.72 4,209 2.36 3.49 -- 5.85 14 N/A
9.59 4.49 8,651 1.48 4.70 0.63 5.55 47 N/A
9.91 9.70 10,496 1.55 5.24 1.00 5.79 89 N/A
9.98 1.67 (a) 182 2.50* (b) 1.00 (b) 1.62 (b) 3.50 (b) -- N/A
9.41 0.26 460 2.50* 3.64 -- 6.14 40 N/A
9.63 9.22 994 2.50* 4.08 -- 6.58 37 N/A
9.41 3.95 4,172 1.58 5.01 0.72 5.87 142 N/A
9.67 8.63 2,456 2.00 4.50 1.00 5.50 132 N/A
10.05 0.50 (a) 308 2.50*(b) (0.66)(b) 0.74 (b) 1.10 (b) 121 (a) --
9.93 (0.59) 6,841 2.50* (0.81) -- 1.69 136 --
13.10 33.48 22,581 1.42 0.39 -- 1.81 234 --
13.08 9.83 40,321 1.18 0.23 0.65 0.76 301 $0.0543
16.96 41.62 54,214 1.21 (0.11) 1.00 0.10 261 0.0552
</TABLE>
9
<PAGE>
FINANCIAL HIGHLIGHTS Continued
- -----------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in
conjunction with the financial statements, notes thereto, and the unqualified
report of independent accountants which are contained in the Statement of
Additional Information. Further information about the performance of the
Fund's Series is contained in the Fund's Annual Report to Shareholders, which
may be obtained without charge upon request to the Fund.
<TABLE>
<CAPTION>
NET
NET ASSET REALIZED TOTAL
YEAR VALUE NET AND TOTAL FROM DISTRIBUTIONS DIVIDENDS
ENDED BEGINNING INVESTMENT UNREALIZED INVESTMENT DIVIDENDS TO TO AND
JULY 31 OF PERIOD INCOME (LOSS) GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS
- ---------- ----------- ------------- ------------ ------------ -------------- --------------- ---------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
CAPITAL GROWTH
1993 (4) $10.00 $(0.02) $(1.10) $(1.12) -- -- --
1994 8.88 0.13 0.45 0.58 $(0.04) -- $(0.04)
1995 9.42 0.10 1.77 1.87 (0.12) -- (0.12)
1996 11.17 0.07 1.55 1.62 (0.11) $(0.07) (0.18)
1997 12.61 (0.03) 5.41 5.38 (0.01) (0.32) (0.33)
DIVIDEND GROWTH
1993 (1) 10.00 0.13 0.58 0.71 (0.10) -- (0.10)
1994 10.61 0.28 0.37 0.65 (0.23) (0.01) (0.24)
1995 11.02 0.34 2.13 2.47 (0.31) (0.10) (0.41)
1996 13.08 0.32 1.76 2.08 (0.36) (0.19) (0.55)
1997 14.61 0.33 5.60 5.93 (0.33) (0.52) (0.85)
UTILITIES
1993 (2) 10.00 0.19 1.30 1.49 (0.14) -- (0.14)
1994 11.35 0.37 (0.95) (0.58) (0.34) (0.01) (0.35)
1995 10.42 0.42 0.80 1.22 (0.37) (0.02) (0.39)
1996 11.25 0.38 0.61 0.99 (0.45) -- (0.45)
1997 11.79 0.41 1.90 2.31 (0.32) -- (0.32)
VALUE-ADDED MARKET
1993 (3) 10.00 0.05 0.02 0.07 (0.04) -- (0.04)
1994 10.03 0.24 0.65 0.89 (0.11) -- (0.11)
1995 10.81 0.21 2.16 2.37 (0.26) (0.12) (0.38)
1996 12.80 0.25 1.17 1.42 (0.22) (0.07) (0.29)
1997 13.93 0.21 5.58 5.79 (0.25) (0.63) (0.88)
GLOBAL EQUITY
1993 (2) 10.00 0.07 (0.03) 0.04 -- -- --
1994 10.04 0.08 0.58 0.66 (0.05) -- (0.05)
1995 10.65 0.14 0.49 0.63 (0.11) -- (0.11)
1996 11.17 0.09 0.71 0.80 (0.18) -- (0.18)
1997 11.79 0.09 2.98 3.07 (0.06) (0.32) (0.38)
STRATEGIST
1993 (1) 10.00 0.06 (0.23) (0.17) -- -- --
1994 9.83 0.23 (0.20) 0.03 (0.13) -- (0.13)
1995 9.73 0.24 1.49 1.73 (0.18) -- (0.18)
1996 11.28 0.25 1.63 1.88 (0.34) (0.22) (0.56)
1997 12.60 0.37 2.96 3.33 (0.28) (0.48) (0.76)
</TABLE>
- ------------
* After application of the Fund's expense limitation.
+ Calculated based on the net asset value as of the last business day
of the period.
(a) Not annualized.
(b) Annualized.
Commencement of operations:
(1) January 7, 1993.
(2) January 8, 1993.
(3) February 1, 1993.
(4) February 2, 1993.
10
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET RATIOS TO AVERAGE NET
ASSETS ASSETS
(BEFORE EXPENSES WERE (AFTER EXPENSES WERE
ASSUMED) ASSUMED)
-------------------------- -------------------------
NET ASSET NET ASSETS
VALUE TOTAL END OF NET NET PORTFOLIO AVERAGE
END OF INVESTMENT PERIOD INVESTMENT INVESTMENT TURNOVER COMMISSION
PERIOD RETURN+ (000'S) EXPENSES INCOME (LOSS) EXPENSES INCOME (LOSS) RATE RATE PAID
- ----------- ------------- ------------ ----------- ------------- ---------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8.88 (11.20)%(a) $ 135 2.50%*(b) (1.01)%(b) 1.97%(b) (0.47)%(b) 2%(a) --
9.42 6.57 215 2.50* (0.98) -- 1.52 11 --
11.17 20.08 678 2.50* (1.07) -- 1.43 20 --
12.61 14.58 1,988 2.50* (1.24) 0.76 0.50 68 $0.0536
17.66 43.46 3,670 3.16 (2.38) 1.00 (0.22) 147 0.0575
10.61 7.11 (a) 2,417 2.50* (b) 0.61 (b) 0.16 (b) 2.89 (b) 7 (a) --
11.02 6.13 12,821 1.51 1.78 -- 3.29 13 --
13.08 23.07 35,404 1.14 2.34 -- 3.48 29 --
14.61 16.09 69,763 1.00 2.07 0.63 2.44 18 0.0526
19.69 41.92 115,312 0.97 1.92 0.97 1.92 31 0.0537
11.35 14.98 (a) 1,334 2.50* (b) 1.59 (b) 0.30 (b) 3.79 (b) 8 (a) --
10.42 (5.23) 3,860 2.50* 1.62 -- 4.14 5 --
11.25 12.16 5,380 1.91 2.41 -- 4.32 24 --
11.79 8.76 7,593 1.52 2.31 0.62 3.20 17 0.0508
13.78 19.87 5,391 1.78 1.85 1.00 2.63 89 0.0508
10.03 0.71 (a) 640 2.50* (b) (0.16) (b) 0.92 (b) 1.42 (b) 1 (a) --
10.81 8.89 5,133 1.82 0.70 -- 2.53 8 --
12.80 22.65 14,080 1.22 1.33 -- 2.55 7 --
13.93 11.19 20,379 0.78 1.58 0.47 1.89 8 0.0300
18.84 43.12 23,780 1.02 1.04 1.00 1.07 23 0.0300
10.04 0.40 (a) 322 2.50* (b) (0.90) (b) 1.00 (b) 1.77 (b) -- --
10.65 6.54 2,020 2.50* 0.09 -- 2.41 8 --
11.17 6.08 7,286 2.25 0.48 -- 2.73 55 --
11.79 7.26 11,685 1.73 (0.15) 0.66 0.92 95 0.0500
14.48 26.66 19,797 1.85 (0.01) 1.00 0.84 80 0.0348
9.83 (1.70) (a) 551 2.50* (b) (0.19) (b) 0.64 (b) 1.67 (b) 26 (a) --
9.73 0.12 1,276 2.50* 0.70 -- 3.20 57 --
11.28 18.21 6,759 2.14 1.97 -- 4.11 115 --
12.60 16.97 17,496 1.61 1.92 0.66 2.86 113 0.0525
15.17 27.35 26,459 1.40 2.50 1.00 2.90 90 0.0535
</TABLE>
11
<PAGE>
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
Dean Witter Retirement Series (the "Fund") is an open-end, no-load,
management investment company consisting of eleven separate Series: the
Liquid Asset Series, the U.S. Government Money Market Series, the U.S.
Government Securities Series, the Intermediate Income Securities Series, the
American Value Series, the Capital Growth Series, the Dividend Growth Series,
the Strategist Series, the Utilities Series, the Value-Added Market Series,
and the Global Equity Series. All of the Series, with the exception of the
Strategist Series, are diversified. The Fund is a trust of the type commonly
known as a "Massachusetts business trust" and was organized under the laws of
Massachusetts on May 14, 1992. The Distributor and any of its affiliates are
authorized, pursuant to a Plan of Distribution entered into by the Fund with
the Distributor and Dean Witter Reynolds Inc. ("DWR") in accordance with Rule
12b-1 of the Investment Company Act of 1940, as amended (the "Act"), to make
payments for expenses, out of their own resources, incurred in connection
with the promotion of distribution of shares of the Fund.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment
Manager"), whose address is Two World Trade Center, New York, New York 10048,
is the Fund's Investment Manager. The Investment Manager, which was
incorporated in July, 1992, is a wholly-owned subsidiary of Morgan Stanley,
Dean Witter, Discover & Co., a preeminent global financial services firm that
maintains leading market positions in each of its three primary
businesses--securities, asset management and credit services.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to a total of one hundred and two investment
companies (the "Dean Witter Funds"), thirty of which are listed on the New
York Stock Exchange, with combined assets of approximately $98.6 billion as
of September 30, 1997. The Investment Manager also manages portfolios of
pension plans, other institutions and individuals which aggregated
approximately $3.7 billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of
portfolio securities. Inter-Capital has retained Dean Witter Services Company
Inc. to perform the aforementioned administrative services for the Fund.
The Fund's Board of Trustees review the various services provided by or
under the direction of the Investment Manager to ensure that the Fund's general
investment policies and programs are being properly carried out and that
administrative services are being provided to the Fund in a satisfactory
manner.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily by applying the
annual rate of 0.50% to the net assets of the Liquid Asset Series; 0.50% to
the net assets of the U.S. Government Money Market Series; 0.65% to the net
assets of the U.S. Government Securities Series; 0.65% to the net assets of
the Intermediate Income Securities Series; 0.85% to the net assets of the
American Value Series; 0.85% to the net assets of the Capital Growth Series;
0.75% to the net assets of the Dividend Growth Series; 0.85% to the net
assets of the Strategist Series; 0.75% to the net assets of the Utilities
Series; 0.50% to the net assets of the Value-Added Market Series; and 1.0% to
the Global Equity Series, each business day. The management fees set forth
above for the American Value, Capital Growth, Dividend Growth, Strategist,
Utilities and Global Equity Series are higher than those paid by most
investment companies. Until December 31, 1995, the Investment Manager assumed
all expenses relating to each Series' operations (except for any brokerage
fees and a portion of organizational expenses) and waived the compensation
provided for in its Management Agreement with respect to each Series. The
Investment Manager has undertaken to continue to assume, until December 31,
1997, such expenses and to waive the compensation provided for in its
Management Agreement with respect to each Series to the extent that such
expenses and compensation on an annualized basis exceed 1.00% of the daily
net assets of the Series.
For the fiscal year ended July 31, 1997, the Series accrued total
compensation to the Investment Manager and incurred total expenses, after
assumption of expenses by the Investment Manager, each as a percentage of
average daily net assets, as follows:
COMPENSATION TO TOTAL
INVESTMENT MANAGER EXPENSES
------------------ ----------
Liquid Asset................. 0.46% 1.00%
U.S. Government Money
Market...................... 0.30 1.00
U.S. Government Securities .. 0.10 1.00
Intermediate Income.......... 0.00 1.00
American Value............... 0.64 1.00
Capital Growth............... 0.00 1.00
Dividend Growth.............. 0.75 0.97
Strategist................... 0.45 1.00
Utilities.................... 0.00 1.00
Value-Added Market........... 0.48 1.00
Global Equity................ 0.15 1.00
12
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
- -----------------------------------------------------------------------------
LIQUID ASSET SERIES
The investment objectives of the Liquid Asset Series are high current
income, preservation of capital and liquidity. The investment objectives may
not be changed without approval of the Series' shareholders. The Series seeks
to achieve its objectives by investing in the following money market
instruments:
U.S. Government Securities. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration, and
Government National Mortgage Association) or its instrumentalities (such as
the Federal Home Loan Bank, Federal Intermediate Credit Banks and Federal
Land Bank), including Treasury bills, notes and bonds;
Bank Obligations. Obligations (including certificates of deposit, bank
notes and bankers' acceptances) of banks subject to regulation by the U.S.
Government and having total assets of $1 billion or more, and instruments
secured by such obligations, not including obligations of foreign branches of
domestic banks;
Obligations of Savings Institutions. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more;
Fully Insured Certificates of Deposit. Certificates of deposit of banks
and savings institutions having total assets of less than $1 billion, if the
principal amount of the obligation is federally insured by the Bank Insurance
Fund or the Savings Association Insurance Fund (each of which is administered
by the Federal Deposit Insurance Corporation), limited to $100,000 principal
amount per certificate and to 10% or less of the Series' total assets in all
such obligations and in all illiquid assets, in the aggregate;
Commercial Paper and Corporate Obligations. Commercial paper and corporate
debt obligations maturing in thirteen months or less which are rated in one
of the two highest rating categories for short-term debt obligations or, if
not rated, have been issued by issuers which have another short-term debt
obligation that is comparable in priority and security to such non-rated
securities and is so rated, by at least two nationally recognized statistical
rating organizations ("NRSROs") (or one NRSRO if the instrument was rated by
only one such organization) or which, if unrated, are of comparable quality
as determined in accordance with procedures established by the Trustees. The
NRSROs currently rating instruments of the type the Series may purchase are
Moody's Investors Service, Inc., Standard & Poor's Corporation, Duff and
Phelps, Inc., Fitch Investors Service, Inc., IBCA Limited and IBCA Inc., and
Thomson BankWatch, Inc. Their rating criteria are described in the Appendix
to the Fund's Statement of Additional Information.
The foregoing rating limitations apply at the time of acquisition of a
security. Any subsequent change in any rating by a rating service will not
require elimination of any security from the Series' portfolio. However, in
accordance with procedures adopted by the Fund's Trustees pursuant to federal
securities regulations governing money market funds, if the Investment
Manager becomes aware that a portfolio security has received a new rating
from an NRSRO that is below the second highest rating, then, unless the
security is disposed of within five days, the Investment Manager will perform
a creditworthiness analysis of any such downgraded securities, which analysis
will be reported to the Trustees who will, in turn, determine whether the
securities continue to present minimal credit risks to the Liquid Asset
Series.
The ratings assigned by the NRSROs represent their opinions as to the
quality of the securities they undertake to rate. It should be emphasized,
however, that the ratings are general and not absolute standards of quality.
Subject to the foregoing requirements, the Liquid Asset Series may invest
in commercial paper which has been issued pursuant to the "private placement"
exemption afforded by Section 4(2) of the Securities Act of 1933 (the
"Securities Act") and which may be sold to institutional investors pursuant
to Rule 144A under the Securities Act. Management considers such legally
restricted, but readily marketable, commercial paper to be liquid. However,
pursuant to procedures approved by the Trustees of the Fund, if a particular
investment in such commercial paper is determined to be illiquid, that
investment will be included within the 10% limitation on illiquid investments
(see "Investment Restrictions"). If at any time the Liquid Asset Series'
investments in
13
<PAGE>
illiquid securities exceed 10% of the Series' total assets, the Series will
dispose of illiquid securities in an orderly fashion to reduce the Series'
holdings in such securities to less than 10% of its total assets.
Variable Rate and Floating Rate Obligations. Certain of the types of
investments described above may be variable rate or floating rate
obligations. The interest rates payable on variable rate or floating rate
obligations are not fixed and may fluctuate based upon changes in market
rates. The interest rate payable on a variable rate obligation may be
adjusted at pre-designated periodic intervals and on a floating rate
obligation whenever there is a change in the market rate of interest on which
the interest rate payable is based.
Although the Liquid Asset Series will generally not seek profits through
short-term trading, it may dispose of any portfolio security prior to its
maturity if, on the basis of a revised credit evaluation of the issuer or
other circumstances or considerations, it believes such disposition
advisable.
The Liquid Asset Series will attempt to balance its objectives of high
income, capital preservation and liquidity by investing in securities of
varying maturities and risks. The Liquid Asset Series will not, however,
invest in securities that mature in more than thirteen months from the date
of purchase. The amounts invested in obligations of various maturities of
thirteen months or less will depend on management's evaluation of the risks
involved. Longer-term issues, while generally paying higher interest rates,
are subject, as a result of general changes in interest rates, to greater
fluctuations in value than shorter-term issues. Thus, when rates on new debt
securities increase, the value of outstanding securities may decline, and
vice versa. Such changes may also occur, but to a lesser degree, with
short-term issues. These changes, if realized, may cause fluctuations in the
amount of daily dividends and, in extreme cases, could cause the net asset
value per share to decline (see "Determination of Net Asset Value").
Longer-term issues also increase the risk that the issuer may be unable to
pay an installment of interest or principal at maturity. Also, in the event
of unusually large redemption demands, such securities may have to be sold at
a loss prior to maturity, or the Liquid Asset Series might have to borrow
money and incur interest expense. Either occurrence would adversely impact
the amount of daily dividend and could result in a decline in the daily net
asset value per share. The Liquid Asset Series will attempt to minimize these
risks by investing in longer-term securities when it appears to management
that interest rates on such securities are not likely to increase
substantially during the period of expected holding, and then only in
securities of high quality which are readily marketable. However, there can
be no assurance that the Series will be successful in achieving this or its
other objectives.
Private Placements. As stated above, the Liquid Asset Series may invest in
commercial paper issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act of
1933 (the "Securities Act") and which may be sold to other institutional
investors pursuant to Rule 144A under the Securities Act. The adoption by the
Securities and Exchange Commission of Rule 144A, which permits the resale of
certain restricted securities to institutional investors, had the effect of
broadening and increasing the liquidity of the institutional trading market
for securities subject to restrictions on resale to the general public.
Section 4(2) commercial paper sold pursuant to Rule 144A is restricted in
that it can be resold only to qualified institutional investors. However,
since institutions constitute virtually the entire market for such commercial
paper, the market for such Section 4(2) commercial paper is, in reality, as
liquid as that for other commercial paper. While the Liquid Asset Series
generally holds to maturity commercial paper in its portfolio, the advent of
Rule 144A has greatly simplified the ability to sell Section 4(2) commercial
paper to other institutional investors.
Under procedures adopted by the Trustees of the Fund, the Liquid Asset
Series may purchase Section 4(2) commercial paper without being subject to
its limitation on illiquid investments and will be able to utilize Rule 144A
to sell that paper to other institutional investors. The procedures require
that the Investment Manager consider the following factors in determining
that any restricted security eligible for sale pursuant to Rule 144A be
considered liquid: (1) the frequency of trades and quotes for the security,
(2) the number of dealers willing to purchase or sell the security and the
number of other potential purchasers, (3) dealer undertakings to make a
market in the security, and (4) the nature of the security and the nature of
the marketplace trades (i.e., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer). The Investment
Manager will report to the Trustees on a quarterly basis on all restricted
securities held by the Liquid Asset Series
14
<PAGE>
with regard to their ongoing liquidity. In the event any Section 4(2)
commercial paper or restricted security held by the Liquid Asset Series is
determined to be illiquid by the Trustees and the Investment Manager, that
investment would be included as an illiquid security subject to the
limitation on illiquid investments referred to above. Investing in Rule 144A
securities could have the effect of increasing the level of illiquidity to
the extent a Series, at a particular point in time, may be unable to find
qualified institutional buyers interested in purchasing such securities.
The foregoing investment policies are not fund amental and may be changed
by the Trustees without shareholder vote.
U.S. GOVERNMENT MONEY MARKET SERIES
The investment objectives of the U.S. Government Money Market Series are
security of principal, high current income and liquidity. There is no
assurance that the investment objectives will be achieved. These investment
objectives may not be changed without the approval of the shareholders of the
U.S. Government Money Market Series. The investment policies discussed below
may be changed without shareholder approval.
The U.S. Government Money Market Series seeks to achieve its objectives by
investing in U.S. Government securities, including a variety of securities
which are issued and/or guaranteed, as to principal and interest, by the
United States Treasury, by various agencies of the United States Government,
and by various instrumentalities which have been established or sponsored by
the United States Government, and in certain interests in the foregoing
securities. Except for U.S. Treasury securities, these obligations, even
those which are guaranteed by Federal agencies or instrumentalities, may or
may not be backed by the "full faith and credit" of the United States. In the
case of securities not backed by the full faith and credit of the United
States, they may be backed, in part, by a line of credit with the U.S.
Treasury (such as the Federal National Mortgage Association), or the U.S.
Government Money Market Series must look to the agency issuing or
guaranteeing the obligation for ultimate repayment (such as securities of the
Federal Farm Credit System), in which case the U.S. Government Money Market
Series may not be able to assert a claim against the United States itself in
the event the agency or instrumentality does not meet its commitments. The
assumption of the liabilities of these agencies or instrumentalities by the
U.S. Government is discretionary and is not a lawful obligation.
Treasury securities include Treasury bills, Treasury notes, and Treasury
bonds. Some of the government agencies and instrumentalities which issue or
guarantee securities include the Federal Farm Credit System, the Federal Home
Loan Banks, the Federal Home Loan Mortgage Corporation, the Government
National Mortgage Association, the Federal National Mortgage Association, the
Farmers Home Administration, the Federal Land Banks, the Small Business
Administration, the Student Loan Marketing Association, the Export-Import
Bank, the Federal Intermediate Credit Banks and the Banks for Cooperatives.
The U.S. Government Money Market Series may invest in securities issued or
guaranteed, as to principal and interest, by any of the foregoing entities or
by any other agency or instrumentality established or sponsored by the United
States Government. Such investments may take the form of participation
interests in, and may be evidenced by deposit or safekeeping receipts for,
any of the foregoing. Participation interests are pro rata interests in U.S.
Government securities such as interests in pools of mortgages sold by the
Government National Mortgage Association; instruments evidencing deposit or
safekeeping are documentary receipts for such original securities held in
custody by others.
The Federal Deposit Insurance Corporation is the administrative authority
over the Bank Insurance Fund and the Savings Association Insurance Fund,
which are the agencies of the U.S. Government which insure (including both
principal and interest) the deposits of certain banks and savings and loan
associations up to $100,000 per deposit. Current federal regulations also
permit such institutions to issue insured negotiable certificates of deposit
("CDs") in principal amounts of $100,000 or more without regard to the
interest rate ceilings on other deposits. To remain fully insured as to
principal, these investments must currently be limited to $100,000 per bank
or savings and loan association. The interest on such investments is not
insured. The U.S. Government Money Market Series may invest in such CDs of
banks and savings and loan institutions limited to the insured amount of
principal ($100,000) in each case and limited with regard to all such CDs and
all illiquid assets, in the aggregate, to 10% of the U.S. Government Money
Market Series' total assets.
15
<PAGE>
The U.S. Government Money Market Series intends normally to hold its
portfolio securities to maturity. Historically, securities issued or
guaranteed by the U.S. Government or its agencies and instrumentalities have
involved minimal risk of loss of principal or interest, if held to maturity.
The U.S. Government Money Market Series will generally not seek profits
through short-term trading, although it may dispose of any portfolio security
prior to maturity if, on the basis of a revised evaluation or other
circumstance or consideration, the Investment Manager deems such disposition
advisable.
The U.S. Government Money Market Series will attempt to balance its
objectives of security of principal, high current income and liquidity by
investing in securities of varying maturities and risks. The U.S. Government
Money Market Series will not, however, invest in securities with an effective
maturity of more than thirteen months from the date of purchase. The amounts
invested in obligations of various maturities of thirteen months or less will
depend on management's evaluation of the risks involved. Longer-term U.S.
Government issues, while generally paying higher interest rates, are subject
to greater fluctuations in value resulting from general changes in interest
rates than shorter-term issues. Thus, when rates on new securities increase,
the value of outstanding securities may decline, and vice versa. Such changes
may also occur, to a lesser degree, with short-term issues.
These changes, if realized, may cause fluctuations in the amount of daily
dividends and, in extreme cases, could cause the net asset value per share to
decline (see "Determination of Net Asset Value"). In the event of unusually
large redemption demands, such securities may have to be sold at a loss prior
to maturity, or the U.S. Government Money Market Series might have to borrow
money and incur interest expenses. Either occurrence would adversely impact
upon the amount of daily dividend and could result in a decline in daily net
asset value per share or the redemption by the U.S. Government Money Market
Series of shares held in a shareholder's account. The U.S. Government Money
Market Series will attempt to minimize these risks by investing in relatively
longer-term securities when it appears to management that yields on such
securities are not likely to increase substantially during the period of
expected holding, and then only in securities which are readily marketable.
However, there can be no assurance that the U.S. Government Money Market
Series will be successful in achieving this objective.
U.S. GOVERNMENT SECURITIES SERIES
The investment objective of the U.S. Government Securities Series is high
current income consistent with safety of principal. There is no assurance
that the investment objective will be achieved. The investment objective may
not be changed without approval of the U.S. Government Securities Series'
shareholders. The investment policies discussed below may be changed without
shareholder approval.
The U.S. Government Securities Series seeks to achieve its objective by
investing in obligations issued and/or guaranteed by the U.S. Government or
its instrumentalities ("U.S. Government Securities"). All such obligations
are backed by the "full faith and credit" of the United States. Investments
may be made in obligations of instrumentalities of the U.S. Government only
where such obligations are guaranteed by the U.S. Government.
U.S. Government securities include U.S. Treasury securities consisting of
Treasury bills, Treasury notes and Treasury bonds. Some of the other U.S.
Government securities in which the U.S. Government Securities Series may
invest include securities of the Federal Housing Administration, the
Government National Mortgage Association, the Department of Housing and Urban
Development, the Export-Import Bank, the Farmers Home Administration, the
General Services Administration, the Maritime Administration, Resolution
Funding Corporation and the Small Business Administration. The maturities of
such securities usually range from three months to thirty years.
The Series is not limited as to the maturities of the U.S. Government
securities in which it may invest, except that the Series will not purchase
zero coupon securities with remaining maturities of longer than ten years.
For a discussion of the risks of investing in U.S. Government securities
(including such securities purchased on a when-issued, delayed delivery or
forward commitment basis and zero coupon securities), see "General Investment
Techniques" below.
While the U.S. Government Securities Series has the ability to invest in
any securities backed by the full faith and credit of the United States, it
is currently anticipated that a substantial portion of the U.S. Government
Securities Series' assets will be invested in Certificates of the Government
National Mortgage Association ("GNMA"). Should market or economic conditions
warrant, this policy is subject to change at any time at the discretion of
the Investment Manager.
16
<PAGE>
GNMA Certificates. GNMA Certificates are mortgage-backed securities. Each
Certificate evidences an interest in a specific pool of mortgages insured by
the Federal Housing Administration or the Farmers Home Administration (FHA)
or guaranteed by the Veterans Administration (VA). Scheduled payments of
principal and interest are made to the registered holders of GNMA
Certificates. The GNMA Certificates that the U.S. Government Securities
Series will invest in are of the modified pass-through type. GNMA guarantees
the timely payment of monthly installments of principal and interest on
modified pass-through certificates at the time such payments are due, whether
or not such amounts are collected by the issuer on the underlying mortgages.
The National Housing Act provides that the full faith and credit of the
United States is pledged to the timely payment of principal and interest by
GNMA of amounts due on these GNMA Certificates.
The average life of GNMA Certificates varies with the maturities of the
underlying mortgage instruments with maximum maturities of 30 years. The
average life is likely to be substantially less than the original maturity of
the mortgage pools underlying the securities as a result of prepayments or
refinancing of such mortgages or foreclosure. Any prepayments are passed
through to the registered holder with the regular monthly payments of
principal and interest, which has the effect of reducing future payments. Due
to the GNMA guarantee, foreclosures impose no risk to investment principal.
The occurrence of mortgage prepayments is affected by factors including the
level of interest rates, general economic conditions, the location and age of
the mortgage and other social and demographic conditions. As prepayment rates
vary widely, it is not possible to accurately predict the average life of a
particular pool. However, statistics indicate that the average life of the
type of mortgages backing the majority of GNMA Certificates is approximately
twelve years. For this reason, it is standard practice to treat GNMA
Certificates as 30-year mortgage-backed securities which prepay fully in the
twelfth year. Pools of mortgages with other maturities or different
characteristics will have varying assumptions for average life. The assumed
average life of pools of mortgages having terms of less than 30 years is less
than twelve years, but typically not less than five years.
The coupon rate of interest of GNMA Certificates is lower than the
interest rate paid on the VA-guaranteed or FHA-insured mortgages underlying
the Certificates, but only by the amount of the fees paid to GNMA and the
issuer.
The U.S. Government Securities Series will invest in mortgage pass-through
securities representing participation interests in pools of residential
mortgage loans originated by United States governmental or private lenders
such as banks, broker-dealers and financing corporations and guaranteed, to
the extent provided in such securities, by the United States Government or
one of its agencies or instrumentalities. Such securities, which are
ownership interests in the underlying mortgage loans, differ from
conventional debt securities, which provide for periodic payment of interest
in fixed amounts (usually semi-annually) and principal payments at maturity
or on specified call dates. Mortgage pass-through securities provide for
monthly payments that are a "pass-through" of the monthly interest and
principal payments (including any prepayments) made by the individual
borrowers on the pooled mortgage loans, net of any fees paid to the guarantor
of such securities and the servicer of the underlying mortgage loans. The
guaranteed mortgage pass-through securities in which the U.S. Government
Securities Series may invest include those issued or guaranteed by GNMA or
other entities which securities are backed by the full faith and credit of
the United States.
Certificates for mortgage-backed securities evidence an interest in a
specific pool of mortgages. These certificates are, in most cases, "modified
pass-through" instruments, wherein the issuing agency guarantees the payment
of principal and interest on mortgages underlying the certificates, whether
or not such amounts are collected by the issuer on the underlying mortgages.
Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and
the associated average life assumption. In periods of falling interest rates
the rate of prepayment tends to increase, thereby shortening the actual
average life of a pool of mortgage-related securities. Conversely, in periods
of rising rates the rate of prepayment tends to decrease, thereby lengthening
the actual average life of the pool. Reinvestment by the U.S. Government
Securities Series of prepayments may occur at higher or lower interest rates
than the original investment. Historically, actual average life has been
consistent with the twelve-year assumption referred to above. The actual
yield of each GNMA Certificate is influenced by the prepayment experience of
the mortgage pool underlying the Certificates. Interest on GNMA Certificates
is paid monthly rather than semi-annually as for traditional bonds.
17
<PAGE>
Adjustable Rate Mortgage Securities. The U.S. Government Securities Series
may also invest in adjustable rate mortgage securities ("ARMs"), which are
pass-through mortgage securities collateralized by mortgages with adjustable
rather than fixed rates. ARMs eligible for inclusion in a mortgage pool
generally provide for a fixed initial mortgage interest rate for either the
first three, six, twelve or thirteen scheduled monthly payments. Thereafter,
the interest rates are subject to periodic adjustment based on changes to a
designated benchmark index.
ARMs contain maximum and minimum rates beyond which the mortgage interest
rate may not vary over the lifetime of the security. In addition, certain
ARMs provide for additional limitations on the maximum amount by which the
mortgage interest rate may adjust for any single adjustment period.
Alternatively, certain ARMs contain limitations on changes in the required
monthly payment. In the event that a monthly payment is not sufficient to pay
the interest accruing on an ARM, any such excess interest is added to the
principal balance of the mortgage loan, which is repaid through future
monthly payments. If the monthly payment for such an instrument exceeds the
sum of the interest accrued at the applicable mortgage interest rate and the
principal payment required at such point to amortize the outstanding
principal balance over the remaining term of the loan, the excess is utilized
to reduce the then outstanding principal balance of the ARM.
Collateralized Mortgage Obligations and Multiclass Pass-Through
Securities. The U.S. Government Securities Series may also invest in
collateralized mortgage obligations or "CMOs," which are debt obligations
collateralized by mortgage loans or mortgage pass-through securities.
Typically, CMOs are collateralized by GNMA, FNMA or FHLMC Certificates, but
also may be collateralized by whole loans or private mortgage pass-through
securities (such collateral collectively hereinafter referred to as "Mortgage
Assets"). Multiclass pass-through securities are equity interests in a trust
composed of Mortgage Assets. Payments of principal of and interest on the
Mortgage Assets, and any reinvestment income thereon, provide the funds to
pay debt service on the CMOs or make scheduled distributions on the
multiclass pass-through securities. CMOs may be issued by agencies or
instrumentalities of the United States Government, or by private originators
of, or investors in, mortgage loans, including savings and loan associations,
mortgage banks, commercial banks, investment banks and special purpose
subsidiaries of the foregoing. However, the U.S. Government Securities Series
will only invest in CMOs which are backed by the full faith and credit of the
United States.
The issuer of a series of CMOs may elect to be treated as a Real Estate
Mortgage Investment Conduit ("REMIC"). REMICs include governmental and/or
private entities that issue a fixed pool of mortgages secured by an interest
in real property. REMICs are similar to CMOs in that they issue multiple
classes of securities, but unlike CMOs, which are required to be structured
as debt securities, REMICs may be structured as indirect ownership interests
in the underlying assets of the REMICs themselves. However, there are no
effects on the Series from investing in CMOs issued by entities that have
elected to be treated as REMICs, and all future references to CMOs shall also
be deemed to include REMICs. The Fund may invest without limitation in CMOs.
In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche", is issued at a specific
fixed or floating coupon rate and has a stated maturity or final distribution
date. Principal prepayments on the Mortgage Assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final
distribution dates. Interest is paid or accrues on all classes of the CMOs on
a monthly, quarterly or semi-annual basis. Certain CMOs may have variable or
floating interest rates and others may be stripped (securities which provide
only the principal or interest feature of the underlying security).
The principal of and interest on the Mortgage Assets may be allocated
among the several classes of a CMO series in a number of different ways.
Generally, the purpose of the allocation of the cash flow of a CMO to the
various classes is to obtain a more predictable cash flow to the individual
tranches than exists with the underlying collateral of the CMO. As a general
rule, the more predictable the cash flow is on a CMO tranche, the lower the
anticipated yield will be on the tranche at the time of issuance relative to
prevailing market yields on mortgage-backed securities. As part of the
process of creating more predictable cash flows on most of the tranches in a
series of CMOs, one or more tranches generally must be created that absorb
most of the volatility in the cash flows on the underlying mortgage loans.
The yields on these
18
<PAGE>
tranches are generally higher than prevailing market yields on
mortgage-backed securities with similar maturities. As a result of the
uncertainty of the cash flows of these tranches, the market prices of and
yield on these tranches generally are more volatile.
The U.S. Government Securities Series also may invest in, among other
things, parallel pay CMOs and Planned Amortization Class CMOs ("PAC Bond").
Parallel pay CMOs are structured to provide payments of principal on each
payment date to more than one class. These simultaneous payments are taken
into account in calculating the stated maturity date or final distribution
date of each class, which, as with other CMO structures, must be retired by
its stated maturity date or final distribution date, but may be retired
earlier. PAC Bonds generally require payments of a specified amount of
principal on each payment date. PAC Bonds always are parallel pay CMOs with
the required principal payment on such securities having the highest priority
after interest has been paid to all classes.
INTERMEDIATE INCOME SECURITIES SERIES
The investment objective of the Intermediate Income Securities Series is
high current income consistent with safety of principal. This investment
objective may not be changed without approval of the Intermediate Income
Securities Series' shareholders. There is no assurance that the investment
objective will be achieved. The investment policies discussed below may be
changed without shareholder approval.
The Intermediate Income Securities Series seeks to achieve its objective
by investing at least 65% of its total assets in intermediate term,
investment grade fixed-income securities. Such securities have a minimum
remaining maturity of three years and a maximum remaining maturity of ten
years. The Intermediate Income Securities Series will maintain an average
dollar-weighted maturity of approximately seven years or less and may not
invest in securities with remaining maturities greater than twelve years.
Under normal conditions, the Intermediate Income Securities Series' average
weighted maturity will not be less than three years.
Under normal circumstances, the Intermediate Income Securities Series will
invest primarily in corporate debt securities and preferred stock of
investment grade, which consists of securities which are rated at the time of
purchase Baa or better by Moody's Investors Service, Inc. ("Moody's") or BBB
or better by Standard & Poor's Corporation ("S&P"), or which, if unrated, are
determined to be of comparable quality by the Fund's Trustees. While
fixed-income securities rated Baa by Moody's and BBB by S&P are considered
investment grade, they have speculative characteristics. (A more detailed
description of bond ratings is contained in the Appendix to the Statement of
Additional Information.) The Intermediate Income Securities Series may also
purchase U.S. Government securities (securities guaranteed as to principal
and interest by the United States or its agencies or instrumentalities) and
investment grade securities, denominated in U.S. dollars, issued by foreign
governments or issuers. U.S. Government securities in which the Intermediate
Income Securities Series may invest include zero coupon securities and
mortgage backed securities, such as securities issued by the Government
National Mortgage Association, the Federal National Mortgage Association and
the Federal Home Loan Mortgage Corporation. There can be no assurance that
the investment objective of the Intermediate Income Securities Series will be
achieved.
The Investment Manager believes that the Intermediate Income Securities
Series' policies of purchasing intermediate term securities will reduce the
volatility of the Intermediate Income Securities Series' net asset value over
the long term. Although the values of fixed-income securities generally
increase during periods of declining interest rates and decrease during
periods of increasing interest rates, the extent of these fluctuations has
historically generally been smaller for intermediate term securities than for
securities with longer maturities. Conversely, the yield available on
intermediate term securities has also historically been lower than those
available from long term securities.
Investment by the Intermediate Income Securities Series in U.S. dollar
denominated fixed-income securities issued by foreign governments and other
foreign issuers may involve certain risks not associated with U.S. issued
securities (see "Foreign Securities" under "General Portfolio Techniques"
below). The Investment Manager believes that those risks are substantially
lessened because the foreign securities in which the Intermediate Income
Securities Series may invest are investment grade.
While the Intermediate Income Securities Series will invest primarily in
investment grade fixed-income securities, under ordinary circumstances it may
invest up to 35% of its total assets in money market instruments and
repurchase agreements, as well as, with respect to up to 5% of its net
assets,
19
<PAGE>
lower-rated fixed-income securities. No more than 5% of the Intermediate
Income Securities Series' net assets may be invested in lower-rated
fixed-income securities.
Lower-rated fixed-income securities, which are those rated from Ba or BB
to C by Moody's or S&P, respectively, are considered to be speculative
investments. Such lower-rated securities, while producing a higher yield than
investment grade securities, are subject to credit risk to a greater extent
than investment grade securities. The Intermediate Income Securities Series
does not have any minimum quality rating standard with respect to the portion
(up to 5%) of its net assets which may be invested in lower-rated securities.
See the Statement of Additional Information for a description of the special
risks and characteristics of lower-rated fixed-income securities.
There may be periods during which, in the opinion of the Investment
Manager, market conditions warrant reduction of some or all of the
Intermediate Income Securities Series' securities holdings. During such
periods, the Intermediate Income Securities Series may adopt a temporary
"defensive" posture in which greater than 35% of its total assets are
invested in cash or money market instruments. Money market instruments in
which the Intermediate Income Securities Series may invest are securities
issued or guaranteed by the U.S. Government (Treasury bills, notes and bonds,
including zero coupon securities); bank obligations; Eurodollar certificates
of deposit; obligations of savings institutions; fully insured certificates
of deposit; and commercial paper rated within the two highest grades by
Moody's or Standard & Poor's or, if not rated, are issued by a company having
an outstanding debt issue rated at least AA by S&P or Aa by Moody's.
AMERICAN VALUE SERIES
The investment objective of the American Value Series is long-term capital
growth consistent with an effort to reduce volatility. There is no assurance
that the American Value Series' objective will be achieved. The investment
objective may not be changed without the approval of the shareholders of the
American Value Series. The investment policies discussed below may be changed
without shareholder approval.
The American Value Series seeks to achieve its investment objective by
investing in a diversified portfolio of securities consisting principally of
common stocks. The American Value Series utilizes an investment process that
places primary emphasis on seeking to identify industries, rather than
individual companies, as prospects for capital appreciation. The Investment
Manager seeks to invest the assets of the Series in those industries that, at
the time of investment, are attractively valued given their above average
relative earnings growth potential at that time. Therefore, the Series is
typically over-weighted in those sectors deemed to be attractive given their
potential for above average earnings growth.
After selection of the American Value Series' target industries, specific
company investments are selected. In this process, the Investment Manager
seeks to identify companies whose prospects are deemed attractive on the
basis of an evaluation of valuation screens and prospective company
fundamentals.
The Investment Manager seeks to identify what stage of the business cycle
the economy is in and which industry groups have historically outperformed
the overall market during that stage of the cycle, i.e., typically, groups
that tend to have the highest relative earnings growth at that point in the
cycle. The Investment Manager also analyzes secular trends such as
demographics, international trade, etc., that could cause the current cycle
to differ from prior cycles and attempts to weight the portfolio
appropriately, given those factors.
Following selection of the American Value Series' specific investments,
the Investment Manager will attempt to allocate the assets of the American
Value Series so as to reduce the volatility of its portfolio. In doing so,
the American Value Series may hold a portion of its portfolio in fixed-income
securities in an effort to moderate extremes of price fluctuations. The
American Value Series may invest up to 35% of its total assets in common
stocks of non-U.S. companies, including American Depository Receipts (which
are custody receipts with respect to foreign securities) (see "Foreign
Securities" under "General Portfolio Techniques" below), in companies in
industries which have not been determined to be attractively valued or
moderately attractively valued by the Investment Manager, and in convertible
debt securities and warrants, convertible preferred securities, U.S.
Government securities (securities issued or guaranteed as to principal and
interest by the United States or its agencies and instrumentalities) and
investment grade corporate debt securities when, in the opinion of the
Invest-
20
<PAGE>
ment Manager, the projected total return on such securities is equal to or
greater than the expected total return on common stocks, or when such
holdings might be expected to reduce the volatility of the portfolio, and in
money market instruments under any one or more of the following
circumstances: (i) pending investment of proceeds of sale of shares of the
American Value Series or of portfolio securities; (ii) pending settlement of
purchases of portfolio securities; or (iii) to maintain liquidity for the
purpose of meeting anticipated redemptions. Greater than 35% of the American
Value Series' total assets may be invested in money market instruments to
maintain, temporarily, a "defensive" posture when, in the opinion of the
Investment Manager, it is advisable to do so because of economic or market
conditions. The term investment grade consists of fixed-income securities
rated Baa or higher by Moody's Investors Service Inc. or BBB or higher by
Standard and Poor's Corporation, or, if not rated, determined to be of
comparable quality by the Investment Manager.
Because prices of stocks fluctuate from day to day, the value of an
investment in the American Value Series will vary based upon the Series'
investment performance. The American Value Series is intended for long-term
investors who can accept the risks involved in seeking long-term growth of
capital through investment in the securities of large, medium and
small-capitalization companies. Emphasis on attractive industries may run
contrary to general market assessments and may involve risks associated with
departure from typical S&P 500 industry weightings. It should be recognized
that investing in small and medium-capitalization companies involves greater
risk than is customarily associated with investing in more established
companies.
Under normal circumstances, at least 65% of the American Value Series'
total assets will be invested in common stocks of U.S. companies in
industries which, at the time of purchase, were determined to be attractively
valued or moderately attractively valued given their above average relative
earnings growth potential.
The American Value Series may enter into repurchase agreements, invest in
zero coupon securities, invest in real estate investment trusts, lend its
portfolio securities, engage in futures contracts and options transactions,
purchase securities which are issued in private placements or are otherwise
not readily marketable, and purchase securities on a when-issued or delayed
delivery basis or a "when, as and if issued" basis, and purchase or sell
securities on a forward commitment basis, in each case in accordance with the
description of these investments and techniques (and subject to the risks)
set forth under "General Portfolio Techniques" below and in the Statement of
Additional Information.
The foregoing limitations apply at the time of acquisition based on the
last determined market value of the American Value Series' assets, and any
subsequent change in any applicable percentage resulting from market
fluctuations or other changes in total assets will not require elimination of
any security from the portfolio.
CAPITAL GROWTH SERIES
The investment objective of the Capital Growth Series is long-term capital
growth. There is no assurance that the objective will be achieved. The
investment objective may not be changed without the approval of the majority
of the shareholders of the Capital Growth Series. The following policies may
be changed by the Trustees without approval by the shareholders of the
Capital Growth Series.
The Capital Growth Series seeks to achieve its investment objective by
investing, under normal circumstances, at least 65% of its total assets in
common stocks. As part of its management of the Capital Growth Series, the
Investment Manager utilizes a screening process designed to Find companies
which have demonstrated a history of consistent growth in earnings and
revenues for the past several years. Additionally, several companies will
have solid future earnings growth characteristics and attractive valuations.
Companies meeting these requirements will be potential candidates for
investment within the Capital Growth portfolio. Subject to the Capital Growth
Series' investment objective, the Investment Manager, without notice, may
modify the foregoing screening process and/or may utilize additional or
different screening processes in connection with the investment of the
Series' assets. Dividend income will not be a consideration in the selection
of stocks for purchase.
Although the Capital Growth Series invests primarily in common stocks, the
Series may invest up to 35% of its total assets (taken at current value and
subject to any restrictions appearing elsewhere in this Prospectus), in any
combination of the following: (a) U.S. Government securities (securities
issued or guaranteed as to principal and interest by the U.S. Government or
its agencies or instrumentalities) and investment grade fixed-income
securities; (b) convertible securities; (c) money market
21
<PAGE>
instruments; (d) options on equity and debt securities; and (e) futures
contracts and related options thereon, as described below. The Capital Growth
Series may also purchase unit offerings (where corporate debt securities are
offered as a unit with convertible securities, preferred or common stocks,
warrants, or any combination thereof). U.S. Government securities in which
the Capital Growth Series may invest include zero coupon securities.
Convertible securities in which the Capital Growth Series may invest include
bonds, debentures, corporate notes, preferred stock and other securities. The
Capital Growth Series may also purchase securities on a when-issued or
delayed delivery basis, may purchase or sell securities on a forward
commitment basis, and may purchase securities on a "when, as and if issued"
basis.
There may be periods during which, in the opinion of the Investment
Manager, market conditions warrant reduction of some or all of the Capital
Growth Series' securities holdings. During such periods, the Series may adopt
a temporary "defensive" posture in which greater than 35% of its total assets
are invested in cash or money market instruments. Money market instruments in
which the Capital Growth Series may invest are securities issued or
guaranteed by the U.S. Government (Treasury bills, notes and bonds, including
zero coupon securities); obligations of banks (such as certificates of
deposit and banker's acceptances) subject to regulation by the U.S.
Government and having total assets of $1 billion or more; Eurodollar
certificates of deposit; obligations of savings banks and savings and loan
associations having total assets of $1 billion or more; fully insured
certificates of deposit; and commercial paper rated within the two highest
grades by Moody's or S&P or, if not rated, are issued by a company having an
outstanding debt issue rated at least AA by S&P or Aa by Moody's.
DIVIDEND GROWTH SERIES
The investment objective of the Dividend Growth Series is to provide
reasonable current income and long-term growth of income and capital. There
is no assurance that the objective will be achieved. The investment objective
may not be changed without the approval of the shareholders of the Dividend
Growth Series.
The Dividend Growth Series seeks to achieve its investment objective
primarily by investing at least 65% of its total assets in common stock of
companies with a record of paying dividends and the potential for increasing
dividends. The net asset value of the Dividend Growth Series' shares will
fluctuate with changes in market values of portfolio securities. The Dividend
Growth Series will attempt to avoid investing in securities with speculative
characteristics.
The Dividend Growth Series may also invest in securities of foreign
issuers in the form of American Depository Receipts (ADRs), European
Depository Receipts (EDRs) or other similar securities convertible into
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by a United States bank or
trust company evidencing ownership of the underlying securities. EDRs are
European receipts evidencing a similar arrangement. Generally, ADRs, in
registered form, are designed for use in the United States securities markets
and EDRs, in bearer form, are designed for use in European securities
markets.
The following investment policies may be changed without the approval of
the Dividend Growth Series' shareholders:
(1) Up to 35% of the value of the Dividend Growth Series' total assets
may be invested in: (a) convertible debt securities, convertible pre
ferred securities, U.S. Government securities (securities issued or
guaranteed as to principal and interest by the United States or its
agencies and instrumentalities), investment grade corporate debt
securities and/or money market instruments when, in the opinion of the
Investment Manager, the projected total return on such securities is equal
to or greater than the expected total return on equity securities or when
such holdings might be expected to reduce the volatility of the portfolio
(for purposes of this provision, the term "total return" means the
difference between the cost of a security and the aggregate of its market
value and dividends received); or (b) in money market instruments under
any one or more of the following circumstances: (i) pending investment of
proceeds of sale of Dividend Growth Series' shares or of portfolio
securities; (ii) pending settlement of purchases of portfolio securities;
or (iii) to maintain liquidity for the purpose of meeting anticipated
redemptions.
(2) Notwithstanding any of the foregoing limitations, the Dividend Growth
Series may invest more than 35% in money market in struments to maintain,
temporarily, a "defen-
22
<PAGE>
sive" posture when, in the opinion of the Investment Manager, it is
advisable to do so because of economic or market conditions.
The foregoing limitations will apply at the time of acquisition based on
the last determined value of the Dividend Growth Series' assets. Any
subsequent change in any applicable percentage resulting from fluctuations in
value or other changes in total assets will not require elimination of any
security from the portfolio. The Dividend Growth Series may purchase
securities on a when-issued or delayed delivery basis, may purchase or sell
securities on a forward commitment basis and may purchase securities on a
"when, as and if issued" basis.
STRATEGIST SERIES
The investment objective of the Strategist Series is to maximize the total
return on its investments. This is a fundamental policy and cannot be changed
without the approval of the Strategist Series' shareholders. In seeking to
achieve its objective, the Series will actively allocate assets among the
major asset categories of equity securities, fixed-income securities and
money market instruments. Total return consists of current income (including
dividends, interest and, in the case of discounted instruments, discount
accruals) and capital appreciation (including realized and unrealized capital
gains and losses). There can be no assurance that the investment objective of
the Strategist Series will be achieved.
The achievement of the Strategist Series' investment objective depends
upon the ability of the Investment Manager to correctly assess the effects of
economic and market trends on different sectors of the market. The Investment
Manager believes that superior investment returns at lower risk are
achievable by actively allocating resources to the equity, debt and money
market sectors of the market as opposed to relying solely on just one market.
At times, the equity market may hold a higher potential return than the debt
market and would warrant a higher asset allocation. The reverse would be true
when the bond market's potential return is higher. Investments in the money
market sector can be used to soften market declines when both bonds and
equities are fully priced. Conserving capital during declining markets can
contribute to maximizing total return over a longer period of time. In
addition, the securities of companies within various economic sectors may at
times offer higher returns than other sectors and can thus contribute to
superior returns. Finally, the Investment Manager believes that superior
stock selection can also contribute to superior total return.
To facilitate reallocation of the Strategist Series' assets in accordance
with the Investment Manager's views as to shifts in the marketplace, the
Investment Manager will employ transactions in futures contracts and options
thereon. For example, if the Investment Manager believes that a ten percent
increase in that portion of the Strategist Series' assets invested in fixed
income securities and a concomitant decrease in that portion of the
Strategist Series' assets invested in equity securities is timely, the
Strategist Series might purchase interest rate futures, such as Treasury bond
futures, and sell stock index futures, such as the Standard & Poor's 500
Stock Index futures, in equivalent amounts. The utilization of futures
transactions, rather than the purchase and sale of equity and fixed-income
securities, increases the speed and efficacy of the Strategist Series' asset
reallocations.
Within the equity sector, the Investment Manager will actively allocate
funds to those economic sectors expected to benefit from major trends and to
individual stocks which are deemed to have superior investment potential. The
Strategist Series may purchase equity securities (including convertible debt
obligations and convertible preferred stock) sold on the New York, American
and other stock exchanges and in the over-the-counter market. In addition,
the Strategist Series may purchase and sell warrants and purchase and write
listed and over-the-counter options on individual stocks and stock indexes to
hedge against adverse price movements in its equity portfolio and to increase
its total return through the receipt of premium income. The Strategist Series
may also purchase and sell stock index futures and options thereon to hedge
against adverse price movements in its equity portfolio and to facilitate
asset reallocations into and out of the equity area.
Within the fixed-income sector of the market, the Investment Manager will
seek to maximize the return on its investments by adjusting maturities and
coupon rates as well as by exploiting yield differentials among different
types of investment grade bonds. Fixed-income securities in which the
Strategist Series may invest may have maturities ranging from one year to
greater than five years and may include debt securities, including U.S.
Government securities (securities issued or guaranteed as to principal and
interest by the United States or its agencies and instrumentalities) and
corporate securities which are rated at the time of purchase Baa or
23
<PAGE>
better by Moody's Investors Service, Inc. ("Moody's") or BBB or better by
Standard & Poor's Corporation ("S&P"), or which, if unrated, are deemed to be
of comparable quality by the Fund's Trustees (a description of corporate bond
ratings is contained in the Appendix to the Statement of Additional
Information). While bonds rated Baa by Moody's or BBB by S&P are considered
investment grade, they have speculative characteristics as well. U.S.
Government securities which may be purchased include zero coupon securities.
In addition, the Strategist Series may purchase and write listed and
over-the-counter options on fixed-income securities to hedge against adverse
price movements in its fixed-income portfolio and to increase its total
return through the receipt of premium income. The Strategist Series may also
purchase and sell interest rate futures and options thereon to hedge against
adverse price movements in its fixed-income portfolio and to facilitate asset
reallocations into and out of the fixed-income area.
Within the money market sector of the market, the Investment Manager will
seek to maximize returns by seeking out those short-term instruments with the
highest yields. The money market portion of the Strategist Series will
contain short-term (maturities of up to one year) fixed-income securities,
issued by private and governmental institutions. Such securities may include:
U.S. Government securities; bank obligations (such as certificates of deposit
and banker's acceptances); Eurodollar certificates of deposit issued by
foreign branches of domestic banks; obligations of savings institutions;
fully insured certificates of deposit; and commercial paper rated within the
two highest grades by S&P or the highest grade by Moody's or, if not rated,
issued by a company having an outstanding debt issue rated at least AA by S&P
or Aa by Moody's. To the extent the Strategist Series purchases Eurodollar
certificates of deposit issued by foreign branches of domestic banks,
consideration will be given to any risks attendant to their domestic
marketability, the lower reserve requirements normally mandated for overseas
banking operations, the possible impact of interruptions in the flow of
international currency transactions, and future international political and
economic developments which might adversely affect the payment of principal
or interest.
Non-Diversified Status. The Strategist Series is a non-diversified
investment company and, as such, is not subject to the diversification
requirements of the Act. As a non-diversified investment company, the
Strategist Series may invest a greater portion of its assets in the
securities of a single issuer and thus is subject to greater exposure to
risks such as a decline in the credit rating of that issuer. However, the
Strategist Series has qualified and expects to continue to qualify as a
regulated investment company under the federal income tax laws and, as such,
is subject to the applicable diversification requirements of the Internal
Revenue Code, as amended (the "Code"). As a regulated investment company
under the Code, the Strategist Series may not, as of the end of any of its
fiscal quarters, have invested more than 25% of its total assets in the
securities of any one issuer (including a foreign government), or as to 50%
of its total assets, have invested more than 5% of its total assets in the
securities of a single issuer.
UTILITIES SERIES
The investment objective of the Utilities Series is to provide current
income and long-term growth of income and capital. There can be no assurance
that the investment objective will be achieved. This objective is fundamental
and may not be changed without shareholder approval. The investment policies
discussed below may be changed without shareholder approval.
The Utilities Series seeks to achieve its invest ment objective by
investing in equity and fixed-income securities of companies engaged in the
public utilities industry. The term "public utilities industry" consists of
companies engaged in the manufacture, production, generation, transmission,
sale and distribution of gas and electric energy, as well as companies
engaged in the communications field, including telephone, telegraph,
satellite, microwave and other companies providing communication facilities
for the public, but excluding public broadcasting companies. For purposes of
the Utilities Series, a company will be considered to be in the public
utilities industry if, during the most recent twelve month period, at least
50% of the company's gross revenues, on a consolidated basis, are derived
from the public utilities industry. Under ordinary circumstances, at least
65% of the Utilities Series' total assets will be invested in securities of
companies in the public utilities industry.
The Investment Manager believes the Utilities Series' investment policies
are suited to benefit from certain characteristics and historical performance
of the securities of public utility companies. Many of these companies have
historically set a pattern of paying regular dividends and increasing their
common stock dividends over time, and the average
24
<PAGE>
common stock dividend yield of utilities historically has substantially
exceeded that of industrial stocks. The Investment Manager believes that
these factors may not only provide current income but also generally tend to
moderate risk and thus may enhance the opportunity for appreciation of
securities owned by the Utilities Series, although the potential for capital
appreciation has historically been lower for many utility stocks compared
with most industrial stocks. There can be no assurance that the historical
investment performance of the public utilities industry will be indicative of
future events and performance.
The Utilities Series invests in both equity securities (common stocks and
securities convertible into common stock) and fixed-income securities (bonds
and preferred stock) in the public utilities industry. The Utilities Series
will shift its asset allocation without restriction between types of
utilities and between equity and fixed-income securities based upon the
Investment Manager's determination of how to achieve the Utilities Series'
investment objective in light of prevailing market, economic and financial
conditions.
Criteria utilized by the Investment Manager in the selection of equity
securities include the following screens: earnings and dividend growth; book
value; dividend discount; and price/earnings relationships. In addition, the
Investment Manager makes continuing assessments of management, the prevailing
regulatory framework and industry trends. The Investment Manager may also
utilize computer-based equity selection models. In keeping with the Utilities
Series' objective, if in the opinion of the Investment Manager favorable
conditions for capital growth of equity securities are not prevalent at a
particular time, the Utilities Series may allocate its assets predominantly
or exclusively in debt securities with the aim of obtaining current income as
well as preserving capital and thus benefiting long term growth of capital.
The Utilities Series may purchase equity securities sold on the New York,
American and other stock exchanges and in the over-the-counter market.
Fixed-income securities in which the Utilities Series may invest are debt
securities and preferred stocks, which are rated at the time of purchase Baa
or better by Moody's Investors Service, Inc. ("Moody's") or BBB or better by
Standard & Poor's Corporation ("S&P"), or which, if unrated, are deemed to be
of comparable quality by the Fund's Trustees. The Utilities Series may also
purchase equity and fixed-income securities issued by foreign issuers
(including American Depository Receipts, European Depositary Receipts or
other similar securities convertible into securities of foreign issuers).
Under normal circumstances the average weighted maturity of the fixed-income
securities held by the Utilities Series is expected to be in excess of seven
years. A description of corporate bond ratings is contained in the Appendix
to the Statement of Additional Information.
Investments in fixed-income securities rated either BBB by S&P or Baa by
Moody's (the lowest credit ratings designated "investment grade") have
speculative characteristics and, therefore, changes in economic conditions or
other circumstances are more likely to weaken their capacity to make
principal and interest payments than would be the case with investments in
securities with higher credit ratings. If a fixed-income security held by the
Utilities Series is rated BBB or Baa and is subsequently downgraded by a
rating agency, the Utilities Series will retain such security in its
portfolio until the Investment Manager determines that it is practicable to
sell the security without undue market or tax consequences to the Utilities
Series. In the event that such downgraded securities constitute 5% or more of
the Series' total assets, the Investment Manager will immediately sell
securities sufficient to reduce the total to below 5%.
While the Utilities Series will invest primarily in the securities of
public utility companies, under ordinary circumstances it may invest up to
35% of its total assets in U.S. Government securities (securities issued or
guaranteed as to principal and interest by the United States or its agencies
and instrumentalities), money market instruments, repurchase agreements, and
options and futures, as described below. U.S. Government securities in which
the Utilities Series may invest include zero coupon securities.
There may be periods during which, in the opinion of the Investment
Manager, market conditions warrant reduction of some or all of the Utilities
Series' securities holdings. During such periods, the Utilities Series may
adopt a temporary "defensive" posture in which greater than 35% of its net
assets are invested in cash or money market instruments. Money market
instruments in which the Utilities Series may invest are securities issued or
guaranteed by the U.S. Government (Treasury bills, notes and bonds, including
zero coupon securities); bank obligations (such as certificates of deposit
and bank-
25
<PAGE>
ers' acceptances); Eurodollar certificates of deposit; obligations of savings
institutions; fully insured certificates of deposit; and commercial paper
rated within the two highest grades by Moody's or S&P or, if not rated, are
issued by a company having an outstanding debt issue rated at least AA by S&P
or Aa by Moody's.
Electric Utilities Industry. Under normal circumstances, the Utilities
Series will invest at least 25% of its total assets in debt and equity
securities issued by companies in the electric utilities industry. For
temporary defensive purposes, however, the Series may reduce its investments
in the electric utilities industry to less than 25% of its total assets. The
Utilities Series' policy of concentrating its investments in the electric
utilities industry is fundamental and may not be changed without the approval
of a majority of the Utilities Series' voting securities.
The electric utilities industry as a whole has certain characteristics and
risks particular to that industry. Unlike industrial companies, the rates
which utility companies may charge their customers generally are subject to
review and limitation by governmental regulatory commissions. Although rate
changes of a utility usually fluctuate in approximate correlation with
financing costs, due to political and regulatory factors, rate changes
ordinarily occur only following a delay after the changes in financing costs.
This factor will tend to favorably affect a utility company's earnings and
dividends in times of decreasing costs, but conversely will tend to adversely
affect earnings and dividends when costs are rising. In addition, the value
of electric utility debt securities (and, to a lesser extent, equity
securities) tends to have an inverse relationship to the movement of interest
rates.
Among the risks affecting the utilities industry are the following: risks
of increases in fuel and other operating costs; the high cost of borrowing to
finance capital construction during inflationary periods; restrictions on
operations and increased costs and delays associated with compliance with
environmental and nuclear safety regulations; the difficulties involved in
obtaining natural gas for resale or fuel for generating electricity at
reasonable prices; the risks in connection with the construction and
operation of nuclear power plants; the effects of energy conservation,
non-regulated competition, open access to transmission, and the effects of
regulatory changes, such as linking future rate increases to inflation or
other factors not directly related to the actual operating profits of the
enterprise.
VALUE-ADDED MARKET SERIES
The investment objective of the Value-Added Market Series is to achieve a
high level of total return on its assets through a combination of capital
appreciation and current income. This is a fundamental policy and cannot be
changed without the approval of the shareholders of the Value-Added Market
Series. There can be no assurance that the Value-Added Market Series'
investment objective will be achieved. The investment policies discussed
below may be changed without shareholder approval.
The Value-Added Market Series will seek to attain its investment objective
by investing, on an equally-weighted basis, in a diversified portfolio of
common stocks of the companies which are included in the Standard & Poor's
500 Composite Stock Price Index (the "S&P Index"). Standard & Poor's 500 is a
trademark of Standard & Poor's Corporation ("S&P") and has been licensed for
use by the Fund. The Value-Added Market Series is not sponsored, endorsed,
sold or promoted by S&P and S&P makes no representation regarding the
advisability of investing in the Value-Added Market Series. The S&P Index
consists of 500 common stocks selected by S&P, most of which are listed on
the New York Stock Exchange. Inclusion of a stock in the S&P Index implies no
opinion by S&P as to the quality of the stock as an investment. The S&P Index
is determined, composed and calculated by S&P without regard to the
Value-Added Market Series. S&P is neither a sponsor of, nor in any way
affiliated with, the Value-Added Market Series, and S&P makes no
representation or warranty, express or implied, on the advisability of
investing in the Value-Added Market Series or as to the ability of the S&P
Index to track general stock market performance, and S&P disclaims all
warranties of merchantability or fitness for a particular purpose or use with
respect to the S&P Index or any data included therein. S&P has no connection
with the Value-Added Market Series other than the licensing to the Investment
Manager of the use of the S&P Index in connection with the Value-Added Market
Series.
The Value-Added Market Series invests in the stocks included in the S&P
Index on an equally-weighted basis; that is, to the extent practicable and
subject to the specific investment policies and restrictions described below,
an equal portion of the Value-Added Market Series' assets is invested in each
of the 500 securities in the S&P Index. This differs from the S&P Index and
nearly all other major
26
<PAGE>
indexes, which generally are weighted on a market-capitalization basis. For
example, the 50 largest capitalization issuers in the S&P Index represent
approximately 45% of the S&P Index. However, in accordance with its
investment policies, the Value-Added Market Series will strive to maintain
each stockholding equally, so that, subject to the specific investment
policies and investment restrictions described below, approximately 0.20 of
1% of the Value-Added Market Series' total invested assets will be invested
in each of the 500 companies included in the S&P Index. The equal weighting
technique is based on the Investment Manager's statistical analysis that most
portfolio performance is usually generated by only one-quarter to one-third
of the portfolio. Since there is no certainty that any specific company or
industry selection, even within a broad-based index such as the S&P Index,
will achieve superior performance, the Investment Manager believes
equal-weighting may benefit the Value-Added Market Series in seeking to
attain its investment objective.
The holdings of the Value-Added Market Series will be adjusted by the
Investment Manager not less than quarterly to reflect changes in the
Value-Added Market Series' asset levels and in the relative values of the
common stocks held by the Value-Added Market Series so that following each
adjustment the value of the Value-Added Market Series' investment in each
security will be equal to the extent practicable. In addition, whenever a
company is eliminated from or added to the S&P Index, the Value-Added Market
Series will sell or purchase the stock of such company, as the case may be,
as soon as practicable. Accordingly, securities may be purchased and sold by
the Value-Added Market Series when such purchases and sales would not be made
under traditional investment criteria.
In addition, while the Investment Manager will not actively manage the
portfolio other than to follow the guidelines set forth above for following
an equally-weighted S&P Index, it may eliminate one or more securities (or
elect not to increase the Value-Added Market Series' position in such
securities), notwithstanding the continued listing of such securities in the
S&P Index, in the following circumstances: (a) the stock is no longer
publicly traded, such as in the case of a leveraged buyout or merger; (b) an
unexpected adverse development with respect to a company, such as bankruptcy
or insolvency; (c) in the view of the Investment Manager, there is a high
degree of risk with respect to a company that bankruptcy or insolvency will
occur; or (d) in the view of the Investment Manager, based on its
consideration of the price of a company's securities, the depth of the market
in those securities and the amount of those securities held or to be held by
the Value-Added Market Series, retaining shares of a company or making any
additional purchases would be inadvisable because of liquidity risks. The
Investment Manager will monitor on an ongoing basis all companies falling
within any of the circumstances described in this paragraph, and will return
such company's shares to the Value-Added Market Series' holdings, or
recommence purchases, when and if those conditions cease to exist.
The Value-Added Market Series may purchase futures contracts on stock
indexes at a time when it is not fully invested on account of additional cash
invested in the Series or income received by the Series. Purchase of a
futures contract in those circumstances serves as a temporary substitute for
the purchase of individual stocks which may then be purchased in orderly
fashion.
A portion of the Value-Added Market Series' assets, not exceeding 25% of
its total assets, may be invested temporarily in money market instruments
under any one or more of the following circumstances: (a) pending investment
of proceeds of sale of shares of the Value-Added Market Series; (b) pending
settlement of purchases of portfolio securities; or (c) to maintain liquidity
for the purposes of meeting anticipated redemptions. The money market
instruments in which the Value-Added Market Series may invest are
certificates of deposit of U.S. domestic banks with assets of $1 billion or
more; bankers' acceptances; time deposits; U.S. Government and U.S.
Government agency securities; or commercial paper rated within the two
highest grades by S&P or Moody's Investors Service, Inc., or, if not rated,
are of comparable quality as determined by the Fund's Trustees, and which
mature within one year from the date of purchase.
GLOBAL EQUITY SERIES
The investment objective of the Global Equity Series is to seek to obtain
total return on its assets primarily through long-term capital growth and to
a lesser extent from income. There can be no assurance that the Global Equity
Series will achieve its objective. The investment objective is a fundamental
policy and cannot be changed without the approval of the shareholders of the
Global Equity Series. The investment policies discussed below may be changed
without shareholder approval.
27
<PAGE>
The Global Equity Series will invest at least 65% of its total assets in
equity securities issued by issuers located in various countries around the
world. The Series' investment portfolio will, thereby, be invested in at
least three separate countries.
The Global Equity Series will seek to achieve such objective through
investments in all types of common stocks and equivalents (such as
convertible debt securities and warrants), preferred stocks and bonds and
other debt obligations of domestic and foreign companies and governments and
international organizations. There is no limitation on the percent or amount
of the Global Equity Series' assets which may be invested for growth or
income.
The Global Equity Series will maintain a flexible investment policy and,
based on a worldwide investment strategy, will invest in a diversified
portfolio of securities of companies and governments located throughout the
world. Such securities will generally be those with a record of paying
dividends and the potential for increasing dividends. The percentage of the
Global Equity Series' assets invested in particular geographic sectors will
shift from time to time in accordance with the judgment of the Investment
Manager.
Notwithstanding the Global Equity Series' investment objective of seeking
total return, the Global Equity Series may, for defensive purposes, without
limitation, invest in: obligations of the United States Government, its
agencies or instrumentalities; cash and cash equivalents in major currencies;
repurchase agreements; money market instruments; and commercial paper.
The Global Equity Series may also invest in securities of foreign issuers
in the form of American Depository Receipts (ADRs), European Depository
Receipts (EDRs) or other similar securities convertible into securities of
foreign issuers. These securities may not necessarily be denominated in the
same currency as the securities into which they may be converted. ADRs are
receipts typically issued by a United States bank or trust company evidencing
ownership of the underlying securities. EDRs are European receipts evidencing
a similar arrangement. Generally, ADRs, in registered form, are designed for
use in the United States securities markets and EDRs, in bearer form, are
designed for use in European securities markets.
The Global Equity Series may purchase securities on a when-issued or
delayed delivery basis, may purchase or sell securities on a forward
commitment basis and may purchase securities on a "when, as and if issued"
basis.
GENERAL INVESTMENT TECHNIQUES
Repurchase Agreements. Each Series of the Fund may enter into repurchase
agreements, which may be viewed as a type of secured lending by the Series,
and which typically involve the acquisition by a Series of debt securities
from a selling financial institution such as a bank, savings and loan
association or broker-dealer. The agreement provides that the Series will
sell back to the institution, and that the institution will repurchase, the
underlying security at a specified price and at a fixed time in the future,
usually not more than seven days from the date of purchase. While repurchase
agreements involve certain risks not associated with direct investments in
debt securities, including the risks of default or bankruptcy of the selling
financial institution, the Fund follows procedures designed to minimize those
risks. These procedures include effecting repurchase transactions only with
large, well-capitalized and well-established financial institutions and
maintaining adequate collateralization.
Reverse Repurchase Agreements. The Liquid Asset, U.S. Government Money
Market and Intermediate Income Securities Series may also use reverse
repurchase agreements as part of their investment strategy. Reverse
repurchase agreements involve sales by the Series of assets concurrently with
an agreement by the Series to repurchase the same assets at a later date at a
fixed price. Such transactions are only advantageous if the interest cost to
the Series of the reverse repurchase transaction is less than the cost of
otherwise obtaining the cash. Opportunities to achieve this advantage may not
always be available, and the Series intend to use the reverse repurchase
technique only when it will be to their advantage to do so. Reverse
repurchase agreements are considered borrowings by the Series and for
purposes other than meeting redemptions may not exceed 5% of the Series'
total assets.
When-Issued and Delayed Delivery Securities and Forward Commitments. From
time to time, in the ordinary course of business, each Series of the Fund may
purchase securities on a when-issued or delayed delivery basis or may
purchase or sell securities on a forward commitment basis. When such
transactions are negotiated, the price is fixed
28
<PAGE>
at the time of the commitment, but delivery and payment can take place a month
or more after the date of the commitment. While a Series will only purchase
securities on a when-issued, delayed delivery or forward commitment basis with
the intention of acquiring the securities, a Series may sell the securities
before the settlement date, if it is deemed advisable. The securities so
purchased or sold are subject to market fluctuation and no interest accrues to
the purchaser during this period. At the time a Series makes the commitment to
purchase or sell securities on a when-issued, delayed delivery or forward
commitment basis, it will record the transaction and thereafter reflect the
value, each day, of such security purchased or, if a sale, the proceeds to be
received in determining its net asset value. At the time of delivery of the
securities, their value may be more or less than the purchase or sale price. A
Series will also establish a segregated account with its custodian bank in
which it will continually maintain cash or cash equivalents or other high grade
portfolio securities equal in value to commitments to purchase securities on a
when-issued, delayed delivery or forward commitment basis. An increase in the
percentage of a Series' assets committed to the purchase of securities on a
when-issued, delayed delivery or forward commitment basis may increase the
volatility of a Series' net asset value.
When, As and If Issued Securities. Each Series (other than the U.S.
Government Money Market Series) may purchase securities on a "when, as and if
issued" basis under which the issuance of the security depends upon the
occurrence of a subsequent event, such as approval of a merger, corporate
reorganization or debt restructuring. The commitment for the purchase of any
such security will not be recognized in the portfolio until the Investment
Manager determines that the issuance of the security is probable, whereupon
the accounting treatment for such commitment will be the same as for a
commitment to purchase a security on a when-issued, delayed delivery or
forward commitment basis, described above and in the Statement of Additional
Information. An increase in the percentage of a Series' assets committed to
the purchase of securities on a "when, as and if issued" basis may increase
the volatility of its net asset value.
Zero Coupon Securities. A portion of the fixed-income securities purchased
by each Series may be zero coupon securities. Such securities are purchased
at a discount from their face amount, giving the purchaser the right to
receive their full value at maturity. The interest earned on such securities
is, implicitly, automatically compounded and paid out at maturity. While such
compounding at a constant rate eliminates the risk of receiving lower yields
upon reinvestment of interest if prevailing interest rates decline, the owner
of a zero coupon security will be unable to participate in higher yields upon
reinvestment of interest received on interest-paying securities if prevailing
interest rates rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent a Series invests in zero coupon securities, it will
not receive current cash available for distribution to shareholders. In
addition, zero coupon securities are subject to substantially greater price
fluctuations during periods of changing prevailing interest rates than are
comparable securities which pay interest on a current basis. Current federal
tax law requires that a holder (such as a Series) of a zero coupon security
accrue a portion of the discount at which the security was purchased as
income each year even though the Series receives no interest payments in cash
on the security during the year.
Warrants. Each Series (other than the Liquid Asset Series, the U.S.
Government Money Market Series and the U.S. Government Securities Series) may
acquire warrants attached to other securities and, in addition, each of the
Dividend Growth Series, the American Value Series, Strategist Series,
Utilities Series and Global Equity Series may invest up to 5% of the value of
its total assets in warrants not attached to other securities, including up
to 2% of such assets in warrants not listed on either the New York or
American Stock Exchange. Warrants are, in effect, an option to purchase
equity securities at a specific price, generally valid for a specific period
of time, and have no voting rights, pay no dividends and have no rights with
respect to the corporation issuing them. If warrants remain unexercised at
the end of the exercise period, they will lapse and the Series' investment in
them will be lost. The prices of warrants do not necessarily move parallel to
the prices of the underlying securities.
Private Placements. The Liquid Asset, Intermediate Income Securities,
American Value, Capital Growth, Dividend Growth, Strategist, Utilities,
Value-Added Market and Global Equity Series may invest up to 15% (10% with
respect to the Liquid Asset Series) of their net assets in securities which
are subject to restrictions on resale because they have not been registered
under the Securities Act or which are otherwise not readily marketable
("illiquid securities"). These securities are generally referred
29
<PAGE>
to as private placements or restricted securities. Limitations on the resale of
such securities may have an adverse effect on their marketability, and may
prevent the Series from disposing of them promptly at reasonable prices. The
Series may have to bear the expense of registering such securities for resale
and the risk of substantial delays in effecting such registration. The above
policy on purchase of illiquid securities may be changed by the Fund's
Trustees.
Rule 144A under the Securities Act permits the Series to sell restricted
securities to qualified institutional buyers without limitation. The Trustees
of the Fund have adopted procedures for the Investment Manager to utilize in
determining the liquidity of securities which may be sold pursuant to Rule
144A. In addition, the Trustees have determined that, where such securities
are determined to be liquid under these procedures, investment in such
securities by the Series shall not be subject to the limitation on
investments in illiquid securities referred to above. Investing in Rule 144A
securities could have the effect of increasing the level of illiquidity to
the extent a Series, at a particular point in time, may be unable to find
qualified institutional buyers interested in purchasing such securities.
Investments in Securities Rated Baa by Moody's or BBB by S&P. The
Intermediate Income Securities Series, American Value Series, Capital Growth
Series, Dividend Growth Series, Strategist Series and Utilities Series may
invest a portion of their assets in fixed-income securities rated at the time
of purchase Baa or better by Moody's Investors Service, Inc. ("Moody's") or
BBB or better by Standard & Poor's Corporation ("S&P"). Investments in
fixed-income securities rated either Baa by Moody's or BBB by S&P (the lowest
credit ratings designated "investment grade") may have speculative
characteristics and, therefore, changes in economic conditions or other
circumstances are more likely to weaken their capacity to make principal and
interest payments than would be the case with investments in securities with
higher credit ratings. If a bond held by a Series is downgraded by a rating
agency to a rating of below Baa or BBB, the Series will retain such security
in its portfolio until the Investment Manager determines that it is
practicable to sell the security without undue market or tax consequences to
the Series.
Convertible Securities. The American Value Series, Capital Growth Series,
Dividend Growth Series, Strategist Series, Utilities Series and Global Equity
Series may invest a portion of their assets in convertible securities. A
convertible security is a bond, debenture, note, preferred stock or other
security that may be converted into or exchanged for a prescribed amount of
common stock of the same or a different issuer within a particular period of
time at a specified price or formula. Convertible securities rank senior to
common stocks in a corporation's capital structure and, therefore, entail
less risk than the corporation's common stock. The value of a convertible
security is a function of its "investment value" (its value as if it did not
have a conversion privilege), and its "conversion value" (the security's
worth if it were to be exchanged for the underlying security, at market
value, pursuant to its conversion privilege).
To the extent that a convertible security's investment value is greater
than its conversion value, its price will be primarily a reflection of such
investment value and its price will be likely to increase when interest rates
fall and decrease when interest rates rise, as with a fixed-income security
(the credit standing of the issuer and other factors may also have an effect
on the convertible security's value). If the conversion value exceeds the
investment value, the price of the convertible security will rise above its
investment value and, in addition, will sell at some premium over its
conversion value. (This premium represents the price investors are willing to
pay for the privilege of purchasing a fixed-income security with a
possibility of capital appreciation due to the conversion privilege.) At such
times the price of the convertible security will tend to fluctuate directly
with the price of the underlying equity security.
Because of the special nature of certain of the Series' permitted
investments in lower rated convertible securities, the Investment Manager
must take account of certain special considerations in assessing the risks
associated with such investments. The prices of lower rated securities have
been found to be less sensitive to changes in prevailing interest rates than
higher rated investments, but are likely to be more sensitive to adverse
economic changes or individual corporate developments. During an economic
downturn or substantial period of rising interest rates, highly leveraged
issuers may experience financial stress which would adversely affect their
ability to service their principal and interest payment obligations, to meet
their projected business goals or to obtain additional financing. If the
issuer of a lower rated convertible security owned by a Series defaults, such
Series may incur additional expenses to seek recovery. In addition, periods
of economic
30
<PAGE>
uncertainty and change can be expected to result in an increased volatility of
market prices of lower rated securities and a corresponding volatility in the
net asset value of a share of the Series.
Real Estate Investment Trusts. Each Series, except the Liquid Asset
Series, U.S. Government Money Market Series, U.S. Government Securities
Series and Intermediate Income Securities Series may invest in real estate
investment trusts, which pool investors' funds for investments primarily in
commercial real estate properties. Investment in real estate investment
trusts may be the most practical available means for the Series to invest in
the real estate industry (the Series are prohibited from investing in real
estate directly). As a shareholder in a real estate investment trust, a
Series would bear its ratable share of the real estate investment trust's
expenses, including its advisory and administration fees. At the same time
the Series would continue to pay its own investment management fees and other
expenses, as a result of which the Series and its shareholders in effect will
be absorbing duplicate levels of fees with respect to investments in real
estate investment trusts. Real estate investment trusts are not diversified
and are subject to the risk of financing projects. They are also subject to
heavy cash flow dependency, defaults by borrowers or tenants,
self-liquidation, and the possibility of failing to qualify for tax-free
status under the Internal Revenue Code and failing to maintain exemption from
the Investment Company Act of 1940, as amended.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, each Series of the Fund may lend its portfolio securities to
brokers, dealers and other financial institutions, provided that such loans
are callable at any time by the Series (subject to certain notice provisions
described in the Statement of Additional Information), and are at all times
secured by cash or money market instruments, which are maintained in a
segregated account pursuant to applicable regulations and that are equal to
at least the market value, determined daily, of the loaned securities. As
with any extensions of credit, there are risks of delay in recovery and in
some cases even loss of rights in the collateral should the borrower of the
securities fail financially. However, loans of portfolio securities will only
be made to firms deemed by the Investment Manager to be creditworthy and when
the income which can be earned from such loans justifies the attendant risks.
Foreign Securities. The Global Equity Series will invest extensively in
foreign securities. In addition, the American Value, Capital Growth,
Strategist, Utilities and Intermediate Income Securities Series may, to a
considerably lesser extent, invest in foreign securities.
Foreign securities investments may be affected by changes in currency
rates or exchange control regulations, changes in governmental administration
or economic or monetary policy (in the United States and abroad) or changed
circumstances in dealings between nations. Fluctuations in the relative rates
of exchange between the currencies of different nations will affect the value
of a Series' investments denominated in foreign currency. Changes in foreign
currency exchange rates relative to the U.S. dollar will affect the U.S.
dollar value of a Series' assets denominated in that currency and thereby
impact upon the Series' total return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected
by the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of
the exchanges on which the currencies trade. The foreign currency
transactions of a Series will be conducted on a spot basis or, in the case of
the Global Equity Series, through forward contracts or futures contracts
(described below under "Options and Futures Transactions"). The Series will
incur certain costs in connection with these currency transactions.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer
of Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory requirements
of U.S. companies and, as such, there may be less publicly available
information about such companies. Moreover, foreign companies are not subject
to uniform accounting, auditing and financial reporting standards and
requirements comparable to those applicable to U.S. companies.
Securities of foreign issuers may be less liquid than comparable
securities of U.S. issuers and, as such, their price changes may be more
volatile. Furthermore, foreign exchanges and broker-dealers
31
<PAGE>
are generally subject to less government and exchange scrutiny and regulation
than their American counterparts. Brokerage commissions, dealer concessions and
other transaction costs may be higher on foreign markets than in the U.S. In
addition, differences in clearance and settlement procedures on foreign markets
may occasion delays in settlements of a Series' trades effected in such
markets. Inability to dispose of portfolio securities due to settlement delays
could result in losses to a Series due to subsequent declines in value of such
securities and the inability of the Series to make intended security purchases
due to settlement problems could result in a failure of the Series to make
potentially advantageous investments. To the extent a Series purchases
Eurodollar certificates of deposit issued by foreign branches of domestic
United States banks, consideration will be given to their domestic
marketability, the lower reserve requirements normally mandated for overseas
banking operations, the possible impact of interruptions in the flow of
international currency transactions, and future international political and
economic developments which might adversely affect the payment of principal or
interest.
Mortgage-Backed Securities. The U.S. Government Securities Series may
invest in mortgage-backed securities. Mortgage-backed securities have certain
different characteristics than traditional debt securities. Among the major
differences are that interest and principal payments are made more
frequently, usually monthly, and that principal may be prepaid at any time
because the underlying mortgage loans or other assets generally may be
prepaid at any time. As a result, if the Series purchases such a security at
a premium, a prepayment rate that is faster than expected may reduce yield to
maturity, while a prepayment rate that is slower than expected may have the
opposite effect of increasing yield to maturity. Alternatively, if the Series
purchases these securities at a discount, faster than expected prepayments
will increase, while slower than expected prepayments may reduce, yield to
maturity.
Mortgage-backed securities, like all fixed-income securities, generally
decrease in value as a result of increases in interest rates. In addition,
although generally the value of fixed-income securities increases during
periods of falling interest rates, mortgage-backed securities may benefit
less than other fixed-income securities from declining interest rates because
of the risk of prepayments. As discussed above under "GNMA Certificates," the
assumed average life of mortgages backing the majority of GNMA Certificates
is twelve years. This average life is likely to be substantially shorter than
the original maturity of the mortgage pools underlying the certificates, as a
pool's duration may be shortened by unscheduled or early payments of
principal on the underlying mortgages. As prepayment rates vary widely, it is
not possible to accurately predict the average life of a particular pool.
Although the extent of prepayments or a pool of mortgage loans depends on
various factors, including the prevailing level of interest rates, general
economic conditions, the location and age of the mortgage and other social
and demographic conditions, as a general rule prepayments on fixed rate
mortgage loans will increase during a period of falling interest rates and
decrease during a period of rising interest rates. If the Series has
purchased securities backed by pools containing mortgages whose yields exceed
the prevailing interest rate any premium paid for such securities may be
lost. As a result, the net asset value of shares of the U.S. Government
Securities Series and the Series' ability to achieve its investment objective
may be adversely affected by mortgage prepayments. Amounts available for
reinvestment by the Series are likely to be greater during a period of
declining interest rates and, as a result, likely to be reinvested at lower
interest rates than during a period of rising interest rates.
There are certain risks associated specifically with CMOs. A number of
different factors, including the extent of prepayment of principal of the
Mortgage Assets, affect the availability of cash for principal payments by
the CMO issuer on any payment date and, accordingly, affect the timing of
principal payments on each CMO class.
Forward Foreign Currency Exchange Contracts. The American Value, Capital
Growth, Strategist, Utilities and Global Equity Series may enter into forward
foreign currency exchange contracts ("forward contracts") to facilitate
settlement of foreign currency denominated portfolio securities. In addition,
the Global Equity Series may enter into forward contracts in connection with
its foreign securities investments under various other circumstances.
A forward contract involves an obligation to purchase or sell a currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the
contract. A Series may enter into forward contracts as a hedge against
fluctuations in future foreign exchange rates.
32
<PAGE>
When a Series enters into a contract for the purchase or sale of a
security denominated in a foreign currency, it may, for example, desire to
"lock in" the price of the security in U.S. dollars or some other foreign
currency which the Series is temporarily holding in its portfolio. By
entering into a forward contract for the purchase or sale, for a fixed amount
of dollars or other currency, of the amount of foreign currency involved in
the underlying security transactions, the Series will be able to protect
itself against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar or other currency which is being used
for the security purchase and the foreign currency in which the security is
denominated during the period between the date on which the security is
purchased or sold and the date on which payment is made or received.
Other circumstances under which the Global Equity Series may enter into
forward contracts are as follows. At times, when, for example, the Global
Equity Series' Investment Manager believes that the currency of a particular
foreign country may suffer a substantial decline against the U.S. dollar or
some other foreign currency, the Global Equity Series may enter into a
forward contract to sell, for a fixed amount of dollars or other currency,
the amount of foreign currency approximating the value of some or all of the
Series' securities holdings (or securities which the Series has purchased for
its portfolio) denominated in such foreign currency. Under identical
circumstances, the Series may enter into a forward contract to sell, for a
fixed amount of U.S. dollars or other currency, an amount of foreign currency
other than the currency in which the securities to be hedged are denominated
approximating the value of some or all of the portfolio securities to be
hedged. This method of hedging, called "cross-hedging," will be selected by
the Investment Manager when it is determined that the foreign currency in
which the portfolio securities are denominated has insufficient liquidity or
is trading at a discount as compared with some other foreign currency with
which it tends to move in tandem.
In addition, when the Global Equity Series' Investment Manager anticipates
purchasing securities at some time in the future, and wishes to lock in the
current exchange rate of the currency in which those securities are
denominated against the U.S. dollar or some other foreign currency, the
Series may enter into a forward contract to purchase an amount of currency
equal to some or all of the value of the anticipated purchase, for a fixed
amount of U.S. dollars or other currency. The Series may, however, close out
the forward contract without purchasing the security which was the subject of
the "anticipatory" hedge.
Lastly, the Global Equity Series is permitted to enter into forward
contracts with respect to currencies in which certain of its portfolio
securities are denominated and on which options have been written (see
"Options and Futures Transactions").
In all of the above circumstances, if the currency in which the Series'
securities holdings (or anticipated portfolio securities) are denominated
rises in value with respect to the currency which is being purchased (or
sold), then the Series will have realized fewer gains than had the Series not
entered into the forward contracts. Moreover, the precise matching of the
forward contract amounts and the value of the securities involved will not
generally be possible, since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and
the date it matures. The Series are not required to enter into such
transactions with regard to their foreign currency-denominated securities and
will not do so unless deemed appropriate by the Investment Manager.
The Global Equity Series generally will not enter into a forward contract
with a term of greater than one year, although it may enter into forward
contracts for periods of up to five years. To the extent that the Global
Equity Series enters into forward foreign currency contracts to hedge against
a decline in the value of portfolio holdings denominated in a particular
foreign currency resulting from currency fluctuations, there is a risk that
the Series may nevertheless realize a gain or loss as a result of currency
fluctuations after such portfolio holdings are sold if the Series is unable
to enter into an "offsetting" forward foreign currency contract with the same
party or another party. The Global Equity Series may be limited in its
ability to enter into hedging transactions involving forward contracts by the
Internal Revenue Code's requirements relating to qualifications as a
regulated investment company (see "Dividends, Distributions and Taxes").
OPTIONS AND FUTURES TRANSACTIONS
As noted above, each of the American Value, Capital Growth, Strategist,
Utilities, Global Equity and Intermediate Income Securities Series may write
covered call options and covered put options
33
<PAGE>
on eligible portfolio securities and on stock and bond indexes and purchase
options of the same or similar series to effect closing transactions, and may
hedge against potential changes in the market value of its investments (or
anticipated investments) by purchasing put and call options on securities
which it holds (or has the right to acquire) in its portfolio and engaging in
transactions involving interest rate futures contracts and index futures
contracts and options on such contracts. The Value-Added Market Series may
purchase stock index futures as a temporary substitute for the purchase of
individual stocks. The Global Equity Series may also hedge against potential
changes in the market value of the currencies in which its investments (or
anticipated investments) are denominated by purchasing put and call options
on currencies and engaging in transactions involving currency futures
contracts and options on such contracts.
Call and put options on U.S. Treasury notes, bonds and bills, on various
foreign currencies and on equity securities are listed on Exchanges and are
written in over-the-counter transactions ("OTC options"). Listed options are
issued or guaranteed by the exchange on which they trade or by a clearing
corporation such as the Options Clearing Corporation ("OCC"). Ownership of a
listed call option gives the Series the right to buy from the OCC (in the
U.S.) or other clearing corporation or exchange the underlying security
covered by the option at the stated exercise price (the price per unit of the
underlying security) by filing an exercise notice prior to the expiration of
the option. The writer (seller) of the option would then have the obligation
to sell to the OCC (in the U.S.) or other clearing corporation or exchange
the underlying security at that exercise price prior to the expiration date
of the option, regardless of its then current market price. Ownership of a
listed put option would give the Series the right to sell the underlying
security to the OCC (in the U.S.) or other clearing corporation or exchange
at the stated exercise price. Upon notice of exercise of the put option, the
writer of the put would have the obligation to purchase the underlying
security from the OCC (in the U.S.) or other clearing corporation or exchange
at the exercise price.
Exchange-listed options are issued by the OCC (in the U.S.) or other
clearing corporation or exchange which assures that all transactions in such
options are properly executed. OTC options are purchased from or sold
(written) to dealers or financial institutions which have entered into direct
agreements with the Series. With OTC options, such variables as expiration
date, exercise price and premium will be agreed upon between the Series and
the transacting dealer, without the intermediation of a third party such as
the OCC. If the transacting dealer fails to make or take delivery of the
securities or currency underlying an option it has written, in accordance
with the terms of that option, the Series would lose the premium paid for the
option as well as any anticipated benefit of the transaction. The Series will
engage in OTC option transactions only with member banks of the Federal
Reserve System or primary dealers in U.S. Government securities or with
affiliates of such banks or dealers which have capital of at least $50
million or whose obligations are guaranteed by an entity having capital of at
least $50 million.
Covered Call Writing. Series are permitted to write covered call options
on portfolio securities, without limit, in order to aid them in achieving
their investment objectives. In the case of the Global Equity Series, such
options may be denominated in either U.S. dollars or foreign currencies and
may be on the U.S. dollar and foreign currencies. As a writer of a call
option, the Series has the obligation, upon notice of exercise of the option,
to deliver the security (or amount of currency) underlying the option prior
to the expiration date of the option (certain listed and OTC put options
written by a Series will be exercisable by the purchaser only on a specific
date).
Covered Put Writing. As a writer of covered put options, a Series incurs
an obligation to buy the security underlying the option from the purchaser of
the put, at the option's exercise price at any time during the option period,
at the purchaser's election (certain listed and OTC put options written by a
Series will be exercisable by the purchaser only on a specific date). Series
will write put options for two purposes: (1) to receive the income derived
from the premiums paid by purchasers; and (2) when the Series' management
wishes to purchase the security underlying the option at a price lower than
its current market price, in which case the Series will write the covered put
at an exercise price reflecting the lower purchase price sought. The
aggregate value of the obligations underlying the puts determined as of the
date the options are sold will not exceed 50% of a Series' net assets.
Purchasing Call and Put Options. Series may purchase listed and OTC call
and put options in amounts equalling up to 10% of their total assets. These
Series may purchase call options either to
34
<PAGE>
close out a covered call position or to protect against an increase in the
price of a security a Series anticipates purchasing or, in the case of call
options on a foreign currency, to hedge against an adverse exchange rate
change of the currency in which the security the Global Equity Series
anticipates purchasing is denominated vis-a-vis the currency in which the
exercise price is denominated. The Series may purchase put options on
securities which it holds (or has the right to acquire) in its portfolio only
to protect itself against a decline in the value of the security. Similarly,
the Global Equity Series may purchase put options on currencies in which
securities it holds are denominated only to protect itself against a decline
in value of such currency vis-a-vis the currency in which the exercise price
is denominated. The Series may also purchase put options to close out written
put positions in a manner similar to call option closing purchase
transactions. There are no other limits on the ability of these Series to
purchase call and put options.
Stock Index Options. Series may invest in options on stock indexes, which
are similar to options on stock except that, rather than the right to take or
make delivery of stock at a specified price, an option on a stock index gives
the holder the right to receive, upon exercise of the option, an amount of
cash if the closing level of the stock index upon which the option is based
is greater than, in the case of a call, or less than, in the case of a put,
the exercise price of the option.
Futures Contracts. The Intermediate Income Securities, American Value,
Capital Growth, Strategist, Utilities, Value-Added Market and Global Equity
Series may purchase and sell interest rate futures contracts that are
currently traded, or may in the future be traded, on U.S. commodity exchanges
on such underlying securities as U.S. Treasury bonds, notes, and bills and
GNMA Certificates and stock and bond index futures contracts that are traded
on U.S. commodity exchanges on such indexes as the Moody's Investment-Grade
Corporate Bond Index, the Standard & Poor's 500 Index and the New York Stock
Exchange Composite Index. The Global Equity Series may also purchase and sell
futures contracts that are currently traded, or may in the future be traded,
on foreign commodity exchanges on such underlying securities as common stocks
or any foreign government fixed-income security, on various currencies
("currency futures") and on various indexes of foreign equity and
fixed-income securities as may exist or come into being. As a futures
contract purchaser, a Series incurs an obligation to take delivery of a
specified amount of the obligation underlying the contract at a specified
time in the future for a specified price. As a seller of a futures contract,
a Series incurs an obligation to deliver the specified amount of the
underlying obligation at a specified time in return for an agreed upon price.
Series will purchase or sell interest rate futures contracts and bond
index futures contracts for the purpose of hedging their fixed-income
portfolio (or anticipated portfolio) securities against changes in prevailing
interest rates or, in the case of the Strategist and Utilities Series to
alter the Series' asset allocations. Series will, generally, purchase or sell
stock index futures contracts for the purpose of hedging their equity
portfolio (or anticipated portfolio) securities against changes in their
prices. The Value-Added Market Series will purchase stock index futures as a
temporary substitute for the purchase or sale of individual stocks, which may
then be purchased or sold in an orderly fashion. The Global Equity Series
will purchase or sell currency futures on currencies in which its portfolio
securities (or anticipated portfolio securities) are denominated for the
purposes of hedging against anticipated changes in currency exchange rates.
When, for example, either the Strategist or Utilities Series wishes to
increase its allocation in fixed-income securities, it may purchase a futures
contract on a bond index or on a U.S. Treasury bond, or a call option on such
futures contract, thereby increasing its exposure to the fixed-income sector.
Options on Futures Contracts. The Intermediate Income Securities, American
Value, Capital Growth, Strategist, Utilities and Global Equity Series may
purchase and write call and put options on futures contracts which are traded
on an exchange and enter into closing transactions with respect to such
options to terminate an existing position. An option on a futures contract
gives the purchaser the right, in return for the premium paid, to assume a
position in a futures contract (a long position if the option is a call and a
short position if the option is a put) at a specified exercise price at any
time during the term of the option. Series will only purchase and write
options on futures contracts for identical purposes to those set forth above
for the purchase of a futures contract (purchase of a call option or sale of
a put option) and the sale of a futures contract (purchase of a put option or
sale of a call option), or to close out a long or short position in futures
contracts.
35
<PAGE>
Risks of Options and Futures Transactions. A Series may close out its
position as writer of an option, or as a buyer or seller of a futures
contract, only if a liquid secondary market exists for options or futures
contracts of that series. There is no assurance that such a market will
exist, particularly in the case of OTC options, as such options will
generally only be closed out by entering into a closing purchase transaction
with the purchasing dealer. Also, exchanges limit the amount by which the
price of a futures contract may move on any day. If the price moves equal the
daily limit on successive days, then it may prove impossible to liquidate a
futures position until the daily limit moves have ceased.
The extent to which a Series may enter into transactions involving options
and futures contracts may be limited by the Internal Revenue Code's
requirements for qualification of each Series as a regulated investment
company and the Fund's intention to qualify each Series as such. See
"Dividends, Distributions and Taxes."
Futures contracts and options transactions may be considered speculative
in nature and may involve greater risks than those customarily assumed by
other investment companies which do not invest in such instruments. One such
risk is that a Series' management could be incorrect in its expectations as
to the direction or extent of various interest rate movements or the time
span within which the movements take place. For example, if a Series sold
interest rate futures contracts for the sale of securities in anticipation of
an increase in interest rates, and then interest rates went down instead,
causing bond prices to rise, the Series would lose money on the sale. Another
risk which may arise in employing futures contracts to protect against the
price volatility of portfolio securities is that the prices of securities,
currencies and indexes subject to futures contracts (and thereby the futures
contract prices) may correlate imperfectly with the behavior of the U.S.
dollar cash prices of the portfolio securities (and, in the case of the
Global Equity Series, the securities' denominated currencies). Another such
risk is that prices of interest rate futures contracts may not move in tandem
with the changes in prevailing interest rates against which the Series seeks
a hedge. A correlation may also be distorted by the fact that the futures
market is dominated by short-term traders seeking to profit from the
difference between a contract or security price objective and their cost of
borrowed funds. Such distortions are generally minor and would diminish as
the contract approached maturity.
The Global Equity Series, by entering into transactions in foreign futures
and options markets, will incur risks similar to those discussed above under
"Foreign Securities."
New options and futures contracts and other financial products and various
combinations thereof continue to be developed. The Series may invest in any
such options, futures and other products as may be developed to the extent
consistent with their investment objectives and applicable regulatory
requirements, and will make any and all pertinent disclosures relating to
such investments in its Prospectus and/or Statement of Additional
Information. Except as otherwise noted above, and as set forth in other
investment policies and investment restrictions, there are no limitations on
any Series' ability to invest in options, futures or options on futures.
PORTFOLIO TRADING
Although each Series does not intend to engage in short-term trading of
portfolio securities as a means of achieving the investment objectives of the
respective Series, each Series may sell portfolio securities without regard
to the length of time they have been held whenever such sale will in the
opinion of the Investment Manager strengthen the Series' position and
contribute to its investment objectives. In determining which securities to
purchase for the Series or hold in a Series, the Investment Manager will rely
on information from various sources, including research, analysis and
appraisals of brokers and dealers, the views of Trustees of the Fund and
others regarding economic developments and interest rate trends, and the
Investment Manager's own analysis of factors it deems relevant.
Personnel of the Investment Manager have substantial experience in the use
of the investment techniques described above under the heading "Options and
Futures Transactions," which techniques require skills different from those
needed to select the portfolio securities underlying various options and
futures contracts.
Brokerage commissions are not normally charged on the purchase or sale of
money market instruments and U.S. Government obligations, or on currency
conversions, but such transactions will involve costs in the form of spreads
between bid and asked prices. Orders for transactions in portfolio securities
and commodities may be placed for the Fund with a number of brokers and
dealers, including DWR and other broker-dealer affiliates of the
36
<PAGE>
Investment Manager. Pursuant to an order of the Securities and Exchange
Commission, the Fund may effect principal transactions in certain money
market instruments with DWR. In addition, the Fund may incur brokerage
commissions on transactions conducted through DWR.
The Liquid Asset and U.S. Government Money Market Series are expected to
have high portfolio turnovers due to the short-term maturities of securities
purchased, but this should not affect income or net asset value as brokerage
commissions are not normally charged on the purchase or sale of money market
instruments. It is not anticipated that the portfolio turnover rates of the
Series will exceed the following percentages in any year: U.S. Government
Securities Series, Capital Growth Series, Dividend Growth Series, Utilities
Series, Value-Added Market Series and Global Equity Series: 100%;
Intermediate Income Securities Series and Strategist Series: 200%; American
Value Series: 400%. A portfolio turnover rate exceeding 100% in any one year
is greater than that of many other investment companies. Each Series of the
Fund will incur underwriting discount costs (on underwritten securities)
and/or brokerage costs commensurate with its portfolio turnover rate.
Short-term gains and losses may result from such portfolio transactions. See
"Dividends, Distribution and Taxes" for a discussion of the tax implications
of these trading policies.
The expenses of the Global Equity Series relating to its portfolio
management are likely to be greater than those incurred by other investment
companies investing primarily in securities issued by domestic issuers as
custodial costs, brokerage commissions and other transaction charges related
to investing in foreign markets are generally higher than in the United
States. Short-term gains and losses may result from portfolio transactions.
See "Dividends, Distributions and Taxes" for a discussion of the tax
implications of the Series' trading policies. A more extensive discussion of
the Series' brokerage policies is set forth in the Statement of Additional
Information.
PORTFOLIO MANAGEMENT
The following individuals are primarily responsible for the day-to-day
management of certain of the Series of the Fund: Rajesh K. Gupta, Senior Vice
President of InterCapital, has been the primary portfolio manager of the U.S.
Government Securities Series since its inception; Mr. Gupta has been managing
portfolios comprised of U.S. Government and other securities at InterCapital
for over five years. Rochelle G. Siegel, Senior Vice President of
InterCapital, has been the primary portfolio manager of the Intermediate
Income Securities Series since its inception; Ms. Siegel has been managing
portfolios comprised of fixed-income securities at InterCapital for over five
years. Anita H. Kolleeny, Senior Vice President of InterCapital, has been the
primary portfolio manager of the American Value Series since its inception;
Ms. Kolleeny has been managing portfolios comprised of equity and other
securities at InterCapital for over five years. Paul D. Vance, Senior Vice
President of InterCapital, has been the primary portfolio manager of the
Dividend Growth Series since its inception; Mr. Vance has been managing
portfolios comprised of equity and other securities at InterCapital for over
five years. Peter Hermann, Vice President of InterCapital, has been the
primary portfolio manager of the Capital Growth Series since April, 1996;
prior to joining InterCapital in March, 1994, Mr. Hermann was a portfolio
manager at The Bank of New York. Mark Bavoso, Senior Vice President of
InterCapital, has been the primary portfolio manager of the Strategist Series
since January, 1994 and of the Global Equity Series since August, 1995; Mr.
Bavoso has been a portfolio manager at InterCapital for over five years.
Edward F. Gaylor, Senior Vice President of InterCapital, has been the primary
portfolio manager of the Utilities Series since its inception; Mr. Gaylor has
been managing portfolios comprised of equity and other securities at
InterCapital for over five years. Kenton J. Hinchliffe, Senior Vice President
of InterCapital; and Alice Weiss, Vice President of InterCapital, have been
the primary portfolio managers of the Value-Added Market Series since its
inception and September, 1997, respectively; Mr. Hinchliffe and Ms. Weiss
have been managing portfolios comprised of equity and other securities at
InterCapital for over five years.
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions that
have been adopted as fundamental policies of the Intermediate Income
Securities, American Value, Capital Growth, Dividend Growth, Utilities,
Value-Added Market and Global Equity Series. In addition, the Liquid Asset
Series has adopted restrictions two and five as fundamental policies and the
Strategist Series has
37
<PAGE>
adopted restrictions three, four and five as fundamental policies. Under the
Investment Company Act of 1940, as amended (the "Act"), a fundamental policy
may not be changed with respect to a Series without the vote of a majority of
the outstanding voting securities of that Series, as defined in the Act.
Each Series of the Fund may not:
1. As to 75% of its total assets, invest more than 5% of the value of its
total assets in the securities of any one issuer (other than obligations
issued, or guaranteed by, the United States Government, its agencies or
instrumentalities).
2. As to 75% of its total assets, purchase more than 10% of all
outstanding voting securities or any class of securities of any one
issuer. (All of the Series of the Fund may, collectively, purchase more
than 10% of all outstanding voting securities or any class of securities
of any one issuer.)
3. With the exception of the Utilities Series, invest 25% or more of the
value of its total assets in securities of issuers in any one industry.
This restriction does not apply to obligations issued or guaranteed by the
United States Government or its agencies or instrumentalities.
4. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three
years of continuous operation. This restriction shall not apply to any
obligation issued or guaranteed by the United States Government, its
agencies or instrumentalities.
5. Invest more than 15% (10% with respect to the Liquid Asset and U.S.
Government Money Market Series) of its total assets in "illiquid
Securities" (securities for which market quota tions are not readily
available) and repurchase agreements which have a maturity of longer than
seven days.
Generally, OTC options and the assets used as "cover" for written OTC
options are illiquid securities. However, a Series is permitted to treat
the securities it uses as cover for written OTC options as liquid provided
it follows a procedure whereby it will sell OTC options only to qualified
dealers who agree that the Series may repurchase such options at a maximum
price to be calculated pursuant to a predetermined formula set forth in
the option agreement. The formula set forth in the option agreement may
vary from agreement to agreement, but is generally based on a multiple of
the premium received by the Series for writing the option plus the amount,
if any, of the option's intrinsic value. An OTC option is considered an
illiquid asset only to the extent that the maximum repurchase price under
the formula exceeds the intrinsic value of the option.
The Liquid Asset Series has also adopted the following restrictions as
fundamental policies:
1. With respect to 75% of its total assets, purchase any securities,
other than obligations of the U.S. Government, or its agencies or in
strumentalities, if, immediately after such purchase, more than 5% of the
value of the Liquid Asset Series' total assets would be invested in
securities of any one issuer. (However, as a non-fundamental policy, the
Liquid Asset Series will not invest more than 10% of its total assets in
the securities of any one issuer. Furthermore, pursuant to current
regulatory requirements, the Liquid Asset Series may only invest more than
5% of its total assets in the securities of a single issuer (and only with
respect to one issuer at a time) for a period of not more than three
business days and only if the securities have received the highest quality
rating by at least two NRSROs.)
2. Purchase any securities, other than obligations of domestic banks or
of the U.S. Government, or its agencies or instrumentalities, if,
immediately after such purchase, more than 25% of the value of the Liquid
Asset Series' total assets would be invested in the securities of issuers
in the same industry; however, there is no limitation as to investments in
domestic bank obligations or in obligations issued or guaranteed by the
U.S. Government or its agencies or instrumentalities.
All percentage limitations apply immediately after a purchase or initial
investment, and any subsequent change in any applicable percentage resulting
from market fluctuations or other changes in the amount of total assets does
not require elimination of any security from the Series.
38
<PAGE>
DETERMINATION OF NET ASSET VALUE
- -----------------------------------------------------------------------------
The net asset value per share is calculated separately for each Series. In
general, the net asset value per share is computed by taking the value of all
the assets of the Series, subtracting all liabilities, dividing by the number
of shares outstanding and adjusting the result to the nearest cent. The Fund
will compute the net asset value per share of each Series once daily at 4:00
p.m., New York time (or, on days when the New York Stock Exchange closes
prior to 4:00 p.m., at such earlier time), on each day the New York Stock
Exchange is open for trading. The net asset value per share will not be
determined on Good Friday and on such other federal and non-federal holidays
as are observed by the New York Stock Exchange.
The Liquid Asset and U.S. Government Money Market Series utilize the
amortized cost method in valuing their portfolio securities, which method
involves valuing a security at its cost adjusted by a constant amortization
to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. The purpose
of this method of calculation is to facilitate the maintenance of a constant
net asset value per share of $1.00. However, there can be no assurance that
the $1.00 net asset value will be maintained.
In the calculation of the net asset value of the Series other than the
Liquid Asset and U.S. Government Money Market Series: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign stock exchange is valued at its latest sale price on that
exchange prior to the time assets are valued (if there were no sales that
day, the security is valued at the closing bid price and in cases where
securities are traded on more than one exchange, the securities are valued on
the exchange designated as the primary market pursuant to procedures adopted
by the Trustees); and (2) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation. When market
quotations are not readily available, including circumstances under which it
is determined by the Investment Manager that sale or bid prices are not
reflective of a security's market value, portfolio securities are valued at
their fair value as determined in good faith under procedures established by
and under the general supervision of the Fund's Trustees. Valuation of
securities for which market quotations are not readily available may also be
based upon current market prices of securities which are comparable in
coupon, rating and maturity or an appropriate matrix utilizing similar
factors. For valuation purposes, quotations of foreign portfolio securities,
other assets and liabilities and forward contracts stated in foreign currency
are translated into U.S. dollar equivalents at the prevailing market rates
prior to the close of the New York Stock Exchange. Dividends receivable are
accrued as of the ex-dividend date except for certain dividends from foreign
securities which are accrued as soon as the Fund is informed of such
dividends after the ex-dividend date.
Certain of the portfolio securities of each Series may be valued by an
outside pricing service approved by the Fund's Trustees. The pricing service
may utilize a matrix system incorporating security quality, maturity and
coupon as the evaluation model parameters, and/or research evaluations by its
staff, including review of broker-dealer market price quotations, in
determining what it believes is the fair valuation of the portfolio
securities valued by such pricing service.
Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees. Other short-term debt securities will be valued on a mark-to-market
basis until such time as they reach a remaining maturity of sixty days,
whereupon they will be valued at amortized cost using their value on the 61st
day unless the Trustees determine such does not reflect the securities'
market value, in which case these securities will be valued at their fair
value as determined by the Trustees. Options are valued at the mean between
their latest bid and asked prices. Futures are valued at the latest sale
price on the commodities exchange on which they trade unless the Trustees
determine that such price does not reflect their market value, in which case
they will be valued at their fair value as determined by the Trustees. All
other securities and other assets are valued at their fair value as
determined in good faith under procedures established by and under the
general supervision of the Trustees.
39
<PAGE>
Generally, trading in foreign securities, as well as corporate bonds,
United States government securities and money market instruments, is
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of a Series' shares are determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of
the New York Stock Exchange. Occasionally, events which affect the values of
such securities and such exchange rates may occur between the times at which
they are determined and the close of the New York Stock Exchange and will
therefore not be reflected in the computation of a Series' net asset value.
If events materially affecting the value of such securities occur during such
period, then those securities will be valued at their fair value as
determined in good faith under procedures established by and under the
supervision of the Trustees.
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
Shares of the Fund are offered for sale to investors participating in
various employee benefit plans and Individual Retirement Account ("IRA")
rollover plans on a continuous basis, without a sales charge, at the net
asset value per share of each Series. There is no minimum initial or
subsequent purchase of shares of the Fund.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of InterCapital, shares
of the Fund are distributed by the Distributor and offered by DWR and other
dealers who have entered into selected dealer agreements with the Distributor
("Selected Broker-Dealers"). The principal executive office of the
Distributor is located at Two World Trade Center, New York, New York 10048.
Initial and subsequent purchases may be made by contacting Dean Witter
Trust FSB at P.O. Box 1040, Jersey City, NJ 07303, or by contacting an
account executive of DWR or another Selected Broker-Dealer. The Fund and/or
the Distributor reserve the right to permit purchases by non-employee benefit
plan investors.
All shares of the Fund, with the exception of shares of the Liquid Asset
and U.S. Government Money Market Series, are sold through the Distributor on
a normal three business day settlement basis; that is, payment is due on the
third business day (settlement date) after the order is placed with the
Distributor. The offering price of such shares will be the net asset value
per share next determined following receipt of an order (see "Determination
of Net Asset Value"). Shares of the U.S. Government Securities and
Intermediate Income Securities Series which are purchased through the
Distributor are entitled to dividends beginning on the next business day
following settlement date and shares of these Series purchased through the
Transfer Agent are entitled to dividends beginning on the next business day
following receipt of a purchase order. Shares of the U.S. Government
Securities Series and the Intermediate Income Securities Series will be
entitled to receive capital gains distributions if the order is received by
the close of business on the date prior to the record date for such
distribution. Investors in the American Value, Capital Growth, Dividend
Growth, Strategist, Utilities, Value-Added Market and Global Equity Series of
the Fund will be entitled to receive income dividends and capital gains
distributions if their order is received by the close of business on the day
prior to the record date for such distributions. Since the Distributor
forwards investors' funds on settlement date, it will benefit from the
temporary use of the funds if payment is made prior thereto. As noted above,
orders placed directly with the Transfer Agent must be accompanied by
payment. The Fund and the Distributor reserve the right to reject any
purchase orders.
Sales personnel of a Selected Broker-Dealer are compensated for shares of
the Fund sold by them by the Distributor or any of its affiliates and/or by a
Selected Broker-Dealer. In addition, some sales personnel of the Selected
Broker-Dealer will receive non-cash compensation as special sales incentives,
including trips, educational and/or business seminars and merchandise. The
Fund and the Distributor reserve the right to reject any purchase orders.
Liquid Asset and U.S. Government Money Market Series. The offering price
of the shares of the Liquid Asset and U.S. Government Money Market Series
will be at their net asset value next determined after receipt of a purchase
order and acceptance by the Transfer Agent in proper form and accompanied by
payment in Federal Funds (i.e., monies of member banks within the Federal
Reserve System held on deposit at a Federal Reserve Bank) available to the
Fund for investment. Shares commence earning income on the day fol-
40
<PAGE>
lowing the date of purchase. Share certificates will not be issued unless
requested in writing by the shareholder.
To initiate purchase by mail or wire, the investor should contact Dean
Witter Trust FSB, at P.O. Box 1040, Jersey City, NJ 07303. Purchases by wire
must be preceded by a call to the Transfer Agent advising it of the purchase
and must be wired to Dean Witter Retirement Series: (name of Series), The
Bank of New York, for credit to the Account of Dean Witter Trust FSB,
Harborside Financial Center, Plaza Two, Jersey City, New Jersey, Account No.
8900188413. Wire purchase instructions must include the name of the Fund and
Series and the shareholder's account number. Purchases made by check are
normally effective within two business days for checks drawn on Federal
Reserve System member banks, and longer for most other checks. Wire purchases
received by the Transfer Agent prior to 12 noon New York time are normally
effective that day and wire purchases received after 12 noon New York time
are normally effective the next business day. The Fund reserves the right to
reject any purchase order.
Orders for the purchase of Liquid Asset and U.S. Government Money Market
Series shares placed by customers through the Distributor with payment in
clearing house funds will be transmitted by the Distributor to the Fund with
payment in Federal Funds on the business day following the day the order is
placed by the customer with the Distributor. Investors desiring same day
effectiveness should wire Federal Funds directly to the Transfer Agent.
For further information concerning purchases of the Fund's shares, contact
the Distributor or consult the Statement of Additional Information. The Fund
and the Distributor reserve the right to reject any purchase orders.
PLAN OF DISTRIBUTION
The Fund has entered into a Plan of Distribution pursuant to Rule 12b-1
under the Act with the Distributor and DWR whereby the Distributor and any of
its affiliates are authorized to utilize their own resources to finance
certain activities in connection with the distribution of the Fund's shares.
Among the activities and services which may be provided by the Distributor
under the Plan are: (1) compensation to, and expenses of, account executives
and other employees of the Distributor and others, including overhead and
telephone expenses; (2) sales incentives and bonuses to sales representatives
and to marketing personnel in connection with promoting sales of the Fund's
shares; (3) expenses incurred in connection with promoting sales of the
Fund's shares; (4) preparing and distributing sales literature; and (5)
providing advertising and promotional activities, including direct mail
solicitation and tele vision, radio, newspaper, magazine and other media
advertisements.
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
Automatic Investment of Dividends and Distributions. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the shareholders selected Series, unless the shareholder requests
that they be paid in cash. Each purchase of shares of the Fund is made upon
the condition that the Transfer Agent is thereby automatically appointed as
agent of the investor to receive all dividends and capital gains
distributions on shares owned by the investor. Such dividends and
distributions will be paid in shares, at the net asset value per share, each
day on which the Series' shares are valued (for the Liquid Asset and U.S.
Government Money Market Series) and in shares of the U.S. Government
Securities and Intermediate Income Securities Series on the monthly payment
date, which will be no later than the last business day of the month for
which the dividend or distribution is payable. Shareholders of the Liquid
Asset, U.S. Government Money Market, U.S. Government Securities and
Intermediate Income Securities Series who have requested to receive dividends
in cash will normally receive their monthly dividend check during the first
ten days of the following month. Dividends and distributions of the American
Value, Capital Growth, Dividend Growth, Utilities, Strategist, Value-Added
Market and Global Equity Series will be paid, at the net asset values per
share of each Series, in shares of the Series (or in cash if the shareholder
so requests) as of the close of business on the record date. At any time an
investor may request the Transfer Agent in writing to have subsequent
dividends and/or capital gains distributions paid to the investor in cash
rather than shares. To assure sufficient time to process the change, such
request must be received by the Transfer Agent at least five business days
prior to the payment date for which it commences to take effect. In case of
recently purchased shares for which registration instructions have not been
re-
41
<PAGE>
ceived on the record date, cash payments will be made to DWR or other
Selected Broker-Dealers through whom shares were purchased.
Systematic Withdrawal Plan. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset
value. The Withdrawal Plan provides for monthly or quarterly (March, June,
September and December) checks in any dollar amount, not less than $25, or in
any whole percentage of the account balance, on an annualized basis. Each
withdrawal constitutes a redemption of shares and any gain or loss realized
must be recognized for federal income tax purposes.
Shareholders wishing to enroll in the Withdrawal Plan should contact their
DWR or other Selected Broker-Dealer account executive or the Transfer Agent.
Systematic Payroll Deduction Plan. There is also available to employers a
Systematic Payroll Deduction Plan by which their employees may invest in
shares of the Fund. For further information please contact the Transfer Agent
or Distributor.
EXCHANGE PRIVILEGE
An "Exchange Privilege," that is, the privilege of exchanging shares of
one of the Fund's Series for another, is available to all shareholders. An
exchange of shares into any Series other than the Liquid Asset and U.S.
Government Money Market Series is effected on the basis of the next
calculated net asset value per share of the respective Series after the
exchange order is received. When exchanging into the Liquid Asset or U.S.
Government Money Market Series, shares of the relevant Series are redeemed at
their next calculated net asset value and exchanged for shares of the Liquid
Asset or U.S. Government Money Market Series at their net asset value
determined the following business day.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders
and, at the Investment Manager's discretion, may be limited by the Fund's
refusal to accept additional purchases and/or exchanges from the investor.
Although the Fund does not have any specific definition of what constitutes a
pattern of frequent exchanges, and will consider all relevant factors in
determining whether a particular situation is abusive and contrary to the
best interests of the Fund and its other shareholders, investors should be
aware that the Fund may, in its discretion, limit or otherwise restrict the
number of times this Exchange Privilege may be exercised by any investor. Any
such restriction will be made by the Fund on a prospective basis only, upon
notice to the shareholder not later than ten days following such
shareholder's most recent exchange.
The Exchange Privilege may be terminated or revised at any time by the
Fund upon such notice as may be required by applicable regulatory agencies
(presently sixty days' prior written notice for termination or material
revision), and provided further that the Exchange Privilege may be terminated
or materially revised without notice under certain unusual circumstances
described in the Statement of Additional Information. Shareholders
maintaining margin accounts with DWR or another Selected Broker-Dealer are
referred to their account executive regarding restrictions on exchanges of
shares of the Fund pledged in their margin account.
The current prospectus of the Fund describes investment objective(s) and
policies, and shareholders should read the disclosure relating to the Series
into which shares are to be exchanged carefully before investing. In the case
of any shareholder holding a share certificate or certificates, no exchanges
may be made until all applicable share certificates have been received by the
Transfer Agent and deposited in the shareholder's account. An exchange will
be treated for federal income tax purposes the same as a repurchase or
redemption of shares, on which the shareholder may realize a capital gain or
loss (shareholders holding shares in a qualified employee benefit plan may
not realize a capital gain or loss). However, the ability to deduct capital
losses on an exchange is limited in situations where there is an exchange of
shares within ninety days after the shares are purchased. The Exchange
Privilege is only available in states where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of any Series for shares of any other Series
pursuant to this Ex-change Privilege by contacting their account executive
(no Exchange Privilege Authorization Form is required). Other shareholders
(and those sharehold-ers who are clients of DWR or another Selected
Broker-Dealer but who wish to make exchanges directly by writing or
telephoning the Transfer Agent)
42
<PAGE>
must complete and forward to the Transfer Agent an Exchange Privilege
Authorization Form, copies of which may be obtained from the Transfer Agent,
to initiate an exchange. If the Authorization Form is used, exchanges may be
made in writing or by contacting the Transfer Agent at (800) 869-NEWS
(toll-free).
The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures
include requiring various forms of personal identification such as name,
mailing address, social security or other tax identification number and DWR
or other Selected Broker-Dealer account number (if any). Telephone
instructions will also be recorded. If such procedures are not employed, the
Fund may be liable for any losses due to unauthorized or fraudulent
instructions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m., New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her DWR or other
Selected Broker-Dealer account executive, if appropriate, or make a written
exchange request. Shareholders are advised that during periods of drastic
economic or market changes it is possible that the telephone exchange
procedures may be difficult to implement, although this has not been the case
in the past with the Dean Witter Funds.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other Selected Broker-Dealer account executive or
the Transfer Agent.
The availability of various shareholder services described above is
determined by the parameters of the investor's employee benefit plan.
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
Redemptions. Shares of the Fund may be redeemed for cash through the
Transfer Agent (without redemption or other charge) on any day that the New
York Stock Exchange is open (see "Determination of Net Asset Value").
Redemptions will be effected at the net asset value per share next determined
after the receipt of a redemption request meeting the applicable requirements
described below. In most instances, however, redemptions of shares will be
governed by the parameters set forth in the investor's employee benefit plan.
With respect to the redemption of shares of all Series of the Fund with
the exception of the Liquid Asset and U.S. Government Money Market Series,
each request for redemption, whether or not accompanied by a share
certificate (see below), must be sent to the Transfer Agent, which will
redeem the shares at their net asset value next computed (see "Determination
of Net Asset Value") after it receives the request, and certificates, if any,
in good order. Any redemption request received after such computation will be
redeemed at the next determined net asset value. The term "good order" means
that the share certificate, if any, and request for redemption are properly
signed, accompanied by any documentation required by the Transfer Agent, and
bear signature guarantees when required by the Fund or the Transfer Agent.
Shares of the Liquid Asset and U.S. Government Money Market Series may be
redeemed in the following manners:
1. BY CHECK
The Transfer Agent will supply blank checks to any shareholder who has
requested them. The shareholder may make checks payable to the order of
anyone in any amount not less than $500 (checks written in amounts under $500
will not be honored by the Transfer Agent). Shareholders must sign checks
exactly as their shares are registered. If the account is a joint account,
the check may contain one signature unless the joint owners have specifically
specified otherwise on an investment application that all owners are required
to sign checks. Only shareholders having accounts in which no share
certificates have been issued will be permitted to redeem shares by check or
enroll in the Systematic Withdrawal Plan.
Shares will be redeemed at their net asset value next determined (see
"Determination of Net Asset Value") after receipt by the Transfer Agent of a
check which does not exceed the value of the account. Payment of the proceeds
of a check will normally be made on the next business day after receipt by
the Transfer Agent of the check in proper form. Shares purchased by check
(including a certified or bank cashier's check) are not normally
43
<PAGE>
available to cover redemption checks until fifteen days after receipt of the
check used for investment by the Transfer Agent. The Transfer Agent will not
honor a check in an amount exceeding the value of the account at the time the
check is presented for payment. Since the dollar value of an account is
constantly changing, it is not possible for a shareholder to determine in
advance the total value of its account so as to write a check for the
redemption of the entire account.
2. BY TELEPHONE OR WIRE INSTRUCTIONS WITH
PAYMENT TO PREDESIGNATED BANK ACCOUNT
A shareholder may redeem shares by telephoning or sending wire
instructions to the Transfer Agent. Payment will be made by the Transfer
Agent to the shareholder's bank account at any commercial bank designated by
the shareholder in an Investment Application, by wire if the amount is $1,000
or more and the shareholder so requests, and otherwise by mail. Normally, the
Transfer Agent will transmit payment the next business day following receipt
of a request for redemption in proper form. Only shareholders having accounts
in which no share certificates have been issued will be permitted to redeem
shares by wire instructions.
Redemption instructions must include the shareholder's name and account
number and be called to the Transfer Agent at 800-869-NEWS (toll-free).
The Fund will employ reasonable procedures to confirm that redemption
instructions communicated over the telephone are genuine. Such procedures
include requiring various forms of personal identification such as name,
mailing address, social security or other tax identification number and DWR
or other Selected Broker-Dealer account number (if any). Telephone
instructions will also be recorded. If such procedures are not employed, the
Fund may be liable for any losses due to unauthorized or fraudulent
instructions.
Telephone redemptions will be accepted if received by the Transfer Agent
between 9:00 a.m. and 4:00 p.m., New York time, on any day the New York Stock
Exchange is open. Any shareholder wishing to make a telephone redemption and
who is unable to reach the Fund by telephone should contact his or her DWR or
other Selected Broker-Dealer account executive, if appropriate, or make a
written redemption request. Shareholders are advised that during periods of
drastic economic or market changes it is possible that the telephone
redemption procedures may be difficult to implement, although this has not
been the case in the past with other funds managed by the Investment Manager.
3. BY MAIL
A shareholder may redeem shares by sending a letter to Dean Witter Trust
FSB, P.O. Box 983, Jersey City, NJ 07303, requesting redemption and
surrendering stock certificates if any have been issued.
Redemption proceeds will be mailed to the shareholder at his or her
registered address or mailed or wired to his or her predesignated bank
account, as he or she may request. Proceeds of redemption may also be sent to
some other person, as requested by the shareholder in accordance with the
general redemption requirements listed below.
GENERAL REDEMPTION REQUIREMENTS
Written requests for redemption must be signed by the registered
shareholder(s). Whether certificates are held by the shareholder or shares
are held in a shareholder's account, if the proceeds are to be paid to anyone
other than the registered shareholder(s) or sent to any address other than
the shareholder's registered address or predesignated bank account,
signatures must be guaranteed by an eligible guarantor acceptable to the
Transfer Agent (shareholders should contact the Transfer Agent for a
determination as to whether a particular institution is such an eligible
guarantor). Additional documentation may be required where shares are held by
a corporation, partnership, trust or other organization.
If shares to be redeemed are represented by a share certificate, the
request for redemption must be accompanied by the share certificate and a
stock power signed by the registered shareholder(s) exactly as the account is
registered. Such signatures must also be guaranteed by an eligible guarantor
acceptable to the Transfer Agent (shareholders should contact the Transfer
Agent for a determination as to whether a particular institution is such an
eligible guarantor). Additional documentation may be required where shares
are held by a corporation, partnership, trust or other organization. A stock
power may be obtained from any dealer or commercial bank. The Fund may change
the signature guarantee requirements from time to time upon notice to
shareholders, which may be by means of a new prospectus.
44
<PAGE>
All requests for redemption should be sent to Dean Witter Trust FSB, P.O.
Box 983, Jersey City, NJ 07303.
Generally, the Fund will attempt to make payment for all redemptions
within one business day, and in no event later than seven days after receipt
of such redemption request in proper form. However, if the shares being
redeemed were purchased by check (including a certified or bank cashier's
check), payment may be delayed for the minimum time needed to verify that the
check used for investment has been honored (not more than fifteen days from
the time of investment of the check by the Transfer Agent). In addition, the
Fund may postpone redemptions at certain times when normal trading is not
taking place on the New York Stock Exchange.
Repurchase. DWR and other Selected Broker-Dealers are authorized to
repurchase, as agent for the Fund, shares represented by a share certificate
which is delivered to any of their offices. Shares held in a shareholder's
account without a share certificate may also be repurchased by DWR and other
Selected Broker-Dealers upon the telephonic request of the shareholder. The
repurchase price is the net asset value next determined (see "Purchase of
Fund Shares--Determination of Net Asset Value") after such repurchase order
is received. The offer by the Distributor to repurchase shares from
shareholders may be suspended by the Distributor at any time. In that event,
shareholders may redeem their shares through the Fund's Transfer Agent as set
forth above under "Redemption."
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
Dividends and Distributions. The Liquid Asset, U.S. Government Money
Market, U.S. Government Securities and Intermediate Income Securities Series
declare dividends of substantially all of their daily net investment income
on each day the New York Stock Exchange is open for business (see "Purchase
of Fund Shares"). The Liquid Asset and U.S. Government Money Market Series
pay all dividends from net investment income (and net short-term capital
gains, if any) to shareholders of record as of the close of business the
preceding business day. The amount of the dividend payable by each Series may
fluctuate from day to day and may be omitted on some days if net realized
losses on portfolio securities exceed its net investment income. The U.S.
Government Securities and Intermediate Income Securities Series will pay all
dividends from net investment income monthly and distribute all distributions
from net realized short-term capital gains, if any, in excess of any net
realized long-term losses, at least once per year. The Dividend Growth and
Utilities Series will declare and pay all dividends from net investment
income and (it is anticipated) net short-term capital gains, if any,
quarterly. The American Value, Capital Growth, Strategist, Value-Added Market
and Global Equity Series will pay all dividends from net investment income
and net short-term capital gains, if any, annually. Any net long-term capital
gains realized by any Series will be distributed at least once each year.
However, any Series may determine to distribute or to retain all or part of
any long-term capital gains in any year for reinvestment.
All dividends and any capital gains distributions will be paid in
additional Fund shares and automatically credited to the shareholder's
account without issuance of a share certificate unless the shareholder
requests in writing that all dividends and/or distributions be paid in cash.
Taxes. Because each Series of the Fund intends to distribute all of its
net investment income and capital gains to shareholders and otherwise
continue to qualify as a regulated investment company under Subchapter M of
the Internal Revenue Code, it is not expected that any Series will be
required to pay any federal income tax. Shareholders normally subject to
federal income tax will normally have to pay federal income taxes, and any
state income taxes, on the dividends and distributions they receive from each
Series of the Fund. Such dividends and distributions, to the extent that they
are derived from net investment income or short-term capital gains, are
taxable to the shareholder, who is normally subject to income tax as ordinary
income regardless of whether the shareholder receives such payments in
additional shares or in cash. Any dividends declared in the last quarter of
any calendar year which are paid in the following year prior to February 1
will be deemed received by the shareholder in the prior calendar year.
Dividend payments will be eligible for the federal dividends received
deduction available to the Fund's corporate shareholders only to the extent
the aggregate dividends received by the Series would be eligible for the
deduction if the Series were the shareholder claiming the dividends received
deduction. In this
45
<PAGE>
regard, a 46-day holding period per dividend, generally, must be met. No
portion of the dividends payable by the Liquid Asset Series, the U.S.
Government Money Market Series, the U.S. Government Securities Series and the
Intermediate Income Securities Series will be eligible for the federal
dividends received deduction for corporations.
Gains or losses on a Series' transactions, if any, in listed options on
non-equity securities, futures and options on futures generally are treated
as 60% long-term and 40% short-term. When the Series engages in options and
futures transactions, various tax regulations applicable to the Series may
have the effect of causing the Series to recognize a gain or loss for tax
purposes before that gain or loss is realized, or to defer recognition of a
realized loss for tax purposes. Recognition, for tax purposes, of an
unrealized loss may result in a lesser amount of the Series' realized net
gains being available for distribution.
One of the requirements for a Series to remain qualified as a regulated
investment company is that less than 30% of its gross income be derived from
gains from the sale or other disposition of securities held for less than
three months. Accordingly, the Series may be restricted in the writing of
options on securities held for less than three months, in the writing of
options which expire in less than three months, and in effecting closing
transactions with respect to call or put options which have been written or
purchased less than three months prior to such transactions. A Series may
also be restricted in its ability to engage in transactions involving futures
contracts.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. Capital gains distributions are not
eligible for the dividends received deduction.
The Series may at times make payments from sources other than income or
net capital gains. Payments from such sources will, in effect, represent a
return of a portion of each shareholder's investment. All, or a portion, of
such payments will not be taxable to shareholders.
At the end of the year, shareholders will be sent full information on
their dividends and capital gains distributions for tax purposes, including
information as to the portion taxable as ordinary income, the portion taxable
as mid-term and long-term capital gains and the portion eligible for the
dividends received deduction. To avoid being subject to a 31% federal backup
withholding tax on taxable dividends, capital gains distributions and the
proceeds of redemptions and repurchases, shareholders' taxpayer
identification numbers must be furnished and certified as to their accuracy.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation. Moreover, shares of the Fund which
are held in an employee benefit plan are subject to the distribution tax
rules appropriate to that plan. With respect to all purchases, redemptions,
repurchases, exchanges effected and distributions received on such shares of
the Fund, shareholders should consult with their tax adviser.
Dividends, interest and gains received by the Fund (primarily by the
Global Equity Series) may give rise to withholding and other taxes imposed by
foreign countries. If it qualifies for and has made the appropriate election
with the Internal Revenue Service, the Fund will report annually to its
shareholders the amount per share of such taxes, to enable shareholders to
deduct their pro rata portion of such taxes from their taxable income or
claim United States foreign tax credits with respect to such taxes. In the
absence of such an election, a Series would deduct foreign tax in computing
the amount of its distributable income.
A portion of the dividend distributions from the U.S. Government
Securities and U.S. Government Money Market Series may be exempt from certain
state's personal income taxes. The benefit of this tax-exemption may be lost
if the shares of such Series are held in a qualified plan which is exempt
from state income taxation.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
From time to time, the Liquid Asset and U.S. Government Money Market
Series may advertise their "yields" and "effective yields." The "yield" of
the Liquid Asset and U.S. Government Money Market Series refers to the income
generated by an investment in the Liquid Asset and U.S. Government Money
Market Series over a given period (which period will be stated in the
advertisement). This income is then "annualized." That is, the amount of
income generated by an investment during that
46
<PAGE>
seven-day period is assumed to be generated each seven-day period within a
365-day period and is shown as a percentage of investment. The "effective
yield" for a seven-day period is calculated similarly but, when annualized,
the income earned by an investment in the Liquid Asset and U.S. Government
Money Market Series is assumed to be reinvested each week within a 365-day
period. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment.
From time to time the U.S. Government Securities and Intermediate Income
Securities Series may quote their "yield" in advertisements and sales
literature. The yield of a Series is computed by dividing the Series' net
investment income over a 30-day period by an average value (using the average
number of shares entitled to receive dividends and the net asset value per
share at the end of the period), all in accordance with applicable regulatory
requirements. Such amount is compounded for six months and then annualized
for a twelve-month period to derive the Series' yield.
Each Series of the Fund may also quote its "total return" in
advertisements and sales literature. The "average annual total return" of a
Series refers to a figure reflecting the average annualized percentage
increase (or decrease) in the value of an initial investment in the Fund of
$1,000 over a period of one or five years, as well as over the life of the
Series. Average annual total return reflects all income earned by a Series,
any appreciation or depreciation of the Series' assets and all expenses
incurred by the Series, for the stated period. It also assumes reinvestment
of all dividends and distributions paid by the Series.
In addition to the foregoing, a Series may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or
other types of total return figures. The Series may also advertise the growth
of hypothetical investments of $10,000, $50,000 and $100,000 in shares of the
Series. A Series from time to time may also advertise its performance
relative to certain performance rankings and indexes compiled by independent
organizations, such as mutual fund performance rankings of Lipper Analytical
Services, Inc.
Both the yield and the total return of a Series are based on historical
earnings and are not intended to indicate future performance.
ADDITIONAL INFORMATION
- -----------------------------------------------------------------------------
The shares of beneficial interest of the Fund, with $0.01 par value, are
divided into eleven separate Series, and the shares of each Series are equal
as to earnings, assets and voting privileges with all other shares of that
Series. There are no conversion, preemptive or other subscription rights.
Upon liquidation of the Fund or any Series, shareholders of a Series are
entitled to share pro rata in the net assets of that Series available for
distribution to shareholders after all debts and expenses have been paid. The
shares do not have cumulative voting rights.
The assets received by the Fund on the sale of shares of each Series and
all income, earnings, profits and proceeds thereof, subject only to the
rights of creditors, are allocated to each Series, and constitute the assets
of such Series. The assets of each Series are required to be segregated on
the Fund's books of account.
Additional Series (the proceeds of which would be invested in separate,
independently managed portfolios with distinct investment objectives,
policies and restrictions) may be offered in the future, but such additional
offerings would not affect the interests of the current shareholders in the
existing Series.
On any matters affecting only one Series, only the shareholders of that
Series are entitled to vote. On matters relating to all the Series but
affecting the Series differently, separate votes by Series are required.
Approval of an Investment Management Agreement and a change in fundamental
policies would be regarded as matters requiring separate voting by each
Series.
The Fund is not required to hold Annual Meetings of Shareholders and, in
ordinary circumstances, the Fund does not intend to hold such meetings.
Under Massachusetts law, shareholders of a business trust may, under
certain limited circumstances, be held personally liable as partners for
obligations of the Fund. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the
Fund, requires that Fund obligations include such disclaimer, and provides
for indemnification and reimbursement of expenses out of the Fund's property
for any shareholder held personally liable for the obligations of the Fund.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is
47
<PAGE>
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability,
and the nature of the Fund's assets and operations, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.
Code of Ethics. Directors, officers and employees of InterCapital, Dean
Witter Services Company Inc. and the Distributor are subject to a strict Code
of Ethics adopted by those companies. The Code of Ethics is intended to
ensure that the interests of shareholders and other clients are placed ahead
of any personal interest, that no undue personal benefit is obtained from a
person's employment activities and that actual and potential conflicts of
interest are avoided. To achieve these goals and comply with regulatory
requirements, the Code of Ethics requires, among other things, that personal
securities transactions by employees of the companies be subject to an
advance clearance process to monitor that no investment company managed or
advised by InterCapital ("Dean Witter Fund") is engaged at the same time in a
purchase or sale of the same security. The Code of Ethics bans the purchase
of securities in an initial public offering, and also prohibits engaging in
futures and options transactions and profiting on short-term trading (that
is, a purchase within sixty days of a sale or a sale within sixty days of a
purchase) of a security. In addition, investment personnel may not purchase
or sell a security for their personal account within thirty days before or
after any transaction in any Dean Witter Fund managed by them. Any violations
of the Code of Ethics are subject to sanctions, including reprimand, demotion
or suspension or termination of employment. The Code of Ethics comports with
regulatory requirements and the recommendations in the 1994 report by the
Investment Company Institute Advisory Group on Personal Investing.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover
of this Prospectus.
As of September 30, 1997, the following persons may be deemed to "control"
the designated Series by virtue of ownership of over 25% of the outstanding
shares of the Series: Glendale Elementary School Self-Insurance Account (U.S.
Government Money Market Series); Private Business Inc. 401(k) Plan (Capital
Growth Series); Pizzagalli Construction 401(k) Plan (Value-Added Market
Series); and VVP America Inc. Retirement Plan (Global Equity Series). This is
primarily a consequence of the relative sizes of the particular Series and
the fact that the shareholders of record are in most cases employee benefit
plans which are comprised of multiple beneficial shareholders.
48
<PAGE>
Dean Witter
Retirement Series
Two World Trade Center
New York, New York 10048
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
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
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
<PAGE>
DEAN WITTER RETIREMENT SERIES Two World Trade Center,
LETTER TO THE SHAREHOLDERS July 31, 1997 New York, New York 10048
DEAR SHAREHOLDER:
Following a modest increase in the federal-funds rate in late March, it
appeared at first as if the Federal Reserve Board was poised for a series of
further rate increases. However, a slight cooling off of recent economic
data, an ongoing lack of inflationary pressure and progress toward a federal
balanced budget agreement have argued against a quick succession of
rate-tightening moves.
As a result, interest rates actually declined during the second quarter of
1997, with the yield on 30-year U.S. Treasury bonds down 32 basis points
(0.32 percentage points) to 6.78 percent. While rates seem to be holding at
these lower levels, the possibility exists that the Fed may again tighten
policy in an attempt to ward off future inflationary pressure. Interest rates
available on money-market securities held steady during the second quarter.
AMID POSITIVE ECONOMIC NEWS, MIXED SIGNALS
On the heels of stronger than expected economic activity for the first
quarter, the second quarter began to show conflicting signals. Employment
data for June, for example, provided mixed indicators on the strength of the
economy by registering an increase in the unemployment rate to 5 percent,
though growth in employment came in at a solid 217,000 new jobs. A sign of a
possible slowing in the pace of economic activity came on July 1 with the
release of the National Association of Purchasing Managers Index for June,
which fell from May's levels. However, retail sales turned positive in June
after falling for three consecutive months.
The financial markets greeted constrained year-over-year wage increases and
six consecutive months of declining producer prices with jubilation. Payroll
growth has now risen by an average of 234,000 per month thus far in 1997,
above a strong average monthly growth of 212,000 for 1996. Labor shortages
exist in some metropolitan markets. Looking toward the third quarter, the Fed
would seem to have justification to either raise its federal-funds target
rate or hold steady, awaiting further economic evidence.
<PAGE>
DEAN WITTER RETIREMENT SERIES
LETTER TO THE SHAREHOLDERS July 31, 1997, continued
STOCK MARKETS CONTINUE TO FLY HIGH
Most global equity markets enjoyed favorable performance in the first half of
1997. In the United States, the stock market endured a correction of nearly
10 percent after the Fed raised interest rates in March. The downturn was
short-lived, however, as inflation data showed little, if any, pressure.
While the stocks of large-capitalization companies have dominated the market
year-to-date, smaller and mid-sized stocks are finally showing signs of
breaking out of their slump.
Latin American equity markets began the year on a strong note, gaining an
average of 15 percent during the first quarter as robust corporate earnings
growth and attractive valuations prompted strong capital inflows. The
region's markets then rallied an additional 22 percent on average during the
second quarter as macroeconomic and political fundamentals continued to
improve and corporate earnings results were generally in line with
expectations.
Asian equity markets posted mixed results during the first half of 1997 as
capital inflows tapered off from the high levels experienced at the end of
1996. Investor sentiment was negatively affected by a general lack of
earnings growth momentum and continued declines in export growth throughout
much of the region. Investors were also somewhat nervous about the prospects
for further asset deflation in the region, which has depressed the Thai and
Korean stock markets over the past year. The Japanese market staged a
recovery in the second quarter as the prospects for higher interest rates
faded, sentiment for a self-sustaining economic recovery there rebounded and
the selling pressure that crushed Japanese bank stocks subsided.
The investment climate in the European emerging markets remains broadly
positive. With the exception of Russia, the stock markets of eastern Europe
were constrained by low investor confidence following a Czech currency
crisis. Russian equities continued to post the region's strongest gains,
surging 120 percent in U.S. dollar terms during the first half of 1997 as
concerns surrounding President Yeltsin's health faded.
On a cautionary note, global market volatility has picked up. Stock markets
worldwide have fluctuated on U.S. interest-rate moves, economic data
releases, earnings disappointments and election results. Despite this
increase in volatility, equities continue to offer attractive total return
potential in the current environment of fiscally tight government policies,
strong global economic growth and low inflation.
LIQUID ASSET SERIES
As of the end of July 1997, the Liquid Asset Series had assets of
approximately $21 million, with an average life of 29 days. The Series' total
return for the twelve-month fiscal year ended July 31, 1997 was 4.57 percent
and its annualized yield for July was 4.65 percent.
At the end of the fiscal year, approximately 68 percent of the portfolio of
the Liquid Asset Series consisted of high-quality commercial paper, 8 percent
was invested in bankers' acceptances issued by major, financially strong
commercial banks and the remaining 24 percent was invested in federal agency
obligations. More than 93 percent of the Series' assets was due to mature in
less than three months.
<PAGE>
DEAN WITTER RETIREMENT SERIES
LETTER TO THE SHAREHOLDERS July 31, 1997, continued
The Series is well positioned for stability of value with a high degree of
liquidity. We continue to operate the Series in a straightforward
conservative style without "structured notes" or derivatives, which could
fluctuate excessively when interest rates change.
U.S. GOVERNMENT MONEY MARKET SERIES
As of July 31, 1997, the U.S. Government Money Market Series had assets of
approximately $4 million, with an average life of 31 days. The Series' total
return for the twelve-month fiscal year ended July 31, 1997 was 4.51 percent
and its annualized yield for July was 4.65 percent.
On July 31, 1997, approximately 99 percent of the portfolio of the U.S.
Government Money Market Series consisted of Federal agency obligations with
the remaining 1 percent invested in U.S. Treasury bills. More than 91 percent
of the Series' assets was due to mature in less than three months.
The Series is well positioned for stability of value with a high degree of
liquidity. We continue to operate the Series in a straightforward
conservative style without "structured notes" or derivatives, which could
fluctuate excessively when interest rates change.
U.S. GOVERNMENT SECURITIES SERIES
GROWTH OF $10,000
DATE FUND LEHMAN IX LIPPER IX
============================================================================
January 8, 1993 $10,000 $10,000 $10,000
- ----------------------------------------------------------------------------
July 31, 1993 $10,260 $10,595 $10,500
============================================================================
July 31, 1994 $10,188 $10,581 $10,291
- ----------------------------------------------------------------------------
July 31, 1995 $10,975 $11,600 $11,158
- ----------------------------------------------------------------------------
July 31, 1996 $11,467 $12,198 $11,619
- ----------------------------------------------------------------------------
July 31, 1997 $12,579 $13,439 $12,763
============================================================================
AVERAGE ANNUAL TOTAL RETURNS
ONE YEAR LIFE OF FUND
============================
9.70%(1) 5.16%(1)
============================
================================================
[ ] Fund [ ] Lehman(2) [ ] Lipper(3)
================================================
Past performance is not predictive of future returns.
- -------------------
(1) Total return figures shown assume reinvestment of all distributions.
(2) The Lehman Brothers General U.S. Government Index is a broad-based measure
of all U.S. Government and U.S. Treasury Securities. The Index does not
include any expenses, fees or charges. The index is unmanaged and should
not be considered an investment.
(3) The Lipper General U.S. Government Funds Index is an equally-weighted
performance index of the largest qualifying funds (based on net assets) in
the Lipper General U.S. Government Funds objective. The Index, which is
adjusted for capital distributions and income dividends, is unmanaged and
should not be considered an investment. There are currently 30 funds
represented.
For the fiscal year ended July 31, 1997, the U.S. Government Securities
Series posted a total return of 9.70 percent. This compares to a return of
10.17 percent for the Lehman Brothers General U.S. Government Index (Lehman
Index) and a return of 9.85 percent for the Lipper General U.S. Government
Funds Index (Lipper Index). During the fiscal year, the Series paid dividends
and distributions of approximately $0.58 per share. The accompanying chart
illustrates the performance of a hypothetical $10,000 investment in the
Series from inception (January 8, 1993) through the fiscal year ended July
31, 1997, versus the performance of similar investments in the Lehman Index
and Lipper Index.
On July 31, 1997, the Series' net assets exceeded $10.4 million, with
Government National Mortgage Association mortgage-backed securities (GNMAs)
representing 82 percent of the portfolio, U.S. Treasury securities 13 percent
and zero-coupon U.S. Treasury securities 5 percent. At present, the Series'
average maturity reflects a constructive position. Accordingly, as attractive
investment opportunities become available, the average maturity
<PAGE>
DEAN WITTER RETIREMENT SERIES
LETTER TO THE SHAREHOLDERS July 31, 1997, continued
may be gradually extended. On July 31, 1997, the average duration was 5.41
years. (Duration is a measure of the portfolio's sensitivity to changes in
interest rates.)
We believe that GNMAs continue to offer significant long-term value and, in
the current investment environment, offer not only an incremental yield
incentive over U.S. Treasury securities of similar maturity but also provide
the potential for better total returns.
INTERMEDIATE INCOME SECURITIES SERIES
GROWTH OF $10,000
DATE FUND LEHMAN IX LIPPER IX
============================================================================
January 12, 1993 $10,000 $10,000 $10,000
- ----------------------------------------------------------------------------
July 31, 1993 $10,167 $10,720 $10,544
============================================================================
July 31, 1994 $10,193 $10,725 $10,523
- ----------------------------------------------------------------------------
July 31, 1995 $11,133 $12,010 $11,484
- ----------------------------------------------------------------------------
July 31, 1996 $11,573 $12,680 $12,084
- ----------------------------------------------------------------------------
July 31, 1997 $12,572 $14,219 $13,307
============================================================================
AVERAGE ANNUAL TOTAL RETURNS
ONE YEAR LIFE OF FUND
============================
8.63%(1) 5.16%(1)
============================
================================================
[ ] Fund [ ] Lehman(2) [ ] Lipper(3)
================================================
Past performance is not predictive of future returns.
- -------------------
(1) Total return figures shown assume reinvestment of all distributions.
(2) The Lehman Brothers Intermediate Investment Grade Debt Index is an
unmanaged index of 5 to 10 year investment-grade corporate debt
securities. The Index does not include any expenses, fees or charges. The
index is unmanaged and should not be considered an investment.
(3) The Lipper Intermediate Investment Grade Funds Index is an
equally-weighted performance index of the largest qualifying funds (based
on net assets) in the Lipper Intermediate Investment Grade Debt 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 30 funds represented in this index.
For the fiscal year ended July 31, 1997, the Intermediate Income Securities
Series posted a total return of 8.63 percent. This compares to a return of
12.14 percent for the Lehman Brothers Intermediate Investment Grade Debt
Index (Lehman Index) and a return of 10.12 percent for the Lipper
Intermediate Investment Grade Funds Index (Lipper Index). During the fiscal
year, the Series paid distributions exceeding $.52 per share. The
accompanying chart illustrates the performance of a hypothetical $10,000
investment in the Series from inception (January 12, 1993) through the fiscal
year ended July 31, 1997, versus the performance of similar investments in
the Lehman Index and Lipper Index.
The Series' performance during the fiscal year was reflective of the overall
decline in interest rates beginning in the second quarter of 1997. The Series
underperformed the Lehman Index due to its somewhat greater commitment to
U.S. Treasuries during the first part of the period, when they substantially
underperformed corporate securities. Also affecting performance were
unusually large cash flows in and out of the Series. Toward the end of
October 1996, sizable share purchases caused the Series' assets to grow
nearly 50 percent in one month. Subsequently, share redemptions in January
and early February reduced net assets by more than 60 percent from their
December 1996 levels. As a result of these redemptions, nearly all the U.S.
Treasury positions held in the portfolio were sold. Although this provided
the Series with the opportunity to raise its allocation to corporates, it
also extended the average maturity of the portfolio to more than six years.
This negatively influenced the Series' performance since interest rates were
on the ascent. To offset the Series' longer duration, and improve liquidity,
the cash reserves were allowed to increase and some of the better-performing
corporates were replaced with shorter-maturity U.S. Treasuries. After
reaching a high of 13 percent, cash reserves were reduced to 7.7 percent by
July 31, 1997. New funds were invested in four-to seven-year U.S. Treasuries
and corporates. Due to the Series' relatively small asset size, greater
provisions were made for liquidity by greater U.S. Treasury allocations and
investments in higher-quality corporates.
<PAGE>
DEAN WITTER RETIREMENT SERIES
LETTER TO THE SHAREHOLDERS July 31, 1997, continued
On July 31, 1997, 64 percent of the Series' noncash holdings was invested in
corporate bonds, with U.S. Treasuries accounting for the remaining 36
percent. The average maturity and duration of the portfolio were 4.84 years
and 3.82 years, respectively. The average credit quality rating was A1.
AMERICAN VALUE SERIES
GROWTH OF $10,000
DATE FUND S&P 500 LIPPER IX
============================================================================
February 1, 1993 $10,000 $10,000 $10,000
- ----------------------------------------------------------------------------
July 31, 1993 $10,050 $10,271 $10,426
============================================================================
July 31, 1994 $ 9,990 $10,801 $10,916
- ----------------------------------------------------------------------------
July 31, 1995 $13,335 $13,613 $13,703
- ----------------------------------------------------------------------------
July 31, 1996 $14,645 $15,862 $14,917
- ----------------------------------------------------------------------------
July 31, 1997 $20,740 $24,123 $21,443
============================================================================
AVERAGE ANNUAL TOTAL RETURNS
ONE YEAR LIFE OF FUND
============================
41.62%(1) 17.63%(1)
============================
================================================
[ ] Fund [ ] S&P 500(2) [ ] Lipper(3)
================================================
Past performance is not predictive of future returns.
- -------------------
(1) Total return figures shown assume reinvestment of all distributions.
(2) The Standard & Poor's 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 Index does not include
any expenses, fees or charges. The Index is unmanaged and should not be
considered an investment.
(3) The Lipper Growth Funds Index is an equally-weighted performance index
of the largest qualifying funds (based on net assets) in the Lipper
Growth 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 30 funds represented in this
Index.
For the fiscal year ended July 31, 1997, the American Value Series posted a
total return of 41.62 percent. This compares to a return of 52.08 percent for
the Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index) and a
return of 43.76 percent for the Lipper Growth Funds Index (Lipper Index). The
accompanying chart illustrates the performance of a hypothetical $10,000
investment in the Series from inception (February 1, 1993) through the fiscal
year ended July 31, 1997, versus the performance of similar investments in
the S&P 500 Index and Lipper Index.
At the end of July 1997, the Series was well diversified, both in terms of
industries and in its market capitalization. On an industry front, the
portfolio now has a slight tilt toward economically sensitive groups. At 35
percent of net assets, technology continues to represent an important
portfolio commitment. Driven by companies' need for each to be the low-cost
producer in a competitive global environment, demand for technology is
expected to rebound, with the fall typically being the strongest seasonal
period for this sector.
With real wages rising ahead of inflation, and unemployment at its lowest
level in several decades, retailers (approximately 6 percent of the Series'
portfolio) are expected to experience stronger relative earnings. Cyclical
industries that we believe have strong secular strength include energy
(approximately 6 percent of the portfolio), agriculture (approximately 4
percent) and capital goods (approximately 4 percent), which all should
benefit from increased exports to newly industrialized countries with
developing middle classes.
Health-care companies with proprietary products, including drug, medical
device and biotechnology companies, are expected to continue to outpace
general corporate earnings growth. They represent 12 percent of the Series'
net assets. The secular trends of deregulation and consolidation are expected
to continue to lift stocks in the financial sector, which represents
approximately 16 percent of the portfolio.
<PAGE>
The Series is also diversified in terms of market capitalization. As of July
31, 1997, large-cap issues represented approximately 60 percent of the stock
portfolio, mid-sized companies about 40 percent. Going forward, the American
Value Series will be increasingly tilted in the direction of mid-cap issues,
as the
<PAGE>
DEAN WITTER RETIREMENT SERIES
LETTER TO THE SHAREHOLDERS July 31, 1997, continued
dollar seems to be breaking out of its seven-year range, a development that
historically favors mid-sized companies, which typically have significantly
lower currency exposures than larger companies. Additionally, relative
valuations in this sector of the market have become compelling from their
underperformance over the last few years.
CAPITAL GROWTH SERIES
GROWTH OF $10,000
DATE FUND S&P 500 LIPPER IX
============================================================================
February 2, 1993 $10,000 $10,000 $10,000
- ----------------------------------------------------------------------------
July 31, 1993 $ 8,880 $10,271 $10,426
============================================================================
July 31, 1994 $ 9,463 $10,800 $10,916
- ----------------------------------------------------------------------------
July 31, 1995 $11,363 $13,612 $13,703
- ----------------------------------------------------------------------------
July 31, 1996 $13,020 $15,860 $14,917
- ----------------------------------------------------------------------------
July 31, 1997 $18,680 $24,120 $21,443
============================================================================
AVERAGE ANNUAL TOTAL RETURNS
ONE YEAR LIFE OF FUND
============================
43.46%(1) 14.93%(1)
============================
================================================
[ ] Fund [ ] S&P 500(2) [ ] Lipper(3)
================================================
Past performance is not predictive of future returns.
- -------------------
(1) Total return figures shown assume reinvestment of all distributions.
(2) 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 Index does not include
any expenses, fees or charges. The Index is unmanaged and should not be
considered an investment.
(3) The Lipper Growth Funds Index is an equally-weighted performance index
of the largest qualifying funds (based on net assets) in the Lipper
Growth 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 30 funds represented in this
Index.
For the fiscal year ended July 31, 1997, the Capital Growth Series posted a
total return of 43.46 percent. This compares to a return of 52.08 percent for
the Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index) and a
return of 43.76 percent for the Lipper Growth Funds Index (Lipper Index). The
accompanying chart illustrates the performance of a hypothetical $10,000
investment in the Series from inception (February 2, 1993) through the fiscal
year ended July 31, 1997, versus the performance of similar investments in
the S&P 500 Index and Lipper Index.
As the fiscal year came to a close, the Series completed a transition begun
during the early summer of 1996 when we modified its screening criteria. The
new criteria widened the universe from which we could choose stocks for the
portfolio and stated that companies considered for the portfolio must
demonstrate a history of consistent growth in earnings and revenues for the
past several years. These companies are also chosen for their solid future
earnings growth characteristics and attractive valuations.
During the fiscal year, the Series built up its positions in financial
services, upgraded its technology weighting, increased its exposure to the
retail industry and established positions in the energy sector. The Series also
increased its exposure to small-and mid-capitalization stocks and decreased its
former heavy weighting in large-capitalization securities. This shift was made
primarily because of the better valuation levels and higher growth potential
found in the newly increased sectors. As of July 31, 1997, the Series'
portfolio was weighted approximately 59 percent in large-cap stocks, with the
remaining percent in small-and mid-cap stocks. Although smaller issues
underperformed during much of this period, it is important to remember that,
historically, small-and mid-cap stocks have outperformed large caps over the
long term. Values in these issues began increasing relative to large caps
during the latter part of the fiscal year. We believe that investors will take
notice of this and begin to narrow the market's
<PAGE>
DEAN WITTER RETIREMENT SERIES
LETTER TO THE SHAREHOLDERS July 31, 1997, continued
large-cap bias. The Series will continue to hold stocks of various market
capitalizations, for diversification across both industry sectors and
capitalization ranges.
DIVIDEND GROWTH SERIES
GROWTH OF $10,000
DATE FUND S&P 500(2) LIPPER IX(3)
============================================================================
January 7, 1993 $10,000 $10,000 $10,000
- ----------------------------------------------------------------------------
July 31, 1993 $10,711 $10,577 $10,621
============================================================================
July 31, 1994 $11,368 $11,122 $11,280
- ----------------------------------------------------------------------------
July 31, 1995 $13,991 $14,018 $13,558
- ----------------------------------------------------------------------------
July 31, 1996 $16,242 $16,333 $15,337
- ----------------------------------------------------------------------------
July 31, 1997 $23,051 $24,839 $22,104
============================================================================
AVERAGE ANNUAL TOTAL RETURNS
ONE YEAR LIFE OF FUND
============================
41.92%(1) 20.09%(1)
============================
================================================
[ ] Fund [ ] S&P 500(2) [ ] Lipper(3)
================================================
Past performance is not predictive of future returns.
- -------------------
(1) Total return figures shown assume reinvestment of all distributions.
(2) 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 Index does not include
any expenses, fees or charges. The Index is unmanaged and should not be
considered an investment.
(3) The Lipper Growth and Income Funds Index is an equally-weighted
performance index of the largest qualifying funds (based on net assets)
in the Lipper Growth and 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
30 funds in this Index.
For the fiscal year ended July 31, 1997, the Dividend Growth Series posted a
total return of 41.92 percent. This compares to a return of 52.08 percent for
the Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index) and a
return of 44.14 percent for the Lipper Growth and Income Funds Index (Lipper
Index). The accompanying chart illustrates the performance of a hypothetical
$10,000 investment in the Series from inception (January 7, 1993) through the
fiscal year ended July 31, 1997, versus the performance of similar
investments in the S&P 500 Index and Lipper Index.
The Series' underperformance of the broad market was in large part due to
exceptional strength in small-capitalization stocks at various times during
the year, in particular technology, which afford little or no current yield.
On July 31, 1997, the Series' net assets exceeded $115 million. On that date,
the Series owned 38 equity issues spread among 30 different industry groups.
Since its inception, the Series has utilized a proprietary screening process
to assist in building its portfolio of common stocks. One new portfolio
position, Unicom Corp., was established during the fiscal year. Also, a
spin-off from Tenneco, Inc. during the period resulted in the receipt of
shares of Newport News Shipbuilding Inc. and El Paso Natural Gas Co. These
shares, along with our position in Pacific Gas & Electric Co., were sold
prior to the end of the fiscal year.
UTILITIES SERIES
For the fiscal year ended July 31, 1997, the Utilities Series posted a total
return of 19.87 percent. This compares to a return of 52.08 percent for the
Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index) and 22.57
percent for the Lipper Utilities Fund Average (Lipper Average). The
accompanying chart illustrates the performance of a hypothetical $10,000
investment in the Series from inception (January 8, 1993) through the fiscal
year ended July 31, 1997, versus the performance of similar investments in the
S&P 500 Index and Lipper Average.
<PAGE>
DEAN WITTER RETIREMENT SERIES
LETTER TO THE SHAREHOLDERS July 31, 1997, continued
The utilities industry continues to react to uncertainty and confusion
surrounding its deregulation and restructuring. This response was evident
during the fiscal year as the industry underperformed the general market
despite strong earnings and low inflation. More recently, however, it appears
that investor confidence is improving as the form and direction of a
competitive utilities industry take shape. This was seen by the resurgence in
telecommunications stocks that occurred during the second half of the fiscal
year as investors anticipated further industry consolidation and alliances,
as well as in attractive earnings growth prospects from wireless services and
value-added features.
UTILITIES SERIES
GROWTH OF $10,000
DATE FUND S&P 500 LIPPER IX
============================================================================
January 8, 1993 $10,000 $10,000 $10,000
- ----------------------------------------------------------------------------
July 31, 1993 $11,498 $10,618 $11,118
============================================================================
July 31, 1994 $10,896 $11,166 $10,365
- ----------------------------------------------------------------------------
July 31, 1995 $12,221 $14,073 $11,382
- ----------------------------------------------------------------------------
July 31, 1996 $13,291 $16,397 $12,642
- ----------------------------------------------------------------------------
July 31, 1997 $15,933 $24,937 $15,495
============================================================================
AVERAGE ANNUAL TOTAL RETURNS
ONE YEAR LIFE OF FUND
============================
19.87%(1) 10.76%(1)
============================
================================================
[ ] Fund [ ] S&P 500(2) [ ] Lipper(3)
================================================
Past performance is not predictive of future returns.
- -------------------
(1) Total return figures shown assume reinvestment of all distributions.
(2) 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 Index does not include
any expenses, fees or charges. The Index is unmanaged and should not be
considered an investment.
(3) The Lipper Utility Funds Average tracks the performance of the funds which
invest 65% of their equity portfolio in utility shares as reported by
Lipper Analytical Services.
The Series remained fully invested during the first half of 1997, with 95
percent of its assets allocated to utility and utility-related equities on
July 31, 1997, and the remaining 5 percent in cash and cash equivalents. The
Series' equity portfolio reflected improved investor confidence, particularly
in the electric utilities and telecommunications sectors, given their
favorable growth outlook and the potential investment opportunities resulting
from a competitive environment. Within this component of the portfolio, 49
percent was allocated to electric utilities, 28 percent to telecommunications
and 18 percent to natural gas. Further diversifying the Series' portfolio are
selective foreign securities, primarily in the global telecommunications
sector, which accounted for 11 percent of net assets.
While the electric utility sector remained focused on making a balanced
transition from a monopoly to a deregulated environment, mergers and
acquisitions continued. The Series continues to invest selectively within the
electric utility sector and remains committed to companies characterized by
low energy cost and good earnings growth opportunities. Within the natural
gas sector, the Series continues to focus on high-quality, well-diversified
pipeline companies, given the favorable long-term outlook for the industry.
Looking ahead, the Series anticipates a modest reduction of its equity
allocation to electric utilities in favor of selective telecommunications and
natural gas companies. The Fund may also increase its foreign exposure to
capitalize on and participate in worldwide telecommunications infrastructure
growth.
<PAGE>
DEAN WITTER RETIREMENT SERIES
LETTER TO THE SHAREHOLDERS July 31, 1997, continued
VALUE-ADDED SERIES
GROWTH OF $10,000
DATE FUND S&P 500 LIPPER IX
============================================================================
February 1, 1993 $10,000 $10,000 $10,000
- ----------------------------------------------------------------------------
July 31, 1993 $10,071 $10,271 $10,465
============================================================================
July 31, 1994 $10,967 $10,801 $11,114
- ----------------------------------------------------------------------------
July 31, 1995 $13,450 $13,613 $13,359
- ----------------------------------------------------------------------------
July 31, 1996 $14,955 $15,862 $15,112
- ----------------------------------------------------------------------------
July 31, 1997 $21,405 $24,123 $21,780
============================================================================
AVERAGE ANNUAL TOTAL RETURNS
ONE YEAR LIFE OF FUND
============================
43.12%(1) 18.46%(1)
============================
================================================
[ ] Fund [ ] S&P 500(2) [ ] Lipper(3)
================================================
Past performance is not predictive of future returns.
- -------------------
(1) Total return figures shown assume reinvestment of all distributions.
(2) 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 Index does not include
any expenses, fees or charges. The Index is unmanaged and should not be
considered an investment.
(3) The Lipper Growth and Income Funds Index is an equally-weighted
performance index of the largest qualifying funds (based on net assets)
in the Lipper Growth and 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
30 funds in this Index.
For the fiscal year ended July 31, 1997, the Value-Added Series posted a
total return of 43.12 percent. This compares to a return of 52.08 percent for
the Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index) and
44.14 percent for the Lipper Growth and Income Funds Index (Lipper Index).
The accompanying chart illustrates the performance of a hypothetical $10,000
investment in the Series from inception (February 1, 1993) through the fiscal
year ended July 31, 1997, versus the performance of similar investments in
the S&P 500 Index and Lipper Index.
The Series is index oriented, investing in stocks that comprise the S&P 500,
its benchmark. Unlike the S&P 500, however, the Series weights all the
stocks' positions equally, thereby emphasizing the stocks of small-and
mid-sized companies, which historically have outperformed larger stocks.
While the Series performed well over the most recent six-and twelve-month
periods, its results were overshadowed by the S&P 500's returns. During the
fiscal year ended July 31, 1997, the S&P 500 was driven by
large-capitalization multinationals and technology stocks. These sectors are
more heavily weighted on the S&P 500 than in the Series' portfolio.
GLOBAL EQUITY SERIES
For the fiscal year ended July 31, 1997, the Global Equity Series posted a
total return of 26.66 percent. This compares to a return of 52.08 percent for
the Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index), a
return of 30.66 percent for the Morgan Stanley Capital International World
Index (MSCI Index) and a return of 32.32 percent for the Lipper Global Funds
Index (Lipper Index). The accompanying chart illustrates the performance of a
hypothetical $10,000 investment in the Series from inception (January 8,
1993) through the fiscal year ended July 31, 1997, versus the performance of
similar investments in the S&P 500 Index, MSCI Index and Lipper Index.
On July 31, 1997, the Series' net assets exceeded $19.7 million, with 30
percent in Europe, 32 percent in the United States, 20 percent in Japan, 9
percent in the emerging markets of the Pacific Rim, 7 percent in
<PAGE>
DEAN WITTER RETIREMENT SERIES
LETTER TO THE SHAREHOLDERS July 31, 1997, continued
Latin America and the remaining 2 percent scattered elsewhere. The Series'
asset allocation represented overweightings in Europe, Japan, the Pacific Rim
and Latin America.
GLOBAL EQUITY SERIES
GROWTH OF $10,000
DATE FUND S&P 500 MSCI IX LIPPER IX
============================================================================
January 8, 1993 $10,000 $10,000 $10,000 $10,000
- ----------------------------------------------------------------------------
July 31, 1993 $ 9,970 $10,618 $11,818 $11,239
============================================================================
July 31, 1994 $10,697 $11,166 $12,797 $13,168
- ----------------------------------------------------------------------------
July 31, 1995 $11,347 $14,073 $14,346 $14,509
- ----------------------------------------------------------------------------
July 31, 1996 $12,171 $16,397 $15,364 $15,516
- ----------------------------------------------------------------------------
July 31, 1997 $15,416 $24,937 $20,075 $20,531
============================================================================
AVERAGE ANNUAL TOTAL RETURNS
ONE YEAR LIFE OF FUND
============================
26.66%(1) 9.96%(1)
============================
========================================================================
[ ] Fund [ ] S&P 500(2) [ ] MSCI IX(3) [ ] Lipper IX(4)
========================================================================
Past performance is not predictive of future returns.
- -------------------
(1) Total return figures shown assume reinvestment of all distributions.
(2) 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 Index does not include
any expenses, fees or charges. The Index is unmanaged and should not be
considered an investment.
(3) The Morgan Stanley Capital International World Index (MSCI) measures the
performance for a diverse range of global stock markets including the
U.S., Canada, Europe, Australia, New Zealand and the Far East. The index
does not include any expenses, fees or charges or reinvestment of
dividends. The Index is unmanaged and should not be considered an
investment.
(4) The Lipper Global Funds Index is an equally-weighted performance index of
the largest qualifying funds (based on net assets) in the Lipper Global
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 30 funds represented in
this Index.
The Series' emphasis on European equities stems from the recovery there in
economic growth and company earnings. European exports have benefited from
the strong U.S. dollar, which has boosted corporate competitiveness. Also,
European corporations have been embracing cost-cutting moves to reduce
payroll, restructure business units and sell underperforming assets. Similar
moves in the United States have boosted returns on equity capital and equity
valuations. The Series also finds valuations in Asian markets attractive
after two years of subpar performance and recent currency volatility there.
Among the Series' key portfolio holdings are HSBC Holdings PLC (banking, Hong
Kong), Siemens AG (telecommunications, Germany), Cemex, S.A. de C.V.
(building materials, Mexico), Sony Corp. (electronics, Japan), Koninklijke
Ahold NV (retail, the Netherlands), Novartis AG (pharmaceuticals,
Switzerland) and Sun Microsystems, Inc. (computers-systems, United States).
STRATEGIST SERIES
For the fiscal year ended July 31, 1997, the Strategist Series posted a total
return of 27.35 percent. This compares to a return of 52.08 percent for the
Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index), a return
of 10.79 percent for the Lehman Brothers Government/Corporate Bond Index
(Lehman Index) and 29.05 percent for the Lipper Flexible Portfolio Funds
Index (Lipper Index). The accompanying chart illustrates the performance of a
hypothetical $10,000 investment in the Series from inception (January 7,
1993) through the fiscal year ended July 31, 1997, versus the performance of
similar investments in the S&P 500 Index, Lehman Index and Lipper Index.
<PAGE>
DEAN WITTER RETIREMENT SERIES
LETTER TO THE SHAREHOLDERS July 31, 1997, continued
During the fiscal year, the Series benefited from our decision to remain
overweighted in long-dated financial assets. The table below summarizes the
asset allocation changes made in the Strategist Series' portfolio during the
fiscal year:
STRATEGIST SERIES
GROWTH OF $10,000
DATE FUND S&P 500 LEHMAN LIPPER IX
============================================================================
January 7, 1993 $10,000 $10,000 $10,000 $10,000
- ----------------------------------------------------------------------------
July 31, 1993 $ 9,830 $10,577 $10,617 $10,454
============================================================================
July 31, 1994 $ 9,842 $11,122 $10,603 $10,798
- ----------------------------------------------------------------------------
July 31, 1995 $11,634 $14,018 $11,677 $12,579
- ----------------------------------------------------------------------------
July 31, 1996 $13,608 $16,333 $12,297 $13,687
- ----------------------------------------------------------------------------
July 31, 1997 $17,330 $24,839 $13,624 $17,662
============================================================================
AVERAGE ANNUAL TOTAL RETURNS
ONE YEAR LIFE OF FUND
============================
27.35%(1) 12.81%(1)
============================
====================================================================
[ ] Fund [ ] S&P 500(2) [ ] Lehman(3) [ ] Lipper(4)
====================================================================
Past performance is not predictive of future returns.
- -------------------
(1) Total return figures shown assume reinvestment of all distributions.
(2) 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 Index does not include
any expenses, fees or charges. The Index is unmanaged and should not be
considered an investment.
(3) 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 Index is unmanaged and
should not be considered an investment.
(4) The Lipper Flexible Portfolio Funds Index is an equally-weighted
performance index of the largest qualifying funds (based on net assets)
in the Lipper Flexible Portfolio 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
30 funds represented in this Index.
<TABLE>
<CAPTION>
EQUITY FIXED-INCOME
EXPOSURE (%) EXPOSURE (%) CASH (%)
------------ -------------- --------
<S> <C> <C> <C>
July 31, 1996 ....................... 50 40 10
April 28, 1997 ....................... 50 20 30
May 19, 1997 ........................ 60 20 20
June 26, 1997 ....................... 65 20 15
</TABLE>
As we enter the new fiscal year, the Series is allocated to reflect our
positive stance toward the equity markets and more cautious view of bonds.
With 58 percent of current assets invested in stocks, we believe that
corporate earnings growth, especially in a few specific industry sectors,
will continue to provide double-digit returns. Our equity portfolio, while
well diversified with more than 45 holdings, is highly concentrated in
industries we feel will provide above-average earnings growth and profit
potential. These include technology (mainframe and workstation manufacturers,
disk drive and software suppliers), financial services (insurance, banking,
savings and loans), energy (domestic and international oil companies) and
retailers (apparel and specialty stores, department store chains). We expect
each of these sectors either to continue their impressive pattern of powerful
earnings reports (technology and financials) or to begin a turnaround from
depressed earnings levels (energy and retailing).
Our underweighting in bonds, at only a 20 percent allocation, reflects our
concern that the Federal Reserve Board may feel compelled to raise rates in
the second half of 1997, thus keeping a lid on bond prices for the balance of
the year. Longer term, we would view any drop in long bonds' prices as a
buying opportunity and would likely use a portion of our 22 percent cash
reserve to purchase issues along the yield curve. Currently, the bond
portfolio is comprised of 12 government-issued securities and 12 corporate
bonds, with a wide variety of yields and maturities. All carry
investment-grade ratings.
<PAGE>
DEAN WITTER RETIREMENT SERIES
LETTER TO THE SHAREHOLDERS July 31, 1997, continued
We appreciate your support of Dean Witter Retirement Series 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 RETIREMENT SERIES
RESULTS OF SPECIAL MEETING (unaudited)
On May 21, 1997, a special meeting of the Series' shareholders was held for
the purpose of voting on three separate matters, the results of which are as
follows:
(1) FOR EACH SERIES, APPROVAL OF A NEW INVESTMENT MANAGEMENT AGREEMENT
BETWEEN THE SERIES AND DEAN WITTER INTERCAPITAL INC. IN CONNECTION WITH
THE MERGER OF MORGAN STANLEY GROUP INC. WITH DEAN WITTER, DISCOVER & CO.:
Liquid Asset Series
For ..................... 19,779,400
Against ................. 106,527
Abstain ................. 266,372
U.S. Government Money Market Series
For ..................... 4,502,076
Against ................. 0
Abstain ................. 0
U.S. Government Securities Series
For ..................... 696,109
Against ................. 2,291
Abstain ................. 69,551
Intermediate Income Securities Series
For ..................... 151,816
Against ................. 0
Abstain ................. 5,572
American Value Series
For ..................... 2,068,650
Against ................. 40,170
Abstain ................. 143,685
Capital Growth Series
For ..................... 102,824
Against ................. 0
Abstain ................. 38,633
Dividend Growth Series
For ..................... 3,623,000
Against ................. 521,569
Abstain ................. 256,271
Utilities Series
For ..................... 237,912
Against ................. 2,108
Abstain ................. 33,928
Value-Added Market Series
For ..................... 940,344
Against ................. 2,261
Abstain ................. 28,379
Global Equity Series
For ..................... 798,944
Against ................. 17,237
Abstain ................. 141,869
Strategist Series
For ..................... 1,294,809
Against ................. 911
Abstain ................. 33,360
<PAGE>
DEAN WITTER RETIREMENT SERIES
RESULTS OF SPECIAL MEETING (unaudited) continued
(2) ELECTION OF TRUSTEES:
Michael Bozic
For .................. 35,221,586
Withheld ............. 684,992
Charles A. Fiumefreddo
For .................. 35,221,869
Withheld ............. 684,709
Edwin J. Garn
For .................. 35,221,881
Withheld ............. 684,697
John R. Haire
For .................. 35,221,786
Withheld ............. 684,792
Wayne E. Hedien
For .................. 35,221,881
Withheld ............. 684,697
Dr. Manuel H. Johnson
For .................. 35,221,881
Withheld ............. 684,697
Michael E. Nugent
For .................. 35,221,881
Withheld ............. 684,697
Philip J. Purcell
For .................. 35,221,881
Withheld ............. 684,697
John L. Schroeder
For .................. 35,221,881
Withheld ............. 684,697
(3) RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP AS INDEPENDENT
ACCOUNTANTS:
For ...................................................... 34,484,382
Against .................................................. 545,576
Abstain .................................................. 876,620
<PAGE>
DEAN WITTER RETIREMENT SERIES - LIQUID ASSET
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (64.4%)
Automotive-Finance (8.5%)
$500 Ford Motor Credit Co. ........................................... 5.61% 08/25/97 $ 498,150
1,000 General Motors Acceptance Corp. ................................. 5.48-5.97 08/25/97-10/20/97 991,779
311 Toyota Motor Credit Corp. ....................................... 5.71 08/14/97 310,360
-------------
1,800,289
-------------
Bank Holding Companies (7.0%)
500 Bankers Trust New York Corp. .................................... 5.72 01/08/98 487,644
1,000 Barnett Banks, Inc. ............................................ 5.55 08/21/97 996,933
-------------
1,484,577
-------------
Banks-Commercial (18.6%)
465 ABN-AMRO North America Finance Inc. ............................. 5.74 09/05/97 462,446
500 Commerzbank U.S. Finance Inc. .................................. 5.52 08/15/97 498,931
1,000 Internationale Nederlanden (U.S.) Funding Corp. ................. 5.60 08/01/97 1,000,000
400 KfW International Finance Inc. .................................. 5.54 09/02/97 398,044
500 Societe Generale N.A., Inc. ..................................... 5.61 09/10/97 496,917
600 UBS Finance (Delaware) Inc. .................................... 5.53 08/07/97 599,449
500 WestPac Capital Corp. .......................................... 5.54 09/05/97 497,326
-------------
3,953,113
-------------
Brokerage (4.7%)
1,000 Goldman Sachs Group L.P. ....................................... 5.63-5.64 08/04/97-09/03/97 997,215
-------------
Finance-Consumer (6.4%)
400 American Express Credit Corp. ................................... 5.63 08/01/97 400,000
950 American General Finance Corp. .................................. 5.64 08/05/97 949,409
-------------
1,349,409
-------------
Finance-Diversified (8.4%)
400 Associates Corp. of North America ............................... 5.65 08/05/97 399,751
750 Commercial Credit Co. ........................................... 5.53 08/27/97 747,021
650 General Electric Capital Corp. .................................. 5.55-5.61 09/16/97-10/14/97 644,124
-------------
1,790,896
-------------
Industrials (2.0%)
425 Weyerhaeuser Co. ................................................ 5.54 08/20/97 423,764
-------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - LIQUID ASSET
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
Office Equipment (4.7%)
$1,000 Xerox Credit Corp. .............................................. 5.51% 08/19/97 $ 997,260
-------------
Utilities-Finance (4.1%)
866 National Rural Utilities Cooperative Finance Corp. ............. 5.57-5.62 08/22/97-09/11/97 861,971
-------------
TOTAL COMMERCIAL PAPER (Amortized Cost $13,658,494) ............................................ 13,658,494
-------------
U.S. GOVERNMENT AGENCY (23.2%)
4,930 Federal Home Loan
Mortgage Corp.
(Amortized Cost $4,926,600) .................................... 5.47-5.75 08/01/97-09/19/97 4,926,600
-------------
BANKERS' ACCEPTANCES (7.2%)
1,014 BostonBank, N.A. ................................................ 5.71-5.88 09/30/97-01/20/98 993,499
541 Union Bank of California, N.A. .................................. 5.59 10/15/97 534,804
-------------
TOTAL BANKERS' ACCEPTANCES (Amortized Cost $1,528,303) .......................................... 1,528,303
-------------
TOTAL INVESTMENTS
(Amortized Cost $20,113,397)(a) ............................................... 94.8% 20,113,397
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ............................... 5.2 1,099,631
----- -------------
NET ASSETS .................................................................... 100.0% $21,213,028
===== =============
</TABLE>
- --------------
(a) Cost is the same for federal income tax purposes.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - U.S. GOVERNMENT MONEY MARKET
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCIES
(98.7%)
$1,000 Federal Farm Credit Bank .. 5.52-5.77% 08/04/97-11/25/97 $ 991,289
1,690 Federal Home Loan Banks ... 5.42-5.66 08/07/97-09/02/97 1,687,131
725 Federal Home Loan Mortgage
Corp. .................... 5.59-5.75 08/01/97-10/17/97 720,019
590 Federal National Mortgage
Association .............. 5.38-5.49 08/04/97-08/07/97 589,647
----------
TOTAL U.S. GOVERNMENT AGENCIES
(Amortized Cost $3,988,086) .............................. 3,988,086
----------
U.S. GOVERNMENT OBLIGATION (1.2%)
50 U.S. Treasury Bill
(Amortized Cost $48,650) .. 5.32 02/05/98 48,650
----------
TOTAL INVESTMENTS
(Amortized Cost $4,036,736)(a).......... 99.9% 4,036,736
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES ......................... 0.1 4,560
----- ----------
NET ASSETS.............................. 100.0% $4,041,296
====== ==========
</TABLE>
- --------------
(a) Cost is the same for federal income tax purposes.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - U.S. GOVERNMENT SECURITIES
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS (98.6%)
Government National
Mortgage Assoc. I (71.4%)
$3,684 ................................................................. 7.00 % 06/15/23-03/15/27 $ 3,688,923
3,737 ................................................................. 7.50 01/15/24-01/15/27 3,802,491
------------
7,491,414
------------
971 Government National
Mortgage Assoc. II (9.2%) ...................................... 7.00 03/20/26 968,255
------------
U.S. Treasury Notes (12.6%)
1,200 ................................................................. 6.375 09/30/01 1,221,852
100 ................................................................. 6.250 06/30/02 101,434
------------
1,323,286
------------
600 U.S. Treasury Principal Strips (5.4%) ........................... 0.00 08/15/98 567,120
------------
TOTAL INVESTMENTS
(Identified Cost $10,212,454)(a) ......................................... 98.6% 10,350,075
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ........................... 1.4 146,232
----- ------------
NET ASSETS ............................................................... 100.0% $10,496,307
===== ============
</TABLE>
- --------------
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$202,248 and the aggregate gross unrealized depreciation is $64,627,
resulting in net unrealized appreciation of $137,621.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (56.8%)
Automobile-Rentals (4.0%)
$100 Hertz Corp. ..................................................... 6.00 % 01/15/03 $ 97,979
------------
Automotive (0.8%)
20 Chrysler Corp. .................................................. 10.40 08/01/99 20,005
------------
Automotive-Finance (1.1%)
25 General Motors Acceptance Corp. ................................. 8.40 10/15/99 26,177
------------
Banks (9.5%)
100 Bank One Corp. .................................................. 7.60 05/01/07 106,545
100 Long Island Savings Bank ....................................... 7.00 06/13/02 102,145
25 Star Bank N.A. .................................................. 6.375 03/01/04 24,764
------------
233,454
------------
Brokerage (4.1%)
100 Bear Stearns Companies, Inc. ................................... 6.75 08/15/00 101,506
------------
Data Processing (4.1%)
100 Oracle Corp. ................................................... 6.91 02/15/07 101,719
------------
Financial (8.4%)
100 Ikon Capital Inc. ............................................... 6.73 06/15/01 101,477
100 Nac Re Corp ..................................................... 8.00 06/15/99 103,259
------------
204,736
------------
Foreign Government (4.0%)
100 State of Israel ................................................ 6.375 12/15/05 97,826
------------
Healthcare (1.0%)
25 Columbia/HCA Healthcare Corp. .................................. 6.87 09/15/03 25,403
------------
Industrials (4.1%)
100 Millennium America Inc. ........................................ 7.00 11/15/06 100,710
------------
Leisure (4.4%)
100 Royal Caribbean Cruises ......................................... 8.25 04/01/05 108,221
------------
Manufacturing (2.0%)
50 Reebok International plc
(United Kingdom) ............................................... 6.75 09/15/05 49,374
------------
Paper & Forest Products (4.1%)
100 Noranda Forest, Inc. (Canada) ................................... 6.875 11/15/05 100,602
------------
Textiles (1.0%)
25 Burlington Industries, Inc. .................................... 7.25 09/15/05 25,313
------------
Utilities - Electric (4.2%)
100 Connecticut Light & Power Co. .................................. 7.875 06/01/01 102,208
------------
TOTAL CORPORATE BONDS
(Identified Cost $1,371,214) ........................................................ 1,395,233
------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS (34.7%)
$100 U.S. Treasury Note .............................................. 6.125% 03/31/98 $ 100,396
300 U.S. Treasury Note .............................................. 5.75 10/31/00 299,463
300 U.S. Treasury Note .............................................. 5.875 11/30/01 299,868
150 U.S. Treasury Note .............................................. 6.25 01/31/02 152,100
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Identified Cost $843,820) .......................................................... 851,827
------------
SHORT-TERM INVESTMENT (a)(4.1%)
U.S. GOVERNMENT AGENCY
100 Federal Home Loan Banks
(Amortized Cost $100,000) ....................................... 5.39 08/01/97 100,000
------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $2,315,034)(b) ......................................... 95.6% 2,347,060
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................... 4.4 108,712
-------- -----------
NET ASSETS .............................................................. 100.0% $2,455,772
======== ===========
</TABLE>
- --------------
(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
$36,736 and the aggregate gross unrealized depreciation is $4,710,
resulting in net unrealized appreciation of $32,026.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - AMERICAN VALUE
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (97.7%)
Agriculture Related (4.4%)
4,500 Case Corp. ..................................................... $ 280,969
4,500 Deere & Co. .................................................... 255,937
5,500 Dekalb Genetics Corp. (Class B) ................................. 420,406
7,000 Delta & Pine Land Co. .......................................... 266,000
14,000 Monsanto Co. ................................................... 697,375
6,500 Pioneer Hi-Bred International, Inc. ............................. 481,000
-------------
2,401,687
-------------
Banks (7.1%)
6,000 Bank of New York Co., Inc. ..................................... 291,375
7,000 BankAmerica Corp. .............................................. 528,500
4,000 Bankers Trust New York Corp. .................................... 404,750
250,000 Credito Italiano Spa (Italy) ................................... 497,644
4,000 First Chicago NBD Corp. ........................................ 303,500
6,000 Fleet Financial Group, Inc. .................................... 407,250
10,000 Mellon Bank Corp. .............................................. 504,375
7,200 NationsBank Corp. .............................................. 512,550
6,000 Washington Mutual, Inc. ........................................ 414,000
-------------
3,863,944
-------------
Basic Cyclicals (0.7%)
2,300 Champion International Corp. .................................... 142,600
3,000 Reynolds Metals Co. ............................................ 234,000
-------------
376,600
-------------
Biotechnology (2.4%)
21,000 Biochem Pharma, Inc. (Canada)* ................................. 603,750
13,000 Centocor, Inc.* ................................................ 499,687
2,000 Gilead Sciences, Inc.* ......................................... 56,250
3,500 Vertex Pharmaceuticals, Inc.* .................................. 122,062
-------------
1,281,749
-------------
Capital Equipment (4.3%)
2,000 Aeroquip-Vickers, Inc. .......................................... 109,625
5,500 Boeing Co. ..................................................... 323,469
3,000 Crane Co. ...................................................... 136,312
6,000 General Electric Co. ........................................... 421,125
4,500 Kuhlman Corp. .................................................. 139,500
3,200 Parker-Hannifin Corp. .......................................... 206,000
2,200 Sundstrand Corp. ............................................... 136,400
10,000 Timken Co. ..................................................... 351,875
2,000 Tyco International Ltd. ......................................... 162,000
4,000 United Technologies Corp. ...................................... 338,250
-------------
2,324,556
-------------
Communications Equipment (9.4%)
2,000 Advanced Fibre Communications, Inc.* ........................... $ 139,250
21,000 Bay Networks, Inc.* ............................................ 640,500
15,000 Brightpoint, Inc.* ............................................. 447,187
3,000 CIENA Corp.* ................................................... 168,000
6,000 Cisco Systems, Inc.* ........................................... 476,625
700 Corsair Communications, Inc.* .................................. 13,738
11,500 Ericsson (L.M.) Telephone Co. (Class B)(ADR)(Sweden) ........... 520,375
7,000 Lucent Technologies Inc. ....................................... 594,562
10,000 Newbridge Networks Corp. (Canada)* .............................. 521,250
6,000 Nokia Corp. (ADR)(Finland) ...................................... 513,750
5,000 Northern Telecom Ltd. (Canada) .................................. 522,812
2,000 Tekelec* ....................................................... 123,000
7,000 Tellabs, Inc.* ................................................. 418,687
-------------
5,099,736
-------------
Computer Equipment (3.1%)
4,000 Dell Computer Corp.* ........................................... 342,000
12,000 EMC Corp.* ..................................................... 606,000
9,000 Kemet Corp.* ................................................... 230,625
6,500 SCI Systems, Inc.* ............................................. 516,344
-------------
1,694,969
-------------
Computer Software (4.3%)
15,000 BEA Systems, Inc.* ............................................. 290,625
5,000 Compuware Corp.* ............................................... 308,125
400 Great Plains Software, Inc.* ................................... 10,700
4,100 Microsoft Corp.* ............................................... 579,381
7,000 Oracle Corp.* .................................................. 380,187
5,000 Peoplesoft, Inc.* .............................................. 291,875
8,000 Veritas Software Corp.* ........................................ 494,000
-------------
2,354,893
-------------
Consumer-Noncyclical (4.5%)
9,000 Alberto-Culver Co. (Class B) ................................... 252,562
2,500 Avon Products, Inc. ............................................ 181,406
3,800 Coca Cola Co. .................................................. 263,150
1,600 Coca Cola FEMSA S.A. de C.V. (ADR)(Mexico) ...................... 89,800
8,000 Colgate-Palmolive Co. .......................................... 606,000
10,000 PanAmerican Beverages, Inc. (Class A)(Mexico) ................... 335,000
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - AMERICAN VALUE
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
3,000 Procter & Gamble Co. ........................................... $ 456,375
7,000 Sunbeam Corporation ............................................ 273,875
-------------
2,458,168
-------------
Consumer Business Services (1.4%)
8,000 AccuStaff, Inc.* ............................................... 218,000
7,400 Browning-Ferris Industries, Inc. ............................... 273,800
5,000 Corrections Corp. of America* .................................. 221,562
2,000 Service Corp. International ..................................... 68,000
-------------
781,362
-------------
Consumer Products (2.6%)
5,000 CVS Corp. ....................................................... 284,375
4,000 Philips Electronics NV (Netherlands) ........................... 327,250
3,500 Philips Electronics NV (Netherlands) ........................... 283,962
1,900 Sony Corp. (Japan) ............................................. 189,134
3,100 Sony Corp. (ADR)(Japan) ........................................ 315,619
-------------
1,400,340
-------------
Drugs (4.0%)
5,000 Dura Pharmaceuticals, Inc.* .................................... 194,062
4,500 Lilly (Eli) & Co. .............................................. 508,500
5,000 Medicis Pharmaceutical Corp. (Class A)* ........................ 225,000
280 Novartis (Switzerland) .......................................... 449,742
4,400 Pfizer, Inc. ................................................... 262,350
3,600 Warner-Lambert Co. ............................................. 502,875
-------------
2,142,529
-------------
Energy (5.9%)
9,000 Baker Hughes, Inc. .............................................. 396,563
8,000 Cooper Cameron Corp.* .......................................... 469,000
2,500 Diamond Offshore Drilling, Inc. ................................. 233,125
5,000 EVI, Inc.* ..................................................... 244,375
8,000 Falcon Drilling Company, Inc.* ................................. 231,000
12,000 Halliburton Co. ................................................ 552,000
5,000 Halter Marine Group, Inc.* ..................................... 153,125
8,200 Schlumberger, Ltd. ............................................. 626,275
4,000 Smith International, Inc.* ..................................... 286,750
-------------
3,192,213
-------------
Financial-Miscellaneous (7.1%)
400 Advanta Corp. (Class A) ........................................ 14,400
7,000 American Express Co. ............................................ 586,250
15,000 Hambrecht & Quist Group* ....................................... 447,188
Kansas City Southern
2,000 Industries, Inc. ............................................... 150,750
4,000 Legg Mason, Inc. ............................................... $ 245,750
16,000 Lehman Brothers Holdings, Inc. .................................. 797,000
8,000 Merrill Lynch & Co., Inc. ....................................... 563,500
8,000 Paine Webber Group, Inc. ........................................ 320,000
1,000 Price (T.) Rowe Associates, Inc. ................................ 54,250
10,000 Providian Financial Corp.* ..................................... 391,875
4,500 Salomon, Inc. .................................................. 285,469
-------------
3,856,432
-------------
Healthcare Products & Services (2.9%)
7,000 HBO & Co. ...................................................... 540,750
16,000 Health Management Associates, Inc. (Class A)* .................. 511,000
20,000 Healthsouth Corp.* ............................................. 530,000
-------------
1,581,750
-------------
Insurance (2.3%)
3,000 Hartford Financial Services Group, Inc. ........................ 261,375
Marsh & McLennan
7,000 Companies, Inc. ................................................ 542,063
5,000 Nationwide Financial Services, Inc. (Class A) .................. 151,250
4,000 Travelers Group, Inc. ........................................... 287,750
-------------
1,242,438
-------------
Internet (3.0%)
10,000 America Online, Inc.* .......................................... 675,000
10,000 E*TRADE Group, Inc.* ........................................... 305,000
10,000 Sterling Commerce, Inc.* ....................................... 376,875
5,000 Yahoo! Inc.* ................................................... 281,250
-------------
1,638,125
-------------
Media Group (4.1%)
6,600 Clear Channel Communications, Inc.* ............................ 410,850
Evergreen Media Corp.
8,000 (Class A)* ..................................................... 367,000
10,000 Jacor Communications, Inc.* .................................... 428,750
13,200 Outdoor Systems, Inc.* ......................................... 343,200
2,000 Univision Communications, Inc. (Class A)* ...................... 86,000
25,000 Westinghouse Electric Corp. ..................................... 601,563
-------------
2,237,363
-------------
Medical Supplies (2.4%)
6,000 Boston Scientific Corp.* ....................................... 430,500
5,500 Guidant Corp. .................................................. 501,875
4,000 Medtronic, Inc. ................................................ 349,000
-------------
1,281,375
-------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - AMERICAN VALUE
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
Retail (5.8%)
3,000 Barnes & Noble, Inc.* .......................................... $ 150,000
13,500 Costco Companies Inc.* ......................................... 511,313
10,000 Dayton-Hudson Corp. ............................................ 646,250
5,000 Dollar General Corp. ............................................ 220,000
10,000 Family Dollar Stores, Inc. ..................................... 325,625
6,000 General Nutrition Companies, Inc.* ............................. 171,000
7,800 Home Depot, Inc. ............................................... 389,025
3,000 Ross Stores, Inc. .............................................. 94,500
17,000 Wal-Mart Stores, Inc. .......................................... 638,563
-------------
3,146,276
-------------
Semiconductor Equipment (5.7%)
9,000 Applied Materials, Inc.* ....................................... 826,313
2,000 ASM Lithography Holding NV (Netherlands)* ....................... 162,000
5,000 CFM Technologies, Inc.* ........................................ 129,375
1,000 DuPont Photomasks, Inc.* ........................................ 50,750
3,000 Etec Systems, Inc.* ............................................ 160,875
13,000 KLA-Tencor Corp.* .............................................. 786,500
7,000 LAM Research Corp.* ............................................ 370,125
7,000 PRI Automation, Inc.* .......................................... 345,625
5,000 Teradyne, Inc.* ................................................ 233,750
-------------
3,065,313
-------------
Semiconductors (9.2%)
4,000 Altera Corp. ................................................... 241,000
17,000 Analog Devices, Inc.* .......................................... 534,438
10,000 Burr-Brown Corp.* .............................................. 348,125
700 Galileo Technology Ltd. (Israel)* ............................... 16,975
2,000 Intel Corp. .................................................... 183,500
5,000 Lattice Semiconductor Corp.* ................................... 335,625
5,000 Linear Technology Corp. ........................................ 333,750
8,000 Maxim Integrated Products, Inc.* ................................ 553,000
2,500 MEMC Electronic Materials, Inc.* ................................ 72,500
4,000 Micrel, Inc.* .................................................. 259,000
9,000 Micron Technology, Inc. * ...................................... 438,188
6,000 Motorola, Inc. ................................................. 481,875
6,000 Texas Instruments, Inc. ......................................... 690,000
10,000 Vitesse Semiconductor Corp.* ................................... 483,750
-------------
4,971,726
-------------
Transportation (1.1%)
Continental Airlines, Inc.
900 (Class B)* ..................................................... $ 33,525
4,000 PACCAR, Inc. .................................................... 197,000
1,400 Ryanair Holdings PLC (ADR)(Ireland)* ........................... 39,375
3,000 Teekay Shipping Corp. .......................................... 104,813
6,000 US Airways Group, Inc.* ........................................ 229,877
-------------
604,590
-------------
TOTAL COMMON STOCKS (Identified Cost $42,913,438) .............. 52,998,134
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- --------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (A) (1.7%)
U.S. GOVERNMENT AGENCY
$900 Federal Home Loan Mortgage
Corp. 5.75% due 08/01/97
(Amortized Cost $900,000).......... 900,000
-----------
TOTAL INVESTMENTS
(Identified Cost $43,813,438)(b) . 99.4% 53,898,134
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES ................... 0.6 316,360
-------- ------------
NET ASSETS........................ 100.0% $54,214,494
======== ============
</TABLE>
- ------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown
has been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$10,364,753 and the aggregate gross unrealized depreciation is
$280,057, resulting in net unrealized appreciation of $10,084,696.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - CAPITAL GROWTH
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (98.0%)
Auto Trucks & Parts (2.3%)
5,000 Miller Industries, Inc.* ........................................ $ 84,375
------------
Banking (4.8%)
1,450 State Street Corp. .............................................. 81,291
1,350 Washington Mutual, Inc. ......................................... 93,150
------------
174,441
------------
Commercial Services (1.4%)
1,900 Affiliated Computer Services, Inc. (Class A)* ................... 51,537
------------
Communications -
Equipment & Software (3.8%)
1,100 3Com Corp.* ..................................................... 60,087
1,350 Tellabs, Inc.* .................................................. 80,747
------------
140,834
------------
Computer Services (1.9%)
1,800 Sterling Commerce, Inc.* ........................................ 67,837
------------
Computer Software (8.9%)
1,100 Computer Associates International, Inc. ......................... 74,869
2,200 Danka Business Systems PLC (ADR)(United Kingdom) ................ 107,525
800 Electronics for Imaging, Inc.* .................................. 44,000
450 Microsoft Corp.* ................................................ 63,591
700 Oracle Corp.* ................................................... 38,019
------------
328,004
------------
Computer - Systems (4.7%)
2,000 EMC Corp.* ...................................................... 101,000
900 SCI Systems, Inc.* .............................................. 71,494
------------
172,494
------------
Consumer Business Services (2.6%)
2,200 AccuStaff, Inc.* ................................................ 59,950
1,000 Service Corp. International ..................................... 34,000
------------
93,950
------------
Drugs (1.4%)
1,100 Elan Corp. PLC (ADR)(Ireland)* .................................. 52,250
------------
Electronics (4.2%)
750 Hadco Corp.* .................................................... 49,406
1,800 Jabil Circuit, Inc.* ............................................ 87,637
250 Sanmina Corp.* .................................................. 18,344
------------
155,387
------------
Electronics - Semiconductors/
Components (1.2%)
400 Intel Corp. ..................................................... 36,700
150 Photronics, Inc.* ............................................... 8,137
------------
44,837
------------
Enviromental Control (1.5%)
1,600 Newpark Resources, Inc.* ........................................ $ 55,300
------------
Financial - Miscellaneous (11.4%)
1,600 Green Tree Financial Corp. ...................................... 75,400
700 Household International, Inc. ................................... 90,650
2,200 MBNA Corp. ...................................................... 99,000
1,300 MGIC Investment Corp. ........................................... 68,331
1,400 SunAmerica, Inc. ................................................ 84,700
------------
418,081
------------
Healthcare - Diversified (2.2%)
2,000 Universal Health Services, Inc. (Class B)* ...................... 81,250
------------
Hospital Management (1.5%)
1,200 Express Scripts, Inc. (Class A)* ................................ 53,400
------------
Household Furnishings & Appliances (3.1%)
1,200 American Standard Companies, Inc.* .............................. 59,625
1,000 Ethan Allen Interiors, Inc. ..................................... 53,000
------------
112,625
------------
Life Insurance (1.4%)
1,300 Providian Financial Corp.* ...................................... 50,944
------------
Manufacturing - Diversified (2.7%)
1,200 Tyco International Ltd. ......................................... 97,200
------------
Media (2.0%)
1,200 Clear Channel Communications, Inc.* ............................. 74,700
------------
Oil & Gas Products (0.5%)
300 Camco International, Inc. ....................................... 19,387
------------
Oil Drilling & Services (9.3%)
1,450 ENSCO International, Inc.* ...................................... 95,881
2,900 Pride International, Inc.* ...................................... 76,669
1,500 Tidewater, Inc. ................................................. 75,750
2,400 Varco International, Inc.* ...................................... 92,850
------------
341,150
------------
Oil Equipment & Services (4.2%)
2,400 Falcon Drilling Company, Inc.* .................................. 69,300
1,200 Smith International, Inc.* ...................................... 86,025
------------
155,325
Pharmaceuticals (2.8%)
2,300 Medicis Pharmaceutical Corp. (Class A)* ......................... 103,500
------------
Retail - Department Stores (3.7%)
1,900 Dollar General Corp. ............................................ 83,600
950 Proffitt's, Inc.* ............................................... 50,350
------------
133,950
------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - CAPITAL GROWTH
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------
Retail - Drugs Stores (1.7%)
1,100 Walgreen Co. .................................................... $ 62,150
------------
Retail - Food Chains (4.1%)
2,400 Kroger Co.* ..................................................... 70,950
1,500 Safeway, Inc.* .................................................. 80,438
------------
151,388
------------
Retail - Specialty (6.0%)
1,562 Consolidated Stores Corp.* ...................................... 62,871
2,700 General Nutrition Companies, Inc.* .............................. 76,950
3,200 Staples, Inc.* .................................................. 80,400
------------
220,221
------------
Utilities - Electric (1.9%)
900 AES Corp.* ...................................................... 71,100
------------
Utilities - Telephone (0.8%)
850 Airtouch Communications, Inc.* .................................. 27,997
------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $2,725,382)(a) . 98.0% 3,595,614
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES................... 2.0 74,032
----- ----------
NET ASSETS....................... 100.0% $3,669,646
===== ==========
</TABLE>
- ------------
ADR American Depository Receipt.
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$870,624 and the aggregate gross unrealized depreciation is $392,
resulting in net unrealized appreciation of $870,232.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - DIVIDEND GROWTH
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (100.0%)
Aerospace (2.7%)
55,000 Raytheon Co. ................................................... $3,073,125
--------------
Aluminum (2.7%)
35,500 Aluminum Co. of America ........................................ 3,141,750
--------------
Automotive (5.3%)
84,000 Chrysler Corp. ................................................. 3,118,500
74,000 Ford Motor Co. ................................................. 3,024,750
--------------
6,143,250
--------------
Banks (2.7%)
43,000 NationsBank Corp. .............................................. 3,061,062
--------------
Banks - Money Center (2.7%)
41,000 BankAmerica Corp. .............................................. 3,095,500
--------------
Beverages - Soft Drinks (2.7%)
81,000 PepsiCo Inc. ................................................... 3,103,312
--------------
Chemicals (5.1%)
44,000 Du Pont (E.I.) de Nemours & Co., Inc. .......................... 2,945,250
49,500 Eastman Chemical Co. ........................................... 2,994,750
--------------
5,940,000
--------------
Computers - Systems (2.7%)
29,000 International Business Machines Corp. .......................... 3,066,750
--------------
Conglomerates (5.1%)
31,500 Minnesota Mining & Manufacturing Co. ........................... 2,984,625
63,000 Tenneco, Inc. .................................................. 2,937,375
--------------
5,922,000
--------------
Drugs (2.6%)
38,000 Bristol-Myers Squibb Co. ....................................... 2,980,625
--------------
Drugs & Healthcare (2.7%) ......................................
47,000 Abbott Laboratories ............................................ 3,075,562
--------------
Electric - Major (2.6%)
42,300 General Electric Co. ........................................... 2,968,931
--------------
Energy (2.6%)
47,000 Kerr-McGee Corp. ............................................... 2,943,375
--------------
Foods (5.2%)
59,800 Quaker Oats Company (The) ...................................... 3,061,012
13,300 Unilever NV (ADR)(Netherlands) ................................. 2,899,400
--------------
5,960,412
--------------
Machinery - Agricultural (2.6%)
53,600 Deere & Co. .................................................... 3,048,500
--------------
Manufacturing - Diversified (2.5%)
39,000 Honeywell, Inc. ................................................ $2,912,813
--------------
Metals - Miscellaneous (2.5%)
34,000 Phelps Dodge Corp. ............................................. 2,892,125
--------------
Natural Gas (2.6%)
78,000 Enron Corp. .................................................... 2,959,125
--------------
Office Equipment (2.7%)
41,000 Pitney Bowes, Inc. ............................................. 3,080,125
--------------
Oil - Domestic (5.3%)
32,000 Amoco Corp. .................................................... 3,008,000
59,000 Ashland, Inc. .................................................. 3,134,375
--------------
6,142,375
--------------
Oil Integrated - International (2.7%)
48,200 Exxon Corp. .................................................... 3,096,850
--------------
Paper & Forest Products (2.7%)
51,000 Weyerhaeuser Co. ............................................... 3,174,750
--------------
Photography (2.6%)
45,500 Eastman Kodak Co. .............................................. 3,048,500
--------------
Railroads (2.8%)
51,500 CSX Corp. ...................................................... 3,180,125
--------------
Retail - Department Stores (2.6%)
54,000 May Department Stores Co. ...................................... 3,017,250
--------------
Retail - Food Chains (2.6%)
120,600 American Stores Co. ............................................ 3,045,150
--------------
Steel (2.5%)
83,000 Timken Co. ..................................................... 2,920,563
--------------
Telecommunications (5.3%)
41,000 Bell Atlantic Corp. ............................................ 2,975,063
63,000 Sprint Corp. ................................................... 3,118,500
--------------
6,093,563
--------------
Tobacco (2.6%)
67,000 Philip Morris Companies, Inc. .................................. 3,023,375
--------------
Utilities - Electric (8.0%)
142,000 Houston Industries, Inc. ....................................... 2,973,125
82,800 New England Electric System .................................... 3,089,475
139,000 Unicom Corp. ................................................... 3,153,563
--------------
9,216,163
--------------
TOTAL COMMON STOCKS
(Identified Cost $86,532,718) .................................. 115,327,006
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - DIVIDEND GROWTH
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (0.7%)
REPURCHASE AGREEMENT
The Bank of New York 5.75% due 08/01/97 (dated 07/31/97;
$757 proceeds $757,142)(a) (Identified Cost $757,021) ............. $ 757,021
-------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $87,289,739)(b) . 100.7 % 116,084,027
LIABILITIES IN EXCESS OF OTHER
ASSETS ............................ (0.7) (772,518)
-------- -------------
NET ASSETS ........................ 100.0 % $115,311,509
======== =============
</TABLE>
- ------------
ADR American Depository Receipt.
(a) Collateralized by $244,167 Federal National Mortgage Association
9.55% due 11/10/97 valued at $252,039, $400,000 Federal National
Mortgage Association 7.37% due 04/14/04 valued at $414,359 and
$99,269 Federal National Mortgage Association 7.50% due 04/16/07
valued at $105,764.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$29,069,461 and the aggregate gross unrealized depreciation is
$275,173, resulting in net unrealized appreciation of $28,794,288.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - UTILITIES
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (100.0%)
Natural Gas (19.1%)
5,000 American Water Works Company, Inc. ............................. $ 108,437
3,500 Brooklyn Union Gas Co. .......................................... 105,219
4,500 Calpine Corp.* .................................................. 88,875
3,500 Enron Corp. ..................................................... 132,781
5,000 MCN Corp. ...................................................... 158,437
2,000 Mobil Corp. ..................................................... 153,000
3,000 Pacific Enterprises ............................................. 100,312
4,000 Williams Companies, Inc. ........................................ 183,000
-----------
1,030,061
-----------
Telecommunications (29.1%)
3,000 Alltel Corp. .................................................... 98,625
3,000 AT&T Corp. ..................................................... 110,438
3,000 BellSouth Corp. ................................................ 142,125
3,500 Cable & Wireless PLC (ADR)(United Kingdom) ...................... 105,219
2,500 Compania de Telefonos de Chile S.A. (ADR)(Chile) ................ 82,344
Grupo Iusacell S.A. de C.V.
7,000 (Series L)(ADR)(Mexico)* ........................................ 131,688
3,000 GTE Corp. ....................................................... 139,500
2,000 Nokia Corp. (ADR)(Finland)* ..................................... 171,250
3,000 Sprint Corp. .................................................... 148,500
3,000 Teleport Communications Group Inc. (Class A)* ................... 118,125
2,500 Vodafone Group PLC (ADR)(United Kingdom) ........................ 126,250
5,500 WorldCom, Inc.* ................................................. 192,156
-----------
1,566,220
-----------
Utilities - Electric (51.8%)
2,000 AES Corp.* ...................................................... 158,000
3,000 American Electric Power Co. ..................................... 134,250
4,000 CILCORP, Inc. .................................................. 167,750
4,000 CINergy Corp. .................................................. 134,500
4,000 CMS Energy Corp. ............................................... 148,000
5,000 DPL, Inc. ...................................................... 123,125
4,050 DQE, Inc. ...................................................... 127,828
3,000 Duke Energy Corp. ............................................... 152,063
5,000 Edison International ........................................... 126,250
4,000 Florida Progress Corp. ......................................... 128,750
4,000 General Public Utilities Corp. ................................. 138,750
6,000 MDU Resources Group, Inc. ...................................... 142,500
3,000 NIPSCO Industries, Inc. ......................................... 126,375
5,500 PacifiCorp ...................................................... 122,719
4,500 Pinnacle West Capital Corp. .................................... 142,031
4,000 Public Service Company of Colorado .............................. $ 166,500
4,500 Sierra Pacific Resources ........................................ 143,719
6,000 Teco Energy, Inc. .............................................. 152,250
4,000 Utilicorp United, Inc. .......................................... 119,250
4,000 Western Resources, Inc. ......................................... 138,500
-----------
2,793,110
-----------
TOTAL COMMON STOCKS
(Identified Cost $4,358,265) .................................... 5,389,391
-----------
PRINCIPAL
AMOUNT IN
THOUSANDS
- -----------
SHORT-TERM INVESTMENTS (5.2%)
U.S. GOVERNMENT AGENCY (a)(2.8%)
Federal National Mortgage Assoc. 5.48% due 08/04/97
$150 (Amortized Cost $149,931) ....................................... 149,931
-----------
REPURCHASE AGREEMENT (2.4%)
The Bank of New York
5.75% due 08/01/97 (dated 07/31/97; proceeds $132,571)(b)
133 (Identified Cost $132,550) ...................................... 132,550
-----------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $282,481) ...................................... 282,481
-----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $4,640,746)
(C) ............. ............. 105.2% 5,671,872
LIABILITIES IN EXCESS OF OTHER
ASSETS........................ (5.2) (280,644)
----- -----------
NET ASSETS..................... 100.0% $ 5,391,228
===== ===========
</TABLE>
- --------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown
has been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $30,477 U.S. Treasury Note 6.25% due 05/31/99
valued at $31,043 and $99,095 U.S. Treasury Note 7.125% due 09/30/99
valued at $104,158.
(c) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$1,034,626 and the aggregate gross unrealized depreciation is $3,500,
resulting in net unrealized appreciation of $1,031,126.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (97.4%)
Aerospace & Defense (1.0%)
750 Boeing Co. ..................................................... $ 44,109
550 General Dynamics Corp. ......................................... 48,675
450 Lockheed Martin Corp. .......................................... 47,925
550 McDonnell Douglas Corp. ........................................ 42,075
450 Northrop Grumman Corp. ......................................... 51,806
-------------
234,590
-------------
Agriculture Related (0.2%)
600 Pioneer Hi-Bred International, Inc. ............................. 44,400
-------------
Air Freight (0.2%)
800 Federal Express Corp.* .......................................... 51,650
-------------
Airlines (0.8%)
450 AMR Corp.* ...................................................... 48,403
450 Delta Air Lines, Inc. .......................................... 39,994
1,550 Southwest Airlines Co. ......................................... 45,241
1,300 US Airways Group, Inc.* ......................................... 49,806
-------------
183,444
-------------
Aluminum (0.6%)
1,100 Alcan Aluminum Ltd. (Canada) .................................... 43,106
600 Aluminum Co. of America ......................................... 53,100
550 Reynolds Metals Co. ............................................ 42,900
-------------
139,106
-------------
Auto Parts - After Market (1.5%)
1,850 Cooper Tire & Rubber Co. ....................................... 46,134
1,150 Dana Corp. ..................................................... 52,253
1,250 Echlin, Inc. ................................................... 46,328
1,275 Genuine Parts Co. .............................................. 41,597
750 Goodyear Tire & Rubber Co. ..................................... 48,422
1,500 ITT Industries, Inc. ........................................... 42,469
1,000 Snap-On, Inc. .................................................. 41,250
800 TRW, Inc. ...................................................... 46,800
-------------
365,253
-------------
Auto Trucks & Parts (0.6%)
650 Cummins Engine Co., Inc. ....................................... 51,025
2,500 Navistar International Corp.* ................................... 51,562
1,050 PACCAR, Inc. ................................................... 51,712
-------------
154,299
-------------
Automobiles (0.6%)
1,100 Chrysler Corp. ................................................. 40,837
1,100 Ford Motor Co. ................................................. 44,962
800 General Motors Corp. ........................................... 49,500
-------------
135,299
-------------
Banks - Money Center (1.2%)
700 BankAmerica Corp. .............................................. $ 52,850
450 Bankers Trust New York Corp. ................................... 45,534
400 Chase Manhattan Corp. .......................................... 45,425
350 Citicorp ........................................................ 47,512
650 First Chicago NBD Corp. ........................................ 49,319
400 Morgan (J.P.) & Co., Inc. ...................................... 46,350
-------------
286,990
-------------
Banks - Regional (4.4%)
950 Banc One Corp. ................................................. 53,319
1,100 Bank of New York Co., Inc. ..................................... 53,419
550 BankBoston Corp. ............................................... 46,716
900 Barnett Banks, Inc. ............................................ 51,244
600 Comerica, Inc. ................................................. 45,375
700 CoreStates Financial Corp. ..................................... 43,181
825 Fifth Third Bancorp ............................................. 52,078
550 First Bank System, Inc. ........................................ 48,950
450 First Union Corp. .............................................. 45,647
700 Fleet Financial Group, Inc. .................................... 47,512
700 KeyCorp ......................................................... 43,531
1,000 Mellon Bank Corp. .............................................. 50,437
750 National City Corp. ............................................ 44,625
700 NationsBank Corp. .............................................. 49,831
750 Norwest Corp. .................................................. 47,297
900 PNC Bank Corp. ................................................. 41,175
450 Republic New York Corp. ........................................ 51,975
700 SunTrust Banks, Inc. ........................................... 44,931
750 U.S. Bancorp .................................................... 49,969
700 Wachovia Corp. ................................................. 45,150
800 Washington Mutual, Inc. ........................................ 55,200
150 Wells Fargo & Co. .............................................. 41,241
-------------
1,052,803
-------------
Beverages - Alcoholic (0.7%)
1,100 Anheuser-Busch Companies, Inc. ................................. 47,231
800 Brown-Forman Corp. (Class B) .................................... 39,000
1,650 Coors (Adolph) Co. ............................................. 51,872
1,100 Seagram Co. Ltd. (Canada) ....................................... 42,144
-------------
180,247
-------------
Beverages - Soft Drinks (0.5%)
650 Coca Cola Co. .................................................. 45,012
1,150 PepsiCo, Inc. .................................................. 44,059
1,700 Whitman Corp. .................................................. 42,925
-------------
131,996
-------------
Biotechnology (0.2%)
700 Amgen, Inc.* .................................................... 41,125
-------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
Broadcast Media (0.6%)
2,200 Comcast Corp. (Class A Special) ................................. $ 49,637
Tele-Communications, Inc.
3,100 (Class A)* ...................................................... 52,894
2,200 U.S. West Media Group* .......................................... 48,537
-------------
151,068
-------------
Brokerage (0.2%)
1,000 Schwab (Charles) Corp. ......................................... 46,812
-------------
Building Materials (0.7%)
600 Armstrong World Industries, Inc. ............................... 44,287
1,000 Masco Corp. .................................................... 46,875
1,000 Owens-Corning ................................................... 42,062
1,300 Sherwin-Williams Co. ........................................... 41,681
-------------
174,905
-------------
Business Services (0.2%)
1,200 Cognizant Corp. ................................................ 51,150
-------------
Chemicals (1.5%)
550 Air Products & Chemicals, Inc. ................................. 48,503
450 Dow Chemical Co. ............................................... 42,750
700 Du Pont (E.I.) De Nemours & Co., Inc. .......................... 46,856
750 Eastman Chemical Co. ........................................... 45,375
900 Monsanto Co. ................................................... 44,831
800 Praxair, Inc. .................................................. 44,100
450 Rohm & Haas Co. ................................................ 44,100
750 Union Carbide Corp. ............................................ 41,531
-------------
358,046
-------------
Chemicals - Diversified (0.9%)
1,100 Avery Dennison Corp. ........................................... 48,537
1,800 Engelhard Corp. ................................................ 38,700
550 FMC Corp.* ...................................................... 47,162
950 Goodrich (B.F.) Co. ............................................ 42,928
700 PPG Industries, Inc. ........................................... 44,800
-------------
222,127
-------------
Chemicals - Specialty (1.5%)
1,000 Ecolab, Inc. ................................................... 46,687
750 Grace (W. R.) & Co. ............................................ 46,125
850 Great Lakes Chemical Corp. ..................................... 42,553
850 Hercules, Inc. ................................................. 45,156
800 International Flavors & Fragrances Inc. ........................ 42,450
1,300 Morton International, Inc. ..................................... 43,469
1,050 Nalco Chemical Co. ............................................. 42,853
1,200 Sigma-Aldrich Corp. ............................................ 41,250
-------------
350,543
-------------
Communications -
Equipment/Manufacturers (1.2%)
1,500 Andrew Corp.* ................................................... $ 39,094
1,650 DSC Communications Corp.* ....................................... 48,572
2,200 NextLevel Systems, Inc.* ........................................ 43,862
500 Northern Telecom Ltd. (Canada) .................................. 52,281
2,300 Scientific-Atlanta, Inc. ....................................... 48,300
800 Tellabs, Inc.* .................................................. 47,850
-------------
279,959
-------------
Communications Equipment (0.6%)
500 Harris Corp. ................................................... 43,437
600 Lucent Technologies Inc. ....................................... 50,962
650 Motorola, Inc. ................................................. 52,203
-------------
146,602
-------------
Computer Software & Services (3.0%)
900 3Com Corp.* ..................................................... 49,162
1,200 Adobe Systems, Inc. ............................................ 44,850
1,200 Autodesk, Inc. ................................................. 50,850
900 Automatic Data Processing, Inc. ................................ 44,550
1,650 Bay Networks, Inc.* ............................................. 50,325
1,400 Cabletron Systems, Inc.* ........................................ 47,425
1,000 Ceridian Corp.* ................................................. 43,750
650 Cisco Systems, Inc.* ............................................ 51,634
750 Computer Associates International, Inc. ........................ 51,047
600 Computer Sciences Corp.* ........................................ 48,862
350 Microsoft Corp.* ................................................ 49,459
10 Netscape Communications Corp.* .................................. 380
5,200 Novell, Inc.* ................................................... 39,325
950 Oracle Corp.* ................................................... 51,597
900 Parametric Technology Corp.* .................................... 44,100
5,800 Unisys Corp.* ................................................... 55,825
-------------
723,141
-------------
Computers - Peripheral Equipment (0.4%)
1,050 EMC Corp.* ...................................................... 53,025
1,000 Seagate Technology, Inc.* ....................................... 41,062
-------------
94,087
-------------
Computers - Systems (2.5%)
4,400 Amdahl Corp.* ................................................... 51,975
2,500 Apple Computer, Inc.* ........................................... 43,594
950 COMPAQ Computer Corp.* .......................................... 54,269
1,750 Data General Corp.* ............................................. 52,828
600 Dell Computer Corp.* ............................................ 51,300
1,100 Digital Equipment Corp.* ........................................ 45,306
700 Hewlett-Packard Co. ............................................ 49,044
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
500 International Business Machines Corp. .......................... $ 52,875
800 Shared Medical Systems Corp. ................................... 43,100
2,150 Silicon Graphics, Inc.* ......................................... 53,750
1,150 Sun Microsystems, Inc.* ......................................... 52,541
1,700 Tandem Computers Inc.* .......................................... 49,937
-------------
600,519
-------------
Containers - Metal & Glass (0.4%)
1,400 Ball Corp. ..................................................... 41,650
900 Crown Cork & Seal Co., Inc. .................................... 45,506
-------------
87,156
-------------
Containers - Paper (0.7%)
900 Bemis Company, Inc. ............................................ 41,344
3,200 Stone Container Corp. .......................................... 53,200
600 Temple-Inland, Inc. ............................................ 40,387
700 Union Camp Corp. ............................................... 40,994
-------------
175,925
-------------
Cosmetics (0.6%)
1,600 Alberto-Culver Co. (Class B) .................................... 44,900
600 Avon Products, Inc. ............................................ 43,537
450 Gillette Co. ................................................... 44,550
-------------
132,987
-------------
Data Processing (0.4%)
1,200 Equifax, Inc. .................................................. 40,725
1,000 First Data Corp. ............................................... 43,625
-------------
84,350
-------------
Distributors - Consumer Products (0.7%)
700 Cardinal Health, Inc. .......................................... 43,575
2,400 Fleming Companies., Inc. ....................................... 38,250
1,300 Supervalu, Inc. ................................................ 52,650
1,150 Sysco Corp. .................................................... 42,909
-------------
177,384
-------------
Electrical Equipment (1.8%)
1,000 AMP, Inc. ...................................................... 52,250
700 Emerson Electric Co. ........................................... 41,300
700 General Electric Co. ........................................... 49,131
950 General Signal Corp. ........................................... 46,728
550 Honeywell, Inc. ................................................ 41,078
550 Raychem Corp. .................................................. 53,350
700 Rockwell International Corp. ................................... 45,937
800 Thomas & Betts Corp. ........................................... 45,700
1,950 Westinghouse Electric Corp. .................................... 46,922
-------------
422,396
-------------
Electronic Components (0.2%)
500 Grainger (W.W.), Inc. .......................................... $ 48,000
-------------
Electronics - Defense (0.2%)
850 Raytheon Co. ................................................... 47,494
-------------
Electronics - Instrumentation (0.6%)
2,200 EG & G, Inc. ................................................... 45,100
550 Perkin-Elmer Corp. ............................................. 44,894
750 Tektronix, Inc. ................................................ 46,312
-------------
136,306
-------------
Electronics - Semiconductors (1.2%)
1,300 Advanced Micro Devices, Inc.* ................................... 45,581
500 Intel Corp. .................................................... 45,875
1,500 LSI Logic Corp.* ................................................ 47,344
1,150 Micron Technology, Inc. ........................................ 55,991
1,500 National Semiconductor Corp.* ................................... 47,250
450 Texas Instruments, Inc. ........................................ 51,750
-------------
293,791
-------------
Engineering & Construction (0.6%)
700 Fluor Corp. .................................................... 43,050
950 Foster Wheeler Corp. ........................................... 42,156
1,700 McDermott International, Inc. .................................. 51,956
-------------
137,162
-------------
Entertainment (0.7%)
1,100 King World Productions, Inc.* ................................... 44,412
850 Time Warner, Inc. .............................................. 46,378
1,400 Viacom, Inc. (Class B)* ......................................... 43,225
500 Walt Disney Co. ................................................ 40,406
-------------
174,421
-------------
Entertainment, Gaming & Lodging (0.2%)
2,400 Harrah's Entertainment, Inc.* ................................... 49,200
-------------
Finance - Consumer (1.0%)
600 Beneficial Corp. ............................................... 43,500
1,400 Countrywide Credit Industries, Inc. ............................ 49,350
1,100 Green Tree Financial Corp. ..................................... 51,837
400 Household International, Inc. .................................. 51,800
1,150 MBNA Corp. ..................................................... 51,750
-------------
248,237
-------------
Finance - Diversified (1.8%)
600 American Express Co. ........................................... 50,250
950 American General Corp. ......................................... 50,587
900 Fannie Mae ...................................................... 42,581
1,200 Freddie Mac ..................................................... 43,275
400 MBIA Inc. ...................................................... 47,200
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
900 MGIC Investment Corp. .......................................... $ 47,306
1,050 Morgan Stanley, Dean Witter, Discover & Co. (Note 3) ............ 54,928
700 SunAmerica, Inc. ............................................... 42,350
500 Transamerica Corp. ............................................. 50,437
-------------
428,914
-------------
Foods (2.4%)
2,100 Archer-Daniels-Midland Co. ..................................... 47,250
800 Campbell Soup Co. .............................................. 41,500
700 ConAgra, Inc. .................................................. 49,219
500 CPC International, Inc. ........................................ 47,969
600 General Mills, Inc. ............................................ 41,475
900 Heinz (H.J.) Co. ............................................... 41,569
750 Hershey Foods Corp. ............................................ 41,437
500 Kellogg Co. .................................................... 45,937
900 Quaker Oats Company (The) ....................................... 46,069
500 Ralston-Ralston Purina Group .................................... 45,125
900 Sara Lee Corp. ................................................. 39,431
200 Unilever NV (ADR)(Netherlands) .................................. 43,600
600 Wrigley (Wm.) Jr. Co. (Class A) ................................. 46,162
-------------
576,743
-------------
Hardware & Tools (0.4%)
1,200 Black & Decker Corp. ........................................... 50,550
1,100 Stanley Works ................................................... 49,844
-------------
100,394
-------------
Healthcare - Diversified (1.6%)
650 Abbott Laboratories ............................................. 42,534
1,400 Allergan, Inc. ................................................. 44,712
600 American Home Products Corp. ................................... 49,462
600 Bristol-Myers Squibb Co. ....................................... 47,062
1,800 Healthsouth Corp.* .............................................. 47,700
700 Johnson & Johnson ............................................... 43,619
1,300 Mallinckrodt Group, Inc. ....................................... 45,500
380 Warner-Lambert Co. ............................................. 53,081
-------------
373,670
-------------
Healthcare - Drugs (1.0%)
450 Lilly (Eli) & Co. .............................................. 50,850
450 Merck & Co., Inc. .............................................. 46,772
800 Pfizer, Inc. ................................................... 47,700
1,200 Pharmacia & Upjohn, Inc. ....................................... 45,300
1,000 Schering-Plough Corp. .......................................... 54,562
-------------
245,184
-------------
Healthcare - Miscellaneous (0.4%)
2,900 Beverly Enterprises, Inc.* ...................................... $ 44,587
1,500 Manor Care, Inc. ............................................... 49,500
-------------
94,087
-------------
Healthcare HMOs (0.4%)
1,950 Humana, Inc.* ................................................... 47,531
850 United Healthcare Corp. ........................................ 48,450
-------------
95,981
-------------
Healthcare Services (0.2%)
1,450 Alza Corp.* ..................................................... 46,853
-------------
Home Building (0.8%)
950 Centex Corp. ................................................... 52,962
1,450 Fleetwood Enterprises, Inc. .................................... 47,034
2,450 Kaufman & Broad Home Corp. ..................................... 52,369
1,200 Pulte Corp. .................................................... 48,975
-------------
201,340
-------------
Hospital Management (0.4%)
1,300 Columbia/HCA Healthcare Corp. .................................. 41,925
1,600 Tenet Healthcare Corp.* ......................................... 47,900
-------------
89,825
-------------
Hotels/Motels (0.8%)
700 HFS, Inc.* ...................................................... 40,775
1,400 Hilton Hotels Corp. ............................................ 44,012
750 ITT Corp.* ...................................................... 47,953
750 Marriot International, Inc. .................................... 51,562
-------------
184,302
-------------
Household Furnishings & Appliances (0.4%)
1,800 Maytag Corp. ................................................... 52,537
900 Whirlpool Corp. ................................................ 45,000
-------------
97,537
-------------
Household Products (0.8%)
340 Clorox Co. ..................................................... 47,472
700 Colgate-Palmolive Co. .......................................... 53,025
900 Kimberly-Clark Corp. ........................................... 45,619
300 Procter & Gamble Co. ........................................... 45,637
-------------
191,753
-------------
Housewares (0.6%)
1,200 Newell Co. ..................................................... 50,325
1,600 Rubbermaid, Inc. ............................................... 41,700
1,300 Tupperware Corp. ............................................... 45,175
-------------
137,200
-------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
Insurance Brokers (0.4%)
825 Aon Corp. ...................................................... $ 46,200
700 Marsh & McLennan Cos., Inc. .................................... 54,206
-------------
100,406
-------------
Investment Banking/Brokerage (0.4%)
750 Merrill Lynch & Co., Inc. ...................................... 52,828
750 Salomon, Inc. .................................................. 47,578
-------------
100,406
-------------
Leisure Time (0.2%)
1,350 Brunswick Corp. ................................................ 43,537
-------------
Life Insurance (1.2%)
450 Aetna Inc. ..................................................... 51,272
1,000 Conseco, Inc. .................................................. 40,750
600 Jefferson-Pilot Corp. .......................................... 42,637
1,100 Providian Financial Corp.* ...................................... 43,106
650 Torchmark Corp. ................................................ 51,756
1,100 UNUM Corp. ..................................................... 48,950
-------------
278,471
-------------
Machine Tools (0.2%)
2,100 Giddings & Lewis, Inc. ......................................... 43,706
-------------
Machinery -Diversified (2.3%)
800 Briggs & Stratton Corp. ........................................ 40,550
650 Case Corp. ..................................................... 40,584
900 Caterpillar, Inc. .............................................. 50,400
1,700 Cincinnati Milacron, Inc. ...................................... 47,600
800 Cooper Industries, Inc. ........................................ 44,450
800 Deere & Co. .................................................... 45,500
700 Dover Corp. .................................................... 49,962
1,100 Harnischfeger Industries, Inc. ................................. 47,437
750 Ingersoll-Rand Co. ............................................. 51,047
650 NACCO Industries, Inc. (Class A) ................................ 45,094
1,200 Thermo Electron Corp.* .......................................... 41,025
1,400 Timken Co. ..................................................... 49,262
-------------
552,911
-------------
Manufacturing - Diversified (3.2%)
950 Aeroquip-Vickers, Inc. ......................................... 52,072
500 AlliedSignal, Inc. ............................................. 46,125
850 Corning, Inc. .................................................. 52,541
1,150 Crane Co. ...................................................... 52,253
550 Eaton Corp. .................................................... 49,672
900 Illinois Tool Works, Inc. ...................................... 46,688
900 Johnson Controls, Inc. ......................................... 40,331
900 Millipore Corp. ................................................ 39,769
Minnesota Mining &
450 Manufacturing Co. .............................................. 42,638
900 National Service Industries, Inc. .............................. $ 44,381
1,700 Pall Corp. ..................................................... 42,713
800 Parker-Hannifin Corp. .......................................... 51,500
1,000 Tenneco, Inc. .................................................. 46,625
700 Textron Inc. ................................................... 49,044
650 Tyco International Ltd. ......................................... 52,650
500 United Technologies Corp. ...................................... 42,281
-------------
751,283
-------------
Medical Products & Supplies (2.0%)
1,300 Bard (C.R.), Inc. .............................................. 48,913
1,000 Bausch & Lomb, Inc. ............................................ 42,563
800 Baxter International, Inc. ..................................... 46,250
800 Becton, Dickinson & Co. ........................................ 42,900
2,500 Biomet, Inc. ................................................... 49,844
700 Boston Scientific Corp.* ........................................ 50,225
600 Guidant Corp. .................................................. 54,750
500 Medtronic, Inc. ................................................ 43,625
1,200 St. Jude Medical, Inc.* ......................................... 48,975
1,200 United States Surgical Corp. ................................... 44,550
-------------
472,595
-------------
Metals & Mining (1.5%)
1,350 ASARCO, Inc. ................................................... 45,900
2,000 Barrick Gold Corp. (Canada) ..................................... 45,625
7,300 Battle Mountain Gold Co. ....................................... 40,606
1,850 Cyprus Amax Minerals Co. ....................................... 46,944
7,800 Echo Bay Mines Ltd. (Canada) .................................... 39,000
2,900 Homestake Mining Co. ........................................... 40,056
1,300 Newmont Mining Corp. ........................................... 53,625
2,600 Placer Dome Inc. (Canada) ....................................... 44,200
-------------
355,956
-------------
Metals - Miscellaneous (0.5%)
1,400 Freeport-McMoran Copper & Gold, Inc. (Class B) .................. 40,950
1,400 Inco Ltd. (Canada) .............................................. 43,313
500 Phelps Dodge Corp. ............................................. 42,531
-------------
126,794
-------------
Miscellaneous (0.4%)
1,350 American Greetings Corp. (Class A) .............................. 45,056
1,800 Jostens, Inc. .................................................. 46,468
-------------
91,524
-------------
Multi-Line Insurance (1.2%)
450 American International Group, Inc. .............................. 47,925
250 CIGNA Corp. .................................................... 49,875
550 Hartford Financial Services Group, Inc. ......................... 47,919
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
650 Lincoln National Corp. ......................................... $ 46,231
400 Loews Corp. .................................................... 43,250
700 Travelers Group, Inc. .......................................... 50,356
-------------
285,556
-------------
Natural Gas (0.3%)
600 Anardarko Petroleum Corp. ...................................... 41,925
1,100 Apache Corp. ................................................... 38,775
-------------
80,700
-------------
Office Equipment & Supplies (0.6%)
1,600 Ikon Office Solutions, Inc. .................................... 46,700
2,100 Moore Corp. Ltd. (Canada) ....................................... 45,544
600 Pitney Bowes, Inc. ............................................. 45,075
-------------
137,319
-------------
Oil & Gas Drilling (1.5%)
950 Baker Hughes, Inc. ............................................. 41,859
1,250 Dresser Industries, Inc. ....................................... 52,188
1,100 Halliburton Co. ................................................ 50,600
700 Helmerich & Payne, Inc. ........................................ 47,119
1,600 Rowan Cos., Inc.* ............................................... 52,600
700 Schlumberger, Ltd. .............................................. 53,463
600 Western Atlas, Inc.* ............................................ 47,738
-------------
345,567
-------------
Oil & Gas Exploration (0.9%)
900 Burlington Resources, Inc. ..................................... 42,525
650 Kerr-McGee Corp. ............................................... 40,706
680 Louisiana Land & Exploration Co. ................................ 48,025
1,700 Oryx Energy Co.* ................................................ 41,969
1,600 Union Pacific Resources Group, Inc. ............................. 39,500
-------------
212,725
-------------
Oil - Domestic Integrated (1.5%)
750 Amerada Hess Corp. ............................................. 44,109
900 Ashland, Inc. .................................................. 47,826
1,700 Occidental Petroleum Corp. ..................................... 42,606
650 Pennzoil Co. ................................................... 50,781
1,000 Phillips Petroleum Co. ......................................... 46,063
1,300 Sun Co., Inc. .................................................. 46,556
1,050 Unocal Corp. ................................................... 42,000
1,450 USX-Marathon Group .............................................. 46,672
-------------
366,613
-------------
Oil - International Integrated (1.3%)
450 Amoco Corp. .................................................... 42,300
600 Atlantic Richfield Co. ......................................... 44,888
550 Chevron Corp. .................................................. 43,519
700 Exxon Corp. .................................................... 44,975
600 Mobil Corp. .................................................... 45,900
800 Royal Dutch Petroleum Co. (Netherlands) ......................... $ 44,750
350 Texaco, Inc. ................................................... 40,622
-------------
306,954
-------------
Paper & Forest Products (2.1%)
1,200 Boise Cascade Corp. ............................................ 44,475
800 Champion International Corp. ................................... 49,600
500 Georgia-Pacific Corp. .......................................... 47,219
900 International Paper Co. ........................................ 50,400
1,100 James River Corp. of Virginia ................................... 45,306
1,800 Louisiana-Pacific Corp. ........................................ 41,288
600 Mead Corp. ..................................................... 43,200
900 Potlatch Corp. ................................................. 43,031
1,200 Westvaco Corp. ................................................. 40,125
800 Weyerhaeuser Co. ............................................... 49,800
550 Willamette Industries, Inc. .................................... 41,903
-------------
496,347
-------------
Photography/Imaging (0.6%)
700 Eastman Kodak Co. .............................................. 46,900
850 Polaroid Corp. ................................................. 50,575
650 Xerox Corp. .................................................... 53,463
-------------
150,938
-------------
Pollution Control (0.2%)
1,300 Waste Management Inc. .......................................... 41,600
-------------
Property - Casualty Insurance (1.2%)
600 Allstate Corp. ................................................. 47,400
700 Chubb Corp. .................................................... 49,350
250 General Re Corp. ............................................... 52,219
900 Safeco Corp. ................................................... 43,088
600 St. Paul Companies, Inc. ....................................... 47,063
1,800 USF&G Corp. .................................................... 44,213
-------------
283,333
-------------
Publishing (0.9%)
950 Dow Jones & Co., Inc. .......................................... 41,028
1,500 Dun & Bradstreet Corp. ......................................... 40,500
700 McGraw-Hill, Inc. .............................................. 47,469
1,600 Meredith Corp. ................................................. 44,300
750 Times Mirror Co. (Class A) ...................................... 40,969
-------------
214,266
-------------
Publishing -Newspaper (0.8%)
450 Gannett Co., Inc. .............................................. 44,691
900 Knight-Ridder Newspapers, Inc. ................................. 44,719
950 New York Times Co. (Class A) .................................... 47,738
950 Tribune Co. .................................................... 50,291
-------------
187,439
-------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
Railroads (0.8%)
450 Burlington Northern Santa Fe Corp. ............................. $ 43,453
750 CSX Corp. ...................................................... 46,313
450 Norfolk Southern Corp. ......................................... 49,838
550 Union Pacific Corp. ............................................ 39,428
-------------
179,032
-------------
Restaurants (0.6%)
5,000 Darden Restaurants, Inc. ....................................... 47,813
750 McDonald's Corp. ............................................... 40,313
1,750 Wendy's International, Inc. .................................... 42,766
-------------
130,892
-------------
Retail - Department Stores (1.4%)
1,200 Dillard Department Stores, Inc. (Class A) ....................... 45,375
1,200 Federated Department Stores, Inc.* .............................. 52,575
850 Harcourt General, Inc. ......................................... 40,163
850 May Department Stores Co. ...................................... 47,494
750 Mercantile Stores Co., Inc. .................................... 50,391
900 Nordstrom, Inc. ................................................ 50,963
800 Penney (J.C.) Co., Inc. ........................................ 46,800
-------------
333,761
-------------
Retail - Drug Stores (0.8%)
850 CVS Corp. ...................................................... 48,344
1,500 Longs Drug Stores Corp. ........................................ 40,406
900 Rite Aid Corp. ................................................. 46,744
900 Walgreen Co. ................................................... 50,850
-------------
186,344
-------------
Retail - Food Chains (1.1%)
1,150 Albertson's, Inc. .............................................. 42,622
1,600 American Stores Co. ............................................ 40,400
1,400 Giant Food, Inc. (Class A) ...................................... 46,988
1,600 Great Atlantic & Pacific Tea Co., Inc. ......................... 43,900
1,400 Kroger Co.* ..................................................... 41,388
1,250 Winn-Dixie Stores, Inc. ........................................ 45,781
-------------
261,079
-------------
Retail - General Merchandise (1.1%)
1,400 Costco Companies Inc.* .......................................... 53,025
800 Dayton-Hudson Corp. ............................................ 51,700
4,000 Kmart Corp.* .................................................... 47,500
800 Sears, Roebuck & Co. ........................................... 50,650
1,400 Wal-Mart Stores, Inc. .......................................... 52,588
-------------
255,463
-------------
Retail - Specialty (1.6%)
1,600 AutoZone, Inc.* ................................................. $ 45,800
1,200 Circuit City Stores, Inc. ...................................... 43,500
1,050 Home Depot, Inc. ............................................... 52,369
1,100 Lowe's Companies, Inc. ......................................... 41,388
1,300 Pep Boys-Manny, Moe & Jack ...................................... 43,225
800 Tandy Corp. .................................................... 47,550
1,450 Toys 'R' Us, Inc.* .............................................. 49,391
1,800 Woolworth Corp.* ................................................ 50,963
-------------
374,186
-------------
Retail - Specialty Apparel (0.8%)
6,700 Charming Shoppes, Inc.* ......................................... 39,363
1,200 Gap, Inc. ...................................................... 53,325
2,200 Limited (The), Inc. ............................................ 49,088
1,700 TJX Companies, Inc. ............................................ 50,788
-------------
192,564
-------------
Savings & Loan Companies (0.4%)
1,000 Ahmanson (H.F.) & Co. .......................................... 53,188
600 Golden West Financial Corp. .................................... 50,475
-------------
103,663
-------------
Semiconductor Equipment (0.2%)
550 Applied Materials, Inc.* ........................................ 50,497
-------------
Shoes (0.6%)
700 Nike, Inc. (Class B) ............................................ 43,619
900 Reebok International Ltd. ....................................... 46,463
3,200 Stride Rite Corp. .............................................. 43,400
-------------
133,482
-------------
Specialized Services (1.0%)
1,350 Block (H.&R.), Inc. ............................................ 51,722
1,900 CUC International, Inc.* ........................................ 46,788
1,050 Interpublic Group of Companies, Inc. ........................... 46,988
2,550 Safety-Kleen Corp. ............................................. 44,784
1,200 Service Corp. International ..................................... 40,800
-------------
231,082
-------------
Specialty Printing (0.6%)
1,200 Deluxe Corp. ................................................... 39,975
1,200 Donnelley (R.R.) & Sons Co. .................................... 48,225
2,300 Harland (John H.) Co. .......................................... 45,138
-------------
133,338
-------------
Steel & Iron (1.3%)
1,600 Allegheny Teledyne Inc. ........................................ 49,800
7,400 Armco, Inc.* .................................................... 40,238
4,000 Bethlehem Steel Corp.* .......................................... 45,000
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
1,800 Inland Steel Industries, Inc. .................................. $ 41,288
750 Nucor Corp. .................................................... 46,547
1,150 USX-U.S. Steel Group, Inc. ..................................... 42,047
2,400 Worthington Industries, Inc. ................................... 47,400
-------------
312,320
-------------
Telecommunications -
Long Distance (1.0%)
1,300 AT&T Corp. ..................................................... 47,856
2,300 Frontier Corp. ................................................. 47,438
1,200 MCI Communications Corp. ....................................... 42,225
850 Sprint Corp. ................................................... 42,075
1,500 WorldCom, Inc.* ................................................. 52,406
-------------
232,000
-------------
Telecommunications -Wireless (0.2%)
1,500 Airtouch Communications, Inc.* .................................. 49,406
-------------
Textiles (0.9%)
Fruit of the Loom, Inc.
1,700 (Class A)* ...................................................... 46,538
850 Liz Claiborne, Inc. ............................................ 40,694
1,400 Russell Corp. .................................................. 40,863
900 Springs Industries, Inc. (Class A) .............................. 43,538
550 VF Corp. ....................................................... 49,363
-------------
220,996
-------------
Tobacco (0.6%)
1,150 Fortune Brands, Inc. ........................................... 40,753
1,050 Philip Morris Companies, Inc. .................................. 47,381
1,500 UST, Inc. ...................................................... 43,594
-------------
131,728
-------------
Toys (0.4%)
1,600 Hasbro Inc. .................................................... 49,100
1,350 Mattel, Inc. ................................................... 46,913
-------------
96,013
-------------
Truckers (0.4%)
1,300 Caliber System, Inc. ........................................... 50,619
1,250 Ryder System, Inc. ............................................. 44,766
-------------
95,385
-------------
Utilities - Electric (4.9%)
900 American Electric Power Co., Inc. ............................... 40,275
1,700 Baltimore Gas & Electric Co. ................................... 47,281
1,300 Carolina Power & Light Co. ..................................... 46,313
2,300 Central & South West Corp. ..................................... 46,144
1,200 CINergy Corp. .................................................. 40,350
1,400 Consolidated Edison Co. of New York, Inc. ...................... $ 44,275
1,450 Detroit Edison Co. ............................................. 43,409
1,300 Dominion Resources, Inc. ....................................... 47,775
1,050 Duke Energy Corp. .............................................. 53,222
1,700 Edison International ............................................ 42,925
1,450 Entergy Corp. .................................................. 39,603
1,000 FPL Group, Inc. ................................................ 47,875
1,200 General Public Utilities Corp. ................................. 41,625
2,200 Houston Industries, Inc. ....................................... 46,063
4,300 Niagara Mohawk Power Corp.* ..................................... 40,044
800 Northern States Power Co. ...................................... 41,100
1,950 Ohio Edison Co. ................................................ 43,388
2,050 PacifiCorp ...................................................... 45,741
2,100 PECO Energy Co. ................................................ 49,350
1,700 PG & E Corp. ................................................... 42,181
2,300 PP&L Resources, Inc. ........................................... 47,006
1,900 Public Service Enterprise Group, Inc. .......................... 47,025
1,900 Southern Co. ................................................... 41,681
1,200 Texas Utilities Co. ............................................ 42,525
2,100 Unicom Corp. ................................................... 47,644
1,200 Union Electric Co. ............................................. 46,200
-------------
1,161,020
-------------
Utilities - Natural Gas (2.4%)
800 Coastal Corp. .................................................. 43,500
600 Columbia Gas System, Inc. ...................................... 41,250
700 Consolidated Natural Gas Co. ................................... 40,513
1,300 Eastern Enterprises ............................................. 46,556
1,200 Enron Corp. .................................................... 45,525
1,900 ENSERCH Corp. .................................................. 42,275
1,200 NICOR, Inc. .................................................... 43,950
2,800 NorAm Energy Corp. ............................................. 44,800
1,250 ONEOK Inc. ..................................................... 43,750
1,200 Pacific Enterprises ............................................. 40,125
1,100 Peoples Energy Corp. ........................................... 42,213
900 Sonat, Inc. .................................................... 44,888
900 Williams Cos., Inc. ............................................ 41,175
-------------
560,520
-------------
Utilities - Telephone (1.4%)
1,250 Alltel Corp. ................................................... 41,094
650 Ameritech Corp. ................................................ 43,834
550 Bell Atlantic Corp. ............................................ 39,909
850 BellSouth Corp. ................................................ 40,269
1,000 GTE Corp. ...................................................... 46,500
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
700 NYNEX Corp. .................................................... $ 38,806
750 SBC Communications, Inc. ....................................... 44,391
1,100 U.S. West Communications Group, Inc. ............................ 40,219
-------------
335,022
-------------
Waste Management (0.4%)
1,200 Browning-Ferris Industries, Inc. ............................... 44,400
2,900 Laidlaw Inc. (Class B)(Canada) .................................. 46,219
-------------
90,619
-------------
TOTAL COMMON STOCKS (Identified Cost $14,805,322) ............... 23,156,111
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENT (a)(2.9%)
U.S. GOVERNMENT AGENCY
$700 Federal Home Loan Mortgage Corp.
5.75% due 08/01/97
(Amortized Cost $700,000) .................................... $ 700,000
------------
TOTAL INVESTMENTS
(Identified cost $15,505,322)(b) . 100.3% 23,856,111
LIABILITIES IN EXCESS OF
CASH AND OTHER ASSETS............. (0.3) (76,376)
----- ------------
NET ASSETS........................ 100.0% $23,779,735
===== ============
</TABLE>
- ------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown
has been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$8,490,682 and the aggregate gross unrealized depreciation is
$139,893, resulting in net unrealized appreciation of $8,350,789.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (93.8%)
ARGENTINA (0.7%)
Banks
1,700 Banco de Galicia y Buenos Aires S.A. de C.V. (Class B)(ADR) ....$ 53,337
-----------
Brewery
2,000 Quilmes Industrial S.A. (ADR) .................................. 23,000
-----------
Telecommunications
1,000 Telecom Argentina Stet - France Telecom S.A. (Class B)(ADR) .... 57,813
-----------
TOTAL ARGENTINA ................................................ 134,150
-----------
AUSTRALIA (1.0%)
Business Services
4,800 Mayne Nickless Ltd. ............................................ 27,735
-----------
Energy
2,500 Woodside Petroleum Ltd. ........................................ 21,268
-----------
Financial Services
24,000 Tyndall Australia Ltd. ......................................... 41,083
-----------
Foods & Beverages
30,000 Goodman Fielder Ltd. ........................................... 46,263
-----------
Metals & Mining
20,155 M.I.M. Holdings Ltd. ........................................... 28,022
14,000 Pasminco Ltd. .................................................. 27,000
-----------
55,022
-----------
TOTAL AUSTRALIA ................................................ 191,371
-----------
BELGIUM (0.2%)
Retail
1,000 G.I.B. Holdings Ltd. ........................................... 48,471
-----------
BRAZIL (2.3%)
Banks
600 Uniao de Bancos Brasileiros S.A. (GDR)* ........................ 24,150
-----------
Brewery
4,500 Companhia Cervejaria Brahma -(ADR) ............................. 68,906
-----------
Steel & Iron
2,000 Usinas Siderurgicas de Minas Gerais S.A. (ADR) -144A** ......... 23,700
3,000 Usinas Siderurgicas de Minas Gerais S.A. (S Shares)(ADR) ....... 35,550
-----------
59,250
-----------
Telecommunications
600 Telecommunicacoes Brasileiras S.A. (ADR) .......................$ 89,025
-----------
Utilities - Electric
2,000 Companhia Energetica de Minas Gerais S.A. (ADR) ................ 112,500
5,000 Companhia Paranaense de Energia -Copel (Preference Shares) ..... 96,250
-----------
208,750
-----------
TOTAL BRAZIL ................................................... 450,081
-----------
CANADA (0.7%)
Energy
5,000 Ranger Oil Ltd. ................................................ 48,970
-----------
Retail - Department Stores
4,000 Hudson's Bay Co. ............................................... 89,669
-----------
TOTAL CANADA ................................................... 138,639
-----------
CHILE (0.7%)
Pharmaceuticals
1,300 Laboratorio Chile S.A. (ADR) ................................... 38,431
-----------
Retail
3,000 Supermercados Unimarc S.A. (ADR)* .............................. 51,938
-----------
Telecommunications
1,487 Compania de Telecommunicaciones de Chile S.A. (ADR) ............ 48,978
-----------
TOTAL CHILE .................................................... 139,347
-----------
CHINA (0.2%)
Transportation
1,000 China Southern Airlines Co. (ADR) .............................. 31,000
-----------
DENMARK (0.9%)
Pharmaceuticals
1,000 Novo-Nordisk AS (Series B) ..................................... 105,361
-----------
Transportation
700 Kobenhavns Lufthavne AS ........................................ 73,453
-----------
TOTAL DENMARK .................................................. 178,814
-----------
FINLAND (0.7%)
Manufacturing
800 KCI Konecranes International ................................... 32,104
-----------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------
Paper Products
3,200 UPM-Kymmene OY Corp. ...........................................$ 77,810
-----------
Pharmaceuticals
1,000 Orion-yhtymae OY (B Shares) .................................... 36,300
-----------
TOTAL FINLAND .................................................. 146,214
-----------
FRANCE (3.6%)
Automotive
1,200 Michelin (B Shares) ............................................ 74,682
-----------
Computer Services
400 Axime (Ex Segin) ............................................... 44,599
-----------
Energy
700 Elf Aquitaine S.A. ............................................. 79,855
-----------
Financial Services
350 Credit Local de France ......................................... 34,675
-----------
Household Products
740 Societe BIC S.A. ............................................... 61,015
-----------
Insurance
2,000 AXA-UAP ........................................................ 130,730
1,400 Scor ........................................................... 61,218
-----------
191,948
-----------
Leisure
600 Accor S.A. ..................................................... 90,230
-----------
Retail
80 Carrefour Supermarche .......................................... 54,022
-----------
Steel & Iron
4,500 Usinor Sacilor ................................................. 89,673
-----------
TOTAL FRANCE ................................................... 720,699
-----------
GERMANY (3.8%)
Apparel
400 Adidas AG ...................................................... 46,995
-----------
Automotive
90 Bayerische Motoren Werke (BMW) AG .............................. 73,332
300 MAN AG ......................................................... 90,481
250 Volkswagen AG .................................................. 191,188
-----------
355,001
-----------
Chemicals
1,200 Bayer AG ....................................................... 50,519
600 SGL Carbon AG .................................................. 79,793
-----------
130,312
-----------
Machinery - Diversified
100 Mannesmann AG ..................................................$ 46,696
-----------
Pharmaceuticals
1,000 Gehe AG ........................................................ 62,605
-----------
Telecommunications
900 Siemens AG ..................................................... 62,709
-----------
Utilities - Electric
700 VEBA AG ........................................................ 40,702
-----------
TOTAL GERMANY .................................................. 745,020
-----------
HONG KONG (4.9%)
Banking
12,000 Guoco Group Ltd. ............................................... 67,743
3,140 HSBC Holdings PLC .............................................. 109,521
-----------
177,264
-----------
Conglomerates
24,000 China Resources Enterprise Ltd. ................................ 119,984
12,000 Citic Pacific Ltd. ............................................. 76,114
-----------
196,098
-----------
Finance & Brokerage
36,000 Peregrine Investments Holdings Ltd. ............................ 79,525
-----------
Real Estate
10,000 Cheung Kong (Holdings) Ltd. .................................... 111,097
24,000 New World Development Co., Ltd. ................................. 172,846
6,000 Sun Hung Kai Properties Ltd. ................................... 75,378
-----------
359,321
-----------
Utilities
36,600 Hong Kong & China Gas Co. Ltd. .................................. 79,431
-----------
Utilities - Electric
13,000 China Light & Power Co. Ltd. ................................... 74,564
-----------
TOTAL HONG KONG ................................................ 966,203
-----------
IRELAND (0.3%)
Transportation
2,000 Ryanair Holdings PLC (ADR)* .................................... 56,250
-----------
ITALY (1.4%)
Energy
1,500 Ente Nazionale Idrocarburi SpA (ADR) ........................... 88,219
-----------
Household Furnishings & Appliances
3,000 Industrie Natuzzi SpA (ADR) .................................... 82,688
-----------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------
Telecommunications
16,000 Telecom Italia SpA .............................................$ 101,703
------------
TOTAL ITALY .................................................... 272,610
------------
JAPAN (19.5%)
Automotive
4,000 Honda Motor Co. ................................................ 133,626
6,000 Suzuki Motor Co. Ltd. .......................................... 72,887
------------
206,513
------------
Banking
14,000 Asahi Bank, Ltd. ............................................... 104,876
3,000 Bank of Tokyo-Mitsubishi, Ltd. ................................. 55,677
9,000 Sakura Bank Ltd. ............................................... 55,045
------------
215,598
------------
Building & Construction
12,000 Sekisui House Ltd. ............................................. 114,392
------------
Business Services
2,000 Secom Co. ...................................................... 146,280
------------
Chemicals
8,000 Kaneka Corp. ................................................... 49,064
6,000 Nippon Shokubai K.K. Co. ....................................... 41,859
4,000 Shin-Etsu Chemical Co., Ltd. ................................... 114,054
------------
204,977
------------
Computers
6,000 Fujitsu, Ltd. .................................................. 88,072
------------
Consumer Products
4,000 Kao Corp. ...................................................... 60,064
------------
Electronics
6,000 Canon, Inc. .................................................... 191,328
9,000 Hitachi, Ltd. .................................................. 101,738
9,000 Hitachi Cable .................................................. 81,238
6,000 Matsushita Electric Industrial Co., Ltd. ....................... 125,021
8,000 Sharp Corp. .................................................... 102,581
2,000 Sony Corp. ..................................................... 199,089
2,000 TDK Corp. ...................................................... 172,094
------------
973,089
------------
Electronics - Semiconductors/Components
1,000 Rohm Co., Ltd. ................................................. 130,758
------------
Financial Services
6,000 Nomura Securities Co. Ltd. ..................................... 85,035
2,000 Orix Corp. ..................................................... 161,296
------------
246,331
------------
International Trade
10,000 Mitsui & Co. ...................................................$ 95,326
------------
Machine Tools
7,000 Asahi Diamond Industries Co. Ltd. .............................. 57,576
------------
Machinery
10,000 Minebea Co., Ltd. .............................................. 118,947
13,000 Mitsubishi Heavy Industries, Ltd. ............................... 91,572
------------
210,519
------------
Pharmaceuticals
5,000 Eisai Co. Ltd. ................................................. 103,762
6,000 Fujisawa Pharmaceutical ........................................ 61,245
2,000 Sankyo Co. Ltd. ................................................ 71,368
2,000 Terumo Corp. ................................................... 40,324
------------
276,699
------------
Real Estate
5,000 Mitsui Fudosan Co., Ltd. ....................................... 64,113
------------
Restaurants
5 Yoshinoya D & C Company Ltd. ................................... 61,583
------------
Retail
2,000 Aoyama Trading Co., Ltd. ....................................... 59,895
4,000 Izumiya Co. Ltd. ............................................... 50,953
2,000 Jusco Co. ...................................................... 55,677
------------
166,525
------------
Steel & Iron
40,000 NKK Corp. ...................................................... 72,887
------------
Telecommunications
10 DDI Corp. ...................................................... 68,669
14 Nippon Telegraph & Telephone Corp. ............................. 141,724
------------
210,393
------------
Textiles
15,000 Teijin Ltd. .................................................... 64,535
------------
Transportation
15 East Japan Railway Co. ......................................... 64,409
6,000 Yamato Transport Co. Ltd. ...................................... 75,924
------------
140,333
------------
Wholesale Distributor
1,000 Softbank Corp. ................................................. 51,881
------------
TOTAL JAPAN .................................................... 3,858,444
------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------
MALAYSIA (2.2%)
Banking
8,000 Malayan Banking Berhad .........................................$ 75,959
22,666 Public Bank Berhad ............................................. 32,540
550 RHB Sakura Merchant Bankers Berhad ............................. 856
-----------
109,355
-----------
Building & Construction
9,000 United Engineers Malaysia Berhad ............................... 62,894
-----------
Conglomerates
10,000 Road Builder (M) Holdings Berhad ............................... 41,777
-----------
Entertainment
37,000 Magnum Corporation Berhad ...................................... 47,497
-----------
Financial Services
12,000 Arab Malaysian Finance Berhad 7.5% due 5/25/02 (Loan Stock) .... 4,147
-----------
Machinery
10,000 UMW Holdings Berhad ............................................ 39,499
-----------
Natural Gas
15,000 Petronas Gas Berhad ............................................ 52,697
-----------
Utilities - Electric
20,000 Tenaga Nasional Berhad ......................................... 80,517
-----------
TOTAL MALAYSIA ................................................. 438,383
-----------
MEXICO (3.4%)
Banking
Grupo Financiero Banamex Accival S.A. de C.V.
29,391 (B Shares)* .................................................... 90,414
-----------
Beverages
2,700 Pepsi-Gemex S.A. de C.V. (GDR) ................................. 39,150
-----------
Brewery
Grupo Modelo S.A. de C.V.
6,000 (Series C) ..................................................... 55,794
-----------
Building Materials
15,087 Cemex, S.A. de C.V. (B Shares) ................................. 86,840
-----------
Conglomerates
1,707 DESC S.A. de C.V. (Series C)(ADR) .............................. 62,732
Grupo Carso S.A. de C.V.
7,000 (Series A1) .................................................... 56,856
-----------
119,588
-----------
Food Processing
2,500 Grupo Industrial Maseca S.A. de C.V. (ADR) .....................$ 46,250
-----------
Paper & Forest Products
14,000 Kimberly-Clark de Mexico, S.A. de C.V. (A Shares) .............. 68,048
-----------
Retail
2,200 Grupo Elektra, S.A. de C.V. (GDR) ............................... 65,450
-----------
Telecommunications
2,000 Telefonos de Mexico S.A. de C.V. (Series L)(ADR) ............... 111,000
-----------
TOTAL MEXICO ................................................... 682,534
-----------
NETHERLANDS (4.3%)
Building Materials
800 Hunter Douglas NV .............................................. 37,205
-----------
Business & Public Services
700 Randstad Holdings NV ........................................... 74,946
-----------
Chemicals
500 Akzo Nobel NV .................................................. 77,462
-----------
Electronics
2,000 Philips Electronics NV ......................................... 162,264
-----------
Food Processing
200 Nutricia Verenigde Bedrijven NV ................................ 33,998
-----------
Furniture
1,400 Ahrend Groep NV ................................................ 47,327
-----------
Insurance
500 Aegon NV ....................................................... 37,958
875 ING Groep NV ................................................... 42,594
-----------
80,552
-----------
Publishing
2,900 Elsevier NV .................................................... 51,118
-----------
Retail
950 Gucci Group NV ................................................. 59,969
2,700 Koninklijke Ahold NV ........................................... 78,104
-----------
138,073
-----------
Steel
1,100 Koninklijke Hoogovens NV ....................................... 66,668
-----------
Transportation
2,000 KLM Royal Dutch Air Lines NV ................................... 71,377
-----------
TOTAL NETHERLANDS .............................................. 840,990
-----------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES -GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------
PERU (0.2%)
Banking
7,000 Banco Wiese (ADR) ..............................................$ 43,750
-----------
PHILIPPINES (0.1%)
Telecommunications
600 Philippine Long Distance Telephone Co. (ADR) ................... 20,137
-----------
PORTUGAL (0.4%)
Telecommunications
1,100 Portugal Telecom S.A. (ADR) .................................... 44,275
500 Telecel-Comunicacaoes Pessoais, S.A.* .......................... 39,155
-----------
TOTAL PORTUGAL ................................................. 83,430
-----------
SINGAPORE (1.6%)
Banking
4,500 Development Bank of Singapore, Ltd. ............................ 58,422
-----------
Beverages
7,000 Fraser & Neave Ltd. ............................................ 47,580
-----------
Hospital Management
6,000 Parkway Holdings Ltd. .......................................... 27,529
-----------
Publishing
4,000 Singapore Press Holdings Ltd. .................................. 75,856
-----------
Transportation
3,700 Singapore International Airlines ............................... 34,706
-----------
Utilities - Telecommunications
37,000 Singapore Telecommunications, Ltd. ............................. 70,167
-----------
TOTAL SINGAPORE ................................................ 314,260
-----------
SOUTH AFRICA (0.1%)
Brewers
700 South African Breweries Ltd. (ADR) ............................. 22,488
-----------
SOUTH KOREA (0.3%)
Electronics
1,700 Samsung Electronics Co. (GDR)(Non-voting) -144A** .............. 51,510
-----------
SPAIN (1.7%)
Banks
3,300 Banco Bilbao Vizcaya ........................................... 86,127
200 Banco Popular Espanol S.A. ..................................... 44,307
-----------
130,434
-----------
Natural Gas
800 Gas Natural SDG S.A. ...........................................$ 39,132
-----------
Retail
3,100 Centros Comerciales Pryca, S.A. ................................ 59,857
-----------
Telecommunications
500 Telefonica de Espana S.A. (ADR) ................................ 39,375
-----------
Utilities - Electric
2,800 Empresa Nacional de Electricidad S.A. .......................... 57,669
-----------
TOTAL SPAIN .................................................... 326,467
-----------
SWEDEN (1.4%)
Automotive
2,200 Scania AB (A Shares) ........................................... 63,038
-----------
Machinery
2,300 Kalmar Industries AB ........................................... 38,563
-----------
Manufacturing
1,200 Assa Abloy AB (Series B) ....................................... 26,276
-----------
Paper Products
Stora Kopparbergs Aktiebolag
3,400 (A Shares) ..................................................... 55,731
-----------
Telecommunications
2,250 Ericsson (L.M.) Telephone Co. AB (Series "B" Free) ............. 101,211
-----------
TOTAL SWEDEN ................................................... 284,819
-----------
SWITZERLAND (1.7%)
Engineering
40 ABB AG-Bearer .................................................. 56,890
-----------
Food Processing
70 Nestle S.A. .................................................... 88,901
-----------
Pharmaceuticals
32 Novartis AG .................................................... 51,399
30 Novartis AG - Bearer ........................................... 48,147
10 Roche Holdings AG .............................................. 96,790
-----------
196,336
-----------
TOTAL SWITZERLAND .............................................. 342,127
-----------
UNITED KINGDOM (10.4%)
Aerospace
11,453 Rolls-Royce PLC ................................................ 43,939
-----------
Aerospace & Defense
3,978 British Aerospace PLC .......................................... 86,970
2,900 Smiths Industries PLC .......................................... 38,274
-----------
125,244
-----------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------
Auto Parts - Original Equipment
26,200 LucasVarity PLC ................................................$ 80,755
-----------
Banking
3,600 Abbey National PLC ............................................. 49,460
1,323 Barclays Bank, PLC ............................................. 27,872
7,103 National Westminster Bank PLC .................................. 100,849
-----------
178,181
-----------
Beverages
5,800 Bass PLC ....................................................... 79,306
-----------
Broadcast Media
3,600 Flextech PLC* .................................................. 38,807
-----------
Building & Construction
5,893 Blue Circle Industries PLC ..................................... 39,999
-----------
Business Services
3,400 Compass Group PLC .............................................. 34,171
3,000 Reuters Holdings PLC ........................................... 32,315
-----------
66,486
-----------
Computer Software & Services
3,500 SEMA Group PLC ................................................. 80,622
-----------
Conglomerates
8,300 BTR PLC ........................................................ 25,787
9,302 Tomkins PLC .................................................... 46,972
-----------
72,759
-----------
Consumer Products
3,000 Unilever PLC ................................................... 86,910
-----------
Energy
27,300 Shell Transport & Trading Co. PLC .............................. 201,860
-----------
Food Processing
10,000 Devro PLC ...................................................... 64,104
-----------
Household Products
7,000 Reckitt & Colman PLC ........................................... 108,912
-----------
Insurance
4,200 Britannic Assurance PLC ........................................ 53,813
5,700 Commercial Union PLC ........................................... 64,061
10,441 Royal & Sun Alliance Insurance Group PLC ....................... 85,761
-----------
203,635
-----------
Leisure
2,671 Granada Group PLC .............................................. 36,785
-----------
Pharmaceuticals
6,220 Glaxo Wellcome PLC ............................................. 131,652
-----------
Property - Casualty Insurance
65 General Accident PLC ...........................................$ 980
-----------
Retail
9,500 Sainsbury (J.) PLC ............................................. 66,195
-----------
Telecommunications
10,000 British Telecommunications PLC ................................. 70,007
9,602 Securicor PLC .................................................. 43,607
11,900 Vodafone Group PLC ............................................. 60,091
-----------
173,705
-----------
Transportation
7,811 British Airways PLC ............................................ 84,896
-----------
Utilities
3,220 Thames Water PLC ............................................... 42,392
-----------
Utilities -Electric
6,500 National Power PLC ............................................. 57,546
-----------
TOTAL UNITED KINGDOM ........................................... 2,065,670
-----------
UNITED STATES (25.1%)
Aerospace & Defense
1,040 Lockheed Martin Corp. .......................................... 110,760
6,130 Loral Space & Communications* .................................. 95,781
-----------
206,541
-----------
Aluminum
1,240 Aluminum Co. of America ........................................ 109,740
-----------
Automotive
2,940 Chrysler Corp. ................................................. 109,147
2,870 Ford Motor Co. ................................................. 117,311
-----------
226,458
-----------
Banks
1,970 First Tennessee National Corp. ................................. 102,440
-----------
Beverages - Soft Drinks
2,780 PepsiCo, Inc. .................................................. 106,509
-----------
Biotechnology
4,120 Biochem Pharma, Inc.* .......................................... 118,450
-----------
Chemicals
1,060 Dow Chemical Co. ............................................... 100,700
2,250 Monsanto Co. ................................................... 112,078
1,880 Praxair, Inc. .................................................. 103,635
-----------
316,413
-----------
Communications - Equipment & Software
1,850 Cisco Systems, Inc.* ........................................... 146,959
-----------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------
Computer Software
2,400 Oracle Systems Corp.* ..........................................$ 130,350
-----------
Computers
3,360 Gateway 2000, Inc.* ............................................ 128,310
-----------
Computers - Peripheral Equipment
1,900 Seagate Technology, Inc.* ...................................... 78,019
-----------
Computers - Systems
1,760 Hewlett-Packard Co. ............................................ 123,310
3,230 Sun Microsystems, Inc.* ........................................ 147,571
-----------
270,881
-----------
Electrical Equipment
1,260 Honeywell, Inc. ................................................ 94,106
-----------
Electronics - Defense
1,590 General Motors Corp. (Class H) ................................. 96,096
-----------
Electronics - Semiconductors/Components
1,300 Intel Corp. .................................................... 119,275
-----------
Entertainment
1,240 Walt Disney Productions ........................................ 100,207
-----------
Financial - Miscellaneous
2,400 Ahmanson (H.F.) & Co. .......................................... 127,650
1,460 American Express Co. ........................................... 122,275
2,350 Fannie Mae ..................................................... 111,184
1,400 Golden West Financial Corp. .................................... 117,775
1,770 Travelers Group, Inc. .......................................... 127,329
-----------
606,213
-----------
Foods
1,450 General Mills, Inc. ............................................ 100,231
-----------
Household Furnishings & Appliances
4,340 Maytag Corp. ................................................... 126,674
2,800 Sunbeam Corp. .................................................. 109,550
-----------
236,224
-----------
Household Products
1,700 Colgate-Palmolive Co. .......................................... 128,775
-----------
Medical Products & Supplies
2,040 Baxter International, Inc. ..................................... 117,938
-----------
Medical Services
2,000 HBO & Co. ...................................................... 154,500
-----------
Oil Integrated -International
1,500 Atlantic Richfield Co. .........................................$ 112,219
1,480 Chevron Corp. .................................................. 117,105
1,900 Exxon Corp. .................................................... 122,075
1,520 Mobil Corp. .................................................... 116,280
-----------
467,679
-----------
Pharmaceuticals
1,580 Abbott Laboratories ............................................ 103,391
1,480 American Home Products Corp. ................................... 122,008
-----------
225,399
-----------
Retail - Department Stores
1,800 Sears, Roebuck & Co. ........................................... 113,963
-----------
Retail - Specialty
3,670 Bed Bath & Beyond, Inc.* ....................................... 121,110
-----------
Retail - Specialty Apparel
2,680 Gap, Inc. ...................................................... 119,093
-----------
Semiconductor Equipment
3,140 Teradyne, Inc.* ................................................ 146,795
-----------
Shoes
1,440 Nike, Inc. (Class B) ........................................... 89,730
-----------
TOTAL UNITED STATES ............................................ 4,978,404
-----------
TOTAL COMMON STOCKS
(Identified Cost $15,100,950) .................................. 18,572,282
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- -----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (a)(7.1%)
U.S. GOVERNMENT AGENCIES
Federal Farm Credit Bank
$1,000 5.45% due 08/04/97 ............................................ 999,546
400 Federal Home Loan Mortgage Corp.
5.75% due 08/01/97 ............................................. 400,000
----------
TOTAL SHORT-TERM INVESTMENTS
(Amortized Cost $1,399,546) .................................... 1,399,546
----------
TOTAL INVESTMENTS
(Identified Cost $16,500,496)(b) ................................. 100.9% 19,971,828
LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS ................................................. (0.9) (174,632)
-------- ------------
NET ASSETS ........................................................ 100.0% $19,797,196
======== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
- ------------
ADR American Depository Receipt.
GDR Global Depository Receipt.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(a) Securities were purchased on a discount basis. The interest rates
shown have been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$3,806,319 and the aggregate gross unrealized depreciation is
$334,987, resulting in net unrealized appreciation of $3,471,332.
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JULY 31, 1997:
<TABLE>
<CAPTION>
IN UNREALIZED
CONTRACTS TO EXCHANGE DELIVERY APPRECIATION/
RECEIVE FOR DATE (DEPRECIATION)
- ------------------ ------------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
$ 64,633 ESP 10,034,338 08/01/97 $ 50
$ 1,472 MXN 11,571 08/01/97 (8)
DEM 69,082 $ 37,698 08/04/97 (123)
NLG 142,403 $ 69,027 08/04/97 (257)
yen 6,273,323 $ 52,939 08/05/97 (18)
MYR 199,255 $ 75,936 08/05/97 (259)
PTE 7,438,359 $ 40,153 08/05/97 (119)
$ 93,976 ESP 14,622,742 08/07/97 (139)
SGD 72,082 $ 49,042 08/07/97 (47)
$ 22,998 AUD 30,870 08/08/97 (77)
FRF 563,860 $ 91,528 08/29/97 (546)
-------
Net unrealized depreciation...................... $(1,543)
=======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY PORTFOLIO
SUMMARY OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- -----------------------------------------------------------
<S> <C> <C>
Aerospace ...................... $ 43,939 0.2%
Aerospace & Defense ............ 331,785 1.7
Aluminum ....................... 109,740 0.6
Apparel ........................ 46,995 0.2
Auto Parts -Original Equipment 80,755 0.4
Automotive ..................... 925,692 4.7
Banking ........................ 872,984 4.4
Banks .......................... 310,361 1.6
Beverages ...................... 166,036 0.8
Beverages -Soft Drinks ......... 106,509 0.5
Biotechnology .................. 118,450 0.6
Brewers ........................ 22,488 0.1
Brewery ........................ 147,700 0.8
Broadcast Media ................ 38,807 0.2
Building & Construction ........ 217,285 1.1
Building Materials ............. 124,045 0.6
Business & Public Services .... 74,946 0.4
Business Services .............. 240,501 1.2
Chemicals ...................... 729,164 3.7
Communications -Equipment &
Software ...................... 146,959 0.7
Computer Services .............. 44,599 0.2
Computer Software .............. 130,350 0.7
Computer Software & Services ... 80,622 0.4
Computers ...................... 216,382 1.1
Computers -Peripheral Equipment 78,019 0.4
Computers -Systems ............. 270,881 1.4
Conglomerates .................. 430,222 2.2
Consumer Products .............. 146,974 0.7
Electrical Equipment ........... 94,106 0.5
Electronics .................... 1,186,863 6.0
Electronics -Defense ........... 96,096 0.5
Electronics -Semiconductors/
Components .................... 250,033 1.3
Energy ......................... 440,172 2.2
Engineering .................... 56,890 0.3
Entertainment .................. 147,704 0.8
Finance & Brokerage ............ 79,525 0.4
Financial -Miscellaneous ...... 606,213 3.1
Financial Services ............. 326,236 1.6
Food Processing ................ 233,253 1.2
Foods .......................... 100,231 0.5
Foods & Beverages .............. 46,263 0.2
Furniture ...................... 47,327 0.2
Hospital Management ............ 27,529 0.1
Household Furnishings &
Appliances .................... 318,912 1.6
Household Products ............. $ 298,702 1.5%
Insurance ...................... 476,135 2.4
International Trade ............ 95,326 0.5
Leisure ........................ 127,015 0.6
Machine Tools .................. 57,576 0.3
Machinery ...................... 288,581 1.5
Machinery -Diversified ......... 46,696 0.2
Manufacturing .................. 58,380 0.3
Medical Products & Supplies ... 117,938 0.6
Medical Services ............... 154,500 0.8
Metals & Mining ................ 55,022 0.3
Natural Gas .................... 91,829 0.5
Oil Integrated -International . 467,679 2.4
Paper & Forest Products ........ 68,048 0.3
Paper Products ................. 133,541 0.7
Pharmaceuticals ................ 1,072,783 5.4
Property -Casualty Insurance ... 980 0.0
Publishing ..................... 126,974 0.6
Real Estate .................... 423,434 2.1
Restaurants .................... 61,583 0.3
Retail ......................... 650,531 3.3
Retail -Department Stores ..... 203,632 1.0
Retail -Specialty .............. 121,110 0.6
Retail -Specialty Apparel ..... 119,093 0.6
Semiconductor Equipment ........ 146,795 0.7
Shoes .......................... 89,730 0.5
Steel .......................... 66,668 0.3
Steel & Iron ................... 221,810 1.1
Telecommunications ............. 1,099,479 5.6
Textiles ....................... 64,535 0.3
Transportation ................. 492,015 2.5
U.S. Government Agencies ...... 1,399,546 7.1
Utilities ...................... 121,823 0.6
Utilities -Electric ............ 519,748 2.6
Utilities -Telecommunications .. 70,167 0.4
Wholesale Distributor .......... 51,881 0.3
------------- ------------
$19,971,828 100.9%
============= ============
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
- ---------------------------------------------------
<S> <C> <C>
Common Stocks .......... $18,572,282 93.8%
Short-Term Investments 1,399,546 7.1
----------- -----
$19,971,828 100.9%
=========== =====
</TABLE>
<PAGE>
DEAN WITTER RETIREMENT SERIES - STRATEGIST
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS (58.4%)
Aerospace & Defense (1.1%)
3,905 Honeywell, Inc. ................................................ $ 291,655
-------------
Aluminum (0.5%)
1,600 Aluminum Co. of America ......................................... 141,600
-------------
Automotive (1.7%)
8,000 Chrysler Corp. .................................................. 297,000
3,500 Ford Motor Co. ................................................. 143,062
-------------
440,062
-------------
Banks - Money Center (2.3%)
4,500 Citicorp ........................................................ 610,875
-------------
Banks - Regional (2.0%)
1,940 Wells Fargo & Co. ............................................... 533,379
-------------
Beverages - Soft Drinks (0.5%)
3,400 PepsiCo Inc. ................................................... 130,262
-------------
Cable/Cellular (0.8%)
9,400 U.S. West Media Group* .......................................... 207,387
-------------
Chemicals (2.6%)
1,250 Dow Chemical Co. ................................................ 118,750
11,450 Monsanto Co. ................................................... 570,353
-------------
689,103
-------------
Communications - Equipment & Software (0.6%)
1,840 Cisco Systems, Inc.* ........................................... 146,165
-------------
Computer Software (1.6%)
1,800 Microsoft Corp.* ................................................ 254,362
3,150 Oracle Corp.* ................................................... 171,084
-------------
425,446
-------------
Computers (4.5%)
10,400 Dell Computer Corp.* ........................................... 889,200
7,800 Gateway 2000, Inc.* ............................................ 297,862
-------------
1,187,062
-------------
Computers - Peripheral Equipment (1.8%)
11,250 Seagate Technology, Inc.* ....................................... 461,953
-------------
Computers - Systems (3.7%)
3,450 Diebold, Inc. .................................................. 173,362
9,500 Hewlett-Packard Co. ............................................ 665,594
3,300 Sun Microsystems, Inc.* ......................................... 150,769
-------------
989,725
-------------
Consumer Products (1.8%)
14,000 Tupperware Corp. ............................................... 486,500
-------------
Electrical Equipment (2.4%)
4,820 Emerson Electric Co. ............................................ $ 284,380
5,160 General Electric Co. ........................................... 362,167
-------------
646,547
-------------
Electronics -
Semiconductors/Components (2.1%)
6,000 Intel Corp. ..................................................... 550,500
-------------
Entertainment/Gaming (0.7%)
7,000 Circus Circus Enterprises, Inc.* ................................ 175,437
-------------
Financial Services (2.0%)
5,000 American Express Co. ............................................ 418,750
2,600 Fannie Mae ...................................................... 123,013
-------------
541,763
-------------
Foods (2.6%)
2,860 Campbell Soup Co. .............................................. 148,363
7,900 General Mills, Inc. ............................................ 546,088
-------------
694,451
-------------
Forest Products (2.4%)
10,100 Champion International Corp. .................................... 626,200
-------------
Healthcare - HMOs (1.0%)
11,200 Humana, Inc.* .................................................. 273,000
-------------
Household Appliances (1.2%)
11,000 Maytag Corp. ................................................... 321,063
-------------
Insurance (0.1%)
Aetna Inc. (Class C)
172 (Conv. Pref.) $4.75 ............................................ 17,329
-------------
Oil - International Integrated (5.8%)
6,400 Atlantic Richfield Co. ......................................... 478,800
2,070 Chevron Corp. .................................................. 163,789
2,800 Exxon Corp. .................................................... 179,900
7,200 Mobil Corp. ..................................................... 550,800
1,500 Texaco, Inc. .................................................... 174,094
-------------
1,547,383
-------------
Pharmaceuticals (4.5%)
1,800 Abbott Laboratories ............................................. 117,788
6,700 American Home Products Corp. .................................... 552,331
8,450 Johnson & Johnson ............................................... 526,541
-------------
1,196,660
-------------
Retail -Specialty (3.2%)
10,000 Bed Bath & Beyond, Inc.* ....................................... 330,000
2,400 Costco Companies Inc.* .......................................... 90,900
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - STRATEGIST
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
3,450 Home Depot, Inc. ............................................... $ 172,069
14,250 Pier 1 Imports, Inc. ............................................ 251,156
-------------
844,125
-------------
Retail - Specialty Apparel (2.5%)
14,600 Gap, Inc. ....................................................... 648,788
-------------
Savings & Loans (0.5%)
1,500 Golden West Financial Corp. ..................................... 126,187
-------------
Shoes (0.7%)
3,000 Nike, Inc. (Class B) ............................................ 186,938
-------------
Steel (1.2%)
4,300 Inland Steel Industries, Inc. .................................. 98,631
3,450 Nucor Corp. ..................................................... 214,116
-------------
312,747
-------------
TOTAL COMMON AND
PREFERRED STOCKS
(Identified Cost $10,314,161) .................................. 15,450,292
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- -----------
<S> <C> <C>
CORPORATE BONDS (3.7%)
Automotive - Finance (0.1%)
$ 15 Ford Capital BV (Netherlands)
9.375% due 05/15/01 ........................................... 16,545
------------
Banks (0.9%)
100 Bank One Corp
9.875% due 03/01/09 ........................................... 124,417
Central Fidelity Capital I
100 Series -144A**
6.75% due 04/15/27 ............................................ 102,601
------------
227,018
------------
Financial (0.4%)
100 Money Store Inc. (The)
8.375% due 04/15/04 ........................................... 105,497
------------
Financial Services (0.4%)
Centura Capital Trust I
100 Series 144A**
8.845% due 06/01/27 ........................................... 108,125
------------
Insurance (0.4%)
100 Vesta Capital Trust I -144A**
8.525% due 01/15/27 ........................................... 108,250
------------
Metals & Mining (0.4%)
100 Placer Dome, Inc. (Canada)
8.50% due 12/31/45 ............................................ 102,750
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Oil & Gas Products (0.4%)
$ 100 Mitchell Energy & Development Corp.
6.75% due 02/15/04 ............................................ $ 99,420
-------------
Oil - Domestic (0.2%)
50 Occidental Petroleum Corp.
11.125% due 08/01/10 .......................................... 67,914
-------------
Steel (0.0%)
10 Pohang Iron & Steel Co., Ltd. (South Korea)
7.50% due 08/01/02 ............................................ 10,336
-------------
Telecommunications (0.4%)
100 Total Access Communication -144A** (Thailand)
8.375% due 11/04/06 ........................................... 99,250
-------------
Utilities - Electric (0.1%)
20 Long Island Lighting Co.
6.25% due 07/15/01 ............................................ 19,789
-------------
TOTAL CORPORATE BONDS
(Identified Cost $919,525) ..................................... 964,894
-------------
U.S. GOVERNMENT OBLIGATIONS (16.0%)
400 U.S. Treasury Bond
6.50% due 11/15/26 ............................................ 408,984
315 U.S. Treasury Bond
6.875% due 08/15/25 ........................................... 336,414
150 U.S. Treasury Bond
7.625% due 02/15/25 ........................................... 174,529
550 U.S. Treasury Note
5.125% due 11/30/98 ........................................... 546,364
950 U.S. Treasury Note
5.25% due 12/31/97 ............................................ 949,269
350 U.S. Treasury Note
5.625% due 11/30/00 ........................................... 348,071
450 U.S. Treasury Note
5.75% due 08/15/03 ............................................ 445,927
100 U.S. Treasury Note
5.875% due 11/30/01 ........................................... 99,956
50 U.S. Treasury Note
6.375% due 01/15/99 ........................................... 50,506
350 U.S. Treasury Note
6.50% due 05/15/05 ............................................ 360,315
360 U.S. Treasury Note
6.875% due 08/31/99 ............................................ 367,978
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - STRATEGIST
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 140 U.S. Treasury Note
7.25% due 05/15/04 ........................................................ $ 149,911
-------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Identified Cost $4,145,542) ............................................... 4,238,224
-------------
SHORT-TERM INVESTMENTS (22.0%)
U.S. GOVERNMENT AGENCIES (a)(21.2%)
5,000 Federal Farm Credit Bank
5.42% due 08/05/97 ........................................................ 4,996,989
600 Federal Home Loan Mortgage Corp.
5.75% due 08/01/97 ........................................................ 600,000
-------------
TOTAL U.S. GOVERNMENT AGENCIES
(Amortized Cost $5,596,989) ................................................ 5,596,989
-------------
REPURCHASE AGREEMENT (0.8%)
223 The Bank of New York 5.75% due 08/01/97 (dated 07/31/97; proceeds
$222,587)(b) (Identified Cost $222,551) ................................... 222,551
-------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $5,819,540) ................................................ 5,819,540
-------------
TOTAL INVESTMENTS
(Identified Cost $21,198,768)(c) .......................................... 100.1% 26,472,950
LIABILITIES IN EXCESS OF
OTHER ASSETS ............................................................... (0.1) (13,530)
-------- -------------
NET ASSETS ................................................................. 100.0% $26,459,420
======== =============
</TABLE>
- ------------
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(a) Securities were purchased on a discount basis. The interest rates
shown have been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $120,000 U.S. Treasury Note 7.875% due 04/15/98
valued at $124,656, $93,651 U.S. Treasury Note 7.00% due 04/15/99
valued at $97,514 and $4,723 U.S. Treasury Note 5.625% due 08/31/97
valued at $4,832.
(c) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$5,356,659 and the aggregate gross unrealized depreciation is
$82,477, resulting in net unrealized appreciation of $5,274,182.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
July 31, 1997
<TABLE>
<CAPTION>
INTERMEDIATE
U.S. GOVERNMENT U.S. GOVERNMENT INCOME
LIQUID ASSET MONEY MARKET SECURITIES SECURITIES
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value*............... $20,113,397 $4,036,736 $10,350,075 $2,347,060
Cash .............................................. 8,427 2,213 78,974 86,163
Receivable for:
Investments sold.................................. -- -- -- --
Shares of beneficial interest sold................ 1,135,082 10,301 22,677 3,462
Dividends......................................... -- -- -- --
Interest.......................................... -- -- 76,764 33,314
Foreign withholding taxes reclaimed............... -- -- -- --
Prepaid expenses and other assets.................. 26,147 5,790 6,691 12,589
Deferred organizational expenses................... 1,127 1,284 1,191 1,189
Receivable from affiliate.......................... -- 8,537 -- 6,791
----------- ---------- ----------- ----------
TOTAL ASSETS...................................... 21,284,180 4,064,861 10,536,372 2,490,568
----------- ---------- ----------- ----------
LIABILITIES:
Payable for:
Investments purchased............................. -- -- -- --
Shares of beneficial interest repurchased ........ 38,541 -- 11,416 8,580
Dividends to shareholders......................... -- -- 4,011 746
Investment management fee......................... 4,022 -- 110 --
Accrued expenses and other payables................ 23,148 17,969 19,019 19,964
Organizational expenses payable.................... 5,441 5,596 5,509 5,506
----------- ---------- ----------- ----------
TOTAL LIABILITIES................................. 71,152 23,565 40,065 34,796
----------- ---------- ----------- ----------
NET ASSETS:
Paid-in-capital.................................... 21,213,018 4,041,296 10,359,177 2,514,907
Accumulated undistributed net investment income .. 10 -- -- 46
Accumulated undistributed net realized gain
(loss)............................................ -- -- (491) (91,207)
Net unrealized appreciation........................ -- -- 137,621 32,026
----------- ---------- ----------- ----------
NET ASSETS ...................................... $21,213,028 $4,041,296 $10,496,307 $2,455,772
=========== ========== =========== ==========
*IDENTIFIED COST.................................. $20,113,397 $4,036,736 $10,212,454 $2,315,034
=========== ========== =========== ==========
SHARES OF BENEFICIAL INTEREST OUTSTANDING ...... 21,213,018 4,042,542 1,059,510 253,850
=========== ========== =========== ==========
NET ASSET VALUE PER SHARE
(unlimited authorized shares of $.01 par value) .. $1.00 $1.00 $9.91 $9.67
=========== ========== =========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
AMERICAN CAPITAL DIVIDEND VALUE-ADDED GLOBAL
VALUE GROWTH GROWTH UTILITIES MARKET EQUITY STRATEGIST
- ------------- ------------ -------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$53,898,134 $3,595,614 $116,084,027 $5,671,872 $23,856,111 $19,971,828 $26,472,950
50,162 17,654 -- -- 71,591 97,563 --
1,160,411 114,777 338,972 59,863 724,700 274,717 --
117,578 17,493 153,745 13,810 32,661 36,421 50,264
27,266 905 165,765 20,937 22,727 10,450 18,010
-- -- 121 21 -- -- 81,793
101 -- -- 1,065 -- 8,996 144
13,270 4,338 11,076 5,646 8,501 9,554 7,169
1,376 1,379 1,186 1,191 1,379 1,191 1,189
-- 5,185 -- 2,057 -- 25,572 --
- ------------- ------------ -------------- ------------ ------------- ------------- -------------
55,268,298 3,757,345 116,754,892 5,776,462 24,717,670 20,436,292 26,631,519
- ------------- ------------ -------------- ------------ ------------- ------------- -------------
918,594 58,353 1,221,168 316,275 861,090 574,355 --
77,147 3,874 108,736 43,837 45,267 28,565 125,989
-- -- -- -- -- -- --
20,595 -- 71,294 -- 5,006 -- 16,034
31,781 19,786 36,684 19,613 20,886 30,667 24,575
5,687 5,686 5,501 5,509 5,686 5,509 5,501
- ------------- ------------ -------------- ------------ ------------- ------------- -------------
1,053,804 87,699 1,443,383 385,234 937,935 639,096 172,099
- ------------- ------------ -------------- ------------ ------------- ------------- -------------
37,394,619 2,542,364 78,149,265 3,829,119 14,983,162 15,411,210 20,620,027
46,600 -- 365,924 54,200 100,361 131,548 381,735
6,688,579 257,050 8,002,032 476,783 345,423 784,106 183,476
10,084,696 870,232 28,794,288 1,031,126 8,350,789 3,470,332 5,274,182
- ------------- ------------ -------------- ------------ ------------- ------------- -------------
$54,214,494 $3,669,646 $115,311,509 $5,391,228 $23,779,735 $19,797,196 $26,459,420
============= ============ ============== ============ ============= ============= =============
$43,813,438 $2,725,382 $ 87,289,739 $4,640,746 $15,505,322 $16,500,496 $21,198,768
============= ============ ============== ============ ============= ============= =============
3,197,235 207,826 5,855,243 391,125 1,262,502 1,367,161 1,744,091
============= ============ ============== ============ ============= ============= =============
$16.96 $17.66 $19.69 $13.78 $18.84 $14.48 $15.17
============= ============ ============== ============ ============= ============= =============
</TABLE>
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS, continued
STATEMENTS OF OPERATIONS
For the year ended July 31, 1997
<TABLE>
<CAPTION>
INTERMEDIATE
U.S. GOVERNMENT U.S. GOVERNMENT INCOME
LIQUID ASSET MONEY MARKET SECURITIES SECURITIES
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET INVESTMENT INCOME:
INCOME
Interest........................................... $1,450,222 $393,765 $706,725 $245,036
Dividends.......................................... -- -- -- --
-------------- --------------- --------------- --------------
TOTAL INCOME..................................... 1,450,222 393,765 706,725 245,036
-------------- --------------- --------------- --------------
EXPENSES
Investment management fees......................... 132,515 36,695 67,676 24,502
Transfer agent fees and expenses................... 52,551 6,122 42,577 7,692
Shareholder reports and notices.................... 29,598 4,314 4,749 2,416
Professional fees.................................. 15,232 15,334 14,872 16,995
Registration fees.................................. 25,200 14,233 22,217 13,083
Custodian fees..................................... 10,663 6,196 3,435 4,847
Trustees' fees and expenses........................ 3,655 321 753 250
Organizational expenses............................ 2,722 2,721 2,727 2,727
Other.............................................. 3,904 1,879 1,870 3,021
-------------- --------------- --------------- --------------
TOTAL EXPENSES................................... 276,040 87,815 160,876 75,533
Less: amounts waived/reimbursed ................... (11,009) (14,427) (56,757) (37,837)
-------------- --------------- --------------- --------------
NET EXPENSES..................................... 265,031 73,388 104,119 37,696
-------------- --------------- --------------- --------------
NET INVESTMENT INCOME (LOSS)..................... 1,185,191 320,377 602,606 207,340
-------------- --------------- --------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss)........................... -- -- 5,297 (62,395)
Net change in unrealized
appreciation/depreciation......................... -- -- 365,249 151,066
-------------- --------------- --------------- --------------
NET GAIN......................................... -- -- 370,546 88,671
-------------- --------------- --------------- --------------
NET INCREASE....................................... $1,185,191 $320,377 $973,152 $296,011
============== =============== =============== ==============
</TABLE>
- --------------
* Net of $1,132, $10, $7,380, $972, $1,050, $18,695 and $63 foreign
withholding tax, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
AMERICAN CAPITAL DIVIDEND VALUE-ADDED GLOBAL
VALUE GROWTH GROWTH UTILITIES MARKET EQUITY STRATEGIST
- ------------- ------------ ------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$ 147,964 $ 8,415 $ 69,357 $ 41,817 $ 34,670 $ 67,144 $ 673,048
357,714* 12,328* 2,522,140* 208,343* 368,546* 214,870* 153,990*
- ------------- ------------ ------------- ------------ ------------- ------------ ------------
505,678 20,743 2,591,497 250,160 403,216 282,014 827,038
- ------------- ------------ ------------- ------------ ------------- ------------ ------------
390,217 22,697 672,098 51,738 97,479 153,656 180,204
77,489 3,914 86,989 18,120 18,607 37,093 51,763
20,768 1,692 38,212 3,853 8,952 5,415 10,295
12,798 11,302 13,936 15,840 15,314 15,207 10,489
18,634 28,006 32,684 19,450 20,656 27,047 20,879
28,005 12,249 12,104 7,964 24,785 28,694 13,942
3,312 47 6,141 285 1,131 819 1,050
2,720 2,717 2,724 2,727 2,717 2,727 2,721
3,530 1,744 3,851 2,533 10,004 13,075 5,095
- ------------- ------------ ------------- ------------ ------------- ------------ ------------
557,473 84,368 868,739 122,510 199,645 283,733 296,438
(98,395) (57,660) -- (53,527) (4,686) (130,077) (84,434)
- ------------- ------------ ------------- ------------ ------------- ------------ ------------
459,078 26,708 868,739 68,983 194,959 153,656 212,004
- ------------- ------------ ------------- ------------ ------------- ------------ ------------
46,600 (5,965) 1,722,758 181,177 208,257 128,358 615,034
- ------------- ------------ ------------- ------------ ------------- ------------ ------------
7,151,437 294,325 8,642,932 608,162 896,043 811,865 247,627
9,007,653 762,068 21,493,364 426,820 6,185,067 2,898,751 4,379,845
- ------------- ------------ ------------- ------------ ------------- ------------ ------------
16,159,090 1,056,393 30,136,296 1,034,982 7,081,110 3,710,616 4,627,472
- ------------- ------------ ------------- ------------ ------------- ------------ ------------
$16,205,690 $1,050,428 $31,859,054 $1,216,159 $7,289,367 $3,838,974 $5,242,506
============= ============ ============= ============ ============= ============ ============
</TABLE>
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS, continued
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended July 31,
<TABLE>
<CAPTION>
U.S. GOVERNMENT
LIQUID ASSET MONEY MARKET
------------------------------- --------------------------------------
1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss).......................... $ 1,185,191 $ 3,416,056 $ 320,377 $ 727,122
Net realized gain (loss).............................. -- -- -- --
Net change in unrealized appreciation/depreciation ... -- -- -- --
------------ ------------- ------------ ------------
NET INCREASE ....................................... 1,185,191 3,416,056 320,377 727,122
------------ ------------- ------------ ------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income................................. (1,185,223) (3,416,043) (321,625) (727,125)
Net realized gain..................................... -- -- -- --
------------ ------------- ------------ ------------
TOTAL............................................... (1,185,223) (3,416,043) (321,625) (727,125)
------------ ------------- ------------ ------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Net proceeds from sales............................... 29,266,419 177,956,895 8,809,340 27,880,399
Reinvestment of dividends and distributions .......... 1,185,223 3,416,043 321,624 727,125
Cost of shares repurchased............................ (51,991,220) (174,251,486) (11,716,197) (32,674,558)
------------ ------------- ------------ ------------
NET INCREASE (DECREASE)............................. (21,539,578) 7,121,452 (2,585,233) (4,067,034)
------------ ------------- ------------ ------------
TOTAL INCREASE (DECREASE)........................... (21,539,610) 7,121,465 (2,586,481) (4,067,037)
NET ASSETS:
Beginning of period................................... 42,752,638 35,631,173 6,627,777 10,694,814
------------ ------------- ------------ ------------
END OF PERIOD....................................... $ 21,213,028 $ 42,752,638 $ 4,041,296 $ 6,627,777
============ ============= ============ ============
UNDISTRIBUTED NET INVESTMENT INCOME................... $ 10 $ 42 -- $ 2
============ ============= ============ ============
SHARES ISSUED AND REPURCHASED:
Sold.................................................. 29,266,419 177,956,895 8,809,340 27,880,399
Issued in reinvestment of dividends and
distributions........................................ 1,185,223 3,416,043 321,624 727,125
Repurchased........................................... (51,991,220) (174,251,486) (11,716,197) (32,674,558)
------------ ------------- ------------ ------------
NET INCREASE (DECREASE)............................... (21,539,578) 7,121,452 (2,585,233) (4,067,034)
============ ============= ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT INTERMEDIATE
SECURITIES INCOME SECURITIES AMERICAN VALUE CAPITAL GROWTH
- ---------------------------- ---------------------------- ----------------------------- -------------------------------------
1997 1996 1997 1996 1997 1996 1997 1996
- ------------- ------------- ------------- ------------- -------------- ------------- ------------ -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 602,606 $ 434,937 $ 207,340 $ 218,492 $ 46,600 $ 244,604 $ (5,965) $ 6,999
5,297 18,226 (62,395) (27,045) 7,151,437 4,355,860 294,325 31,476
365,249 (149,772) 151,066 (116,038) 9,007,653 (2,487,467) 762,068 45,817
- ------------- ------------- ------------- ------------- -------------- ------------- ------------ -----------------------
973,152 303,391 296,011 75,409 16,205,690 2,112,997 1,050,428 84,292
- ------------- ------------- ------------- ------------- -------------- ------------- ------------ -----------------------
(602,630) (434,913) (207,294) (218,918) (93,984) (299,827) (2,106) (8,566)
(22,190) -- -- (4,854) (3,137,376) (2,309,181) (56,080) (4,860)
- ------------- ------------- ------------- ------------- -------------- ------------- ------------ -----------------------
(624,820) (434,913) (207,294) (223,772) (3,231,360) (2,609,008) (58,186) (13,426)
- ------------- ------------- ------------- ------------- -------------- ------------- ------------ -----------------------
5,963,450 9,509,649 3,241,075 4,840,703 20,568,978 21,806,112 1,297,311 1,518,128
567,526 433,619 165,904 217,069 3,227,638 2,602,757 58,150 13,426
(5,033,814) (5,369,758) (5,211,640) (1,731,472) (22,877,816) (6,172,981) (665,910) (292,073)
- ------------- ------------- ------------- ------------- -------------- ------------- ------------ -----------------------
1,497,162 4,573,510 (1,804,661) 3,326,300 918,800 18,235,888 689,551 1,239,481
- ------------- ------------- ------------- ------------- -------------- ------------- ------------ -----------------------
1,845,494 4,441,988 (1,715,944) 3,177,937 13,893,130 17,739,877 1,681,793 1,310,347
8,650,813 4,208,825 4,171,716 993,779 40,321,364 22,581,487 1,987,853 677,506
- ------------- ------------- ------------- ------------- -------------- ------------- ------------ -----------------------
$10,496,307 $ 8,650,813 $ 2,455,772 $ 4,171,716 $ 54,214,494 $40,321,364 $3,669,646 $1,987,853
============= ============= ============= ============= ============== ============= ============ =======================
$ $ $
-- $ 24 $ 46 -- $ 46,600 $ 93,984 -- $ 2,106
============= ============= ============= ============= ============== ============= ============ =======================
616,600 971,490 340,574 499,259 1,422,680 1,603,955 91,240 119,028
58,481 44,420 17,479 22,618 237,676 203,340 4,317 1,087
(517,322) (547,637) (547,645) (181,670) (1,545,904) (447,666) (45,416) (23,095)
- ------------- ------------- ------------- ------------- -------------- ------------- ------------ -----------------------
157,759 468,273 (189,592) 340,207 114,452 1,359,629 50,141 97,020
============= ============= ============= ============= ============== ============= ============ =======================
</TABLE>
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS, continued
STATEMENTS OF CHANGES IN NET ASSSETS, continued
For the year ended July 31,
<TABLE>
<CAPTION>
DIVIDEND GROWTH UTILITIES
----------------------------- -----------------------------
1997 1996 1997 1996
- ----------------------------------------------------- -------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................. $ 1,722,758 $ 1,244,989 $ 181,177 $ 205,110
Net realized gain (loss).............................. 8,642,932 2,317,010 608,162 (13,965)
Net change in unrealized appreciation/depreciation ... 21,493,364 2,701,826 426,820 257,350
------------ ----------- ----------- -----------
NET INCREASE ....................................... 31,859,054 6,263,825 1,216,159 448,495
------------ ----------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income................................. (1,707,024) (1,199,564) (160,780) (230,987)
Net realized gain..................................... (2,463,125) (590,466) -- --
------------ ----------- ----------- -----------
TOTAL............................................... (4,170,149) (1,790,030) (160,780) (230,987)
------------ ----------- ----------- -----------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Net proceeds from sales............................... 37,149,898 36,503,267 2,818,978 3,456,194
Reinvestment of dividends and distributions .......... 4,150,502 1,779,713 158,903 227,657
Cost of shares repurchased............................ (23,440,408) (8,398,184) (6,235,329) (1,687,882)
------------ ----------- ----------- -----------
NET INCREASE (DECREASE)............................. 17,859,992 29,884,796 (3,257,448) 1,995,969
------------ ----------- ----------- -----------
TOTAL INCREASE (DECREASE)........................... 45,548,897 34,358,591 (2,202,069) 2,213,477
NET ASSETS:
Beginning of period................................... 69,762,612 35,404,021 7,593,297 5,379,820
------------ ----------- ----------- -----------
END OF PERIOD....................................... $115,311,509 $69,762,612 $ 5,391,228 $ 7,593,297
============ =========== =========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME................... $ 365,924 $ 350,190 $ 54,200 $ 33,362
============ =========== =========== ===========
SHARES ISSUED AND REPURCHASED:
Sold.................................................. 2,205,684 2,524,798 222,951 288,411
Issued in reinvestment of dividends and
distributions........................................ 255,693 126,953 12,596 18,947
Repurchased........................................... (1,379,982) (583,926) (488,313) (141,590)
------------ ----------- ----------- -----------
NET INCREASE (DECREASE)............................... 1,081,395 2,067,825 (252,766) 165,768
============ =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
VALUE-ADDED MARKET GLOBAL EQUITY STRATEGIST
- ----------------------------- ---------------------------- ----------------------------------------
1997 1996 1997 1996 1997 1996
- -------------- ------------- ------------- ------------- ------------- -------------------------
<S> <C> <C> <C> <C> <C>
$ 208,257 $ 331,372 $ 128,358 $ 84,531 $ 615,034 $ 287,670
896,043 186,832 811,865 434,795 247,627 730,868
6,185,067 1,044,025 2,898,751 47,491 4,379,845 291,438
- -------------- ------------- ------------- ------------- ------------- -------------------------
7,289,367 1,562,229 3,838,974 566,817 5,242,506 1,309,976
- -------------- ------------- ------------- ------------- ------------- -------------------------
(279,999) (257,479) (70,000) (126,784) (408,002) (244,742)
(698,399) (78,439) (367,529) -- (699,994) (159,285)
- -------------- ------------- ------------- ------------- ------------- -------------------------
(978,398) (335,918) (437,529) (126,784) (1,107,996) (404,027)
- -------------- ------------- ------------- ------------- ------------- -------------------------
6,558,038 6,512,239 7,696,263 6,329,119 7,519,070 12,101,707
948,925 329,833 435,668 121,869 1,107,086 403,090
(10,417,432) (1,769,137) (3,421,423) (2,492,083) (3,796,952) (2,673,732)
- -------------- ------------- ------------- ------------- ------------- -------------------------
(2,910,469) 5,072,935 4,710,508 3,958,905 4,829,204 9,831,065
- -------------- ------------- ------------- ------------- ------------- -------------------------
3,400,500 6,299,246 8,111,953 4,398,938 8,963,714 10,737,014
20,379,235 14,079,989 11,685,243 7,286,305 17,495,706 6,758,692
- -------------- ------------- ------------- ------------- ------------- -------------------------
$ 23,779,735 $20,379,235 $19,797,196 $11,685,243 $26,459,420 $17,495,706
============== ============= ============= ============= ============= =========================
$ 100,361 $ 172,103 $ 131,548 $ 49,495 $ 381,735 $ 174,703
============== ============= ============= ============= ============= =========================
416,960 468,279 606,253 542,027 549,814 972,731
62,594 24,706 35,887 10,862 83,616 34,364
(680,374) (129,743) (265,700) (214,741) (277,595) (218,134)
- -------------- ------------- ------------- ------------- ------------- -------------------------
(200,820) 363,242 376,440 338,148 355,835 788,961
============== ============= ============= ============= ============= =========================
</TABLE>
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 31, 1997
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Retirement Series (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment
company, consisting of eleven separate Series ("Series"). All of the Series,
with the exception of Strategist, are diversified.
The Fund was organized on May 14, 1992 as a Massachusetts business trust and
each of the Series commenced operations as follows:
<TABLE>
<CAPTION>
COMMENCEMENT COMMENCEMENT
OF OPERATIONS OF OPERATIONS
------------- -------------
<S> <C> <C> <C>
Liquid Asset ....................... December 30, 1992 Dividend Growth ........ January 7, 1993
U.S. Government Money Market ...... January 20, 1993 Utilities .............. January 8, 1993
U.S. Government Securities ......... January 8, 1993 Value-Added Market .... February 1, 1993
Intermediate Income Securities .... January 12, 1993 Global Equity .......... January 8, 1993
American Value ..................... February 1, 1993 Strategist ............. January 7, 1993
Capital Growth ..................... February 2, 1993
</TABLE>
The investment objectives of each Series are as follows:
SERIES INVESTMENT OBJECTIVE
- -------------------------------------------------------------------------------
Liquid Asset Seeks high current income, preservation of capital and
liquidity by investing in short-term money market
instruments.
- -------------------------------------------------------------------------------
U.S. Government Seeks high current income, preservation of capital and
Money Market liquidity by investing primarily in money market
instruments which are issued and/or guaranteed by the
U.S. Government, its agencies or instrumentalities.
- -------------------------------------------------------------------------------
U.S. Government Seeks high current income consistent with safety of
Securities principal by investing in a diversified portfolio of
obligations issued and/or guaranteed by the U.S.
Government or its instrumentalities.
- -------------------------------------------------------------------------------
Intermediate Income Seeks high current income consistent with safety of
Securities principal by investing primarily in intermediate term,
investment grade fixed-income securities.
- -------------------------------------------------------------------------------
American Value Seeks long-term growth consistent with an effort to
reduce volatility by investing principally in common
stock of companies in industries which, at the time of
investment, are believed to be undervalued in the
marketplace.
- -------------------------------------------------------------------------------
Capital Growth Seeks long-term capital growth by investing primarily
in common stocks.
- -------------------------------------------------------------------------------
Dividend Growth Seeks to provide reasonable current income and
long-term growth of income and capital by investing
primarily in common stock of companies with a record of
paying dividends and the potential for increasing
dividends.
- -------------------------------------------------------------------------------
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 31, 1997, continued
SERIES INVESTMENT OBJECTIVE
- -------------------------------------------------------------------------------
Utilities Seeks to provide current income and long-term growth of
income and capital by investing in equity and
fixed-income securities of companies in the public
utilities industry.
- -------------------------------------------------------------------------------
Value-Added Seeks to achieve a high level of total return on its
Market assets through a combination of capital appreciation
and current income. It seeks to achieve this objective
by investing, on an equally weighted basis, in a
diversified portfolio of common stocks of the companies
which are represented in the Standard & Poor's 500
Composite Stock Price Index.
- -------------------------------------------------------------------------------
Global Equity Seeks to provide a high level of total return on its
assets, primarily through long-term capital growth and,
to a lesser extent, from income. It seeks to achieve
this objective through investments in all types of
common stocks and equivalents, preferred stocks and
bonds and other debt obligations of domestic and
foreign companies, governments and international
organizations.
- -------------------------------------------------------------------------------
Strategist Seeks a high total investment return through a fully
managed investment policy utilizing equity, investment
grade fixed income and money market securities.
- -------------------------------------------------------------------------------
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Liquid Asset and U.S. Government Money Market:
Securities are valued at amortized cost which approximates market value. All
remaining Series: (1) an equity security listed or traded on the New York,
American or other domestic or foreign stock exchange is valued at its latest
sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price
(in cases where securities are traded on more than one exchange, the
securities are valued on the exchange designated as the primary market
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 Dean Witter InterCapital Inc. (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
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 31, 1997, continued
established by and under the general supervision of the Trustees (valuation
of securities for which market quotations are not readily available may also
be based upon current market prices of securities which are comparable in
coupon, rating and maturity, or an appropriate matrix utilizing similar
factors); (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 its staff,
including review of broker-dealer market price quotations, if available, in
determining what it believes is the fair valuation of the securities valued
by such pricing service; and (5) short-term debt securities having a maturity
date of more than sixty days at time of purchase are valued on a
mark-to-market basis until sixty days prior to maturity and thereafter at
amortized cost based on their value on the 61st day. Short-term debt
securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. Dividend income and distributions are recorded on the ex-dividend
date except for certain dividends on foreign securities which are recorded as
soon as the Fund is informed after the ex-dividend date. Interest income is
accrued daily. Liquid Asset and U.S. Government Money Market amortize
premiums and accrete discounts on securities owned; gains and losses realized
upon the sale of such securities are based on their amortized cost. Discounts
for all other Series are accreted over the life of the respective securities.
C. FOREIGN CURRENCY TRANSLATION -- The books and records of each Series
investing in foreign currency denominated transactions are translated into
U.S. dollars as follows: (1) the foreign currency market value of investment
securities, other assets and liabilities and forward foreign currency
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 Series do not isolate that portion of the results of operations
arising as a result of changes in the foreign exchange rates from the changes
in the market prices of the securities.
D. FORWARD FOREIGN CURRENCY CONTRACTS -- Some of the Series may enter into
forward foreign currency contracts which are valued daily at the appropriate
exchange rates. The resultant unrealized exchange
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 31, 1997, continued
gains and losses are included in the Statement of Operations as unrealized
foreign currency gain or loss. The Series record realized gains or losses on
delivery of the currency or at the time the forward contract is extinguished
(compensated) by entering into a closing transaction prior to delivery.
E. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply
individually for each Series with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of
its taxable income to its shareholders. Accordingly, no federal income tax
provision is required.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
G. EXPENSES -- Direct expenses are charged to the respective Series and
general Fund expenses are allocated on the basis of relative net assets or
equally among the Series.
H. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of $150,000 ($13,636 allocated to each of
the Series) and will be reimbursed, exclusive of amounts waived. Such
expenses have been deferred and are being amortized by the Fund on the
straight line method over a period not to exceed five years from the
commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement (the "Agreement"), the Fund
pays the Investment Manager a management fee, accrued daily and payable
monthly, by applying the following annual rates to each Series' net assets
determined at the close of each business day: Liquid Asset, U.S. Government
Money Market and Value-Added Market -0.50%; U.S. Government Securities and
Intermediate Income Securities -0.65%; Dividend Growth and Utilities -0.75%;
American Value, Capital Growth and Strategist -0.85%; and Global Equity -1.0%.
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 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.
For the period January 1, 1996 through December 31, 1997, the Investment
Manager is waiving the management fee and reimbursing expenses to the extent
they exceed 1.00% of daily net assets of each Series. At July 31, 1997,
included in the Statement of Assets and Liabilities are receivables from an
affiliate which represent expense reimbursements due to the Fund.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
Purchases and sales/maturities/prepayments of portfolio securities, excluding
short-term investments (except for Liquid Asset and U.S. Government Money
Market), for the year ended July 31, 1997 were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES OTHER
------------------------------ ------------------------------
SALES/
MATURITIES/ SALES/
PURCHASES PREPAYMENTS PURCHASES MATURITIES
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Liquid Asset ................... $395,220,670 $391,812,764 $353,719,078 $382,160,567
U.S. Government Money Market .. 661,528,098 664,513,285 -- --
U.S. Government Securities .... 11,000,110 9,181,622 -- --
Intermediate Income Securities 2,742,469 4,820,820 2,019,750 1,836,116
American Value ................. 1,055,258 1,298,196 114,604,516 110,531,028
Capital Growth ................. 15,742 77,006 4,322,821 3,559,093
Dividend Growth ................ -- -- 44,208,359 27,461,961
Utilities ...................... -- -- 5,530,405 7,587,775
Value-Added Market ............. -- 25,784 4,396,277 8,131,744
Global Equity .................. -- 46,580 15,006,072 11,195,792
Strategist ..................... 3,410,867 5,765,994 12,067,832 9,926,607
</TABLE>
Included in the aforementioned purchases and sales/maturities of portfolio
securities of Value-Added Market are common stock purchases and sales of
Morgan Stanley, Dean Witter, Discover & Co., an affiliate of the Investment
Manager, of $12,464 and $75,839, respectively, including realized gains of
$28,629.
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 31, 1997, continued
Included at July 31, 1997 in the payable for investments purchased and
receivable for investments sold were unsettled trades with Dean Witter
Reynolds Inc. ("DWR"), an affiliate of the Investment Manager, as follows:
<TABLE>
<CAPTION>
CAPITAL DIVIDEND GLOBAL
GROWTH GROWTH UTILITIES EQUITY
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Payable for investments purchased $ 4,319 $887,346 $200,025 $ --
========= ========== =========== =========
Receivable for investments sold .. $38,982 $149,533 $ 42,821 $91,462
========= ========== =========== =========
</TABLE>
For the year ended July 31, 1997, the following Series incurred brokerage
commissions with DWR, for portfolio transactions executed on behalf of such
Series, as follows:
<TABLE>
<CAPTION>
AMERICAN CAPITAL DIVIDEND GLOBAL
VALUE GROWTH GROWTH UTILITIES EQUITY STRATEGIST
- ---------- --------- ---------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C>
$25,735 $1,487 $43,558 $13,830 $9,201 $6,861
========== ========= ========== =========== ======== ============
</TABLE>
For the period May 31, 1997 through July 31, 1997, Capital Growth, Global
Equity and American Value incurred brokerage commissions of $270, $168 and
$1,365, respectively, with Morgan Stanley & Co., Inc., an affiliate of the
Investment Manager since May 31, 1997, for portfolio transactions executed on
behalf of the Series.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Fund's transfer agent. At July 31, 1997 the following Series had approximate
transfer agent fees and expenses payable as follows:
<TABLE>
<CAPTION>
INTERMEDIATE
U.S. GOVERNMENT U.S. GOVERNMENT INCOME AMERICAN CAPITAL
LIQUID ASSET MONEY MARKET SECURITIES SECURITIES VALUE GROWTH
- -------------- --------------- --------------- -------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
$120 $100 $1,250 $150 $800 $90
============== =============== =============== ============== ============ =========
DIVIDEND VALUE-ADDED GLOBAL
GROWTH UTILITIES MARKET EQUITY STRATEGIST
- -------------- --------------- --------------- -------------- ------------
$280 $80 $140 $210 $500
============== =============== =============== ============== ============
</TABLE>
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 31, 1997, continued
4. FEDERAL INCOME TAX STATUS
At July 31, 1997, Intermediate Income Securities had a net capital loss
carryover of approximately $30,200 of which $5,700 will be available through
July 31, 2004 and $24,500 will be available through July 31, 2005 to offset
future capital gains to the extent provided by regulations. During the year
ended July 31, 1997, Utilities utilized its net capital loss carryover of
approximately $102,000.
Net capital and net currency losses incurred after October 31 ("post-October
losses") within the taxable year are deemed to arise on the first business
day of the Series' next taxable year. The following Series incurred and will
elect to defer post-October losses during fiscal 1997:
<TABLE>
<CAPTION>
INTERMEDIATE
U.S. GOVERNMENT INCOME GLOBAL
SECURITIES SECURITIES EQUITY
- --------------- -------------- --------
<S> <C> <C>
$500 $57,800 $900
=============== ============== ========
</TABLE>
At July 31, 1997, the primary reason(s) for temporary book/tax differences
were as follows:
<TABLE>
<CAPTION>
TEMPORARY DIFFERENCES
-------------------------------
POST- CAPITAL LOSS
OCTOBER DEFERRALS FROM
LOSSES WASH SALES
----------- ------------------
<S> <C> <C>
U.S. Government Securities ......... o
Intermediate Income Securities .... o o
American Value ..................... o
Capital Growth ..................... o
Dividend Growth .................... o
Utilities ..........................
Value-Added Market.................. o
Global Equity....................... o o
Strategist ......................... o
</TABLE>
Additionally, Global Equity had temporary differences attributable to income
from the mark-to-market of passive foreign investment companies ("PFICs") and
permanent differences attributable to tax adjustments on PFICs sold by the
Series and Capital Growth had permanent differences attributable to a net
operating loss.
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 31, 1997, continued
To reflect reclassifications arising from permanent book/tax differences for
the year ended July 31, 1997, the following accounts were (charged) credited:
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED UNDISTRIBUTED
NET INVESTMENT NET REALIZED
INCOME GAIN (LOSS)
-------------- ---------------
<S> <C> <C>
Capital Growth $ 5,965 $ (5,965)
Global Equity . $23,695 $(23,695)
</TABLE>
5. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
Some of the Portfolios may enter into forward foreign currency contracts
("forward contracts") to facilitate settlement of foreign currency
denominated portfolio transactions or to manage foreign currency exposure
associated with foreign currency denominated securities.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Portfolios bear the
risk of an unfavorable change in foreign exchange rates underlying the
forward contracts. Risks may also arise upon entering into these contracts
from the potential inability of the counterparties to meet the terms of their
contracts.
At July 31, 1997, Global Equity had outstanding forward contracts to
facilitate settlement of foreign currency denominated portfolio transactions.
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
NET ASSET NET TOTAL
YEAR VALUE NET REALIZED TOTAL FROM DIVIDENDS DISTRIBUTIONS DIVIDENDS
ENDED BEGINNING INVESTMENT AND UNREALIZED INVESTMENT TO TO AND
JULY 31 OF PERIOD INCOME GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS
- ---------- ----------- ------------ -------------- ------------ -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
LIQUID ASSET
1993 (1) $ 1.00 $0.02 -- $ 0.02 $(0.02) -- $(0.02)
1994 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1995 1.00 0.06 -- 0.06 (0.06) -- (0.06)
1996 1.00 0.05 -- 0.05 (0.05) -- (0.05)
1997 1.00 0.05 -- 0.05 (0.05) -- (0.05)
U.S. GOVERNMENT MONEY MARKET
1993 (2) 1.00 --++ -- -- -- -- --
1994 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1995 1.00 0.06 -- 0.06 (0.06) -- (0.06)
1996 1.00 0.05 -- 0.05 (0.05) -- (0.05)
1997 1.00 0.04 -- 0.04 (0.04) -- (0.04)
U.S. GOVERNMENT SECURITIES
1993 (3) 10.00 0.19 $ 0.07 0.26 (0.20) -- (0.20)
1994 10.06 0.44 (0.50) (0.06) (0.44) -- (0.44)
1995 9.56 0.56 0.15 0.71 (0.56) -- (0.56)
1996 9.71 0.55 (0.12) 0.43 (0.55) -- (0.55)
1997 9.59 0.56 0.34 0.90 (0.56) $(0.02) (0.58)
INTERMEDIATE INCOME SECURITIES
1993 (4) 10.00 0.19 (0.02) 0.17 (0.19) -- (0.19)
1994 9.98 0.60 (0.57) 0.03 (0.60) -- (0.60)
1995 9.41 0.61 0.22 0.83 (0.61) -- (0.61)
1996 9.63 0.59 (0.21) 0.38 (0.59) (0.01) (0.60)
1997 9.41 0.53 0.26 0.79 (0.53) -- (0.53)
AMERICAN VALUE
1993 (5) 10.00 0.06 (0.01) 0.05 -- -- --
1994 10.05 0.03 (0.09) (0.06) (0.02) (0.04) (0.06)
1995 9.93 0.14 3.15 3.29 (0.12) -- (0.12)
1996 13.10 0.09 1.17 1.26 (0.15) (1.13) (1.28)
1997 13.08 0.02 5.12 5.14 (0.04) (1.22) (1.26)
</TABLE>
- ------------
* After application of the Fund's expense limitation.
+ Calculated based on the net asset value as of the last business day
of the period.
++ Includes dividends from net investment income of $0.004 per share.
(a) Not annualized.
(b) Annualized.
Commencement of operations:
(1) December 30, 1992. (4) January 12, 1993.
(2) January 20, 1993. (5) February 1, 1993.
(3) January 8, 1993.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET RATIOS TO AVERAGE NET
ASSETS ASSETS
(BEFORE EXPENSES WERE (AFTER EXPENSES WERE
ASSUMED) ASSUMED)
-------------------------- --------------------------
NET ASSET NET ASSETS
VALUE TOTAL END OF NET NET PORTFOLIO AVERAGE
END OF INVESTMENT PERIOD INVESTMENT INVESTMENT TURNOVER COMMISSION
PERIOD RETURN+ (000'S) EXPENSES INCOME (LOSS) EXPENSES INCOME (LOSS) RATE RATE PAID
- ----------- ------------ ------------ ----------- ------------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1.00 1.77%(a) $ 1,081 1.30%(b) 0.53%(b) 0.14%(b) 3.02%(b) N/A N/A
1.00 3.48 1,524 2.50 * 0.99 -- 3.49 N/A N/A
1.00 5.90 35,631 1.16 4.96 -- 6.12 N/A N/A
1.00 5.44 42,753 0.65 5.05 0.33 5.37 N/A N/A
1.00 4.57 21,213 1.04 4.43 1.00 4.47 N/A N/A
1.00 0.42 (a) 125 2.50* (b) (0.95)(b) 2.13 (b) 0.83 (b) N/A N/A
1.00 3.52 555 2.50* 0.82 -- 3.32 N/A N/A
1.00 5.86 10,695 2.50* 3.62 -- 6.12 N/A N/A
1.00 5.23 6,628 0.82 4.75 0.37 5.21 N/A N/A
1.00 4.51 4,041 1.20 4.17 1.00 4.37 N/A N/A
10.06 2.60 (a) 1,756 1.81 (b) 0.33 (b) 0.18 (b) 3.66 (b) -- N/A
9.56 (0.69) 2,954 2.50* 1.96 -- 4.46 29% N/A
9.71 7.72 4,209 2.36 3.49 -- 5.85 14 N/A
9.59 4.49 8,651 1.48 4.70 0.63 5.55 47 N/A
9.91 9.70 10,496 1.55 5.24 1.00 5.79 89 N/A
9.98 1.67 (a) 182 2.50* (b) 1.00 (b) 1.62 (b) 3.50 (b) -- N/A
9.41 0.26 460 2.50* 3.64 -- 6.14 40 N/A
9.63 9.22 994 2.50* 4.08 -- 6.58 37 N/A
9.41 3.95 4,172 1.58 5.01 0.72 5.87 142 N/A
9.67 8.63 2,456 2.00 4.50 1.00 5.50 132 N/A
10.05 0.50 (a) 308 2.50*(b) (0.66)(b) 0.74 (b) 1.10 (b) 121 (a) --
9.93 (0.59) 6,841 2.50* (0.81) -- 1.69 136 --
13.10 33.48 22,581 1.42 0.39 -- 1.81 234 --
13.08 9.83 40,321 1.18 0.23 0.65 0.76 301 $0.0543
16.96 41.62 54,214 1.21 (0.11) 1.00 0.10 261 0.0552
</TABLE>
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL HIGHLIGHTS, continued
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
NET ASSET NET TOTAL
YEAR VALUE NET REALIZED TOTAL FROM DISTRIBUTIONS DIVIDENDS
ENDED BEGINNING INVESTMENT AND UNREALIZED INVESTMENT DIVIDENDS TO TO AND
JULY 31 OF PERIOD INCOME (LOSS) GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS
- ---------- ----------- ------------- -------------- ------------ -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITAL GROWTH
1993 (4) $10.00 $(0.02) $(1.10) $(1.12) -- -- --
1994 8.88 0.13 0.45 0.58 $(0.04) -- $(0.04)
1995 9.42 0.10 1.77 1.87 (0.12) -- (0.12)
1996 11.17 0.07 1.55 1.62 (0.11) $(0.07) (0.18)
1997 12.61 (0.03) 5.41 5.38 (0.01) (0.32) (0.33)
DIVIDEND GROWTH
1993 (1) 10.00 0.13 0.58 0.71 (0.10) -- (0.10)
1994 10.61 0.28 0.37 0.65 (0.23) (0.01) (0.24)
1995 11.02 0.34 2.13 2.47 (0.31) (0.10) (0.41)
1996 13.08 0.32 1.76 2.08 (0.36) (0.19) (0.55)
1997 14.61 0.33 5.60 5.93 (0.33) (0.52) (0.85)
UTILITIES
1993 (2) 10.00 0.19 1.30 1.49 (0.14) -- (0.14)
1994 11.35 0.37 (0.95) (0.58) (0.34) (0.01) (0.35)
1995 10.42 0.42 0.80 1.22 (0.37) (0.02) (0.39)
1996 11.25 0.38 0.61 0.99 (0.45) -- (0.45)
1997 11.79 0.41 1.90 2.31 (0.32) -- (0.32)
VALUE-ADDED MARKET
1993 (3) 10.00 0.05 0.02 0.07 (0.04) -- (0.04)
1994 10.03 0.24 0.65 0.89 (0.11) -- (0.11)
1995 10.81 0.21 2.16 2.37 (0.26) (0.12) (0.38)
1996 12.80 0.25 1.17 1.42 (0.22) (0.07) (0.29)
1997 13.93 0.21 5.58 5.79 (0.25) (0.63) (0.88)
GLOBAL EQUITY
1993 (2) 10.00 0.07 (0.03) 0.04 -- -- --
1994 10.04 0.08 0.58 0.66 (0.05) -- (0.05)
1995 10.65 0.14 0.49 0.63 (0.11) -- (0.11)
1996 11.17 0.09 0.71 0.80 (0.18) -- (0.18)
1997 11.79 0.09 2.98 3.07 (0.06) (0.32) (0.38)
STRATEGIST
1993 (1) 10.00 0.06 (0.23) (0.17) -- -- --
1994 9.83 0.23 (0.20) 0.03 (0.13) -- (0.13)
1995 9.73 0.24 1.49 1.73 (0.18) -- (0.18)
1996 11.28 0.25 1.63 1.88 (0.34) (0.22) (0.56)
1997 12.60 0.37 2.96 3.33 (0.28) (0.48) (0.76)
</TABLE>
- ------------
* After application of the Fund's expense limitation.
+ Calculated based on the net asset value as of the last business day
of the period.
(a) Not annualized.
(b) Annualized.
Commencement of operations:
(1) January 7, 1993.
(2) January 8, 1993.
(3) February 1, 1993.
(4) February 2, 1993.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET RATIOS TO AVERAGE NET
ASSETS ASSETS
(BEFORE EXPENSES WERE (AFTER EXPENSES WERE
ASSUMED) ASSUMED)
-------------------------- -------------------------
NET ASSET NET ASSETS
VALUE TOTAL END OF NET NET PORTFOLIO AVERAGE
END OF INVESTMENT PERIOD INVESTMENT INVESTMENT TURNOVER COMMISSION
PERIOD RETURN+ (000'S) EXPENSES INCOME (LOSS) EXPENSES INCOME (LOSS) RATE RATE PAID
- ----------- ------------- ------------ ----------- ------------- ---------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8.88 (11.20)%(a) $ 135 2.50%*(b) (1.01)%(b) 1.97%(b) (0.47)%(b) 2%(a) --
9.42 6.57 215 2.50* (0.98) -- 1.52 11 --
11.17 20.08 678 2.50 * (1.07) -- 1.43 20 --
12.61 14.58 1,988 2.50 * (1.24) 0.76 0.50 68 $0.0536
17.66 43.46 3,670 3.16 (2.38) 1.00 (0.22) 147 0.0575
10.61 7.11 (a) 2,417 2.50* (b) 0.61 (b) 0.16 (b) 2.89 (b) 7 (a) --
11.02 6.13 12,821 1.51 1.78 -- 3.29 13 --
13.08 23.07 35,404 1.14 2.34 -- 3.48 29 --
14.61 16.09 69,763 1.00 2.07 0.63 2.44 18 0.0526
19.69 41.92 115,312 0.97 1.92 0.97 1.92 31 0.0537
11.35 14.98 (a) 1,334 2.50* (b) 1.59 (b) 0.30 (b) 3.79 (b) 8 (a) --
10.42 (5.23) 3,860 2.50* 1.62 -- 4.14 5 --
11.25 12.16 5,380 1.91 2.41 -- 4.32 24 --
11.79 8.76 7,593 1.52 2.31 0.62 3.20 17 0.0508
13.78 19.87 5,391 1.78 1.85 1.00 2.63 89 0.0508
10.03 0.71 (a) 640 2.50* (b) (0.16) (b) 0.92 (b) 1.42 (b) 1 (a) --
10.81 8.89 5,133 1.82 0.70 -- 2.53 8 --
12.80 22.65 14,080 1.22 1.33 -- 2.55 7 --
13.93 11.19 20,379 0.78 1.58 0.47 1.89 8 0.0300
18.84 43.12 23,780 1.02 1.04 1.00 1.07 23 0.0300
10.04 0.40 (a) 322 2.50* (b) (0.90) (b) 1.00 (b) 1.77 (b) -- --
10.65 6.54 2,020 2.50* 0.09 -- 2.41 8 --
11.17 6.08 7,286 2.25 0.48 -- 2.73 55 --
11.79 7.26 11,685 1.73 (0.15) 0.66 0.92 95 0.0500
14.48 26.66 19,797 1.85 (0.01) 1.00 0.84 80 0.0348
9.83 (1.70) (a) 551 2.50* (b) (0.19) (b) 0.64 (b) 1.67 (b) 26 (a) --
9.73 0.12 1,276 2.50* 0.70 -- 3.20 57 --
11.28 18.21 6,759 2.14 1.97 -- 4.11 115 --
12.60 16.97 17,496 1.61 1.92 0.66 2.86 113 0.0525
15.17 27.35 26,459 1.40 2.50 1.00 2.90 90 0.0535
</TABLE>
<PAGE>
DEAN WITTER RETIREMENT SERIES
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER RETIREMENT SERIES
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Liquid Asset
Series, the U.S. Government Money Market Series, the U.S. Government
Securities Series, the Intermediate Income Securities Series, the American
Value Series, the Capital Growth Series, the Dividend Growth Series, the
Utilities Series, the Value-Added Market Series, the Global Equity Series,
and the Strategist Series (constituting Dean Witter Retirement Series,
hereafter referred to as the "Fund") at July 31, 1997, the results of each of
their operations for the year then ended, the changes in each of their net
assets for each of the two years in the period then ended and the financial
highlights for each of the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at July 31, 1997 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
September 12, 1997
1997 FEDERAL INCOME TAX NOTICE (unaudited)
During the year ended July 31, 1997, the Fund paid to shareholders
long-term capital gains per share as follows:
<TABLE>
<CAPTION>
AMERICAN CAPITAL DIVIDEND VALUE-ADDED GLOBAL
VALUE GROWTH GROWTH MARKET EQUITY STRATEGIST
- ---------- --------- ---------- ------------- -------- ------------
<S> <C> <C> <C> <C> <C>
$0.31 $0.32 $0.47 $0.45 $0.05 $0.31
</TABLE>
Additionally, the following percentages of the income paid qualified
for the dividends received deduction available to corporations:
<TABLE>
<CAPTION>
AMERICAN CAPITAL DIVIDEND VALUE-ADDED GLOBAL
VALUE GROWTH GROWTH UTILITIES MARKET EQUITY STRATEGIST
- ---------- --------- ---------- ----------- ------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
5.58% 100% 99.92% 98.72% 74.37% 7.89% 19.47%
</TABLE>
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
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
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Dean Witter Trust FSB
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.
ANNUAL REPORT
JULY 31, 1997
DEAN WITTER
RETIREMENT SERIES
<PAGE>
DEAN WITTER RETIREMENT SERIES TWO WORLD TRADE CENTER,
NEW YORK, NEW YORK 10048
LETTER TO THE SHAREHOLDERS JANUARY 31, 1998
DEAR SHAREHOLDER:
We are pleased to present the semiannual report on the operations of Dean Witter
Retirement Series for the six-month period ended January 31, 1998.
Overall, the stock market was very generous to investors in 1997. However, in
August the Dow Jones Industrial Average appeared to have peaked at 8,340.
Bellwether multinational corporations such as Coca Cola began to guide earnings
estimates downward for the first time in many years on the basis of slower
growth and the currency impact from the turmoil in Asia. While the NASDAQ
Composite and Mid-Cap indexes peaked in early October, and the Standard &
Poor's 500 Composite Stock Price Index (S&P 500) peaked in early December,
uncertainty grew regarding earnings outlooks. Despite a flat to down fourth
quarter for the various indexes, the stock market, as measured by the Dow
Jones Industrial Average, increased by more than 20 percent for the third year
in a row for the first time ever. As year-end approached, historically
defensive sectors such as consumer goods and utilities outperformed the overall
market, while cyclical stocks lagged.
Over the past year the U.S. economy exhibited healthy growth with declining
inflation and strong employment growth. In this environment the Federal Reserve
Board periodically expressed concern that inflationary pressures could be on the
rise. However, inflation remains in check. Accordingly, the Federal Reserve
Board has left interest rates unchanged since March.
Demand for U.S. Treasury securities and the U.S. dollar increased as the crisis
in Asia induced an investor flight-to-quality. With many of the Southeast Asian
economies in turmoil, 1998 may see the United States inherit the deflationary
aspect of those markets. According to many analysts, this could benefit the
disinflationary trend here.
Real interest rates (market interest rates less inflation) in the United States
remain above historical norms. A realization of this situation by
<PAGE>
DEAN WITTER RETIREMENT SERIES
LETTER TO THE SHAREHOLDERS JANUARY 31, 1998, CONTINUED
investors, combined with the probability of a surplus in the U.S. budget
(leading to a reduction in the issuance of U.S. Treasury securities in 1998),
could cause interest rates to continue to decline in the months to come.
In mid-summer, Asian currencies with values pegged to the U.S. dollar came under
intense speculative attack. After sacrificing considerable reserves in an
attempt to defend the fixed levels, central banks succumbed to the pressure and
let their currencies float. These currencies then declined sharply relative to
the dollar. Thailand triggered the crisis in July. Next the Philippines was
affected, then Malaysia and Indonesia continued the trend in August. Hong Kong
and the northeastern Asian countries appeared to be able to overcome the crisis,
but pressure reemerged in October. Taiwan permitted a small further depreciation
in its currency. The result was a sharp upward movement in Hong Kong interest
rates, which severely affected its stock market given the significant exposure
to bank and real-estate-related stocks. By the end of 1997 Korea had also
succumbed to the currency assault.
Not one market was spared from the Asian crisis, not even the United States.
Fears that the Federal Reserve Board might increase interest rates were
virtually eliminated by the severity of financial disruptions in Asia. The
turmoil in Asia brought with it a flight to quality into U.S. government
securities and fears of a negative impact on the U.S. economy as its competitive
pricing edge eroded. Furthermore, the Asian crisis caused concern as to whether
demand for U.S. products would slow as well, eventually weakening the U.S.
economy. Higher interest rates would exacerbate the Asian currency situation by
making U.S.-dollar-denominated assets even more attractive. As the period
progressed, investor sentiment shifted once again toward the increased
probability of a move to lower interest rates. These factors combined to push
interest rates on intermediate and longer maturities down far more than
shorter-term securities. On January 30, 1998, 10-year Treasury notes were
yielding 5.51 percent compared to 5.31 percent for two-year notes and 5.22
percent for six-month bills. While 10-year notes had declined 50 basis points
over the six-month period under review, six-month bills were down only 9 basis
points, pointing to a continued complacency over future inflation.
After rising by about 25 basis points late in the first quarter of 1997, money
market yields held remarkably stable during the remainder of the year and
through January 1998. The target rate for federal funds remained constant at 5.5
percent from March 25, 1997, through the end of January. Overall economic
conditions in the United States continue to be excellent, with inflation
remaining quite moderate. The unemployment rate reached a 24-year low during the
year.
<PAGE>
DEAN WITTER RETIREMENT SERIES
LETTER TO THE SHAREHOLDERS JANUARY 31, 1998, CONTINUED
Despite Europe's sharp falls in October following the currency crisis in Asia,
European markets generally made a steady recovery during November and December.
Overall, 1997 was characterized by significant improvement in the economic
environment across Europe. In the United Kingdom low interest rates combined
with low inflation to result in strong economic growth and falling unemployment.
During the second half of the year Latin American markets, particularly Brazil
and Argentina, suffered as a result of turmoil in the Asian emerging markets.
Nevertheless, generally healthy economies and continued privatization programs
provided investors with a higher degree of confidence that these markets would
not be fundamentally disturbed by the situation in Asia.
LIQUID ASSET SERIES
As of January 31, 1998, Liquid Asset Series had assets of approximately $15
million, with an average maturity of 10 days. The Series' annualized net
investment income for the period under review was 4.61 percent.
On January 31, 1998, approximately 82 percent of the portfolio of the Liquid
Asset Series were invested in federal agency obligations and 18 percent in
high-quality commercial paper. One hundred percent of the Series' assets were
due to mature within one month.
We believe that Liquid Asset Series remains well positioned to meet its
objective of stability of principle. The Series continues to be operated in a
straight-forward, conservative style without structured notes or derivatives,
which could fluctuate excessively when interest rates change.
We do not expect the yields available in the money market in early 1998 to
differ dramatically from those available during the second half of 1997.
U.S. GOVERNMENT MONEY MARKET SERIES
As of January 31, 1998, the U.S. Government Money Market Series had net assets
totaling approximately $1.3 million, with an average maturity of 9 days. The
Series' annualized net investment income for the six-month period under review
was 4.53 percent. The Series' 30-day annualized yield for January was 4.48
percent.
On January 31, 1998, approximately 96 percent of U.S. Government Money Market
Series' assets were invested in federal agency obligations, with the remaining 4
percent invested in U.S. Treasury bills. One hundred percent of the portfolio's
assets were due to mature within one month.
<PAGE>
DEAN WITTER RETIREMENT SERIES
LETTER TO THE SHAREHOLDERS JANUARY 31, 1998, CONTINUED
We believe the Series is well positioned to meet its objective of security of
principal, high current income and liquidity. We continue to operate the
portfolio in a straight-forward, conservative style without structured notes or
derivatives, which could fluctuate excessively when interest rates change.
We do not expect the yields available in the money market in early 1998 to
differ dramatically from those available during the second half of 1997.
U.S. GOVERNMENT SECURITIES SERIES
For the six-month period ended January 31, 1998, the U.S. Government Securities
Series provided a total return of 4.53 percent compared to a total return of
4.53 percent for the Lipper Analytical Services, Inc. General U.S. Government
Funds Index and 5.39 percent for the Lehman Brothers General U.S. Government
Funds Index. The Series' performance includes income distributions totaling
$0.290996 per share and a change in net asset value from $9.91 per share on July
31, 1997, to $10.06 per share at the end of the period. On January 31, 1998, the
Series had net assets in excess of $9.1 million. Performance for the fiscal year
reflected the volatility of the market and the overall declining interest-rate
environment in 1997.
As of January 31, 1998, 81 percent of the Series' portfolio was invested in
Government National Mortgage Association mortgage-backed securities (GNMAs). The
balance of the Series' portfolio was invested in U.S. Treasury securities (19
percent). The Series' average duration stood at approximately 5.0 years.
(Duration measures a bond fund's sensitivity to interest-rate fluctuations.)
We believe that GNMAs continue to offer significant long-term value. Also, in
the current investment environment, they provide not only an incremental yield
incentive over U.S. Treasury securities of similar maturity, but also the
potential for attractive returns.
INTERMEDIATE INCOME SECURITIES SERIES
For the six-month period ended January 31, 1998, the Intermediate Income Series
had a total return of 3.92 percent. This compares to a total return of 4.13
percent for the Lipper Analytical Services Intermediate Investment Grade Funds
Index, and 4.16 percent for the Lehman Intermediate Government Corporate Bond
Index.
The Series' performance during the six-month period under review was reflective
of the fall in interest rates. The Series was negatively affected by the
inability of its corporate holdings to perform as well as comparable Treasury
maturities in the second part of the period. This is attributable primarily to
anticipated fall-out from Asia onto U.S. corporations. Corporate performance was
also constrained in January, from the impact on prices for outstanding debt of a
record amount of new
<PAGE>
DEAN WITTER RETIREMENT SERIES
LETTER TO THE SHAREHOLDERS JANUARY 31, 1998, CONTINUED
issues coming to market. As a result, the three new securities purchased by the
Series during the period, Citicorp, Dupont (E.I.) de Nemours & Co., Inc. and
Salomon, Inc. (which account for approximately 14 percent of net assets),
underperformed comparable Treasuries by 5 to 15 basis points, despite their
strong creditworthiness. All three issues were rated at least "A" by the major
rating services.
The Series' performance was aided by several transactions that resulted in a
modest inter-period extension of maturity. This allowed the Series to benefit,
to a greater extent, from the decline in interest rates. The Series also reduced
its Treasury and utility holdings, while investments in the bank and finance
sectors were increased. Temporary cash reserves were reduced early in the period
and ended January at 3.5 percent of net assets compared to 7.7 percent on July
31, 1997.
On January 31, 1998, U.S. Treasuries comprised approximately 26 percent of the
portfolio's holdings, with corporates accounting for the remainder (74 percent).
The average maturity of the Series, including cash reserves, was 5.07 years, the
average duration 3.97 years (duration gives investors an idea of a bond
portfolio's sensitivity to interest rate fluctuations). The average quality
rating was "A2." For the six-month period the Series paid dividends of $0.264433
per share.
AMERICAN VALUE SERIES
For the six-month period ended January 31, 1998, the American Value Series
produced a total return of 5.52 percent compared to 3.55 percent for the
Standard & Poor's 500 Composite Stock Price Index (S&P 500) and 3.18 percent for
the Lipper Analytical Services Inc. Growth Funds Index.
Based on recent analysis, the Series' portfolio manager expects U.S. economic
growth to slow to the 2.25 percent range in 1998, with earnings in the vicinity
of 5 percent. When earnings growth slips below the 10 percent range, the
market's leadership typically shifts from economically sensitive issues to
steady growth ones. In response, the Series has been tilted in this direction so
that steady growth stocks currently represent 60 percent of net assets.
On the cyclical side, the Series' 17.6 percent weighting in technology stocks
emphasizes software and services, which are more stable than other technology
sectors during economic slowdowns. Holdings in this area include Microsoft
Corp., Computer Associates International, Inc. and BMC Software, Inc. As of
January 31, 1998, the Series had a 8.1 percent weighting in retail stocks, which
is expected to be bolstered by a low unemployment level below 4.7 percent, and
by real wage growth and lower sourcing costs. The Series' retail positions
include Wal-Mart Stores, Inc. and Barnes & Noble, Inc.
On the growth side, the Series has increased its consumer staples weighting to
11.0 percent of net assets, emphasizing industries and companies with little or
no South American or Asian exposure.
<PAGE>
DEAN WITTER RETIREMENT SERIES
LETTER TO THE SHAREHOLDERS JANUARY 31, 1998, CONTINUED
This sector includes food chains such as Safeway, Inc., drugstores like Rite Aid
Corp., and such selected food companies as Nabisco Holdings Corp. In the
consumer/business services area, the Series continues to hold 12.5 percent of
its net assets in the radio/cable and newspaper industries. Commitments in these
sectors include Clear Channel Communications, Inc., CBS Corp., Comcast Corp. and
Gannett Co., Inc.
Health care, which remains overweighted in the Series at 16.6 percent, reflects
an emphasis on drugs, biotechnology and medical devices -- all industries with
patent protection and pricing power. Companies in these areas include Lilly
(Eli) & Co., Pfizer, Inc., Centocor, Inc. and Guidant Corp. The Series has also
maintained an overweighted position in interest-rate sensitive stocks, as
evidenced by its 18.6 percent commitment to the financial sector, where the
focus is on regional banks, brokerage houses, government agencies and utilities.
A sample of some of these holdings includes Summit Bancorp, Travelers Group,
Inc., and Fannie Mae.
Because an economic backdrop that is typically associated with falling interest
rates and more difficult corporate earnings is expected to remain in place, we
have established a four percent position in long-term U.S. Treasuries.
CAPITAL GROWTH SERIES
For the six-month period ended January 31, 1998, the Capital Growth Series
produced a return of -3.37 percent. This compares to a return of 3.55 percent
for the S&P 500 Index and a return of 3.18 percent for the Lipper Analytical
Services Growth Funds Index. Net assets of the Capital Growth Series totaled
slightly more than $3.1 million as of the end of the period. At that time the
Series owned 51 stocks.
The Series' weightings in small- and mid-cap stocks helped its performance
during the first quarter of 1997. However, with the stock market setback late in
1997, many small- and mid-cap issues failed to match the performance of
large-cap stocks recorded during the second quarter. Though the Series
outperformed the S&P 500 in the first half of the year, its greater than 50
percent exposure to mid-and small-cap stocks resulted in its underperforming the
index in the second half of the year. Additionally, many of the Series' holdings
in the mid-cap area were in the technology and oil-service sectors, among the
two areas that saw most of the significant price declines during the second
quarter of 1997. Both of these sectors had been overweighted. Earnings
disappointments in a few key companies also dampened performance.
<PAGE>
DEAN WITTER RETIREMENT SERIES
LETTER TO THE SHAREHOLDERS JANUARY 31, 1998, CONTINUED
We remain optimistic regarding Capital Growth Series' prospects for 1998. Stocks
in the portfolio are expected to have nearly a 30 percent earnings per share
growth rate for 1998 over 1997 and continue to have a very high return on equity
of approximately 20 percent, with a beta that is not much greater than that of
the overall markets.
DIVIDEND GROWTH SERIES
For the six-month period ended January 31, 1998, Dividend Growth Series had a
total return of 0.88 percent, compared to a total return of 3.55 percent for the
S&P 500 and 2.37 percent for the Lipper Analytical Services, Inc. Growth and
Income Funds Index. The Series' underperformance of its broad market indices was
in large part due to exceptional strength in technology stocks at times, a
sector which affords little or no current yield, and the Series' underweighting
in financial stocks.
Net assets of Dividend Growth Series totaled approximately $106 million on
January 31, 1998. As of January 31, 1998, the Series owned 38 equity issues
spread across 30 different industry groups. One new portfolio position was
established since our last report on July 31, 1997. A spinoff (a divestiture in
which a parent company establishes a subdivision or separate corporation) from
PepsiCo, Inc. during the period resulted in the receipt of shares of Tricon
Global Restaurants, Inc. These shares were subsequently liquidated.
UTILITIES SERIES
For the period ended January 31, 1998, the first half of the fiscal year, the
Utilities Series provided a total return of 14.05 percent compared to a total
return of 13.31 percent for the average Lipper Analytical Services Utility Funds
Index and 3.55 percent for the broad-based S&P 500.
During the past year, utilities benefited from a blend of improving industry
fundamentals, a favorable interest-rate environment and ongoing industry-wide
merger and acquisition activities. However, a primary event underpinning the
strong performance of the Series during the period was the Southeast Asian
economic crisis, which prompted a highly defensive investment mode in the U.S.
market.
Given this utility-friendly investment environment, electric utilities were the
primary beneficiaries of the cautious financial markets, with much of the
impetus being a flight to quality and safety. Additionally, electric utilities
continued to witness fair and balanced deregulation initiatives by many state
utility commissions, which tempered investors concerns and strengthened
shareholder confidence in this sector. Electric utility merger and acquisition
activity was consistently evident throughout the year as many companies enhanced
their earnings outlooks and expanded their product offerings and global presence
in preparation for the new competitive environment. The
<PAGE>
DEAN WITTER RETIREMENT SERIES
LETTER TO THE SHAREHOLDERS JANUARY 31, 1998, CONTINUED
telecommunications sector also showed very healthy performance, benefiting from
numerous merger and acquisition announcements. Furthermore, the telecom sector
overall showed robust earnings growth, fueled by a strong economy and
high-growth applications including wireless communications, data and selective
international investments. While natural gas pricing was adversely effected by
mild weather patterns toward the end of the year, the sectors overall market
performance was enhanced by a combination of industry-wide merger activity and
an expansion of diversified deregulated businesses.
Against this backdrop, the Utilities Series maintained a fully invested posture,
reflecting the underlying defensive theme across the financial markets.
Additionally, investor confidence continued to strengthen, due to the tempering
of regulatory concerns and more visible growth fundamentals within the utility
sectors. On January 31, 1998, 96 percent of the Series' assets were allocated to
utility and utility-related equities with 4 percent held in cash. Within the
equity component of the portfolio, 52 percent of assets were allocated to
electric utilities, 25 percent to telecommunications and 19 percent to natural
gas. Enhancing overall Series diversification are selective foreign securities,
which account for 5 percent of assets, and a focus on the growth area of global
telecommunications infrastructure.
We believe the Series remains uniquely diversified and structured to meet its
objective of providing shareholders with above average current income and
long-term growth of income and capital. Given the focus on Energy and
Telecommunications, the Utilities Series is well positioned to benefit from the
worldwide growth coming from globalization, privatization and strong product
demand.
VALUE-ADDED MARKET SERIES
For the six-month period ended January 31, 1998, the Value-Added Series produced
a total return of 1.52 percent compared to 3.55 percent for the S&P 500 and 2.37
percent for the Lipper Analytical Services, Inc. Growth and Income Funds Index.
While the Series outperformed the S&P 500 during the third quarter of 1997, it
fell behind in the fourth quarter as both small-cap and cyclical stocks came
under pressure. Since inception on February 1, 1993, the Series has posted an
average annual total return of 16.8 percent.
The Series invests in substantially all the stocks included in the S&P 500.
Unlike the index, the Series weights all stock positions equally, thereby
emphasizing the stocks of smaller- to medium-capitalized companies, which causes
performance to differ from that of the S&P 500 Index.
Historically, the strategy employed by the Series has led to strong relative
returns during periods when small-cap stocks have outperformed larger ones.
However, over the past three years large-capitalization stocks have been market
leaders overshadowing the solid returns provided by small-
<PAGE>
DEAN WITTER RETIREMENT SERIES
LETTER TO THE SHAREHOLDERS JANUARY 31, 1998, CONTINUED
and mid-cap stocks. We believe that we are now at a point in the economic cycle
where small caps may once again be positioned to outperform. Many relative
valuation measures, such as price-to-book, dividend yield and price-to-earnings
ratios, suggest that small-cap issues are currently undervalued relative to
large caps.
In addition, a continued strong U.S. dollar should reduce the relative earnings
growth of large multinationals, thus making small- and mid-caps more attractive.
Finally, because of the Asian currency crisis, investors in emerging markets may
decide to reconsider the attractiveness of the domestic small- and mid-cap
sectors. Such a scenario is expected to bode well for the equally weighted
strategy employed by the Series.
GLOBAL EQUITY SERIES
For the six-month period ended January 31, 1998, the Global Equity Series had a
total return of -6.07 percent. This compares to a total return of -3.59 percent
for the Lipper Analytical Services Global Funds Index, a return of 3.55 percent
for the S&P 500 and a return of -2.07 for the Morgan Stanley Capital
International World Index (MSCI Index).
As stated earlier, global markets in general were captivated by the widespread
plunge in Asian markets on the back of intense currency devaluations and ensuing
economic turmoil in that part of the world. Most Asian markets dropped between
60 and 70 percent, with Indonesia and Korea being hit the hardest. Even the Hong
Kong market, whose currency has not fluctuated in value, declined 44.5 percent
and the Japanese market disappointed investors again, falling 21.6 percent.
Japan's fragile economy slowed after the reversal of an income tax rebate and a
hike in its consumption tax. Investors also focused on the fragility of Japan's
financial system and the loss of credibility among politicians dealing with the
economic slump.
The European equity markets, with the dual catalysts of weak domestic currencies
and positive sentiment toward Economic and Monetary Union (EMU), mirrored the
U.S. market's rally. The following countries had exceptionally strong
performance during the period under review: Italy (24.90 percent), Spain (17.84
percent), Switzerland (11.95 percent) and the United Kingdom (10.90 percent).
The following core European markets lagged behind: France (3.78 percent),
Germany (-0.37 percent) and the Netherlands (-4.59 percent).
The Series' underperformance versus the MSCI Index is attributable to its
geographic allocation, which had more significant exposure to Japan and Asia
than the index. In response to the continuing market decline in Japan and the
economic crisis in the rest of Asia, the Series has since reduced
<PAGE>
DEAN WITTER RETIREMENT SERIES
LETTER TO THE SHAREHOLDERS JANUARY 31, 1998, CONTINUED
exposure to those markets. The Series' asset allocation targets now are 38
percent of net assets in Europe, 35 percent in the United States, 6 percent in
Japan, emerging Asia and Latin America and 1 percent in other markets deemed to
be attractive. The balance will be held in cash.
STRATEGIST SERIES
The Strategist Series posted a total return of 0.28 percent for the six-month
period ended January 31, 1998, versus 2.94 percent for the Lipper Analytical
Services Flexible Funds Index. Over the same period, the S&P 500 posted a total
return of 3.55 percent and the Lehman Brothers Government/Corporate Bond Index
posted a total return of 5.12 percent.
The Series' underperformance for the period under review, August 1997 to January
1998, was due to our asset allocation, which favored stocks and underweighted
bonds. For the six-month period, the Strategist Series maintained an asset
allocation target of 70 percent equities, 20 percent U.S. government and
corporate bonds and 10 percent cash equivalents. This was a change from the
first half of 1997 when the Series was positioned at roughly a 50 percent/50
percent stock and bond/cash blend. The move was made because of our view that
corporate earnings growth would continue at an above average pace, therefore
leading us to take a more aggressive approach toward the equity markets. The
untimely currency crises in Indonesia, Singapore, Malaysia, and Thailand had the
compounding negative effect of pummeling technology stocks and causing a rapid
and significant flight to quality bond rally.
While the outperformance of bonds tied to the Asian Pacific crisis may have
affected our strategy during the second half of the year, January 1998 has been
a good month for the equity market. We would expect this trend to continue
through the first quarter of 1998, at the very least, and provide improved
returns to our shareholders based on our current allocation target.
The equity portion of the portfolio features an emphasis on the U.S. consumer,
who is enjoying unprecedented financial liquidity tied to low unemployment and
declining mortgage rates. We hold a number of retailers (Pier 1 Imports, Inc.
and Kmart Corp.), consumer products companies (Colgate-Palmolive Co. and Kellogg
Co.) and leisure-time service providers (Walt Disney Co.). The Series also holds
significant exposure to technology, financial services and energy stocks.
The fixed-income portion of the portfolio is well diversified among both
government and corporate issuers, varying in maturities, interest rates and
duration. At the end of the period, the Series' bond portfolio (21 issues in
all) had an average maturity of 9 1/4 years, an average yield of 6.25 percent
and an average duration of 5 1/3 years.
<PAGE>
DEAN WITTER RETIREMENT SERIES
LETTER TO THE SHAREHOLDERS JANUARY 31, 1998, CONTINUED
As the equity market continues to outperform other asset classes, we will
gradually seek opportunities to decrease our exposure to stocks and raise our
weightings to bonds and cash, protecting profits while continuing to seek
attractive long-term total returns.
LOOKING AHEAD
We expect U.S. economic growth to remain relatively healthy in early 1998, with
the Federal Reserve Board unlikely to raise interest rates. However, the central
bank may need to reassess its current complacent stance on monetary policy
during the year, should inordinately strong economic growth cause an
unacceptable increase in inflation.
Asia's reestablishment of currency stability is paramount in order for the
region's stock markets to make a sustainable recovery. Although the situation in
Asia and its impact on European corporate earnings will continue to be monitored
carefully, the underlying fundamentals of the European markets remain positive.
We appreciate your support of Dean Witter Retirement Series 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 RETIREMENT SERIES - LIQUID ASSET
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (18.5%)
AUTOMOTIVE - FINANCE (8.3%)
$ 700 Chrysler Financial Corp.................................... 5.50% 02/12/98 $ 698,721
500 Ford Motor Credit Co....................................... 5.50 02/13/98 499,012
-----------
1,197,733
-----------
FINANCE - COMMERCIAL (3.4%)
500 CIT Group Holdings, Inc.................................... 5.50 02/27/98 497,953
-----------
FINANCE - CONSUMER (3.4%)
500 American Express Credit Corp............................... 5.51 02/20/98 498,478
-----------
FINANCE - DIVERSIFIED (3.4%)
500 General Electric Capital Corp.............................. 5.50 02/06/98 499,543
-----------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST $2,693,707)............................................................... 2,693,707
-----------
U.S. GOVERNMENT AGENCIES (82.0%)
1,920 Federal Farm Credit Bank................................... 5.43-5.45 02/04/98-02/18/98 1,916,911
5,255 Federal Home Loan Mortgage Corp............................ 5.44-5.57 02/02/98-02/04/98 5,253,204
1,770 Federal National Mortgage Association...................... 5.42-5.44 02/09/98-02/25/98 1,765,271
1,000 Student Loan Marketing Association......................... 5.39 02/02/98 999,701
2,000 Tennessee Valley Authority................................. 5.39 02/11/98 1,996,712
-----------
TOTAL U.S. GOVERNMENT AGENCIES
(AMORTIZED COST $11,931,799).............................................................. 11,931,799
-----------
TOTAL INVESTMENTS
(AMORTIZED COST $14,625,506) (a)........................................................... 100.5% 14,625,506
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS............................................. (0.5) (71,178)
------ ------------
NET ASSETS................................................................................. 100.0% $ 14,554,328
------ ------------
------ ------------
</TABLE>
- ---------------------
(a) Cost is the same for federal income tax purposes.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - U.S. GOVERNMENT MONEY MARKET
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCIES (95.3%)
$ 520 Federal Farm Credit Bank.................................... 5.41-5.37% 02/04/98-02/11/98 $ 519,377
520 Federal Home Loan Banks..................................... 5.39 02/11/98 519,147
240 Federal Home Loan Mortgage Corp............................. 5.57 02/02/98 239,926
----------
TOTAL U.S. GOVERNMENT AGENCIES
(AMORTIZED COST $1,278,450)................................................................ 1,278,450
----------
U.S. GOVERNMENT OBLIGATION (3.7%)
50 U.S. Treasury Bill
(AMORTIZED COST $49,964).................................. 5.32 02/05/98 49,964
----------
TOTAL INVESTMENTS
(AMORTIZED COST $1,328,414) (a)............................................................. 99.0% 1,328,414
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.............................................. 1.0 13,475
------ -----------
NET ASSETS.................................................................................. 100.0% $ 1,341,889
------ -----------
------ -----------
</TABLE>
- ---------------------
(a) Cost is the same for federal income tax purposes.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - U.S. GOVERNMENT SECURITIES
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS (98.2%)
Government National Mortgage Assoc. I (69.0%)
$ 2,569 ...................................................................... 7.00% 11/15/23-03/15/27 $2,607,904
3,588 ...................................................................... 7.50 01/15/24-01/15/27 3,694,826
----------
6,302,730
----------
932 Government National Mortgage Assoc. II (10.3%).......................... 7.00 03/20/26 943,806
----------
900 Resolution Funding Corp Zero Coupon Strips (5.9%)....................... 0.00 04/15/07 534,384
----------
U.S. Treasury Notes (13.0%)
100 ...................................................................... 5.625 01/31/98 99,969
1,050 ...................................................................... 6.375 09/30/01 1,083,201
----------
1,183,170
----------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(IDENTIFIED COST $8,706,194)....................................................................... 8,964,090
----------
SHORT-TERM INVESTMENT (1.7%)
REPURCHASE AGREEMENT
158 The Bank of New York
(dated 01/30/98;
proceeds $158,237) (a)
(IDENTIFIED COST $158,166)............................................ 5.375 02/02/98 158,166
----------
TOTAL INVESTMENTS
(IDENTIFIED COST $8,864,360) (b)..................................................................... 99.9% 9,122,256
OTHER ASSETS IN EXCESS OF LIABILITIES................................................................ 0.1 6,187
------ -----------
NET ASSETS........................................................................................... 100.0% $ 9,128,443
------ -----------
------ -----------
</TABLE>
- ---------------------
(a) Collateralized by $115,874 U.S. Treasury Bond 8.75% due 08/15/20 valued at
$161,330.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $264,269 and the
aggregate gross unrealized depreciation is $6,373, resulting in net
unrealized appreciation of $257,896.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (69.9%)
AUTOMOBILE - RENTALS (4.4%)
$ 100 Hertz Corp....................................................................... 6.00% 01/15/03 $ 99,883
----------
AUTOMOTIVE - FINANCE (1.2%)
25 General Motors Acceptance Corp................................................... 8.40 10/15/99 26,049
----------
BANK HOLDING COMPANIES (4.6%)
100 Citicorp......................................................................... 7.125 09/01/05 104,775
----------
BANKS (10.9%)
100 Bank One Corp.................................................................... 7.60 05/01/07 108,623
100 Shawmut Bank Connecticut, N.A.................................................... 8.625 02/15/05 112,915
25 Star Bank N.A.................................................................... 6.375 03/01/04 25,207
----------
246,745
----------
BROKERAGE (9.0%)
100 Bear Stearns Companies, Inc...................................................... 6.75 08/15/00 101,909
100 Salomon, Inc..................................................................... 6.50 03/01/00 101,019
----------
202,928
----------
CHEMICALS - DIVERSIFIED (4.5%)
100 Dupont (E.I.) de Nemours & Co., Inc.............................................. 6.50 09/01/02 102,621
----------
CHEMICALS - SPECIALTY (4.5%)
100 Millennium America, Inc.......................................................... 7.00 11/15/06 101,489
----------
DATA PROCESSING (4.6%)
100 Oracle Corp...................................................................... 6.91 02/15/07 103,316
----------
FINANCIAL (9.1%)
100 Ikon Capital Inc................................................................. 6.73 06/15/01 102,350
100 Nac Re Corp...................................................................... 8.00 06/15/99 102,820
----------
205,170
----------
FOREIGN GOVERNMENT (4.4%)
100 State of Israel.................................................................. 6.375 12/15/05 98,683
----------
LEISURE (4.8%)
100 Royal Caribbean Cruises.......................................................... 8.25 04/01/05 109,214
----------
MANUFACTURING (2.2%)
50 Reebok International Ltd. (United Kingdom)....................................... 6.75 09/15/05 50,081
----------
PAPER & FOREST PRODUCTS (4.5%)
100 Noranda Forest, Inc. (Canada).................................................... 6.875 11/15/05 102,122
----------
TEXTILES (1.2%)
25 Burlington Industries, Inc....................................................... 7.25 09/15/05 25,896
----------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $1,537,322)........................................................................ 1,578,972
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS (24.8%)
$ 100 U.S. Treasury Note............................................................... 6.125% 03/31/98 $ 100,112
100 U.S. Treasury Note............................................................... 6.625 06/30/01 103,776
300 U.S. Treasury Note............................................................... 5.875 11/30/01 304,776
50 U.S. Treasury Note............................................................... 6.25 01/31/02 51,480
----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $549,070).......................................................................... 560,144
----------
SHORT-TERM INVESTMENT (a) (3.3%)
U.S. GOVERNMENT AGENCY
75 Federal Home Loan Mortgage Corp.
(AMORTIZED COST $74,989)....................................................... 6.00 02/02/98 74,989
----------
TOTAL INVESTMENTS
(IDENTIFIED COST $2,161,381) (b)...................................................................... 98.0% 2,214,105
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................................................ 2.0 45,526
------ -----------
NET ASSETS............................................................................................ 100.0% $ 2,259,631
------ -----------
------ -----------
</TABLE>
- ---------------------
(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 $54,790 and the
aggregate gross unrealized depreciation is $2,066, resulting in net
unrealized appreciation of $52,724.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - AMERICAN VALUE
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (93.5%)
AGRICULTURE RELATED (0.9%)
2,000 Dekalb Genetics Corp. (Class B)......................................................... $ 54,750
7,333 Delta & Pine Land Co.................................................................... 219,990
2,000 Pioneer Hi-Bred International, Inc...................................................... 200,125
-----------
474,865
-----------
AUTO RELATED (0.1%)
2,000 Budget Group, Inc. (Class A)*........................................................... 69,875
-----------
BANKS (6.9%)
5,000 AmSouth Bancorporation.................................................................. 270,000
1,200 City National Corp...................................................................... 39,825
1,000 Comerica, Inc........................................................................... 94,375
200,000 Credito Italiano SpA (Italy)............................................................ 746,959
4,200 Crestar Financial Corp.................................................................. 220,500
17,000 Hibernia Corp. (Class A)................................................................ 324,062
5,000 Mellon Bank Corp........................................................................ 301,875
6,500 Northern Trust Corp..................................................................... 437,531
4,000 PNC Bank Corp........................................................................... 206,250
1,000 Southtrust Corp......................................................................... 56,437
2,000 Summit Bancorp.......................................................................... 100,000
2,000 Union Planters Corp..................................................................... 123,000
1,500 Wells Fargo & Co........................................................................ 463,500
2,000 Westamerica Bancorporation.............................................................. 190,000
-----------
3,574,314
-----------
BIOTECHNOLOGY (2.2%)
1,000 Arterial Vascular Engineering, Inc.*.................................................... 73,250
13,000 Centocor, Inc.*......................................................................... 520,812
3,000 Genzyme Corp. General Division*......................................................... 80,062
4,000 Gilead Sciences, Inc.*.................................................................. 162,000
7,000 IDEC Pharmaceuticals Corp.*............................................................. 292,250
-----------
1,128,374
-----------
BUILDING & CONSTRUCTION (0.3%)
7,000 D.R. Horton, Inc........................................................................ 138,250
-----------
CABLE/CELLULAR (4.1%)
16,000 Comcast Corp. (Class A Special)......................................................... 499,000
4,000 Comcast Corp. (Class A)................................................................. 124,250
7,000 Cox Communications, Inc. (Class A)*..................................................... 258,125
7,000 HSN, Inc.*.............................................................................. 333,375
12,000 Tele-Communications, Inc. (Class A)*.................................................... 336,000
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
9,000 Time Warner, Inc........................................................................ $ 577,687
-----------
2,128,437
-----------
CAPITAL GOODS (0.6%)
4,000 General Electric Co..................................................................... 310,000
-----------
COMMUNICATIONS EQUIPMENT (2.5%)
7,000 CIENA Corp.*............................................................................ 385,437
5,000 Cisco Systems, Inc.*.................................................................... 315,312
3,000 Lucent Technologies Inc................................................................. 265,500
4,000 Nokia Corp. (ADR) (Finland)............................................................. 304,000
-----------
1,270,249
-----------
COMPUTER EQUIPMENT (0.7%)
4,000 SCI Systems, Inc.*...................................................................... 174,000
4,000 Sun Microsystems, Inc.*................................................................. 191,750
-----------
365,750
-----------
COMPUTER SOFTWARE (8.6%)
5,000 Arbor Software Corp.*................................................................... 187,812
4,500 BMC Software, Inc.*..................................................................... 304,875
3,000 CBT Group PLC (ADR) (Ireland)*.......................................................... 272,250
1,000 Citrix Systems, Inc.*................................................................... 68,750
10,000 Computer Associates International, Inc.................................................. 531,875
11,000 Compuware Corp.*........................................................................ 429,000
7,000 Electronic Arts, Inc.*.................................................................. 251,562
5,000 Legato Systems, Inc.*................................................................... 229,375
7,000 Manugistics Group, Inc.*................................................................ 281,750
4,000 Microsoft Corp.*........................................................................ 596,750
13,000 PeopleSoft, Inc.*....................................................................... 455,812
6,000 Platinum Technology, Inc.*.............................................................. 168,000
1,000 SAP AG (Pref.) (Germany)................................................................ 363,040
6,000 Veritas Software Corp.*................................................................. 294,750
-----------
4,435,601
-----------
CONSUMER - NONCYCLICAL (3.9%)
9,000 Alberto-Culver Co. (Class B)............................................................ 266,625
6,000 Clorox Co............................................................................... 459,750
8,000 Heinz (H.J.) Co......................................................................... 443,500
5,000 Keebler Foods Co.*...................................................................... 137,500
6,000 Nabisco Holdings Corp. (Class A)........................................................ 248,250
3,000 Procter & Gamble Co..................................................................... 235,125
2,500 Quaker Oats Company (The)............................................................... 134,375
2,000 Sara Lee Corp........................................................................... 109,125
-----------
2,034,250
-----------
CONSUMER BUSINESS SERVICES (4.5%)
8,000 Automatic Data Processing, Inc.......................................................... 478,500
19,224 Cendant Corp.*.......................................................................... 651,213
10,000 Corrections Corp. of America*........................................................... 368,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - AMERICAN VALUE
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
10,000 Paychex, Inc............................................................................ $ 478,750
8,000 Sysco Corp.............................................................................. 358,000
-----------
2,335,213
-----------
CONSUMER PRODUCTS (7.1%)
10,000 Albertson's, Inc........................................................................ 476,875
4,600 CVS Corp................................................................................ 301,587
5,000 Dominick's Supermarkets, Inc.*.......................................................... 198,125
15,000 Fred Meyer, Inc.*....................................................................... 553,125
15,000 Kroger Co.*............................................................................. 586,875
8,000 Rite Aid Corp........................................................................... 499,500
8,000 Safeway, Inc.*.......................................................................... 531,500
15,600 Walgreen Co............................................................................. 516,750
-----------
3,664,337
-----------
DRUGS (7.6%)
10,000 ALZA Corp. (Class A)*................................................................... 356,250
5,000 Bristol-Myers Squibb Co................................................................. 498,437
2,000 Cardinal Health, Inc.................................................................... 154,875
3,000 Dura Pharmaceuticals, Inc.*............................................................. 119,063
8,000 Lilly (Eli) & Co........................................................................ 540,000
5,000 Medicis Pharmaceutical Corp. (Class A)*................................................. 232,500
160 Novartis AG (Switzerland)............................................................... 274,255
6,300 Pfizer, Inc............................................................................. 516,206
8,000 Schering-Plough Corp.................................................................... 579,000
4,200 Warner-Lambert Co....................................................................... 632,100
-----------
3,902,686
-----------
ENERGY (1.2%)
4,200 Halliburton Co.......................................................................... 188,738
5,800 Schlumberger, Ltd....................................................................... 427,388
-----------
616,126
-----------
FINANCIAL - MISCELLANEOUS (5.3%)
2,000 American Express Co..................................................................... 167,375
3,000 Associates First Capital Corp. (Class A)................................................ 204,000
2,200 Donaldson, Lufkin & Jenrette, Inc....................................................... 154,688
6,350 Edwards (A.G.), Inc..................................................................... 240,506
9,000 Fannie Mae.............................................................................. 555,750
12,000 Freddie Mac............................................................................. 534,000
7,000 Hambrecht & Quist Group*................................................................ 221,813
500 Legg Mason, Inc......................................................................... 24,719
4,000 Lehman Brothers Holdings, Inc........................................................... 217,250
6,500 Paine Webber Group, Inc................................................................. 206,781
4,000 Providian Financial Corp................................................................ 195,500
-----------
2,722,382
-----------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
HEALTHCARE PRODUCTS & SERVICES (4.0%)
12,000 HBO & Co................................................................................ $ 627,750
24,000 Health Management Associates, Inc. (Class A)*........................................... 574,500
14,000 Healthsouth Corp.*...................................................................... 314,125
10,000 Renal Treatment Centers, Inc.*.......................................................... 320,625
9,000 Total Renal Care Holdings, Inc.*........................................................ 218,813
-----------
2,055,813
-----------
INSURANCE (2.6%)
6,000 Allstate Corp........................................................................... 531,000
3,000 Equitable Companies, Inc................................................................ 138,000
2,100 Marsh & McLennan Companies, Inc......................................................... 155,138
5,100 SunAmerica, Inc......................................................................... 204,956
1,500 Torchmark Corp.......................................................................... 62,344
5,500 Travelers Group, Inc.................................................................... 272,250
-----------
1,363,688
-----------
INTERNET (3.5%)
8,000 America Online, Inc.*................................................................... 765,500
6,000 Checkfree Holdings Corp.*............................................................... 147,000
14,000 Excite, Inc.*........................................................................... 596,750
5,000 Yahoo! Inc.*............................................................................ 316,875
-----------
1,826,125
-----------
MEDIA GROUP (8.4%)
22,000 CBS Corp................................................................................ 658,625
14,000 Chancellor Media Corp.*................................................................. 481,250
7,000 Clear Channel Communications, Inc.*..................................................... 539,000
5,000 Gannett Co., Inc........................................................................ 302,500
8,000 Jacor Communications, Inc.*............................................................. 400,000
7,000 News Corp., Ltd. (ADR) (Australia)...................................................... 174,125
19,800 Outdoor Systems, Inc.*.................................................................. 475,200
7,300 Tribune Co.............................................................................. 443,475
8,000 Univision Communications, Inc. (Class A)*............................................... 305,000
5,000 Viacom, Inc. (Class B)*................................................................. 208,750
3,500 Walt Disney Co.......................................................................... 372,969
-----------
4,360,894
-----------
MEDICAL SUPPLIES (2.8%)
5,000 Becton, Dickinson & Co.................................................................. 315,625
8,500 Guidant Corp............................................................................ 546,125
7,300 Medtronic, Inc.......................................................................... 372,756
3,700 Sofamor Danek Group, Inc.*.............................................................. 231,713
-----------
1,466,219
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - AMERICAN VALUE
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MULTI-LINE INSURANCE (0.3%)
2,000 Lincoln National Corp................................................................... $ 151,375
-----------
RESTAURANTS (0.7%)
10,000 Cracker Barrel Old Country Store, Inc................................................... 346,250
-----------
RETAIL (8.1%)
6,000 Barnes & Noble, Inc.*................................................................... 190,875
20,000 Costco Companies, Inc.*................................................................. 867,500
950 Dollar General Corp..................................................................... 34,556
16,000 Family Dollar Stores, Inc............................................................... 510,000
8,000 Gap, Inc................................................................................ 312,500
6,000 General Nutrition Companies, Inc.*...................................................... 216,375
9,500 Home Depot, Inc......................................................................... 572,969
7,200 Lowe's Companies, Inc................................................................... 364,050
12,000 Mattel, Inc............................................................................. 486,000
10,000 Proffitt's, Inc.*....................................................................... 293,750
8,200 Wal-Mart Stores, Inc.................................................................... 326,975
-----------
4,175,550
-----------
SEMICONDUCTORS (1.1%)
3,000 Linear Technology Corp.................................................................. 198,000
3,000 Maxim Integrated Products, Inc.*........................................................ 103,875
8,000 Micron Technology, Inc.*................................................................ 277,000
-----------
578,875
-----------
TELECOMMUNICATIONS (2.0%)
6,000 Ameritech Corp.......................................................................... 257,625
4,000 Intermedia Communications Inc.*......................................................... 246,000
9,000 LCI International, Inc.*................................................................ 258,188
5,000 Teleport Communications Group Inc. (Class A)*........................................... 279,063
-----------
1,040,876
-----------
UTILITIES (3.5%)
13,000 Consolidated Edison Co. of New York, Inc................................................ 537,063
30,000 DPL, Inc................................................................................ 549,375
5,000 GTE Corp................................................................................ 272,813
4,000 New York State Electric & Gas Corp...................................................... 141,000
5,000 SCANA Corp.............................................................................. 140,938
3,000 U.S. West Communications Group.......................................................... 144,377
-----------
1,785,566
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $42,086,011)........................................................... $48,321,940
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATION (4.0%)
$ 1,900 U.S. Treasury Bond 6.375% due 08/15/27 (IDENTIFIED COST $1,918,109)..................... $ 2,040,220
-----------
SHORT-TERM INVESTMENT (a) (3.1%)
U.S. GOVERNMENT AGENCY
1,600 Federal Home Loan Mortgage Corp. 5.57% due 02/02/98
(IDENTIFIED COST $1,599,752).......................................................... 1,599,752
-----------
TOTAL INVESTMENTS
(IDENTIFIED COST $45,603,872) (b).......................................................... 100.6% 51,961,912
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS............................................. (0.6) (306,378)
------ ------------
NET ASSETS................................................................................. 100.0% $ 51,655,534
------ ------------
------ ------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $6,838,484 and the
aggregate gross unrealized depreciation is $480,444, resulting in net
unrealized appreciation of $6,358,040.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - CAPITAL GROWTH
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (102.3%)
APPAREL & FOOTWEAR (0.9%)
600 Nautica Enterprises, Inc.*............................................................... $ 16,800
250 Tommy Hilfiger Corp.*.................................................................... 10,891
----------
27,691
----------
BANKING (1.1%)
600 State Street Corp........................................................................ 33,600
----------
BUILDING MATERIALS (2.6%)
1,300 Southdown, Inc........................................................................... 81,981
----------
CAPITAL GOODS (2.1%)
1,500 Tyco International Ltd................................................................... 66,562
----------
COMPUTER SOFTWARE (7.7%)
600 Cadence Design Systems, Inc.*............................................................ 16,800
900 Computer Associates International, Inc................................................... 47,869
1,000 Microsoft Corp.*......................................................................... 149,187
800 Security Dynamics Technologies, Inc.*.................................................... 28,200
----------
242,056
----------
COMPUTERS - SYSTEMS (3.3%)
1,550 EMC Corp.*............................................................................... 50,472
1,100 Sun Microsystems, Inc.*.................................................................. 52,731
----------
103,203
----------
CONSUMER SERVICES (2.5%)
3,000 AccuStaff, Inc.*......................................................................... 77,250
----------
DRUGS (12.6%)
1,500 Elan Corp. PLC (ADR) (Ireland)*.......................................................... 77,906
1,800 Medicis Pharmaceutical Corp. (Class A)*.................................................. 83,700
1,100 Pfizer, Inc.............................................................................. 90,131
600 Warner-Lambert Co........................................................................ 90,300
1,500 Watson Pharmaceuticals, Inc.*............................................................ 55,125
----------
397,162
----------
ENVIRONMENTAL CONTROL (2.1%)
4,000 Newpark Resources, Inc.*................................................................. 65,000
----------
FINANCIAL - MISCELLANEOUS (11.8%)
200 Household International, Inc............................................................. 24,900
2,900 MBNA Corp................................................................................ 90,081
2,000 Providian Financial Corp................................................................. 97,750
2,000 SunAmerica, Inc.......................................................................... 80,375
1,600 Travelers Group, Inc..................................................................... 79,200
----------
372,306
----------
HEALTHCARE PRODUCTS & SERVICES (2.1%)
1,100 Express Scripts, Inc. (Class A)*......................................................... 67,375
----------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
HOME BUILDING (0.8%)
700 Oakwood Homes Corp....................................................................... $ 25,156
----------
HOSPITAL MANAGEMENT (3.7%)
2,800 Quorum Health Group, Inc.*............................................................... 70,000
1,000 Universal Health Services, Inc. (Class B)*............................................... 46,625
----------
116,625
----------
HOUSEHOLD FURNISHINGS & APPLIANCES (2.3%)
1,500 Ethan Allen Interiors, Inc............................................................... 71,812
----------
INSURANCE (5.2%)
1,800 Conseco, Inc............................................................................. 82,350
1,200 MGIC Investment Corp..................................................................... 81,150
----------
163,500
----------
MACHINERY - DIVERSIFIED (2.3%)
1,400 Deere & Co............................................................................... 73,850
----------
MEDIA (2.4%)
1,000 Clear Channel Communications, Inc.*...................................................... 77,000
----------
OIL DRILLING & SERVICES (1.3%)
1,300 R & B Falcon Corp.*...................................................................... 39,325
----------
OIL EQUIPMENT & SERVICES (3.5%)
5,250 Global Industries Ltd.*.................................................................. 76,453
1,700 Varco International, Inc.*............................................................... 34,850
----------
111,303
----------
RESTAURANTS (1.2%)
1,000 Starbucks Corp.*......................................................................... 36,562
----------
RETAIL - DEPARTMENT STORES (4.0%)
2,700 Proffitt's, Inc.*........................................................................ 79,313
1,200 Stage Stores, Inc.*...................................................................... 46,500
----------
125,813
----------
RETAIL - DRUG STORES (2.0%)
750 Rite Aid Corp............................................................................ 46,828
500 Walgreen Co.............................................................................. 16,563
----------
63,391
----------
RETAIL - FOOD CHAINS (4.8%)
2,000 Kroger Co.*.............................................................................. 78,250
1,100 Safeway, Inc.*........................................................................... 73,081
----------
151,331
----------
RETAIL - GENERAL MERCHANDISE (2.7%)
1,100 Consolidated Stores Corp.*............................................................... 45,238
1,100 Dollar General Corp...................................................................... 40,013
----------
85,251
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - CAPITAL GROWTH
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
RETAIL - SPECIALTY (3.9%)
1,200 CompUSA, Inc.*........................................................................... $ 37,125
2,400 General Nutrition Companies, Inc.*....................................................... 86,550
----------
123,675
----------
RETAIL STORES (2.3%)
2,600 Staples, Inc.*........................................................................... 70,850
----------
TELECOMMUNICATIONS - LONG DISTANCE (2.7%)
3,000 LCI International, Inc.*................................................................. 86,063
----------
TELECOMMUNICATIONS - WIRELESS (2.4%)
1,700 Airtouch Communications, Inc.*........................................................... 74,588
----------
TELECOMMUNICATIONS EQUIPMENT (3.4%)
2,100 Tellabs, Inc.*........................................................................... 107,363
----------
UTILITIES - ELECTRIC (2.6%)
1,900 AES Corp.*............................................................................... 81,344
----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $2,757,715)............................................................. 3,218,988
----------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (a) (1.9%)
U.S. GOVERNMENT AGENCY
$ 60 Federal Home Loan Mortgage Corp. 5.57% due 02/02/98 (AMORTIZED COST $59,990)............. $ 59,990
----------
TOTAL INVESTMENTS
(IDENTIFIED COST $2,817,705) (b)............................................................ 104.2% 3,278,978
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS.............................................. (4.2) (133,479)
------ -----------
NET ASSETS.................................................................................. 100.0% $ 3,145,499
------ -----------
------ -----------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $505,750 and the
aggregate gross unrealized depreciation is $44,477, resulting in net
unrealized appreciation of $461,273.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - DIVIDEND GROWTH
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (102.1%)
AEROSPACE (2.7%)
55,000 Raytheon Co. (Class B)................................................................. $ 2,866,875
------------
ALUMINUM (2.8%)
39,000 Aluminum Co. of America................................................................ 2,978,625
------------
AUTOMOTIVE (5.5%)
82,000 Chrysler Corp.......................................................................... 2,854,625
58,000 Ford Motor Co.......................................................................... 2,958,000
------------
5,812,625
------------
BANKS (2.5%)
45,500 NationsBank Corp....................................................................... 2,730,000
------------
BANKS - MONEY CENTER (2.7%)
41,000 BankAmerica Corp....................................................................... 2,913,562
------------
BEVERAGES - SOFT DRINKS (2.7%)
80,500 PepsiCo Inc............................................................................ 2,903,031
------------
CHEMICALS (5.4%)
50,500 Du Pont (E.I.) de Nemours & Co., Inc................................................... 2,859,562
48,500 Eastman Chemical Co.................................................................... 2,888,781
------------
5,748,343
------------
COMPUTERS - SYSTEMS (2.6%)
28,300 International Business Machines Corp................................................... 2,792,856
------------
CONGLOMERATES (5.4%)
34,000 Minnesota Mining & Manufacturing Co.................................................... 2,839,000
72,000 Tenneco, Inc........................................................................... 2,920,500
------------
5,759,500
------------
DRUGS (2.7%)
28,500 Bristol-Myers Squibb Co................................................................ 2,841,094
------------
DRUGS & HEALTHCARE (2.7%)
41,000 Abbott Laboratories.................................................................... 2,903,312
------------
ELECTRIC - MAJOR (2.8%)
38,000 General Electric Co.................................................................... 2,945,000
------------
ENERGY (2.7%)
46,000 Kerr-McGee Corp........................................................................ 2,880,750
------------
FOODS (5.2%)
53,200 Quaker Oats Company (The).............................................................. 2,859,500
46,500 Unilever NV (ADR) (Netherlands)........................................................ 2,653,406
------------
5,512,906
------------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
MACHINERY - AGRICULTURAL (2.6%)
53,000 Deere & Co............................................................................. $ 2,795,750
------------
MANUFACTURING - DIVERSIFIED (2.8%)
42,000 Honeywell, Inc......................................................................... 2,942,625
------------
METALS - MISCELLANEOUS (2.7%)
44,500 Phelps Dodge Corp...................................................................... 2,931,438
------------
NATURAL GAS (2.7%)
69,000 Enron Corp............................................................................. 2,859,188
------------
OFFICE EQUIPMENT (2.7%)
64,000 Pitney Bowes, Inc...................................................................... 2,936,000
------------
OIL - DOMESTIC (5.4%)
34,500 Amoco Corp............................................................................. 2,807,438
55,000 Ashland, Inc........................................................................... 2,901,250
------------
5,708,688
------------
OIL - INTEGRATED - INTERNATIONAL (2.6%)
46,200 Exxon Corp............................................................................. 2,740,238
------------
PAPER & FOREST PRODUCTS (2.7%)
57,300 Weyerhaeuser Co........................................................................ 2,854,256
------------
PHOTOGRAPHY (2.7%)
44,000 Eastman Kodak Co....................................................................... 2,871,000
------------
RAILROADS (2.7%)
54,000 CSX Corp............................................................................... 2,862,000
------------
RETAIL - DEPARTMENT STORES (2.7%)
54,000 May Department Stores Co............................................................... 2,838,375
------------
RETAIL - FOOD CHAINS (2.7%)
131,000 American Stores Co..................................................................... 2,849,250
------------
STEEL (2.6%)
87,000 Timken Co.............................................................................. 2,805,750
------------
TELECOMMUNICATIONS (5.4%)
31,400 Bell Atlantic Corp..................................................................... 2,906,463
48,500 Sprint Corp............................................................................ 2,879,687
------------
5,786,150
------------
TOBACCO (2.7%)
68,500 Philip Morris Companies, Inc........................................................... 2,842,750
------------
UTILITIES - ELECTRIC (8.0%)
109,400 Houston Industries, Inc................................................................ 2,858,075
66,700 New England Electric System............................................................ 2,801,400
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - DIVIDEND GROWTH
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
90,500 Unicom Corp............................................................................ $ 2,805,500
------------
8,464,975
------------
TOTAL INVESTMENTS
(IDENTIFIED COST $87,103,223) (a)......................................................... 102.1% 108,676,912
LIABILITIES IN EXCESS OF OTHER ASSETS..................................................... (2.1) (2,235,582)
------ -------------
NET ASSETS................................................................................ 100.0% $ 106,441,330
------ -------------
------ -------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
(a) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $22,005,652 and the
aggregate gross unrealized depreciation is $431,963, resulting in net
unrealized appreciation of $21,573,689.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - UTILITIES
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (97.4%)
NATURAL GAS (17.3%)
4,000 Enron Corp............................................................................... $ 165,750
4,000 KeySpan Energy Corp...................................................................... 136,250
5,000 MCN Corp................................................................................. 185,000
2,000 Mobil Corp............................................................................... 136,250
3,000 Pacific Enterprises...................................................................... 108,187
5,000 Swift Energy Co.*........................................................................ 90,000
6,000 Williams Companies, Inc.................................................................. 171,000
----------
992,437
----------
TELECOMMUNICATIONS (25.1%)
4,000 BCE, Inc. (Canada)....................................................................... 125,000
2,500 BellSouth Corp........................................................................... 151,406
5,000 Cincinnati Bell, Inc..................................................................... 179,375
3,000 COLT Telecom Group plc (ADR) (United Kingdom)*........................................... 181,125
4,000 GTE Corp................................................................................. 218,250
4,000 LCI International, Inc.*................................................................. 114,750
3,000 Sprint Corp.............................................................................. 178,125
2,000 Teleport Communications Group Inc. (Class A)*............................................ 111,625
5,000 WorldCom, Inc.*.......................................................................... 179,062
----------
1,438,718
----------
UTILITIES - ELECTRIC (52.6%)
3,000 AES Corp.*............................................................................... 128,437
3,000 American Electric Power Co............................................................... 147,937
3,000 CILCORP, Inc............................................................................. 134,250
4,000 CINergy Corp............................................................................. 138,000
4,000 CMS Energy Corp.......................................................................... 170,250
8,250 DPL, Inc................................................................................. 151,078
4,000 DQE, Inc................................................................................. 130,750
3,000 Duke Power Co............................................................................ 162,563
4,500 Edison International..................................................................... 120,938
5,000 Florida Progress Corp.................................................................... 191,563
4,000 GPU, Inc................................................................................. 157,250
4,000 MDU Resources Group, Inc................................................................. 119,500
4,500 New Century Energies, Inc................................................................ 205,031
3,000 NIPSCO Industries, Inc................................................................... 153,188
4,500 PacifiCorp............................................................................... 104,344
4,000 Pinnacle West Capital Corp............................................................... 160,000
5,000 Sierra Pacific Resources................................................................. 176,875
6,000 Teco Energy, Inc......................................................................... 155,625
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
4,000 Utilicorp United, Inc.................................................................... $ 141,500
4,000 Western Resources, Inc................................................................... 163,000
----------
3,012,079
----------
WATER (2.4%)
5,000 American Water Works Company, Inc........................................................ 135,000
----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $4,211,298)............................................................. 5,578,234
----------
<PAGE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<S> <C> <C>
SHORT-TERM INVESTMENT (3.6%)
REPURCHASE AGREEMENT
$ 203 The Bank of New York 5.375% due 02/02/98 (dated 01/30/98; proceeds $202,961) (a)
(IDENTIFIED COST $202,870)............................................................. 202,870
----------
TOTAL INVESTMENTS
(IDENTIFIED COST $4,414,168) (b)............................................................ 101.0% 5,781,104
LIABILITIES IN EXCESS OF OTHER ASSETS....................................................... (1.0) (55,368)
------ -----------
NET ASSETS.................................................................................. 100.0% $ 5,725,736
------ -----------
------ -----------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Collateralized by $201,162 U.S. Treasury Note 6.75% due 05/31/99 valued at
$206,927.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $1,407,342 and the
aggregate gross unrealized depreciation is $40,406, resulting in net
unrealized appreciation of $1,366,936.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1998 (UNAUDITED)
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Retirement Series (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company,
consisting of eleven separate Series ("Series"). All of the Series, with the
exception of Strategist, are diversified.
The Fund was organized on May 14, 1992 as a Massachusetts business trust and
each of the Series commenced operations as follows:
<TABLE>
<CAPTION>
COMMENCEMENT COMMENCEMENT
OF OPERATIONS OF OPERATIONS
----------------- -----------------
<S> <C> <C> <C>
Liquid Asset............................ December 30, 1992 Dividend Growth......................... January 7, 1993
U.S. Government Money Market............ January 20, 1993 Utilities............................... January 8, 1993
U.S. Government Securities.............. January 8, 1993 Value-Added Market...................... February 1, 1993
Intermediate Income Securities.......... January 12, 1993 Global Equity........................... January 8, 1993
American Value.......................... February 1, 1993 Strategist.............................. January 7, 1993
Capital Growth.......................... February 2, 1993
</TABLE>
The investment objectives of each Series are as follows:
<TABLE>
<CAPTION>
SERIES INVESTMENT OBJECTIVE
<S> <C>
Liquid Asset Seeks high current income, preservation of capital and
liquidity by investing in short-term money market
instruments.
U.S. Government Money Seeks high current income, preservation of capital and
Market liquidity by investing primarily in money market instruments
which are issued and/or guaranteed by the U.S. Government,
its agencies or instrumentalities.
U.S. Government Seeks high current income consistent with safety of principal
Securities by investing in a diversified portfolio of obligations issued
and/or guaranteed by the U.S. Government or its
instrumentalities.
Intermediate Income Seeks high current income consistent with safety of principal
Securities by investing primarily in intermediate term, investment grade
fixed-income securities.
American Value Seeks long-term growth consistent with an effort to reduce
volatility by investing principally in common stock of
companies in industries which, at the time of investment, are
believed to be undervalued in the marketplace.
Capital Growth Seeks long-term capital growth by investing primarily in
common stocks.
Dividend Growth Seeks to provide reasonable current income and long-term
growth of income and capital by investing primarily in common
stock of companies with a record of paying dividends and the
potential for increasing dividends.
Utilities Seeks to provide current income and long-term growth of
income and capital by investing in equity and fixed-income
securities of companies in the public utilities industry.
</TABLE>
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
SERIES INVESTMENT OBJECTIVE
<S> <C>
Value-Added Market Seeks to achieve a high level of total return on its assets
through a combination of capital appreciation and current
income. It seeks to achieve this objective by investing, on
an equally weighted basis, in a diversified portfolio of
common stocks of the companies which are represented in the
Standard & Poor's 500 Composite Stock Price Index.
Global Equity Seeks to provide a high level of total return on its assets,
primarily through long-term capital growth and, to a lesser
extent, from income. It seeks to achieve this objective
through investments in all types of common stocks and
equivalents, preferred stocks and bonds and other debt
obligations of domestic and foreign companies, governments
and international organizations.
Strategist Seeks a high total investment return through a fully managed
investment policy utilizing equity, investment grade fixed
income and money market securities.
</TABLE>
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Liquid Asset and U.S. Government Money Market:
Securities are valued at amortized cost which approximates market value. All
remaining Series: (1) an equity security listed or traded on the New York,
American or other domestic or foreign stock exchange is valued at its latest
sale price on that exchange prior to the time when assets are valued; if there
were no sales that day, the security is valued at the latest bid price (in cases
where securities are traded on more than one exchange, the securities are valued
on the exchange designated as the primary market 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 Dean Witter
InterCapital Inc. (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 securities for which
market quotations are not readily available may also be based upon current
market prices of securities which are comparable in coupon, rating and maturity,
or an appropriate matrix utilizing similar factors); (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 its staff, including review of broker-dealer
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
market price quotations, if available, in determining what it believes is the
fair valuation of the securities valued by such pricing service; and (5)
short-term debt securities having a maturity date of more than sixty days at
time of purchase are valued on a mark-to-market basis until sixty days prior to
maturity and thereafter at amortized cost based on their value on the 61st day.
Short-term debt securities having a maturity date of sixty days or less at the
time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and distributions are recorded on the ex-dividend date except
for certain dividends on foreign securities which are recorded as soon as the
Fund is informed after the ex-dividend date. Interest income is accrued daily.
Liquid Asset and U.S. Government Money Market amortize premiums and accrete
discounts on securities owned; gains and losses realized upon the sale of such
securities are based on their amortized cost. Discounts for all other Series are
accreted over the life of the respective securities.
C. FOREIGN CURRENCY TRANSLATION -- The books and records of each Series
investing in foreign currency denominated transactions are translated into U.S.
dollars as follows: (1) the foreign currency market value of investment
securities, other assets and liabilities and forward foreign currency 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 Series do not isolate that portion
of the results of operations arising as a result of changes in the foreign
exchange rates from the changes in the market prices of the securities.
D. FORWARD FOREIGN CURRENCY CONTRACTS -- Some of the Series may enter into
forward foreign currency contracts which are valued daily at the appropriate
exchange rates. The resultant unrealized exchange gains and losses are included
in the Statement of Operations as unrealized foreign currency gain or loss. The
Series record realized gains or losses on delivery of the currency or at the
time the forward contract is extinguished (compensated) by entering into a
closing transaction prior to delivery.
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
E. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply individually
for each Series with the requirements of the Internal Revenue Code applicable to
regulated investment companies and to distribute all of its taxable income to
its shareholders. Accordingly, no federal income tax provision is required.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
G. EXPENSES -- Direct expenses are charged to the respective Series and general
Fund expenses are allocated on the basis of relative net assets or equally among
the Series.
H. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of $150,000 ($13,636 allocated to each of the
Series) and will be reimbursed, exclusive of amounts waived. Such expenses were
deferred and fully amortized by the Fund as of January 31, 1998.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement (the "Agreement"), the Fund pays
the Investment Manager a management fee, accrued daily and payable monthly, by
applying the following annual rates to each Series' net assets determined at the
close of each business day: Liquid Asset, U.S. Government Money Market and
Value-Added Market - 0.50%; U.S. Government Securities and Intermediate Income
Securities - 0.65%; Dividend Growth and Utilities - 0.75%; American Value,
Capital Growth and Strategist - 0.85%; and Global Equity - 1.0%.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1998 (UNAUDITED) 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.
For the period August 1, 1997 through January 31, 1998, the Investment Manager
has continued to waive its management fee and reimburse expenses to the extent
they exceeded 1.00% of daily net assets of each Series. The waiver and
reimbursement of expenses will continue until June 30, 1998. At January 31,
1998, included in the Statement of Assets and Liabilities are receivables from
an affiliate which represent expense reimbursements due to the Fund.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
Purchases and sales/maturities/prepayments of portfolio securities, excluding
short-term investments (except for Liquid Asset and U.S. Government Money
Market), for the six months ended January 31, 1998 were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES OTHER
-------------------------- ------------------------
SALES/MATURITIES/ SALES/
PURCHASES PREPAYMENTS PURCHASES MATURITIES
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Liquid Asset................................. $465,238,660 $458,417,760 $40,745,922 $53,567,782
U.S. Government Money Market................. 135,205,272 137,983,856 -- --
U.S. Government Securities................... 2,685,761 4,370,987 -- --
Intermediate Income Securities............... 102,766 401,500 412,593 247,738
American Value............................... 5,697,516 2,979,522 63,095,393 71,417,357
Capital Growth............................... -- -- 3,007,969 3,284,177
Dividend Growth.............................. -- -- 13,779,275 20,449,245
Utilities.................................... -- -- 1,133,934 1,575,346
Value-Added Market........................... -- 14,947 1,464,974 3,171,601
Global Equity................................ 8,407 -- 6,994,819 8,140,516
Strategist................................... 632,891 889,618 12,838,780 12,657,535
</TABLE>
Included in the aforementioned sales/maturities of portfolio securities of
Value-Added Market are common stock sales of Morgan Stanley, Dean Witter,
Discover & Co., an affiliate of the Investment Manager, of $14,436, including
realized gains of $8,276.
Included at January 31, 1998 in the payable for investments purchased and
receivable for investments sold were unsettled trades with Dean Witter Reynolds
Inc. ("DWR"), an affiliate of the Investment Manager, as follows:
AMERICAN DIVIDEND
VALUE GROWTH
-------- ----------
Payable for investments purchased................. -- $ 99,113
-------- ----------
-------- ----------
Receivable for investments sold................... $394,607 $1,094,766
-------- ----------
-------- ----------
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
For the six months ended January 31, 1998, the following Series incurred
brokerage commissions with DWR for portfolio transactions executed on behalf of
such Series, as follows:
AMERICAN CAPITAL DIVIDEND GLOBAL
VALUE GROWTH GROWTH UTILITIES EQUITY STRATEGIST
--------- --------- --------- --------- --------- -----------
$ 18,575 $1,326 $25,890 $ 3,453 $ 5,113 $ 18,419
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
Included at January 31, 1998 in the payable for investments purchased and
receivable for investments sold were unsettled trades with Morgan Stanley & Co.,
Inc., an affiliate of the Investment Manager, as follows:
AMERICAN CAPITAL
VALUE GROWTH
-------- --------
Payable for investments purchased................. $447,382 $ 16,640
-------- --------
-------- --------
Receivable for investments sold................... $332,289 $ 25,517
-------- --------
-------- --------
For the six months ended January 31, 1998, the following Series incurred
brokerage commissions with Morgan Stanley & Co., Inc. for portfolio transactions
executed on behalf of such Series, as follows:
AMERICAN VALUE CAPITAL GROWTH DIVIDEND GROWTH
-------------------- ----------- --------------------
$7,255 $404 $645
------ ---- ----
------ ---- ----
Dean Witter Trust FSB, an affiliate of the Investment Manager, is the Fund's
transfer agent. At January 31, 1998 the following Series had approximate
transfer agent fees and expenses payable as follows:
INTERMEDIATE
LIQUID U.S. GOVERNMENT U.S. GOVERNMENT INCOME AMERICAN
ASSET MONEY MARKET SECURITIES SECURITIES VALUE
--------- --------------- --------------- ------------ -----------
$5,700 $600 $1,040 $2,000 $2,000
------ ---- ------ ------ ------
------ ---- ------ ------ ------
CAPITAL DIVIDEND GLOBAL
GROWTH GROWTH UTILITIES EQUITY STRATEGIST
--------- --------------- --------------- ------------ -----------
$ 100 $ 1,500 $ 730 $ 650 $ 2,000
--------- ------ ------ ------ -----------
--------- ------ ------ ------ -----------
4. FEDERAL INCOME TAX STATUS
At July 31, 1997, Intermediate Income Securities had a net capital loss
carryover of approximately $30,200 for which $5,700 will be available through
July 31, 2004 and $24,500 will be available through July 31, 2005 to offset
future capital gains to the extent provided by regulations.
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
Net capital and currency losses incurred after October 31 ("post-October
losses") within the taxable year are deemed to arise on the first business day
of the Series' next taxable year. The following Series incurred and will elect
to defer post-October losses during fiscal 1997:
U.S. GOVERNMENT INTERMEDIATE
SECURITIES INCOME SECURITIES GLOBAL EQUITY
-------------------- -------------------- --------------------
$500 $57,800 $900
---- ------- ----
---- ------- ----
At July 31, 1997, the primary reason(s) for temporary book/tax differences were
as follows:
<TABLE>
<CAPTION>
TEMPORARY DIFFERENCES
--------------------------------------
POST-OCTOBER CAPITAL LOSS DEFERRALS
LOSSES FROM WASH SALES
-------------- ----------------------
<S> <C> <C>
U.S. Government Securities........................ -
Intermediate Income Securities.................... - -
American Value.................................... -
Capital Growth.................................... -
Dividend Growth................................... -
Value-Added Market................................ -
Global Equity..................................... - -
Strategist........................................ -
</TABLE>
Additionally, Global Equity had temporary differences attributable to income
from the mark-to-market of passive foreign investment companies.
5. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
Some of the Portfolios may enter into forward foreign currency contracts
("forward contracts") to facilitate settlement of foreign currency denominated
portfolio transactions or to manage foreign currency exposure associated with
foreign currency denominated securities.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Portfolios bear the
risk of an unfavorable change in foreign exchange rates underlying the forward
contracts. Risks may also arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their contracts.
At January 31, 1998, Global Equity had outstanding forward contracts to
facilitate settlement of foreign currency denominated portfolio transactions.
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
NET ASSET NET
VALUE INVESTMENT NET REALIZED TOTAL FROM DIVIDENDS DISTRIBUTIONS TOTAL DIVIDENDS
BEGINNING INCOME AND UNREALIZED INVESTMENT TO TO AND
YEAR ENDED JULY 31 OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
LIQUID ASSET
1993(1) $ 1.00 $ 0.02 -- $ 0.02 $(0.02) -- $(0.02)
1994 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1995 1.00 0.06 -- 0.06 (0.06) -- (0.06)
1996 1.00 0.05 -- 0.05 (0.05) -- (0.05)
1997 1.00 0.05 -- 0.05 (0.05) -- (0.05)
1998* 1.00 0.02 -- 0.02 (0.02) -- (0.02)
U.S. GOVERNMENT MONEY MARKET
1993 (2) 1.00 -- ++ -- -- -- -- --
1994 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1995 1.00 0.06 -- 0.06 (0.06) -- (0.06)
1996 1.00 0.05 -- 0.05 (0.05) -- (0.05)
1997 1.00 0.04 -- 0.04 (0.04) -- (0.04)
1998* 1.00 0.02 -- 0.02 (0.02) -- (0.02)
U.S. GOVERNMENT SECURITIES
1993(3) 10.00 0.19 $ 0.07 0.26 (0.20) -- (0.20)
1994 10.06 0.44 (0.50) (0.06) (0.44) -- (0.44)
1995 9.56 0.56 0.15 0.71 (0.56) -- (0.56)
1996 9.71 0.55 (0.12) 0.43 (0.55) -- (0.55)
1997 9.59 0.56 0.34 0.90 (0.56) $(0.02) (0.58)
1998* 9.91 0.29 0.15 0.44 (0.29) -- (0.29)
INTERMEDIATE INCOME SECURITIES
1993(4) 10.00 0.19 (0.02) 0.17 (0.19) -- (0.19)
1994 9.98 0.60 (0.57) 0.03 (0.60) -- (0.60)
1995 9.41 0.61 0.22 0.83 (0.61) -- (0.61)
1996 9.63 0.59 (0.21) 0.38 (0.59) (0.01) (0.60)
1997 9.41 0.53 0.26 0.79 (0.53) -- (0.53)
1998* 9.67 0.26 0.11 0.37 (0.26) -- (0.26)
AMERICAN VALUE
1993(5) 10.00 0.06 (0.01) 0.05 -- -- --
1994 10.05 0.03 (0.09) (0.06) (0.02) (0.04) (0.06)
1995 9.93 0.14 3.15 3.29 (0.12) -- (0.12)
1996 13.10 0.09 1.17 1.26 (0.15) (1.13) (1.28)
1997 13.08 0.02 5.12 5.14 (0.04) (1.22) (1.26)
1998* 16.96 0.00 0.81 0.81 (0.02) (3.48) (3.50)
</TABLE>
- ---------------------
* For the six months ended January 31, 1998 (unaudited).
** After application of the Fund's expense limitation.
+ Calculated based on the net asset value as of the last business day
of the period.
++ Includes dividends from net investment income of $0.004 per share.
(a) Not annualized.
(b) Annualized.
Commencement of operations:
(1) December 30, 1992.
(2) January 20, 1993.
(3) January 8, 1993.
(4) January 12, 1993.
(5) February 1, 1993.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET RATIOS TO AVERAGE NET
ASSETS ASSETS
(BEFORE EXPENSES WERE (AFTER EXPENSES WERE
ASSUMED) ASSUMED)
------------------------ -----------------------
NET ASSETS NET NET
NET ASSET TOTAL END OF INVESTMENT INVESTMENT PORTFOLIO AVERAGE
VALUE END INVESTMENT PERIOD INCOME INCOME TURNOVER COMMISSION
OF PERIOD RETURN+ (000'S) EXPENSES (LOSS) EXPENSES (LOSS) RATE RATE PAID
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIQUID ASSET
1993(1) $ 1.00 1.77%(a) $ 1,081 1.30%(b) 0.53%(b) 0.14%(b) 3.02%(b) N/A N/A
1994 1.00 3.48 1,524 2.50** 0.99 -- 3.49 N/A N/A
1995 1.00 5.90 35,631 1.16 4.96 -- 6.12 N/A N/A
1996 1.00 5.44 42,753 0.65 5.05 0.33 5.37 N/A N/A
1997 1.00 4.57 21,213 1.04 4.43 1.00 4.47 N/A N/A
1998* 1.00 2.35(a) 14,554 1.30(b) 4.31(b) 1.00(b) 4.61(b) N/A N/A
U.S. GOVERNMENT
MONEY MARKET
1993 (2) 1.00 0.42(a) 125 2.50**(b) (0.95)(b) 2.13(b) 0.83(b) N/A N/A
1994 1.00 3.52 555 2.50** 0.82 -- 3.32 N/A N/A
1995 1.00 5.86 10,695 2.50** 3.62 -- 6.12 N/A N/A
1996 1.00 5.23 6,628 0.82 4.75 0.37 5.21 N/A N/A
1997 1.00 4.51 4,041 1.20 4.17 1.00 4.37 N/A N/A
1998* 1.00 2.31(a) 1,342 2.60(b) 2.93(b) 1.00(b) 4.53(b) N/A N/A
U.S. GOVERNMENT
SECURITIES
1993(3) 10.06 2.60(a) 1,756 1.81(b) 0.33(b) 0.18(b) 3.66(b) -- N/A
1994 9.56 (0.69) 2,954 2.50** 1.96 -- 4.46 29% N/A
1995 9.71 7.72 4,209 2.36 3.49 -- 5.85 14 N/A
1996 9.59 4.49 8,651 1.48 4.70 0.63 5.55 47 N/A
1997 9.91 9.70 10,496 1.55 5.24 1.00 5.79 89 N/A
1998* 10.06 4.53(a) 9,128 1.68(b) 5.16(b) 1.00(b) 5.84(b) 28(a) N/A
INTERMEDIATE
INCOME SECURITIES
1993(4) 9.98 1.67(a) 182 2.50**(b) 1.00(b) 1.62(b) 3.50(b) -- N/A
1994 9.41 0.26 460 2.50** 3.64 -- 6.14 40 N/A
1995 9.63 9.22 994 2.50** 4.08 -- 6.58 37 N/A
1996 9.41 3.95 4,172 1.58 5.01 0.72 5.87 142 N/A
1997 9.67 8.63 2,456 2.00 4.50 1.00 5.50 132 N/A
1998* 9.78 3.92(a) 2,260 3.20(b) 3.27(b) 1.00(b) 5.47(b) 24(a) N/A
AMERICAN VALUE
1993(5) 10.05 0.50(a) 308 2.50**(b) (0.66)(b) 0.74(b) 1.10(b) 121(a) --
1994 9.93 (0.59) 6,841 2.50** (0.81) -- 1.69 136 --
1995 13.10 33.48 22,581 1.42 0.39 -- 1.81 234 --
1996 13.08 9.83 40,321 1.18 0.23 0.65 0.76 301 $0.0543
1997 16.96 41.62 54,214 1.21 (0.11) 1.00 0.10 261 0.0552
1998* 14.27 5.52(a) 51,656 1.26(b) (0.30)(b) 1.00(b) (0.04)(b) 134(a) 0.0580
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL HIGHLIGHTS, CONTINUED
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
NET ASSET NET
VALUE INVESTMENT NET REALIZED TOTAL FROM DIVIDENDS DISTRIBUTIONS TOTAL DIVIDENDS
BEGINNING INCOME AND UNREALIZED INVESTMENT TO TO AND
YEAR ENDED JULY 31 OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITAL GROWTH
1993(4) $ 10.00 $(0.02) $(1.10) $(1.12) -- -- --
1994 8.88 0.13 0.45 0.58 $(0.04) -- $(0.04)
1995 9.42 0.10 1.77 1.87 (0.12) -- (0.12)
1996 11.17 0.07 1.55 1.62 (0.11) $(0.07) (0.18)
1997 12.61 (0.03) 5.41 5.38 (0.01) (0.32) (0.33)
1998* 17.66 (0.05) (0.70) (0.75) -- (2.69) (2.69)
DIVIDEND GROWTH
1993(1) 10.00 0.13 0.58 0.71 (0.10) -- (0.10)
1994 10.61 0.28 0.37 0.65 (0.23) (0.01) (0.24)
1995 11.02 0.34 2.13 2.47 (0.31) (0.10) (0.41)
1996 13.08 0.32 1.76 2.08 (0.36) (0.19) (0.55)
1997 14.61 0.33 5.60 5.93 (0.33) (0.52) (0.85)
1998* 19.69 0.16 (0.05) 0.11 (0.19) (2.07) (2.26)
UTILITIES
1993(2) 10.00 0.19 1.30 1.49 (0.14) -- (0.14)
1994 11.35 0.37 (0.95) (0.58) (0.34) (0.01) (0.35)
1995 10.42 0.42 0.80 1.22 (0.37) (0.02) (0.39)
1996 11.25 0.38 0.61 0.99 (0.45) -- (0.45)
1997 11.79 0.41 1.90 2.31 (0.32) -- (0.32)
1998* 13.78 0.19 1.73 1.92 (0.27) (1.68) (1.95)
VALUE-ADDED MARKET
1993(3) 10.00 0.05 0.02 0.07 (0.04) -- (0.04)
1994 10.03 0.24 0.65 0.89 (0.11) -- (0.11)
1995 10.81 0.21 2.16 2.37 (0.26) (0.12) (0.38)
1996 12.80 0.25 1.17 1.42 (0.22) (0.07) (0.29)
1997 13.93 0.21 5.58 5.79 (0.25) (0.63) (0.88)
1998* 18.84 0.08 0.18 0.26 (0.16) (0.77) (0.93)
GLOBAL EQUITY
1993(2) 10.00 0.07 (0.03) 0.04 -- -- --
1994 10.04 0.08 0.58 0.66 (0.05) -- (0.05)
1995 10.65 0.14 0.49 0.63 (0.11) -- (0.11)
1996 11.17 0.09 0.71 0.80 (0.18) -- (0.18)
1997 11.79 0.09 2.98 3.07 (0.06) (0.32) (0.38)
1998* 14.48 0.05 (0.96) (0.91) (0.17) (0.62) (0.79)
STRATEGIST
1993(1) 10.00 0.06 (0.23) (0.17) -- -- --
1994 9.83 0.23 (0.20) 0.03 (0.13) -- (0.13)
1995 9.73 0.24 1.49 1.73 (0.18) -- (0.18)
1996 11.28 0.25 1.63 1.88 (0.34) (0.22) (0.56)
1997 12.60 0.37 2.96 3.33 (0.28) (0.48) (0.76)
1998* 15.17 0.18 (0.24) (0.06) (0.38) (1.90) (2.28)
</TABLE>
- ---------------------
* For the six months ended January 31, 1998 (unaudited).
** After application of the Fund's expense limitation.
+ Calculated based on the net asset value as of the last business day
of the period.
(a) Not annualized.
(b) Annualized.
Commencement of operations:
(1) January 7, 1993.
(2) January 8, 1993.
(3) February 1, 1993.
(4) February 2, 1993.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET RATIOS TO AVERAGE NET
ASSETS ASSETS
(BEFORE EXPENSES WERE (AFTER EXPENSES WERE
ASSUMED) ASSUMED)
------------------------ -----------------------
NET ASSETS NET NET
NET ASSET TOTAL END OF INVESTMENT INVESTMENT PORTFOLIO AVERAGE
VALUE END INVESTMENT PERIOD INCOME INCOME TURNOVER COMMISSION
OF PERIOD RETURN+ (000'S) EXPENSES (LOSS) EXPENSES (LOSS) RATE RATE PAID
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CAPITAL GROWTH
1993(4) $ 8.88 (11.20)%(a) $ 135 2.50**%(b) (1.01)%(b) 1.97%(b) (0.47)%(b) 2%(a) --
1994 9.42 6.57 215 2.50** (0.98) -- 1.52 11 --
1995 11.17 20.08 678 2.50** (1.07) -- 1.43 20 --
1996 12.61 14.58 1,988 2.50** (1.24) 0.76 0.50 68 $0.0536
1997 17.66 43.46 3,670 3.16 (2.38) 1.00 (0.22) 147 0.0575
1998* 14.22 (3.37)(a) 3,145 2.66(b) (2.39)(b) 1.00(b) (0.73) (b) 92(a) 0.0558
DIVIDEND GROWTH
1993(1) 10.61 7.11(a) 2,417 2.50**(b) 0.61(b) 0.16(b) 2.89(b) 7(a) --
1994 11.02 6.13 12,821 1.51 1.78 -- 3.29 13 --
1995 13.08 23.07 35,404 1.14 2.34 -- 3.48 29 --
1996 14.61 16.09 69,763 1.00 2.07 0.63 2.44 18 0.0526
1997 19.69 41.92 115,312 0.97 1.92 0.97 1.92 31 0.0537
1998* 17.54 0.88(a) 106,441 0.95(b) 1.61(b) 0.95(b) 1.61(b) 12(a) 0.0518
UTILITIES
1993(2) 11.35 14.98(a) 1,334 2.50**(b) 1.59(b) 0.30(b) 3.79(b) 8(a) --
1994 10.42 (5.23) 3,860 2.50** 1.62 -- 4.14 5 --
1995 11.25 12.16 5,380 1.91 2.41 -- 4.32 24 --
1996 11.79 8.76 7,593 1.52 2.31 0.62 3.20 17 0.0508
1997 13.78 19.87 5,391 1.78 1.85 1.00 2.63 89 0.0508
1998* 13.75 14.05(a) 5,726 2.02(b) 1.54(b) 1.00(b) 2.56(b) 22(a) 0.0507
VALUE-ADDED MARKET
1993(3) 10.03 0.71(a) 640 2.50**(b) (0.16)(b) 0.92(b) 1.42(b) 1(a) --
1994 10.81 8.89 5,133 1.82 0.70 -- 2.53 8 --
1995 12.80 22.65 14,080 1.22 1.33 -- 2.55 7 --
1996 13.93 11.19 20,379 0.78 1.58 0.47 1.89 8 0.0300
1997 18.84 43.12 23,780 1.02 1.04 1.00 1.07 23 0.0300
1998* 18.17 1.52(a) 21,828 0.93(b) 0.81(b) 0.93(b) 0.81(b) 7(a) 0.0300
GLOBAL EQUITY
1993(2) 10.04 0.40(a) 322 2.50**(b) (0.90)(b) 1.00(b) 1.77(b) -- --
1994 10.65 6.54 2,020 2.50** 0.09 -- 2.41 8 --
1995 11.17 6.08 7,286 2.25 0.48 -- 2.73 55 --
1996 11.79 7.26 11,685 1.73 (0.15) 0.66 0.92 95 0.0500
1997 14.48 26.66 19,797 1.85 (0.01) 1.00 0.84 80 0.0348
1998* 12.78 (6.07)(a) 16,540 1.79(b) (0.24)(b) 1.00(b) 0.55(b) 41(a) 0.0345
STRATEGIST
1993(1) 9.83 (1.70)(a) 551 2.50**(b) (0.19)(b) 0.64(b) 1.67(b) 26(a) --
1994 9.73 0.12 1,276 2.50** 0.70 -- 3.20 57 --
1995 11.28 18.21 6,759 2.14 1.97 -- 4.11 115 --
1996 12.60 16.97 17,496 1.61 1.92 0.66 2.86 113 0.0525
1997 15.17 27.35 26,459 1.40 2.50 1.00 2.90 90 0.0535
1998* 12.83 0.28(a) 22,393 1.36(b) 1.54(b) 1.00(b) 1.90(b) 67(a) 0.0512
</TABLE>
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (99.3%)
ADVERTISING/MARKETING SERVICES (0.6%)
1,000 Cognizant Corp.......................................................................... $ 45,375
900 Interpublic Group of Companies, Inc..................................................... 44,156
1,000 Omnicom Group, Inc...................................................................... 40,562
-----------
130,093
-----------
AEROSPACE & DEFENSE (0.8%)
850 Boeing Co............................................................................... 40,428
550 General Dynamics Corp................................................................... 47,437
450 Lockheed Martin Corp.................................................................... 46,828
350 Northrop Grumman Corp................................................................... 42,919
-----------
177,612
-----------
AGRICULTURAL PRODUCTS (0.4%)
2,105 Archer-Daniels-Midland Co............................................................... 44,337
500 Pioneer Hi-Bred International, Inc...................................................... 50,031
-----------
94,368
-----------
AIR FREIGHT (0.2%)
700 Federal Express Corp.*.................................................................. 45,544
-----------
AIRLINES (0.7%)
300 AMR Corp.*.............................................................................. 37,875
350 Delta Air Lines, Inc.................................................................... 39,944
1,600 Southwest Airlines Co................................................................... 41,700
700 US Airways Group Inc.*.................................................................. 42,656
-----------
162,175
-----------
ALUMINUM (0.6%)
1,400 Alcan Aluminium Ltd. (Canada)........................................................... 41,212
600 Aluminum Co. of America................................................................. 45,825
650 Reynolds Metals Co...................................................................... 40,991
-----------
128,028
-----------
AUTO PARTS - AFTER MARKET (1.6%)
1,850 Cooper Tire & Rubber Co................................................................. 44,516
1,000 Dana Corp............................................................................... 50,125
1,250 Echlin, Inc............................................................................. 44,453
1,275 Genuine Parts Co........................................................................ 42,314
750 Goodyear Tire & Rubber Co............................................................... 46,969
1,500 ITT Industries, Inc..................................................................... 46,505
1,000 Snap-On, Inc............................................................................ 39,187
800 TRW, Inc................................................................................ 40,700
-----------
354,769
-----------
AUTOMOBILES (0.6%)
1,100 Chrysler Corp........................................................................... 38,294
900 Ford Motor Co........................................................................... 45,900
700 General Motors Corp..................................................................... 40,556
-----------
124,750
-----------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
BANKS - MONEY CENTER (1.6%)
700 BankAmerica Corp........................................................................ $ 49,744
450 Bankers Trust New York Corp............................................................. 46,941
400 Chase Manhattan Corp.................................................................... 42,875
350 Citicorp................................................................................ 41,650
650 First Chicago NBD Corp.................................................................. 48,506
900 First Union Corp........................................................................ 43,256
400 Morgan (J.P.) & Co., Inc................................................................ 40,475
700 NationsBank Corp........................................................................ 42,000
-----------
355,447
-----------
BANKS - REGIONAL (4.7%)
800 Banc One Corp........................................................................... 44,700
800 Bank of New York Co., Inc............................................................... 43,350
550 BankBoston Corp......................................................................... 49,225
650 BB & T Corp............................................................................. 38,309
500 Comerica, Inc........................................................................... 47,187
600 CoreStates Financial Corp............................................................... 45,900
600 Fifth Third Bancorp..................................................................... 45,750
700 Fleet Financial Group, Inc.............................................................. 50,137
1,200 Huntington Bancshares, Inc.............................................................. 40,050
700 KeyCorp................................................................................. 45,500
800 Mellon Bank Corp........................................................................ 48,300
750 National City Corp...................................................................... 45,141
600 Northern Trust Corp..................................................................... 40,387
1,200 Norwest Corp............................................................................ 43,800
800 PNC Bank Corp........................................................................... 41,250
450 Republic New York Corp.................................................................. 48,994
700 State Street Corp....................................................................... 39,200
800 Summit Bancorp.......................................................................... 40,000
700 SunTrust Banks, Inc..................................................................... 48,475
1,200 Synovus Financial Corp.................................................................. 39,525
450 U.S. Bancorp............................................................................ 49,275
600 Wachovia Corp........................................................................... 46,650
150 Wells Fargo & Co........................................................................ 46,350
-----------
1,027,455
-----------
BEVERAGES - ALCOHOLIC (0.8%)
1,100 Anheuser-Busch Companies, Inc........................................................... 49,431
800 Brown-Forman Corp. (Class B)............................................................ 41,400
1,350 Coors (Adolph) Co. (Class B)............................................................ 42,356
1,100 Seagram Co. Ltd. (Canada)............................................................... 37,537
-----------
170,724
-----------
BEVERAGES - SOFT DRINKS (0.4%)
650 Coca Cola Co............................................................................ 42,087
1,050 PepsiCo, Inc............................................................................ 37,866
-----------
79,953
-----------
BIOTECHNOLOGY (0.2%)
800 Amgen Inc.*............................................................................. 39,950
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BROADCAST MEDIA (1.1%)
1,500 CBS Corp................................................................................ $ 44,906
600 Clear Channel Communications, Inc.*..................................................... 46,200
1,500 Comcast Corp. (Class A Special)......................................................... 46,781
1,700 Tele-Communications, Inc. (Class A)*.................................................... 47,600
1,700 U.S. West Media Group, Inc.*............................................................ 50,469
-----------
235,956
-----------
BUILDING MATERIALS (0.6%)
600 Armstrong World Industries Inc.......................................................... 42,750
1,000 Masco Corp.............................................................................. 49,250
1,400 Owens Corning........................................................................... 38,937
-----------
130,937
-----------
CHEMICALS (1.3%)
550 Air Products & Chemicals, Inc........................................................... 44,034
450 Dow Chemical Co......................................................................... 40,500
700 Du Pont (E.I.) De Nemours & Co., Inc.................................................... 39,637
750 Eastman Chemical Co..................................................................... 44,672
1,000 Praxair, Inc............................................................................ 41,437
450 Rohm & Haas Co.......................................................................... 38,587
900 Union Carbide Corp...................................................................... 39,431
-----------
288,298
-----------
CHEMICALS - DIVERSIFIED (0.9%)
2,200 Engelhard Corp.......................................................................... 36,850
600 FMC Corp.*.............................................................................. 40,350
950 Goodrich (B.F.) Co...................................................................... 39,841
900 Monsanto Co............................................................................. 42,694
700 PPG Industries, Inc..................................................................... 40,162
-----------
199,897
-----------
CHEMICALS - SPECIALTY (1.5%)
1,700 Ecolab, Inc............................................................................. 46,537
500 Grace (W. R.) & Co...................................................................... 39,281
850 Great Lakes Chemical Corp............................................................... 37,134
850 Hercules, Inc........................................................................... 40,109
900 International Flavors & Fragrances, Inc................................................. 37,912
1,300 Morton International, Inc............................................................... 42,900
1,050 Nalco Chemical Co....................................................................... 39,375
1,100 Sigma-Aldrich Corp...................................................................... 42,625
-----------
325,873
-----------
COMMERCIAL & CONSUMER SERVICES (1.0%)
1,000 Block (H.&R.), Inc...................................................................... 43,875
1,300 Cendant Corp.*.......................................................................... 44,037
1,400 Dun & Bradstreet Corp................................................................... 44,625
2,900 Laidlaw, Inc. (Canada).................................................................. 41,325
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
1,200 Service Corp. International............................................................. $ 46,800
-----------
220,662
-----------
COMMUNICATIONS EQUIPMENT (1.8%)
1,600 Andrew Corp.*........................................................................... 44,000
2,000 DSC Communications Corp.*............................................................... 40,000
1,000 Harris Corp............................................................................. 47,625
500 Lucent Technologies Inc................................................................. 44,250
650 Motorola, Inc........................................................................... 38,634
2,800 NextLevel Systems, Inc.*................................................................ 48,650
1,000 Northern Telecom Ltd. (Canada).......................................................... 45,125
2,500 Scientific-Atlanta, Inc................................................................. 38,906
800 Tellabs, Inc.*.......................................................................... 40,900
-----------
388,090
-----------
COMPUTER - NETWORKING (0.7%)
1,200 3Com Corp.*............................................................................. 39,675
1,400 Bay Networks, Inc.*..................................................................... 38,062
2,700 Cabletron Systems, Inc.*................................................................ 38,981
700 Cisco Systems, Inc.*.................................................................... 44,144
-----------
160,862
-----------
COMPUTER SOFTWARE & SERVICES (2.2%)
1,000 Adobe Systems, Inc...................................................................... 38,437
1,100 Autodesk, Inc........................................................................... 42,487
800 Computer Associates International, Inc.................................................. 42,550
600 Computer Sciences Corp.*................................................................ 50,925
900 HBO & Co................................................................................ 47,081
300 Microsoft Corp.*........................................................................ 44,756
5,700 Novell, Inc.*........................................................................... 40,256
1,800 Oracle Corp.*........................................................................... 41,850
900 Parametric Technology Corp.*............................................................ 45,675
700 Shared Medical Systems Corp............................................................. 45,850
2,700 Unisys Corp.*........................................................................... 44,550
-----------
484,417
-----------
COMPUTERS - PERIPHERAL EQUIPMENT (0.4%)
1,500 EMC Corp.*.............................................................................. 48,844
1,800 Seagate Technology, Inc.*............................................................... 41,737
-----------
90,581
-----------
COMPUTERS - SYSTEMS (1.8%)
2,500 Apple Computer, Inc.*................................................................... 45,781
1,384 COMPAQ Computer Corp.................................................................... 41,606
2,600 Data General Corp.*..................................................................... 40,137
500 Dell Computer Corp.*.................................................................... 49,719
800 Digital Equipment Corp.*................................................................ 45,250
700 Hewlett-Packard Co...................................................................... 42,000
500 International Business Machines Corp.................................................... 49,344
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
2,700 Silicon Graphics, Inc.*................................................................. $ 41,850
900 Sun Microsystems, Inc.*................................................................. 43,144
-----------
398,831
-----------
CONSUMER - NONCYCLICAL (0.4%)
1,000 American Greetings Corp. (Class A)...................................................... 43,312
1,800 Jostens, Inc............................................................................ 40,612
-----------
83,924
-----------
CONTAINERS - METAL & GLASS (0.6%)
1,400 Ball Corp............................................................................... 45,500
900 Crown Cork & Seal Co., Inc.............................................................. 44,550
1,300 Owens-Illinois, Inc.*................................................................... 47,287
-----------
137,337
-----------
CONTAINERS - PAPER (0.7%)
1,000 Bemis Company, Inc...................................................................... 43,125
3,100 Stone Container Corp.................................................................... 39,525
700 Temple-Inland, Inc...................................................................... 38,850
700 Union Camp Corp......................................................................... 40,031
-----------
161,531
-----------
DATA PROCESSING (0.8%)
700 Automatic Data Processing, Inc.......................................................... 41,869
1,000 Ceridian Corp.*......................................................................... 45,312
1,200 Equifax, Inc............................................................................ 39,450
1,500 First Data Corp......................................................................... 45,937
-----------
172,568
-----------
DISTRIBUTORS - FOOD & HEALTH (0.6%)
600 Cardinal Health, Inc.................................................................... 46,462
1,000 Supervalu, Inc.......................................................................... 43,875
900 Sysco Corp.............................................................................. 40,275
-----------
130,612
-----------
ELECTRICAL EQUIPMENT (1.6%)
1,100 AMP, Inc................................................................................ 44,000
800 Emerson Electric Co..................................................................... 48,400
600 General Electric Co..................................................................... 46,500
1,000 General Signal Corp..................................................................... 39,000
600 Honeywell, Inc.......................................................................... 42,037
1,100 Raychem Corp............................................................................ 41,044
800 Rockwell International Corp............................................................. 44,700
800 Thomas & Betts Corp..................................................................... 39,500
-----------
345,181
-----------
ELECTRONIC COMPONENTS (0.2%)
500 Grainger (W.W.), Inc.................................................................... 48,125
-----------
ELECTRONICS - DEFENSE (0.2%)
850 Raytheon Co. (Class B).................................................................. 44,306
-----------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
ELECTRONICS - INSTRUMENTATION (0.6%)
1,800 EG & G, Inc............................................................................. $ 43,425
700 Perkin-Elmer Corp....................................................................... 41,300
1,125 Tektronix, Inc.......................................................................... 47,531
-----------
132,256
-----------
ELECTRONICS - SEMICONDUCTORS (1.1%)
2,000 Advanced Micro Devices, Inc.*........................................................... 40,125
500 Intel Corp.............................................................................. 40,500
1,700 LSI Logic Corp.*........................................................................ 40,800
1,350 Micron Technology, Inc.*................................................................ 46,744
1,400 National Semiconductor Corp.*........................................................... 39,375
700 Texas Instruments, Inc.................................................................. 38,237
-----------
245,781
-----------
ENGINEERING & CONSTRUCTION (0.6%)
1,100 Fluor Corp.............................................................................. 41,456
1,700 Foster Wheeler Corp..................................................................... 40,800
1,400 McDermott International, Inc............................................................ 44,625
-----------
126,881
-----------
ENTERTAINMENT (0.8%)
800 King World Productions Inc.*............................................................ 47,350
700 Time Warner, Inc........................................................................ 44,931
1,000 Viacom, Inc. (Class B)*................................................................. 41,750
400 Walt Disney Co.......................................................................... 42,625
-----------
176,656
-----------
FACILITIES & ENVIRONMENTAL SERVICES (0.2%)
1,700 Safety-Kleen Corp....................................................................... 44,200
-----------
FINANCE - CONSUMER (1.3%)
600 Beneficial Corp......................................................................... 46,575
1,000 Countrywide Credit Industries, Inc...................................................... 46,625
2,100 Green Tree Financial Corp............................................................... 41,606
400 Household International, Inc............................................................ 49,800
1,400 MBNA Corp............................................................................... 43,487
1,000 Providian Financial Corp................................................................ 48,875
-----------
276,968
-----------
FINANCE - DIVERSIFIED (1.7%)
600 American Express Co..................................................................... 50,212
700 American General Corp................................................................... 39,462
800 Fannie Mae.............................................................................. 49,400
1,000 Freddie Mac............................................................................. 44,500
700 MBIA Inc................................................................................ 45,325
700 MGIC Investment Corp.................................................................... 47,337
800 Morgan Stanley, Dean Witter, Discover & Co. (Note 3).................................... 46,700
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1,050 SunAmerica, Inc......................................................................... $ 42,197
-----------
365,133
-----------
FOODS (2.5%)
500 Bestfoods............................................................................... 48,750
800 Campbell Soup Co........................................................................ 42,800
1,400 ConAgra, Inc............................................................................ 44,275
600 General Mills, Inc...................................................................... 44,662
800 Heinz (H.J.) Co......................................................................... 44,350
750 Hershey Foods Corp...................................................................... 47,766
900 Kellogg Co.............................................................................. 41,569
800 Quaker Oats Company (The)............................................................... 43,000
500 Ralston-Ralston Purina Group............................................................ 46,937
900 Sara Lee Corp........................................................................... 49,106
800 Unilever NV (ADR) (Netherlands)......................................................... 45,650
600 Wrigley (Wm.) Jr. Co. (Class A)......................................................... 44,362
-----------
543,227
-----------
FOOTWEAR (0.4%)
1,000 Nike, Inc. (Class B).................................................................... 40,062
1,400 Reebok International Ltd. (United Kingdom)*............................................. 37,362
-----------
77,424
-----------
GAMING, LOTTERY, & PARI-MUTUEL COMPANIES (0.4%)
2,000 Harrah's Entertainment, Inc.*........................................................... 44,000
1,700 Mirage Resorts, Inc.*................................................................... 39,206
-----------
83,206
-----------
GOLD & PRECIOUS METALS MINING (0.4%)
2,000 Barrick Gold Corp. (Canada)............................................................. 38,750
7,300 Battle Mountain Gold Co................................................................. 41,062
-----------
79,812
-----------
HARDWARE & TOOLS (0.4%)
900 Black & Decker Corp..................................................................... 43,369
1,100 Stanley Works........................................................................... 48,675
-----------
92,044
-----------
HEALTHCARE - DIVERSIFIED (1.5%)
650 Abbott Laboratories..................................................................... 46,028
1,400 Allergan, Inc........................................................................... 47,600
500 American Home Products Corp............................................................. 47,719
400 Bristol-Myers Squibb Co................................................................. 39,875
700 Johnson & Johnson....................................................................... 46,856
1,300 Mallinckrodt Group, Inc................................................................. 46,069
300 Warner-Lambert Co....................................................................... 45,150
-----------
319,297
-----------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
HEALTHCARE - DRUGS (1.0%)
700 Lilly (Eli) & Co........................................................................ $ 47,250
350 Merck & Co., Inc........................................................................ 41,037
600 Pfizer, Inc............................................................................. 49,162
1,200 Pharmacia & Upjohn, Inc................................................................. 46,125
600 Schering-Plough Corp.................................................................... 43,425
-----------
226,999
-----------
HEALTHCARE - HMOS (0.4%)
1,950 Humana, Inc.*........................................................................... 39,122
850 United Healthcare Corp.................................................................. 43,562
-----------
82,684
-----------
HEALTHCARE - LONG TERM (0.4%)
1,800 Healthsouth Corp.*...................................................................... 40,387
1,400 Manor Care, Inc......................................................................... 48,562
-----------
88,949
-----------
HEALTHCARE SERVICES (0.2%)
1,200 ALZA Corp. (Class A)*................................................................... 42,750
-----------
HEAVY DUTY TRUCKS & PARTS (0.6%)
800 Cummins Engine Co., Inc................................................................. 42,800
1,700 Navistar International Corp.*........................................................... 45,900
800 PACCAR, Inc............................................................................. 40,200
-----------
128,900
-----------
HOME BUILDING (0.8%)
700 Centex Corp............................................................................. 43,925
1,000 Fleetwood Enterprises, Inc.............................................................. 41,625
1,700 Kaufman & Broad Home Corp............................................................... 43,775
1,100 Pulte Corp.............................................................................. 46,887
-----------
176,212
-----------
HOSPITAL MANAGEMENT (0.4%)
1,600 Columbia/HCA Healthcare Corp............................................................ 40,000
1,300 Tenet Healthcare Corp.*................................................................. 44,850
-----------
84,850
-----------
HOUSEHOLD FURNISHINGS & APPLIANCES (0.4%)
1,200 Maytag Corp............................................................................. 46,125
800 Whirlpool Corp.......................................................................... 46,250
-----------
92,375
-----------
HOUSEHOLD PRODUCTS - NON-DURABLE (1.1%)
600 Clorox Co............................................................................... 45,975
600 Colgate-Palmolive Co.................................................................... 43,950
1,100 Fort James Corp......................................................................... 47,231
900 Kimberly-Clark Corp..................................................................... 46,969
600 Procter & Gamble Co..................................................................... 47,025
-----------
231,150
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
HOUSEWARES (0.8%)
1,150 Fortune Brands, Inc..................................................................... $ 43,988
1,200 Newell Co............................................................................... 49,275
1,600 Rubbermaid, Inc......................................................................... 41,400
1,500 Tupperware Corp......................................................................... 38,344
-----------
173,007
-----------
INSURANCE BROKERS (0.4%)
825 Aon Corp................................................................................ 46,045
600 Marsh & McLennan Cos., Inc.............................................................. 44,325
-----------
90,370
-----------
INVESTMENT BANKING/BROKERAGE (0.6%)
750 Lehman Brothers Holdings, Inc........................................................... 40,734
650 Merrill Lynch & Co., Inc................................................................ 41,031
1,200 Schwab (CHARLES) Corp................................................................... 43,800
-----------
125,565
-----------
LEISURE TIME - PRODUCTS (0.6%)
1,350 Brunswick Corp.......................................................................... 40,669
1,400 Hasbro, Inc............................................................................. 48,300
1,000 Mattel, Inc............................................................................. 40,500
-----------
129,469
-----------
LIFE & HEALTH INSURANCE (1.2%)
550 Aetna Inc............................................................................... 40,425
1,000 Conseco, Inc............................................................................ 45,750
600 Jefferson-Pilot Corp.................................................................... 49,013
1,100 Torchmark Corp.......................................................................... 45,719
400 Transamerica Corp....................................................................... 41,100
1,000 UNUM Corp............................................................................... 48,625
-----------
270,632
-----------
LODGING - HOTELS (0.6%)
1,400 Hilton Hotels Corp...................................................................... 39,638
500 ITT Corp.*.............................................................................. 40,000
650 Marriot International, Inc.............................................................. 44,931
-----------
124,569
-----------
MACHINERY - DIVERSIFIED (2.0%)
700 Case Corp............................................................................... 40,819
900 Caterpillar Inc......................................................................... 43,200
1,700 Cincinnati Milacron, Inc................................................................ 43,350
800 Cooper Industries, Inc.................................................................. 42,450
800 Deere & Co.............................................................................. 42,200
1,400 Dover Corp.............................................................................. 47,688
1,100 Harnischfeger Industries, Inc........................................................... 38,500
1,125 Ingersoll-Rand Co....................................................................... 44,719
450 NACCO Industries, Inc. (Class A)........................................................ 45,197
1,400 Timken Co............................................................................... 45,150
-----------
433,273
-----------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
MANUFACTURING - DIVERSIFIED (2.8%)
850 Aeroquip-Vickers, Inc................................................................... $ 42,500
1,100 AlliedSignal, Inc....................................................................... 42,831
1,200 Corning, Inc............................................................................ 40,800
1,050 Crane Co................................................................................ 45,347
450 Eaton Corp.............................................................................. 40,388
800 Illinois Tool Works Inc................................................................. 44,550
900 Johnson Controls, Inc................................................................... 45,619
450 Minnesota Mining & Manufacturing Co..................................................... 37,575
900 National Service Industries, Inc........................................................ 45,000
1,000 Tenneco, Inc............................................................................ 40,563
700 Textron, Inc............................................................................ 41,869
1,200 Thermo Electron Corp.*.................................................................. 46,800
1,000 Tyco International Ltd.................................................................. 44,375
600 United Technologies Corp................................................................ 48,975
-----------
607,192
-----------
MANUFACTURING - SPECIALIZED (1.0%)
1,100 Avery Dennison Corp..................................................................... 49,363
900 Briggs & Stratton Corp.................................................................. 39,656
1,200 Millipore Corp.......................................................................... 39,300
1,900 Pall Corp............................................................................... 37,881
1,000 Parker-Hannifin Corp.................................................................... 43,688
-----------
209,888
-----------
MEDICAL PRODUCTS & SUPPLIES (2.0%)
1,400 Bard (C.R.), Inc........................................................................ 43,400
1,000 Bausch & Lomb, Inc...................................................................... 42,875
800 Baxter International, Inc............................................................... 44,550
800 Becton, Dickinson & Co.................................................................. 50,500
1,500 Biomet, Inc............................................................................. 42,938
800 Boston Scientific Corp.*................................................................ 40,600
700 Guidant Corp............................................................................ 44,975
900 Medtronic, Inc.......................................................................... 45,956
1,300 St. Jude Medical, Inc.*................................................................. 42,250
1,400 United States Surgical Corp............................................................. 39,988
-----------
438,032
-----------
METALS & MINING (1.4%)
1,800 ASARCO, Inc............................................................................. 40,050
2,600 Cyprus Amax Minerals Co................................................................. 40,950
2,700 Freeport-McMoran Copper & Gold, Inc. (Class B).......................................... 39,656
3,900 Homestake Mining Co..................................................................... 37,050
2,200 Inco Ltd. (Canada)...................................................................... 39,050
1,300 Newmont Mining Corp..................................................................... 37,050
600 Phelps Dodge Corp....................................................................... 39,525
2,800 Placer Dome Inc. (Canada)............................................................... 36,050
-----------
309,381
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MULTI-LINE INSURANCE (1.2%)
400 American International Group, Inc....................................................... $ 44,125
250 CIGNA Corp.............................................................................. 42,391
550 Hartford Financial Services Group Inc................................................... 49,500
650 Lincoln National Corp................................................................... 49,197
400 Loews Corp.............................................................................. 39,925
900 Travelers Group, Inc.................................................................... 44,550
-----------
269,688
-----------
OFFICE EQUIPMENT & SUPPLIES (0.4%)
2,600 Moore Corp. Ltd. (Canada)............................................................... 39,000
1,000 Pitney Bowes, Inc....................................................................... 45,875
-----------
84,875
-----------
OIL & GAS - EXPLORATION & PRODUCTION (0.2%)
450 Burlington Northern Santa Fe Corp....................................................... 39,038
-----------
OIL & GAS - REFINING & MARKETING (0.4%)
900 Ashland, Inc............................................................................ 47,475
1,300 Sun Co., Inc............................................................................ 50,375
-----------
97,850
-----------
OIL & GAS DRILLING (1.3%)
1,100 Baker Hughes, Inc....................................................................... 42,419
1,150 Dresser Industries, Inc................................................................. 41,113
900 Halliburton Co.......................................................................... 40,444
1,500 Helmerich & Payne, Inc.................................................................. 38,344
1,500 Rowan Companies, Inc.*.................................................................. 39,563
600 Schlumberger, Ltd....................................................................... 44,213
700 Western Atlas, Inc.*.................................................................... 43,619
-----------
289,715
-----------
OIL - EXPLORATION & PRODUCTION (0.8%)
700 Anardarko Petroleum Corp................................................................ 41,300
1,200 Apache Corp............................................................................. 39,750
1,037 Burlington Resources, Inc............................................................... 44,332
1,700 Oryx Energy Co.*........................................................................ 40,800
-----------
166,182
-----------
OIL - INTEGRATED - DOMESTIC (1.7%)
750 Amerada Hess Corp....................................................................... 41,016
600 Atlantic Richfield Co................................................................... 44,625
650 Kerr-McGee Corp......................................................................... 40,706
1,600 Occidental Petroleum Corp............................................................... 40,800
650 Pennzoil Co............................................................................. 42,006
1,000 Phillips Petroleum Co................................................................... 44,000
1,700 Union Pacific Resources Group, Inc...................................................... 38,038
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
1,200 Unocal Corp............................................................................. $ 41,250
1,350 USX-Marathon Group...................................................................... 45,309
-----------
377,750
-----------
OIL - INTEGRATED - INTERNATIONAL (1.1%)
500 Amoco Corp.............................................................................. 40,688
550 Chevron Corp............................................................................ 41,147
700 Exxon Corp.............................................................................. 41,519
600 Mobil Corp.............................................................................. 40,875
800 Royal Dutch Petroleum Co. (ADR) (Netherlands)........................................... 41,000
800 Texaco, Inc............................................................................. 41,650
-----------
246,879
-----------
PAPER & FOREST PRODUCTS (1.8%)
1,200 Boise Cascade Corp...................................................................... 38,400
800 Champion International Corp............................................................. 40,950
700 Georgia-Pacific Corp.................................................................... 38,588
900 International Paper Co.................................................................. 41,119
2,100 Louisiana-Pacific Corp.................................................................. 42,131
1,200 Mead Corp............................................................................... 39,000
900 Potlatch Corp........................................................................... 40,050
1,200 Westvaco Corp........................................................................... 38,925
800 Weyerhaeuser Co......................................................................... 39,850
1,200 Willamette Industries, Inc.............................................................. 40,200
-----------
399,213
-----------
PERSONAL CARE (0.6%)
1,600 Alberto-Culver Co. (Class B)............................................................ 47,400
700 Avon Products, Inc...................................................................... 42,000
450 Gillette Co............................................................................. 44,438
-----------
133,838
-----------
PHOTOGRAPHY/IMAGING (0.8%)
700 Eastman Kodak Co........................................................................ 45,675
1,600 Ikon Office Solutions, Inc.............................................................. 50,400
1,000 Polaroid Corp........................................................................... 41,063
550 Xerox Corp.............................................................................. 44,206
-----------
181,344
-----------
PROPERTY - CASUALTY INSURANCE (1.6%)
500 Allstate Corp........................................................................... 44,250
600 Chubb Corp.............................................................................. 45,563
300 Cincinnati Financial Corp............................................................... 38,250
200 General Re Corp......................................................................... 41,625
400 Progressive Corp........................................................................ 43,750
900 SAFECO Corp............................................................................. 44,944
500 St. Paul Companies, Inc................................................................. 43,500
2,000 USF&G Corp.............................................................................. 47,625
-----------
349,507
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PUBLISHING (0.8%)
950 Dow Jones & Co., Inc.................................................................... $ 47,738
700 McGraw-Hill, Inc........................................................................ 48,869
1,100 Meredith Corp........................................................................... 43,106
750 Times Mirror Co. (Class A).............................................................. 43,219
-----------
182,932
-----------
PUBLISHING - NEWSPAPER (0.8%)
700 Gannett Co., Inc........................................................................ 42,350
800 Knight-Ridder Newspapers, Inc........................................................... 44,050
600 New York Times Co. (Class A)............................................................ 39,038
850 Tribune Co.............................................................................. 51,638
-----------
177,076
-----------
RAILROADS (0.5%)
750 CSX Corp................................................................................ 39,750
1,250 Norfolk Southern Corp................................................................... 39,453
650 Union Pacific Corp...................................................................... 39,000
-----------
118,203
-----------
RESTAURANTS (0.8%)
3,500 Darden Restaurants, Inc................................................................. 44,188
850 McDonald's Corp......................................................................... 40,056
1,500 TRICON Global Restaurants, Inc.*........................................................ 40,875
1,850 Wendy's International, Inc.............................................................. 41,278
-----------
166,397
-----------
RETAIL - BUILDING SUPPLIES (0.6%)
700 Home Depot, Inc......................................................................... 42,219
900 Lowe's Companies, Inc................................................................... 45,506
1,400 Sherwin-Williams Co..................................................................... 39,900
-----------
127,625
-----------
RETAIL - COMPUTERS & ELECTRONICS (0.4%)
1,200 Circuit City Stores, Inc................................................................ 40,950
1,200 Tandy Corp.............................................................................. 46,500
-----------
87,450
-----------
RETAIL - DEPARTMENT STORES (1.5%)
1,200 Dillard Department Stores, Inc. (Class A)............................................... 42,150
1,200 Federated Department Stores, Inc.*...................................................... 50,850
850 Harcourt General, Inc................................................................... 45,316
850 May Department Stores Co................................................................ 44,678
750 Mercantile Stores Co., Inc.............................................................. 44,625
900 Nordstrom, Inc.......................................................................... 45,731
700 Penney (J.C.) Co., Inc.................................................................. 47,163
-----------
320,513
-----------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
RETAIL - DRUG STORES (0.8%)
600 CVS Corp................................................................................ $ 39,338
1,500 Longs Drug Stores Corp.................................................................. 43,406
700 Rite Aid Corp........................................................................... 43,706
1,400 Walgreen Co............................................................................. 46,375
-----------
172,825
-----------
RETAIL - FOOD CHAINS (1.2%)
900 Albertson's, Inc........................................................................ 42,919
1,800 American Stores Co...................................................................... 39,150
1,400 Giant Food, Inc. (Class A).............................................................. 45,588
1,600 Great Atlantic & Pacific Tea Co., Inc................................................... 45,600
1,200 Kroger Co.*............................................................................. 46,950
900 Winn-Dixie Stores, Inc.................................................................. 43,875
-----------
264,082
-----------
RETAIL - GENERAL MERCHANDISE (1.0%)
1,000 Costco Companies, Inc.*................................................................. 43,375
600 Dayton-Hudson Corp...................................................................... 43,163
3,900 Kmart Corp.*............................................................................ 42,900
900 Sears, Roebuck & Co..................................................................... 41,456
1,100 Wal-Mart Stores, Inc.................................................................... 43,863
-----------
214,757
-----------
RETAIL - SPECIALTY (1.0%)
1,600 AutoZone, Inc.*......................................................................... 43,900
1,000 Consolidated Stores Corp.*.............................................................. 41,125
1,800 Pep Boys-Manny, Moe & Jack.............................................................. 39,375
1,600 Toys 'R' Us, Inc.*...................................................................... 42,900
2,000 Woolworth Corp.*........................................................................ 43,500
-----------
210,800
-----------
RETAIL - SPECIALTY APPAREL (0.8%)
9,500 Charming Shoppes, Inc.*................................................................. 38,000
1,200 Gap, Inc................................................................................ 46,875
1,700 Limited (The), Inc...................................................................... 45,050
1,300 TJX Companies, Inc...................................................................... 44,038
-----------
173,963
-----------
SAVINGS & LOAN COMPANIES (0.6%)
800 Ahmanson (H.F.) & Co.................................................................... 46,650
500 Golden West Financial Corp.............................................................. 42,219
700 Washington Mutual, Inc.................................................................. 44,975
-----------
133,844
-----------
SEMICONDUCTOR EQUIPMENT (0.4%)
1,200 Applied Materials, Inc.*................................................................ 39,300
1,000 KLA-Tencor Corp.*....................................................................... 37,500
-----------
76,800
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SPECIALTY PRINTING (0.6%)
1,200 Deluxe Corp............................................................................. $ 39,600
1,200 Donnelley (R.R.) & Sons Co.............................................................. 44,775
2,500 Harland (John H.) Co.................................................................... 38,438
-----------
122,813
-----------
STEEL & IRON (1.3%)
1,600 Allegheny Teledyne Inc.................................................................. 39,400
7,900 Armco, Inc.............................................................................. 37,031
4,000 Bethlehem Steel Corp.*.................................................................. 39,500
2,000 Inland Steel Industries, Inc............................................................ 39,875
900 Nucor Corp.............................................................................. 42,863
1,150 USX-U.S. Steel Group, Inc............................................................... 38,381
2,300 Worthington Industries, Inc............................................................. 38,669
-----------
275,719
-----------
TELECOMMUNICATIONS - CELLULAR/WIRELESS (0.2%)
1,000 Airtouch Communications, Inc.*.......................................................... 43,875
-----------
TELECOMMUNICATIONS - LONG DISTANCE (0.8%)
700 AT&T Corp............................................................................... 43,838
1,000 MCI Communications Corp................................................................. 46,438
700 Sprint Corp............................................................................. 41,563
1,400 WorldCom, Inc.*......................................................................... 50,138
-----------
181,977
-----------
TELEPHONES (1.6%)
1,000 ALLTEL Corp............................................................................. 42,750
1,000 Ameritech Corp.......................................................................... 42,938
450 Bell Atlantic Corp...................................................................... 41,653
700 BellSouth Corp.......................................................................... 42,394
1,700 Frontier Corp........................................................................... 44,306
800 GTE Corp................................................................................ 43,650
500 SBC Communications, Inc................................................................. 38,875
900 U.S. West Communications Group.......................................................... 43,313
-----------
339,879
-----------
TEXTILES - APPAREL (0.8%)
1,700 Fruit of the Loom, Inc. (Class A)*...................................................... 40,800
1,100 Liz Claiborne, Inc...................................................................... 44,550
1,600 Russell Corp............................................................................ 39,500
1,100 VF Corp................................................................................. 47,025
-----------
171,875
-----------
TEXTILES - HOME FURNISHINGS (0.2%)
900 Springs Industries, Inc. (Class A)...................................................... 47,363
-----------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
TOBACCO (0.4%)
1,050 Philip Morris Companies, Inc............................................................ $ 43,575
1,300 UST, Inc................................................................................ 44,850
-----------
88,425
-----------
TRUCKERS (0.2%)
1,250 Ryder System, Inc....................................................................... 41,875
-----------
UTILITIES - ELECTRIC (5.3%)
1,200 Ameren Corp............................................................................. 43,950
900 American Electric Power Co., Inc........................................................ 44,381
1,500 Baltimore Gas & Electric Co............................................................. 45,563
1,100 Carolina Power & Light Co............................................................... 44,688
1,700 Central & South West Corp............................................................... 46,006
1,200 CINergy Corp............................................................................ 41,400
1,100 Consolidated Edison Co. of New York, Inc................................................ 45,444
1,200 Detroit Edison Co....................................................................... 43,050
1,100 Dominion Resources, Inc................................................................. 43,863
800 Duke Power Co........................................................................... 43,350
1,700 Edison International.................................................................... 45,688
1,550 Entergy Corp............................................................................ 44,369
1,600 FirstEnergy Corp.*...................................................................... 46,400
800 FPL Group, Inc.......................................................................... 45,900
1,200 GPU, Inc................................................................................ 47,175
1,700 Houston Industries, Inc................................................................. 44,413
4,300 Niagara Mohawk Power Corp.*............................................................. 46,494
800 Northern States Power Co................................................................ 42,900
2,050 PacifiCorp.............................................................................. 47,534
2,000 PECO Energy Co.......................................................................... 37,875
1,500 PG & E Corp............................................................................. 44,719
2,000 PP & L Resources, Inc................................................................... 43,750
1,500 Public Service Enterprise Group, Inc.................................................... 46,500
1,900 Southern Co............................................................................. 46,194
1,100 Texas Utilities Co...................................................................... 45,238
1,500 Unicom Corp............................................................................. 46,500
-----------
1,163,344
-----------
UTILITIES - NATURAL GAS (2.2%)
800 Coastal Corp............................................................................ 46,400
600 Columbia Gas System, Inc................................................................ 45,525
700 Consolidated Natural Gas Co............................................................. 38,019
1,100 Eastern Enterprises..................................................................... 45,513
1,200 Enron Corp.............................................................................. 49,725
1,200 NICOR, Inc.............................................................................. 48,300
1,250 ONEOK, Inc.............................................................................. 42,734
1,200 Pacific Enterprises..................................................................... 43,275
1,100 Peoples Energy Corp..................................................................... 41,525
1,000 Sonat, Inc.............................................................................. 43,688
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1,600 Williams Companies, Inc................................................................. $ 45,600
-----------
490,304
-----------
WASTE MANAGEMENT (0.4%)
1,200 Browning-Ferris Industries, Inc......................................................... 41,475
1,700 Waste Management Inc.................................................................... 39,950
-----------
81,425
-----------
TOTAL INVESTMENTS
(IDENTIFIED COST $14,359,063) (a).......................................................... 99.3% 21,680,008
OTHER ASSETS IN EXCESS OF LIABILITIES...................................................... 0.7 147,912
------ ------------
NET ASSETS................................................................................. 100.0% $ 21,827,920
------ ------------
------ ------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $7,720,997 and the
aggregate gross unrealized depreciation is $400,052, resulting in net
unrealized appreciation of $7,320,945.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS (98.0%)
ARGENTINA (0.6%)
BANKING
2,232 Banco de Galicia y Buenos Aires S.A. de C.V. (Class B) (ADR)............................ $ 48,964
-----------
TELECOMMUNICATIONS
1,300 Telefonica de Argentina S.A. (Class B) (ADR)............................................ 45,013
-----------
TOTAL ARGENTINA......................................................................... 93,977
-----------
AUSTRALIA (1.7%)
BANKING
8,000 Westpac Banking Corp., Ltd.............................................................. 54,840
-----------
ENERGY
5,000 Woodside Petroleum Ltd.................................................................. 34,446
-----------
FINANCIAL SERVICES
24,000 Tyndall Australia Ltd................................................................... 40,637
-----------
FOODS & BEVERAGES
30,000 Goodman Fielder Ltd..................................................................... 47,320
-----------
TELECOMMUNICATIONS
2,400 Telstra Corp., Ltd. (ADR)*.............................................................. 108,450
-----------
TOTAL AUSTRALIA......................................................................... 285,693
-----------
BELGIUM (0.3%)
RETAIL
1,000 G.I.B. Holdings Ltd..................................................................... 48,988
-----------
BRAZIL (1.5%)
TELECOMMUNICATIONS
1,400 Telecommunicacoes Brasileiras S.A. (ADR)................................................ 155,400
-----------
UTILITIES - ELECTRIC
7,500 Companhia Paranaense de Energia - Copel (ADR)........................................... 90,000
-----------
TOTAL BRAZIL............................................................................ 245,400
-----------
CANADA (1.7%)
BANKING
2,000 Royal Bank of Canada.................................................................... 104,891
-----------
BIOTECHNOLOGY
5,500 BioChem Pharma, Inc.*................................................................... 112,062
-----------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
COMPUTERS - SYSTEMS
2,000 Geac Computer Corp., Ltd.*.............................................................. $ 66,630
-----------
TOTAL CANADA............................................................................ 283,583
-----------
CHILE (0.6%)
TELECOMMUNICATIONS
2,000 Compania de Telecommunicaciones de Chile S.A. (ADR)..................................... 48,125
-----------
UTILITIES - ELECTRIC
2,000 Enersis S.A. (ADR)...................................................................... 52,875
-----------
TOTAL CHILE............................................................................. 101,000
-----------
CHINA (0.2%)
TELECOMMUNICATIONS
1,300 China Telecom (Hong Kong) Ltd. (ADR)*................................................... 40,869
-----------
DENMARK (1.4%)
PHARMACEUTICALS
1,000 Novo-Nordisk AS (Series B).............................................................. 143,462
-----------
TRANSPORTATION
700 Kobenhavns Lufthavne AS................................................................. 80,840
-----------
TOTAL DENMARK........................................................................... 224,302
-----------
FINLAND (0.4%)
MANUFACTURING
800 KCI Konecranes International............................................................ 27,451
-----------
PHARMACEUTICALS
1,400 Orion-yhtymae Oy (B Shares)............................................................. 42,350
-----------
TOTAL FINLAND........................................................................... 69,801
-----------
FRANCE (6.3%)
AEROSPACE & DEFENSE
3,000 Thomson CSF............................................................................. 102,765
-----------
AUTOMOTIVE
1,200 Compagnie Generale des Etablissements Michelin (B Shares)............................... 63,910
1,200 Valeo S.A............................................................................... 83,837
-----------
147,747
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BANKING
1,600 Banque Nationale de Paris............................................................... $ 82,629
-----------
ENERGY
700 Elf Aquitaine S.A....................................................................... 79,015
-----------
FINANCIAL SERVICES
1,100 Compagnie Financiere de Paribas (A Shares).............................................. 98,328
350 Dexia France............................................................................ 41,620
-----------
139,948
-----------
INSURANCE
1,400 AXA-UAP................................................................................. 116,238
-----------
LEISURE
600 Accor S.A............................................................................... 118,033
-----------
MEDIA
700 Havas S.A............................................................................... 49,978
-----------
TELECOMMUNICATIONS
3,000 France Telecom S.A. (ADR)*.............................................................. 127,125
-----------
TELECOMMUNICATIONS EQUIPMENT
600 Alcatel Alsthom......................................................................... 79,569
-----------
TOTAL FRANCE............................................................................ 1,043,047
-----------
GERMANY (2.8%)
APPAREL
400 Adidas AG............................................................................... 58,721
20 Hugo Boss AG (Pref.).................................................................... 28,431
-----------
87,152
-----------
AUTOMOTIVE
90 Bayerische Motoren Werke (BMW) AG....................................................... 71,842
300 MAN AG.................................................................................. 80,536
-----------
152,378
-----------
CHEMICALS
1,200 Bayer AG................................................................................ 45,074
600 SGL Carbon AG........................................................................... 75,451
-----------
120,525
-----------
MACHINERY - DIVERSIFIED
100 Mannesmann AG........................................................................... 56,916
-----------
TELECOMMUNICATIONS
900 Siemens AG.............................................................................. 54,989
-----------
TOTAL GERMANY........................................................................... 471,960
-----------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
HONG KONG (2.9%)
BANKING
12,000 Guoco Group Ltd......................................................................... $ 17,846
3,140 HSBC Holdings PLC....................................................................... 69,638
-----------
87,484
-----------
CONGLOMERATES
11,000 Hutchison Whampoa, Ltd.................................................................. 64,723
-----------
REAL ESTATE
15,000 Cheung Kong (Holdings) Ltd.............................................................. 76,620
14,000 New World Development Co., Ltd.......................................................... 33,764
6,000 Sun Hung Kai Properties Ltd............................................................. 30,803
-----------
141,187
-----------
UTILITIES
36,600 Hong Kong & China Gas Co., Ltd.......................................................... 61,528
-----------
UTILITIES - ELECTRIC
23,000 CLP Holdings Ltd........................................................................ 126,406
-----------
TOTAL HONG KONG......................................................................... 481,328
-----------
INDIA (0.4%)
TELECOMMUNICATIONS
5,000 Mahanagar Telephone Nigam Ltd. (GDR)*................................................... 75,312
-----------
ISRAEL (0.3%)
RETAIL
4,000 Supersol Ltd. (ADR)..................................................................... 55,000
-----------
ITALY (2.1%)
BANKING
36,000 Banca Commerciale Italiana.............................................................. 147,419
-----------
ENERGY
1,500 Ente Nazionale Idrocarburi SpA (ADR)*................................................... 87,937
-----------
TELECOMMUNICATIONS
16,000 Telecom Italia SpA...................................................................... 110,825
-----------
TOTAL ITALY............................................................................. 346,181
-----------
JAPAN (6.4%)
AUTOMOTIVE
2,000 Honda Motor Co.......................................................................... 72,656
4,000 Suzuki Motor Co., Ltd................................................................... 36,879
-----------
109,535
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BANKING
18,000 Sakura Bank Ltd......................................................................... $ 67,376
-----------
BUILDING & CONSTRUCTION
5,000 Sekisui House Ltd....................................................................... 41,371
-----------
BUSINESS SERVICES
1,000 Secom Co................................................................................ 63,042
-----------
COMPUTERS
6,000 Fujitsu, Ltd............................................................................ 68,558
-----------
ELECTRONICS
1,000 Sony Corp............................................................................... 92,199
-----------
ELECTRONICS - SEMICONDUCTORS/COMPONENTS
1,000 Rohm Co., Ltd........................................................................... 109,535
-----------
FINANCIAL SERVICES
5,000 Nomura Securities Co., Ltd.............................................................. 66,982
-----------
INTERNATIONAL TRADE
10,000 Mitsui & Co............................................................................. 66,351
-----------
MACHINERY
5,000 Minebea Co., Ltd........................................................................ 53,192
-----------
PHARMACEUTICALS
2,000 Terumo Corp............................................................................. 32,151
-----------
REAL ESTATE
5,000 Mitsui Fudosan Co., Ltd................................................................. 49,645
-----------
RESTAURANTS
5 Yoshinoya D & C Co., Ltd................................................................ 47,281
-----------
TELECOMMUNICATIONS
10 Nippon Telegraph & Telephone Corp....................................................... 90,623
-----------
TIRE & RUBBER GOODS
4,000 Bridgestone Corp........................................................................ 96,139
-----------
TOTAL JAPAN............................................................................. 1,053,980
-----------
MALAYSIA (0.5%)
NATURAL GAS
20,000 Petronas Gas Berhad..................................................................... 44,205
-----------
UTILITIES - ELECTRIC
20,000 Tenaga Nasional Berhad.................................................................. 33,931
-----------
TOTAL MALAYSIA.......................................................................... 78,136
-----------
MEXICO (2.8%)
BANKING
80,000 Grupo Financiero Bancomer, S.A. de C.V. (Series B)*..................................... 42,364
-----------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
BEVERAGES - SOFT DRINKS
6,900 Coca-Cola Femsa S.A. de C.V. (ADR)...................................................... $ 127,650
-----------
BUILDING MATERIALS
15,087 Cemex S.A. de C.V. (B Shares)*.......................................................... 63,843
-----------
CONGLOMERATES
1,207 DESC S.A. de C.V. (Series C) (ADR)...................................................... 35,456
7,000 Grupo Carso S.A. de C.V. (Series A1).................................................... 39,882
-----------
75,338
-----------
PAPER & FOREST PRODUCTS
14,000 Kimberly-Clark de Mexico S.A. de C.V. (A Shares)........................................ 60,071
-----------
TELECOMMUNICATIONS
2,000 Telefonos de Mexico S.A. de C.V. (Series L) (ADR)....................................... 98,500
-----------
TOTAL MEXICO............................................................................ 467,766
-----------
NETHERLANDS (4.0%)
BUILDING MATERIALS
800 Hunter Douglas NV....................................................................... 30,266
-----------
BUSINESS & PUBLIC SERVICES
1,750 Randstad Holdings NV.................................................................... 70,452
-----------
CHEMICALS
750 Akzo Nobel NV........................................................................... 135,762
-----------
ELECTRONICS
2,000 Philips Electronics NV.................................................................. 135,034
-----------
FOOD PROCESSING
1,000 Koninklijke Numico NV................................................................... 31,721
-----------
HOUSEHOLD FURNISHINGS & APPLIANCES
1,400 Koninklijke Ahrend Groep NV............................................................. 42,577
-----------
INSURANCE
500 Aegon NV................................................................................ 47,703
875 ING Groep NV............................................................................ 40,064
-----------
87,767
-----------
PUBLISHING
2,900 Elsevier NV............................................................................. 49,091
-----------
RETAIL
2,700 Koninklijke Ahold NV.................................................................... 74,385
-----------
TOTAL NETHERLANDS....................................................................... 657,055
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PERU (0.2%)
BANKING
7,000 Banco Wiese (ADR)....................................................................... $ 34,125
-----------
PHILIPPINES (0.3%)
TELECOMMUNICATIONS
1,700 Philippine Long Distance Telephone Co. (ADR)............................................ 44,625
-----------
PORTUGAL (0.9%)
TELECOMMUNICATIONS
1,600 Portugal Telecom S.A. (ADR)............................................................. 81,400
500 Telecel-Comunicacoes Pessoais S.A.*..................................................... 64,112
-----------
TOTAL PORTUGAL.......................................................................... 145,512
-----------
SINGAPORE (0.9%)
BANKING
4,500 Development Bank of Singapore, Ltd...................................................... 28,905
-----------
UTILITIES - TELECOMMUNICATIONS
59,000 Singapore Telecommunications, Ltd....................................................... 117,139
-----------
TOTAL SINGAPORE......................................................................... 146,044
-----------
SOUTH AFRICA (0.2%)
COMPUTERS - SYSTEMS
2,462 Dimension Data Holdings Ltd. (GDR) - 144A** *........................................... 35,084
-----------
SPAIN (2.2%)
BANKING
2,000 Banco Popular Espanol S.A............................................................... 150,870
-----------
RETAIL
5,100 Centros Comerciales Pryca S.A........................................................... 89,768
-----------
TELECOMMUNICATIONS
700 Telefonica de Espana S.A. (ADR)......................................................... 68,338
-----------
UTILITIES - ELECTRIC
2,800 Endesa S.A.............................................................................. 53,978
-----------
TOTAL SPAIN............................................................................. 362,954
-----------
SWEDEN (0.9%)
AUTOMOTIVE
2,200 Scania AB (A Shares).................................................................... 47,752
-----------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
MACHINERY
2,300 Kalmar Industries AB.................................................................... $ 35,031
-----------
MANUFACTURING
1,200 Assa Abloy AB (Series B)................................................................ 29,598
-----------
TELECOMMUNICATIONS
1,000 Ericsson (L.M.) Telephone Co. AB (Series "B" Free)...................................... 39,217
-----------
TOTAL SWEDEN............................................................................ 151,598
-----------
SWITZERLAND (2.8%)
BUILDING MATERIALS
50 Holderbank Financiere Glarus AG (B Shares).............................................. 41,192
-----------
ENGINEERING
40 ABB AG - Bearer......................................................................... 50,949
-----------
FOOD PROCESSING
100 Nestle S.A.............................................................................. 159,553
-----------
PHARMACEUTICALS
32 Novartis AG............................................................................. 54,851
30 Novartis AG - Bearer.................................................................... 51,524
10 Roche Holdings AG....................................................................... 103,930
-----------
210,305
-----------
TOTAL SWITZERLAND....................................................................... 461,999
-----------
TAIWAN (0.3%)
ELECTRONICS - SEMICONDUCTORS/COMPONENTS
2,000 Taiwan Semiconductor Manufacturing Co., Ltd. (ADR)*..................................... 47,500
-----------
UNITED KINGDOM (15.9%)
AEROSPACE
16,453 Rolls-Royce PLC......................................................................... 55,633
-----------
AEROSPACE & DEFENSE
3,996 British Aerospace PLC................................................................... 103,787
-----------
AUTO PARTS - ORIGINAL EQUIPMENT
11,000 BBA Group PLC........................................................................... 64,507
26,200 LucasVarity PLC......................................................................... 88,591
-----------
153,098
-----------
BANKING
3,600 Abbey National PLC...................................................................... 72,331
7,103 National Westminster Bank PLC........................................................... 127,050
-----------
199,381
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BEVERAGES
5,800 Bass PLC................................................................................ $ 91,901
-----------
BUILDING & CONSTRUCTION
5,963 Blue Circle Industries PLC.............................................................. 31,559
-----------
BUSINESS SERVICES
3,400 Compass Group PLC....................................................................... 45,986
3,000 Reuters Holdings PLC.................................................................... 26,953
-----------
72,939
-----------
COMPUTER SOFTWARE & SERVICES
3,500 SEMA Group PLC.......................................................................... 99,194
-----------
CONGLOMERATES
9,302 Tomkins PLC............................................................................. 50,143
-----------
ELECTRONICS
6,000 General Electric Co. PLC................................................................ 37,538
-----------
ENERGY
17,300 Shell Transport & Trading Co. PLC....................................................... 117,560
-----------
FOOD PROCESSING
10,000 Devro PLC............................................................................... 64,850
6,000 Unilever PLC............................................................................ 47,216
-----------
112,066
-----------
HOUSEHOLD PRODUCTS
7,000 Reckitt & Colman PLC.................................................................... 112,630
-----------
INSURANCE
4,200 Britannic Assurance PLC................................................................. 81,985
5,700 Commercial Union PLC.................................................................... 92,178
10,731 Royal & Sun Alliance Insurance Group PLC................................................ 121,477
-----------
295,640
-----------
LEISURE
2,671 Granada Group PLC....................................................................... 42,017
15,000 Rank Group PLC.......................................................................... 73,446
-----------
115,463
-----------
PHARMACEUTICALS
12,000 British Biotech PLC*.................................................................... 26,855
8,286 Glaxo Wellcome PLC...................................................................... 222,383
-----------
249,238
-----------
PUBLISHING
7,000 Reed International PLC.................................................................. 72,152
-----------
RETAIL
6,200 Next PLC................................................................................ 74,185
9,500 Sainsbury (J.) PLC...................................................................... 77,126
-----------
151,311
-----------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS
10,000 British Telecommunications PLC.......................................................... $ 95,560
4,300 Esat Telecom Group PLC (ADR)*........................................................... 72,563
9,602 Securicor PLC........................................................................... 51,733
12,000 Vodafone Group PLC...................................................................... 92,227
-----------
312,083
-----------
TRANSPORTATION
7,811 British Airways PLC..................................................................... 65,710
-----------
UTILITIES - ELECTRIC
11,500 National Power PLC...................................................................... 125,298
-----------
TOTAL UNITED KINGDOM.................................................................... 2,624,324
-----------
UNITED STATES (36.5%)
AEROSPACE & DEFENSE
6,200 Loral Space & Communications Ltd.*...................................................... 136,788
-----------
ALUMINUM
2,100 Aluminum Co. of America................................................................. 160,387
-----------
AUTOMOTIVE
3,800 Chrysler Corp........................................................................... 132,287
3,000 Ford Motor Co........................................................................... 153,000
-----------
285,287
-----------
BANKS
2,300 First Tennessee National Corp........................................................... 135,412
-----------
BEVERAGES - SOFT DRINKS
3,700 PepsiCo, Inc............................................................................ 133,431
-----------
BUILDING MATERIALS
3,200 Champion International Corp............................................................. 163,800
-----------
CHEMICALS
1,400 Dow Chemical Co......................................................................... 126,000
4,500 Georgia Gulf Corp....................................................................... 146,812
3,200 Monsanto Co............................................................................. 151,800
-----------
424,612
-----------
COMMERCIAL SERVICES
10,000 Actrade International, Ltd.*............................................................ 221,250
-----------
COMMUNICATIONS - EQUIPMENT & SOFTWARE
2,400 Cisco Systems, Inc.*.................................................................... 151,350
-----------
COMPUTERS
5,100 Gateway 2000, Inc.*..................................................................... 192,206
-----------
COMPUTERS - SYSTEMS
2,800 Diebold, Inc............................................................................ 139,300
2,300 Hewlett-Packard Co...................................................................... 138,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
3,500 Sun Microsystems, Inc.*................................................................. $ 167,781
-----------
445,081
-----------
ELECTRICAL EQUIPMENT
2,000 Honeywell, Inc.......................................................................... 140,125
-----------
ELECTRONICS - SEMICONDUCTORS/COMPONENTS
1,800 Intel Corp.............................................................................. 145,800
-----------
ENTERTAINMENT
1,400 Walt Disney Co.......................................................................... 149,188
-----------
FINANCIAL SERVICES
1,700 American Express Co..................................................................... 142,269
2,500 Fannie Mae.............................................................................. 154,375
2,500 Travelers Group, Inc.................................................................... 123,750
-----------
420,394
-----------
FOODS
1,900 General Mills, Inc...................................................................... 141,431
-----------
HOUSEHOLD FURNISHINGS & APPLIANCES
4,100 Maytag Corp............................................................................. 157,594
-----------
HOUSEHOLD PRODUCTS - NON-DURABLE
2,000 Colgate-Palmolive Co.................................................................... 146,500
-----------
MEDICAL SERVICES
3,100 HBO & Co................................................................................ 162,169
-----------
OFFSHORE DRILLING
2,900 Diamond Offshore Drilling, Inc.......................................................... 129,594
-----------
OIL - INTEGRATED - DOMESTIC
1,800 Atlantic Richfield Co................................................................... 133,875
-----------
OIL - INTEGRATED - INTERNATIONAL
1,800 Chevron Corp............................................................................ 134,663
2,200 Exxon Corp.............................................................................. 130,488
2,000 Mobil Corp.............................................................................. 136,250
-----------
401,401
-----------
OIL WELL EQUIPMENT & SERVICE
1,800 Schlumberger, Ltd....................................................................... 132,638
-----------
PHARMACEUTICALS
2,100 Abbott Laboratories..................................................................... 148,706
2,000 American Home Products Corp............................................................. 190,875
-----------
339,581
-----------
RETAIL - SPECIALTY
4,100 Bed Bath & Beyond, Inc.*................................................................ 162,463
5,700 Pep Boys-Manny, Moe & Jack.............................................................. 124,688
-----------
287,151
-----------
RETAIL - SPECIALTY APPAREL
3,750 Gap, Inc................................................................................ 146,484
-----------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
SAVINGS & LOAN COMPANIES
2,300 Ahmanson (H.F.) & Co.................................................................... $ 134,119
1,500 Golden West Financial Corp.............................................................. 126,656
-----------
260,775
-----------
STEEL
2,800 Nucor Corp.............................................................................. 133,350
-----------
TRUCKERS
6,000 Yellow Corp.*........................................................................... 155,250
-----------
TOTAL UNITED STATES..................................................................... 6,032,904
-----------
TOTAL COMMON AND PREFERRED STOCKS
(IDENTIFIED COST $13,567,636)........................................................... 16,210,047
-----------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<S> <C> <C>
SHORT-TERM INVESTMENT (3.9%)
REPURCHASE AGREEMENT
$ 637 The Bank of New York 5.375% due 02/02/98 (dated 01/30/98; proceeds $637,783) (IDENTIFIED
COST $637,497) (a).................................................................... 637,497
-----------
TOTAL INVESTMENTS
(IDENTIFIED COST $14,205,133) (b).......................................................... 101.9% 16,847,544
LIABILITIES IN EXCESS OF OTHER ASSETS...................................................... (1.9) (307,800)
------ ------------
NET ASSETS................................................................................. 100.0% $ 16,539,744
------ ------------
------ ------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
GDR Global Depository Receipt.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(a) Collateralized by $632,131 U.S. Treasury Note 6.75% due 05/31/99 valued at
$650,247.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $3,318,087 and the
aggregate gross unrealized depreciation is $675,676, resulting in net
unrealized appreciation of $2,642,411.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JANUARY 31, 1998:
<TABLE>
<CAPTION>
IN UNREALIZED
CONTRACTS TO EXCHANGE DELIVERY APPRECIATION/
RECEIVE FOR DATE (DEPRECIATION)
- --------------------------------------------------------------------
<S> <C> <C> <C>
ESP 5,233,996 $ 34,075 02/02/98 $ (330)
L 22,579 $ 37,097 02/03/98 (215)
$ 27,614 DEM 50,376 02/04/98 71
$ 88,025 FRF 540,474 02/27/98 (136)
FRF 306,396 $ 50,586 02/27/98 (607)
-------
Net unrealized depreciation ............... $ (1,217)
-------
-------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
SUMMARY OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aerospace.......................................................................... $ 55,633 0.3%
Aerospace & Defense................................................................ 343,340 2.1
Aluminum........................................................................... 160,387 1.0
Apparel............................................................................ 87,152 0.5
Auto Parts - Original Equipment.................................................... 153,098 0.9
Automotive......................................................................... 742,699 4.5
Banking............................................................................ 1,049,248 6.4
Banks.............................................................................. 135,412 0.8
Beverages.......................................................................... 91,901 0.6
Beverages - Soft Drinks............................................................ 261,081 1.6
Biotechnology...................................................................... 112,062 0.7
Building & Construction............................................................ 72,930 0.4
Building Materials................................................................. 299,101 1.8
Business & Public Services......................................................... 70,452 0.4
Business Services.................................................................. 135,981 0.8
Chemicals.......................................................................... 680,899 4.1
Commercial Services................................................................ 221,250 1.3
Communications - Equipment & Software.............................................. 151,350 0.9
Computer Software & Services....................................................... 99,194 0.6
Computers.......................................................................... 260,764 1.6
Computers - Systems................................................................ 546,795 3.3
Conglomerates...................................................................... 190,204 1.2
Electrical Equipment............................................................... 140,125 0.9
Electronics........................................................................ 264,771 1.6
Electronics - Semiconductors/Components............................................ 302,835 1.8
Energy............................................................................. 318,958 1.9
Engineering........................................................................ 50,949 0.3
Entertainment...................................................................... 149,188 0.9
Financial Services................................................................. 667,961 4.0
Food Processing.................................................................... 303,340 1.8
Foods.............................................................................. 141,431 0.9
Foods & Beverages.................................................................. 47,320 0.3
Household Furnishings & Appliances................................................. 200,171 1.2
Household Products................................................................. 112,630 0.7
Household Products - Non - Durable................................................. 146,500 0.9
Insurance.......................................................................... 499,645 3.0
International Trade................................................................ 66,351 0.4
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
Leisure............................................................................ $ 233,496 1.4%
Machinery.......................................................................... 88,223 0.5
Machinery - Diversified............................................................ 56,916 0.3
Manufacturing...................................................................... 57,049 0.3
Media.............................................................................. 49,978 0.3
Medical Services................................................................... 162,169 1.0
Natural Gas........................................................................ 44,205 0.3
Offshore Drilling.................................................................. 129,594 0.8
Oil - Integrated - Domestic........................................................ 133,875 0.8
Oil - Integrated - International................................................... 401,401 2.4
Oil Well Equipment & Service....................................................... 132,638 0.8
Paper & Forest Products............................................................ 60,071 0.4
Pharmaceuticals.................................................................... 1,017,087 6.2
Publishing......................................................................... 121,243 0.7
Real Estate........................................................................ 190,832 1.2
Repurchase Agreement............................................................... 637,497 3.9
Restaurants........................................................................ 47,281 0.3
Retail............................................................................. 419,452 2.5
Retail - Specialty................................................................. 287,151 1.7
Retail - Specialty Apparel......................................................... 146,484 0.9
Savings & Loan Companies........................................................... 260,775 1.6
Steel.............................................................................. 133,350 0.8
Telecommunications................................................................. 1,565,006 9.5
Telecommunications Equipment....................................................... 79,569 0.5
Tire & Rubber Goods................................................................ 96,139 0.6
Transportation..................................................................... 146,550 0.9
Truckers........................................................................... 155,250 0.9
Utilities.......................................................................... 61,528 0.4
Utilities - Electric............................................................... 482,488 2.9
Utilities - Telecommunications..................................................... 117,139 0.7
----------- -----
$16,847,544 101.9%
----------- -----
----------- -----
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
Common Stocks.................................................................. $16,181,616 97.8%
Preferred Stock................................................................ 28,431 0.2
Short-Term Investment.......................................................... 637,497 3.9
----------- -----
$16,847,544 101.9%
----------- -----
----------- -----
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - STRATEGIST
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (68.6%)
AEROSPACE & DEFENSE (2.0%)
3,260 General Motors Corp. (Class H).......................................................... $ 112,877
3,100 Honeywell, Inc.......................................................................... 217,194
1,300 Thiokol Corp............................................................................ 112,125
-----------
442,196
-----------
AIRLINES (1.0%)
4,875 Continental Airlines, Inc. (Class B)*................................................... 226,078
-----------
ALUMINUM (0.9%)
2,700 Aluminum Co. of America................................................................. 206,212
-----------
AUTOMOTIVE (2.0%)
6,000 Chrysler Corp........................................................................... 208,875
4,460 Ford Motor Co........................................................................... 227,460
-----------
436,335
-----------
BANKS - MONEY CENTER (1.7%)
1,800 Chase Manhattan Corp.................................................................... 192,937
1,550 Citicorp................................................................................ 184,450
-----------
377,387
-----------
BANKS - REGIONAL (1.9%)
3,350 NationsBank Corp........................................................................ 201,000
750 Wells Fargo & Co........................................................................ 231,750
-----------
432,750
-----------
BEVERAGES - SOFT DRINKS (0.9%)
5,640 PepsiCo Inc............................................................................. 203,392
-----------
BIOTECHNOLOGY (0.2%)
2,500 BioChem Pharma, Inc. (Canada)*.......................................................... 50,937
-----------
BROADCAST MEDIA (0.8%)
2,420 Clear Channel Communications, Inc.*..................................................... 186,340
-----------
CABLE/CELLULAR (1.2%)
8,960 U.S. West Media Group, Inc.*............................................................ 266,000
-----------
CHEMICALS (2.6%)
2,500 Dow Chemical Co......................................................................... 225,000
880 Du Pont (E.I.) De Nemours & Co., Inc.................................................... 49,830
1,650 Georgia Gulf Corp....................................................................... 53,831
5,500 Monsanto Co............................................................................. 260,906
-----------
589,567
-----------
COMMUNICATIONS EQUIPMENT (3.3%)
1,870 Bay Networks, Inc.*..................................................................... 50,841
4,095 Cisco Systems, Inc.*.................................................................... 258,241
2,500 Lucent Technologies Inc................................................................. 221,250
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
3,830 Tellabs, Inc.*.......................................................................... $ 195,809
-----------
726,141
-----------
COMPUTER SOFTWARE (1.8%)
1,070 HBO & Co................................................................................ 55,974
1,620 Microsoft Corp.*........................................................................ 241,684
2,000 Network Associates, Inc.*............................................................... 108,000
-----------
405,658
-----------
COMPUTERS (4.2%)
2,220 Dell Computer Corp.*.................................................................... 220,751
4,730 Diebold, Inc............................................................................ 235,318
6,330 Gateway 2000, Inc.*..................................................................... 238,562
4,880 Sun Microsystems, Inc.*................................................................. 233,935
-----------
928,566
-----------
CONSUMER PRODUCTS (1.0%)
3,000 Colgate-Palmolive Co.................................................................... 219,750
-----------
ELECTRICAL EQUIPMENT (1.6%)
1,800 Emerson Electric Co..................................................................... 108,900
3,160 General Electric Co..................................................................... 244,900
-----------
353,800
-----------
ENGINEERING & CONSTRUCTION (0.5%)
2,900 Fluor Corp.............................................................................. 109,294
-----------
ENTERTAINMENT (0.2%)
500 Walt Disney Co.......................................................................... 53,281
-----------
FINANCIAL SERVICES (2.9%)
2,660 American Express Co..................................................................... 222,609
3,400 Fannie Mae.............................................................................. 209,950
4,440 Travelers Group, Inc.................................................................... 219,780
-----------
652,339
-----------
FOODS (2.1%)
3,200 General Mills, Inc...................................................................... 238,200
5,100 Kellogg Co.............................................................................. 235,556
-----------
473,756
-----------
HEALTHCARE - HMOS (0.8%)
9,200 Humana, Inc.*........................................................................... 184,575
-----------
HOUSEHOLD APPLIANCES (1.1%)
6,630 Maytag Corp............................................................................. 254,841
-----------
INSURANCE (4.0%)
2,250 Ace, Ltd. (Bermuda)..................................................................... 209,391
2,000 American International Group, Inc....................................................... 220,625
3,080 Chubb Corp.............................................................................. 233,888
4,940 Equitable Companies, Inc................................................................ 227,240
-----------
891,144
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - STRATEGIST
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INTERNET (0.9%)
2,100 America Online, Inc.*................................................................... $ 200,944
-----------
LIFE & HEALTH INSURANCE (0.2%)
1,170 Conseco, Inc............................................................................ 53,528
-----------
OFFICE EQUIPMENT & SUPPLIES (0.2%)
1,700 IKON Office Solutions, Inc.............................................................. 53,550
-----------
OIL - INTEGRATED - DOMESTIC (1.8%)
3,600 Amerada Hess Corp....................................................................... 196,875
2,670 Atlantic Richfield Co................................................................... 198,581
-----------
395,456
-----------
OIL - INTEGRATED - INTERNATIONAL (4.0%)
1,500 Chevron Corp............................................................................ 112,219
3,420 Exxon Corp.............................................................................. 202,849
2,960 Mobil Corp.............................................................................. 201,650
3,880 Royal Dutch Petroleum Co. (ADR) (Netherlands)........................................... 198,850
3,540 Texaco, Inc............................................................................. 184,301
-----------
899,869
-----------
PAPER PRODUCTS (1.7%)
4,340 Bowater, Inc............................................................................ 212,660
3,400 Champion International Corp............................................................. 174,038
-----------
386,698
-----------
PHARMACEUTICALS (5.6%)
3,400 Abbott Laboratories..................................................................... 240,763
3,050 American Home Products Corp............................................................. 291,084
3,660 Johnson & Johnson....................................................................... 244,991
3,520 Lilly (Eli) & Co........................................................................ 237,600
1,570 Warner-Lambert Co....................................................................... 236,285
-----------
1,250,723
-----------
RAILROAD EQUIPMENT (0.5%)
2,400 Trinity Industries, Inc................................................................. 108,600
-----------
RETAIL - DEPARTMENT STORES (1.7%)
15,500 Kmart Corp.*............................................................................ 170,500
4,070 May Department Stores Co................................................................ 213,929
-----------
384,429
-----------
RETAIL - SPECIALTY (5.1%)
5,200 Bed Bath & Beyond, Inc.*................................................................ 206,050
5,570 Costco Companies, Inc.*................................................................. 241,599
4,000 Home Depot, Inc......................................................................... 241,250
3,590 Payless ShoeSource, Inc.*............................................................... 233,574
5,000 Pep Boys-Manny, Moe & Jack.............................................................. 109,375
4,600 Pier 1 Imports, Inc..................................................................... 107,525
-----------
1,139,373
-----------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
RETAIL - SPECIALTY APPAREL (2.3%)
6,555 Gap, Inc. (The)......................................................................... $ 256,055
8,530 Wet Seal, Inc. (Class A)*............................................................... 260,698
-----------
516,753
-----------
SAVINGS & LOAN ASSOCIATIONS (1.2%)
540 Golden West Financial Corp.............................................................. 45,596
3,300 Washington Mutual, Inc.................................................................. 212,025
-----------
257,621
-----------
SEMICONDUCTORS (0.9%)
2,430 Intel Corp.............................................................................. 196,830
-----------
STEEL (0.9%)
4,130 Nucor Corp.............................................................................. 196,691
-----------
TELECOMMUNICATIONS (0.9%)
6,280 Winstar Communications, Inc.*........................................................... 205,278
-----------
TOBACCO (1.0%)
5,300 Philip Morris Companies, Inc............................................................ 219,950
-----------
TRANSPORTATION - MISCELLANEOUS (0.2%)
740 Airborne Freight Corp................................................................... 52,633
-----------
TRUCKERS (0.8%)
6,790 Yellow Corp.*........................................................................... 175,691
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $12,748,839)........................................................... 15,364,956
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<S> <C> <C>
CORPORATE BONDS (4.1%)
BANKS (1.9%)
$ 100 Central Fidelity Capital I Inc. (Series A)
6.594%+ due 04/15/27.................................................................. 101,925
100 Centura Capital Trust I - 144A**
8.845% due 06/01/27................................................................... 111,500
100 MBNA Capital I (Series A)
8.278% due 12/01/26................................................................... 104,288
100 Norwest Financial, Inc.
6.20% due 02/15/01.................................................................... 101,140
-----------
418,853
-----------
BROKERAGE (0.5%)
100 Bear Stearns Co., Inc.
6.75% due 12/15/07.................................................................... 101,716
-----------
CABLE & TELECOMMUNICATIONS (0.5%)
100 Time Warner Entertainment Co.
8.375% due 03/15/23................................................................... 114,351
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES - STRATEGIST
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OIL - DOMESTIC (0.3%)
$ 50 Occidental Petroleum Corp.
11.125% due 08/01/10.................................................................. $ 69,469
-----------
OIL - INTEGRATED - DOMESTIC (0.4%)
100 Mitchell Energy & Development Corp.
6.75% due 02/15/04.................................................................... 100,556
-----------
RECREATION (0.5%)
100 Carnival Cruise Lines (Panama)
7.20% due 10/01/23.................................................................... 104,848
-----------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $886,461).............................................................. 909,793
-----------
U.S. GOVERNMENT OBLIGATIONS (17.2%)
400 U.S. Treasury Bond 6.50% due 11/15/26................................................... 434,880
200 U.S. Treasury Bond 6.625% due 02/15/27.................................................. 221,034
315 U.S. Treasury Bond 6.875% due 08/15/25.................................................. 357,254
150 U.S. Treasury Bond 7.625% due 02/15/25.................................................. 185,241
550 U.S. Treasury Note 5.125% due 11/30/98.................................................. 549,224
350 U.S. Treasury Note 5.625% due 11/30/00.................................................. 352,418
200 U.S. Treasury Note 5.75% due 08/15/03................................................... 202,894
750 U.S. Treasury Note 5.875% due 04/30/98.................................................. 750,938
50 U.S. Treasury Note 6.375% due 01/15/99.................................................. 50,505
360 U.S. Treasury Note 6.875% due 08/31/99.................................................. 368,388
100 U.S. Treasury Note 6.875% due 05/15/06.................................................. 108,634
240 U.S. Treasury Note 7.25% due 05/15/04................................................... 262,490
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $3,690,528)............................................................ 3,843,900
-----------
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (9.9%)
U.S. GOVERNMENT AGENCY (a) (8.9%)
$ 2,000 Federal Home Loan Mortgage Corp. 5.57% due 02/02/98 (AMORTIZED COST $1,999,691)......... $ 1,999,691
REPURCHASE AGREEMENT (1.0%)
231 The Bank of New York 5.375% due 02/02/98 (dated 01/30/98;
proceeds $231,243) (b) (IDENTIFIED COST $231,139)..................................... 231,139
-----------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $2,230,830)............................................................ 2,230,830
-----------
TOTAL INVESTMENTS
(IDENTIFIED COST $19,556,658) (c).......................................................... 99.8% 22,349,479
OTHER ASSETS IN EXCESS OF LIABILITIES...................................................... 0.2 43,305
------ ------------
NET ASSETS................................................................................. 100.0% $ 22,392,784
------ ------------
------ ------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
+ Floating rate security. Coupon rate shown is the rate in effect at January
31, 1998.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $229,194 U.S. Treasury Note 6.75% due 05/31/99 valued at
$235,762.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $3,083,220 and the
aggregate gross unrealized depreciation is $290,399, resulting in net
unrealized appreciation of $2,792,821.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
JANUARY 31, 1998 (UNAUDITED)
U.S.
GOVERNMENT U.S. INTERMEDIATE
LIQUID MONEY GOVERNMENT INCOME
ASSET MARKET SECURITIES SECURITIES
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
ASSETS:
Investments in securities, at
value*...................... $ 14,625,506 $ 1,328,414 $ 9,122,256 $ 2,214,105
Cash.......................... 6,323 3,934 -- 3,102
Receivable for:
Investments sold.......... -- -- -- --
Shares of beneficial
interest sold........... 218 -- 11,954 17,687
Dividends................. -- -- -- --
Interest.................. -- -- 68,587 40,162
Foreign withholding taxes
reclaimed............... -- -- -- --
Prepaid expenses and other
assets...................... 24,491 14,766 16,932 15,312
Receivable from affiliate..... -- 13,513 3,774 9,215
------------ -------------- -------------- --------------
TOTAL ASSETS............. 14,656,538 1,360,627 9,223,503 2,299,583
------------ -------------- -------------- --------------
LIABILITIES:
Payable for:
Investments purchased..... -- -- -- --
Shares of beneficial
interest repurchased.... 75,004 13 73,280 17,685
Dividends to
shareholders............ -- -- 2,887 1,552
Investment management
fee..................... 1,518 -- -- --
Payable to bank............... -- -- -- --
Accrued expenses and other
payables.................... 20,247 13,129 13,399 15,208
Organizational expenses
payable..................... 5,441 5,596 5,494 5,507
------------ -------------- -------------- --------------
TOTAL LIABILITIES........ 102,210 18,738 95,060 39,952
------------ -------------- -------------- --------------
NET ASSETS:
Paid-in-capital............... 14,554,269 1,341,889 8,848,631 2,293,628
Accumulated undistributed net
investment income (loss).... 59 -- 1,523 --
Accumulated undistributed net
realized gain (loss)........ -- -- 20,393 (86,721)
Net unrealized appreciation... -- -- 257,896 52,724
------------ -------------- -------------- --------------
NET ASSETS............... $ 14,554,328 $ 1,341,889 $ 9,128,443 $ 2,259,631
------------ -------------- -------------- --------------
------------ -------------- -------------- --------------
*IDENTIFIED COST......... $ 14,625,506 $ 1,328,414 $ 8,864,360 $ 2,161,381
------------ -------------- -------------- --------------
------------ -------------- -------------- --------------
SHARES OF BENEFICIAL
INTEREST OUTSTANDING..... 14,554,269 1,343,135 907,586 231,029
------------ -------------- -------------- --------------
------------ -------------- -------------- --------------
NET ASSET VALUE PER SHARE
(UNLIMITED AUTHORIZED SHARES
OF $.01 PAR VALUE)............ $1.00 $1.00 $10.06 $9.78
------------ -------------- -------------- --------------
------------ -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
JANUARY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
AMERICAN CAPITAL DIVIDEND VALUE-ADDED GLOBAL
VALUE GROWTH GROWTH UTILITIES MARKET EQUITY STRATEGIST
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities, at
value*...................... $51,961,912 $3,278,978 $108,676,912 $ 5,781,104 $21,680,008 $16,847,544 $22,349,479
Cash.......................... 22,586 6,336 -- -- -- -- --
Receivable for:
Investments sold.......... 3,730,008 64,521 1,094,766 -- 1,808,050 115,705 --
Shares of beneficial
interest sold........... 128,546 6,606 132,946 7,995 20,597 43,821 42,041
Dividends................. 34,902 474 145,893 20,148 20,800 11,090 11,339
Interest.................. 55,955 -- -- 61 -- 190 84,739
Foreign withholding taxes
reclaimed............... 102 -- -- 879 -- 9,627 --
Prepaid expenses and other
assets...................... 18,335 9,813 23,369 12,180 15,058 14,726 17,968
Receivable from affiliate..... -- 10,073 -- 4,399 -- -- --
----------- ---------- ----------- ----------- ----------- ----------- -----------
TOTAL ASSETS............. 55,952,346 3,376,801 110,073,886 5,826,766 23,544,513 17,042,703 22,505,566
----------- ---------- ----------- ----------- ----------- ----------- -----------
LIABILITIES:
Payable for:
Investments purchased..... 4,165,686 84,655 219,824 -- 766,461 384,629 50,490
Shares of beneficial
interest repurchased.... 73,077 127,301 536,067 82,058 2,166 90,818 31,313
Dividends to
shareholders............ -- -- -- -- -- -- --
Investment management
fee..................... 25,936 -- 69,123 -- 9,635 2,005 7,625
Payable to bank............... -- -- 2,776,964 -- 916,944 -- --
Accrued expenses and other
payables.................... 26,426 13,659 25,077 13,463 15,700 19,998 17,853
Organizational expenses
payable..................... 5,687 5,687 5,501 5,509 5,687 5,509 5,501
----------- ---------- ----------- ----------- ----------- ----------- -----------
TOTAL LIABILITIES........ 4,296,812 231,302 3,632,556 101,030 1,716,593 502,959 112,782
----------- ---------- ----------- ----------- ----------- ----------- -----------
NET ASSETS:
Paid-in-capital............... 42,372,269 2,629,962 80,897,846 4,191,598 13,822,383 14,340,215 20,050,426
Accumulated undistributed net
investment income (loss).... (9,930) (12,000) 210,699 22,892 4,120 (29,347) 40,488
Accumulated undistributed net
realized gain (loss)........ 2,935,155 66,264 3,759,096 144,310 680,472 (412,723) (490,951)
Net unrealized appreciation... 6,358,040 461,273 21,573,689 1,366,936 7,320,945 2,641,599 2,792,821
----------- ---------- ----------- ----------- ----------- ----------- -----------
NET ASSETS............... $51,655,534 $3,145,499 $106,441,330 $ 5,725,736 $21,827,920 $16,539,744 $22,392,784
----------- ---------- ----------- ----------- ----------- ----------- -----------
----------- ---------- ----------- ----------- ----------- ----------- -----------
*IDENTIFIED COST......... $45,603,872 $2,817,705 $87,103,223 $ 4,414,168 $14,359,063 $14,205,133 $19,556,658
----------- ---------- ----------- ----------- ----------- ----------- -----------
----------- ---------- ----------- ----------- ----------- ----------- -----------
SHARES OF BENEFICIAL
INTEREST OUTSTANDING..... 3,619,409 221,216 6,067,310 416,454 1,201,316 1,294,028 1,745,060
----------- ---------- ----------- ----------- ----------- ----------- -----------
----------- ---------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE PER SHARE
(UNLIMITED AUTHORIZED SHARES
OF $.01 PAR VALUE)............ $14.27 $14.22 $17.54 $13.75 $18.17 $12.78 $12.83
----------- ---------- ----------- ----------- ----------- ----------- -----------
----------- ---------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JANUARY 31, 1998 (UNAUDITED)
U.S.
GOVERNMENT U.S. INTERMEDIATE
LIQUID MONEY GOVERNMENT INCOME
ASSET MARKET SECURITIES SECURITIES
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET INVESTMENT INCOME:
INCOME
Interest...................... $ 513,192 $ 70,286 $ 342,206 $ 78,148
Dividends..................... -- -- -- --
------------- ------------- ------------- -------------
TOTAL INCOME............. 513,192 70,286 342,206 78,148
------------- ------------- ------------- -------------
EXPENSES
Investment management fee..... 45,737 6,359 32,484 7,860
Transfer agent fees and
expenses.................... 29,090 3,091 28,410 6,787
Shareholder reports and
notices..................... 2,090 2,272 3,073 1,257
Professional fees............. 7,639 6,984 9,340 8,204
Trustees' fees and expenses... 654 194 191 161
Registration fees............. 25,676 8,283 6,649 9,771
Custodian fees................ 5,784 3,425 1,414 1,981
Organizational expenses....... 1,127 1,284 1,198 1,189
Other......................... 867 1,112 1,353 1,449
------------- ------------- ------------- -------------
TOTAL EXPENSES........... 118,664 33,004 84,112 38,659
Less: amounts
waived/reimbursed........... (27,190) (20,286) (34,137) (26,618)
------------- ------------- ------------- -------------
NET EXPENSES............. 91,474 12,718 49,975 12,041
------------- ------------- ------------- -------------
NET INVESTMENT INCOME
(LOSS)................... 421,718 57,568 292,231 66,107
------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED
GAIN (LOSS):
Net realized gain (loss) on:
Investments............... -- -- 20,884 4,486
Foreign exchange
transactions............ -- -- -- --
------------- ------------- ------------- -------------
TOTAL GAIN (LOSS)........ -- -- 20,884 4,486
------------- ------------- ------------- -------------
Net change in unrealized
appreciation on:
Investments............... -- -- 120,275 20,698
Translation of forward
foreign currency
contracts, other assets
and liabilities
denominated in foreign
currencies.............. -- -- -- --
------------- ------------- ------------- -------------
NET
APPRECIATION/DEPRECIATION... -- -- 120,275 20,698
------------- ------------- ------------- -------------
NET GAIN (LOSS).......... -- -- 141,159 25,184
------------- ------------- ------------- -------------
NET INCREASE (DECREASE)....... $ 421,718 $ 57,568 $ 433,390 $ 91,291
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
- ------------------
* Net of $214, $40, $2,918, $310, $581 and $8,092 foreign withholding tax,
respectively.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
AMERICAN CAPITAL DIVIDEND VALUE-ADDED GLOBAL
VALUE GROWTH GROWTH UTILITIES MARKET EQUITY STRATEGIST
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
INCOME
Interest...................... $ 110,855 $ 713 $ 9,439 $ 8,680 $ 11,805 $ 17,773 $ 269,126
Dividends..................... 149,796* 3,744* 1,422,606* 86,439* 190,780* 119,744* 94,051
----------- ---------- ----------- --------- ----------- -------------- ------------
TOTAL INCOME............. 260,651 4,457 1,432,045 95,119 202,585 137,517 363,177
----------- ---------- ----------- --------- ----------- -------------- ------------
EXPENSES
Investment management fee..... 229,993 13,989 418,755 20,047 58,249 88,799 106,545
Transfer agent fees and
expenses.................... 48,915 2,411 57,705 9,175 13,452 24,150 31,512
Shareholder reports and
notices..................... 12,904 878 18,040 1,419 5,764 4,941 6,365
Professional fees............. 7,940 8,372 7,113 8,410 7,932 3,415 7,968
Trustees' fees and expenses... 1,171 32 2,576 43 538 552 653
Registration fees............. 15,902 7,874 6,489 6,757 7,426 10,052 7,209
Custodian fees................ 22,271 7,922 16,419 6,172 9,899 19,725 6,997
Organizational expenses....... 1,368 1,364 1,186 1,190 1,365 1,191 1,189
Other......................... 1,819 903 2,605 671 3,881 6,511 1,969
----------- ---------- ----------- --------- ----------- -------------- ------------
TOTAL EXPENSES........... 342,283 43,745 530,888 53,884 108,506 159,336 170,407
Less: amounts
waived/reimbursed........... (71,703) (27,288) -- (27,155) -- (70,537) (45,059)
----------- ---------- ----------- --------- ----------- -------------- ------------
NET EXPENSES............. 270,580 16,457 530,888 26,729 108,506 88,799 125,348
----------- ---------- ----------- --------- ----------- -------------- ------------
NET INVESTMENT INCOME
(LOSS)................... (9,929) (12,000) 901,157 68,390 94,079 48,718 237,829
----------- ---------- ----------- --------- ----------- -------------- ------------
NET REALIZED AND UNREALIZED
GAIN (LOSS):
Net realized gain (loss) on:
Investments............... 6,670,506 308,540 7,240,475 294,455 1,275,998 (409,191) 2,217,573
Foreign exchange
transactions............ -- -- -- -- -- (965) --
----------- ---------- ----------- --------- ----------- -------------- ------------
TOTAL GAIN (LOSS)........ 6,670,506 308,540 7,240,475 294,455 1,275,998 (410,156) 2,217,573
----------- ---------- ----------- --------- ----------- -------------- ------------
Net change in unrealized
appreciation on:
Investments............... (3,726,656) (408,959) (7,220,599) 335,810 (1,029,844) (828,921) (2,481,361)
Translation of forward
foreign currency
contracts, other assets
and liabilities
denominated in foreign
currencies.............. -- -- -- -- -- 188 --
----------- ---------- ----------- --------- ----------- -------------- ------------
NET
APPRECIATION/DEPRECIATION... (3,726,656) (408,959) (7,220,599) 335,810 (1,029,844) (828,733) (2,481,361)
----------- ---------- ----------- --------- ----------- -------------- ------------
NET GAIN (LOSS).......... 2,943,850 (100,419) 19,876 630,265 246,154 (1,238,889) (263,788)
----------- ---------- ----------- --------- ----------- -------------- ------------
NET INCREASE (DECREASE)....... $ 2,933,921 $ (112,419) $ 921,033 $ 698,655 $ 340,233 $ (1,190,171) $ (25,959)
----------- ---------- ----------- --------- ----------- -------------- ------------
----------- ---------- ----------- --------- ----------- -------------- ------------
</TABLE>
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LIQUID ASSET U.S. GOVERNMENT MONEY MARKET
---------------------------- -----------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
JANUARY 31, FOR THE YEAR JANUARY 31, FOR THE YEAR
1998 ENDED 1998 ENDED
(UNAUDITED) JULY 31, 1997 (UNAUDITED) JULY 31, 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income
(loss)...................... $ 421,718 $ 1,185,191 $ 57,568 $ 320,377
Net realized gain (loss)...... -- -- -- --
Net change in unrealized
appreciation/depreciation... -- -- -- --
------------- ------------- ------------- -------------
NET INCREASE
(DECREASE)............... 421,718 1,185,191 57,568 320,377
------------- ------------- ------------- -------------
DIVIDENDS AND DISTRIBUTIONS
FROM:
Net investment income......... (421,669) (1,185,223) (57,568) (321,625)
Net realized gain............. -- -- -- --
------------- ------------- ------------- -------------
TOTAL.................... (421,669) (1,185,223) (57,568) (321,625)
------------- ------------- ------------- -------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sales....... 4,996,727 29,266,419 3,589,536 8,809,340
Reinvestment of dividends and
distributions............... 421,669 1,185,223 57,570 321,624
Cost of shares repurchased.... (12,077,145) (51,991,220) (6,346,513) (11,716,197)
------------- ------------- ------------- -------------
NET INCREASE
(DECREASE)............... (6,658,749) (21,539,578) (2,699,407) (2,585,233)
------------- ------------- ------------- -------------
TOTAL INCREASE
(DECREASE)............... (6,658,700) (21,539,610) (2,699,407) (2,586,481)
NET ASSETS:
Beginning of period........... 21,213,028 42,752,638 4,041,296 6,627,777
------------- ------------- ------------- -------------
END OF PERIOD............ $ 14,554,328 $ 21,213,028 $ 1,341,889 $ 4,041,296
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS)................. $ 59 $ 10 $ -- $ --
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
SHARES ISSUED AND REPURCHASED:
Sold.......................... 4,996,727 29,266,419 3,589,536 8,809,340
Issued in reinvestment of
dividends and
distributions............... 421,669 1,185,223 57,570 321,624
Repurchased................... (12,077,145) (51,991,220) (6,346,513) (11,716,197)
------------- ------------- ------------- -------------
NET INCREASE (DECREASE)....... (6,658,749) (21,539,578) (2,699,407) (2,585,233)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INTERMEDIATE INCOME
SECURITIES
U.S. GOVERNMENT SECURITIES -------------------------- AMERICAN VALUE
--------------------------- -----------------------------
FOR THE SIX
FOR THE SIX MONTHS FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED FOR THE YEAR MONTHS ENDED
JANUARY 31, ENDED JANUARY 31, ENDED JANUARY 31, FOR THE YEAR
1998 JULY 31, 1998 JULY 31, 1998 ENDED
(UNAUDITED) 1997 (UNAUDITED) 1997 (UNAUDITED) JULY 31, 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income
(loss)...................... $ 292,231 $ 602,606 $ 66,107 $ 207,340 $ (9,929) $ 46,600
Net realized gain (loss)...... 20,884 5,297 4,486 (62,395) 6,670,506 7,151,437
Net change in unrealized
appreciation/depreciation... 120,275 365,249 20,698 151,066 (3,726,656) 9,007,653
------------ ------------ ----------- ------------ ------------- -------------
NET INCREASE
(DECREASE)............... 433,390 973,152 91,291 296,011 2,933,921 16,205,690
------------ ------------ ----------- ------------ ------------- -------------
DIVIDENDS AND DISTRIBUTIONS
FROM:
Net investment income......... (290,708) (602,630) (66,153) (207,294) (46,601) (93,984)
Net realized gain............. -- (22,190) -- -- (10,423,930) (3,137,376)
------------ ------------ ----------- ------------ ------------- -------------
TOTAL.................... (290,708) (624,820) (66,153) (207,294) (10,470,531) (3,231,360)
------------ ------------ ----------- ------------ ------------- -------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sales....... 1,813,180 5,963,450 283,057 3,241,075 7,940,634 20,568,978
Reinvestment of dividends and
distributions............... 285,087 567,526 65,091 165,904 10,456,727 3,227,638
Cost of shares repurchased.... (3,608,813) (5,033,814) (569,427) (5,211,640) (13,419,711) (22,877,816)
------------ ------------ ----------- ------------ ------------- -------------
NET INCREASE
(DECREASE)............... (1,510,546) 1,497,162 (221,279) (1,804,661) 4,977,650 918,800
------------ ------------ ----------- ------------ ------------- -------------
TOTAL INCREASE
(DECREASE)............... (1,367,864) 1,845,494 (196,141) (1,715,944) (2,558,960) 13,893,130
NET ASSETS:
Beginning of period........... 10,496,307 8,650,813 2,455,772 4,171,716 54,214,494 40,321,364
------------ ------------ ----------- ------------ ------------- -------------
END OF PERIOD............ $ 9,128,443 $ 10,496,307 $2,259,631 $ 2,455,772 $ 51,655,534 $ 54,214,494
------------ ------------ ----------- ------------ ------------- -------------
------------ ------------ ----------- ------------ ------------- -------------
UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS)................. $ 1,523 $ -- $ -- $ 46 $ (9,930) $ 46,600
------------ ------------ ----------- ------------ ------------- -------------
------------ ------------ ----------- ------------ ------------- -------------
SHARES ISSUED AND REPURCHASED:
Sold.......................... 182,904 616,600 29,319 340,574 475,241 1,422,680
Issued in reinvestment of
dividends and
distributions............... 28,729 58,481 6,741 17,479 759,385 237,676
Repurchased................... (363,557) (517,322) (58,881) (547,645) (812,452) (1,545,904)
------------ ------------ ----------- ------------ ------------- -------------
NET INCREASE (DECREASE)....... (151,924) 157,759 (22,821) (189,592) 422,174 114,452
------------ ------------ ----------- ------------ ------------- -------------
------------ ------------ ----------- ------------ ------------- -------------
<CAPTION>
CAPITAL GROWTH
-------------------------
FOR THE SIX
MONTHS FOR THE
ENDED YEAR
JANUARY 31, ENDED
1998 JULY 31,
(UNAUDITED) 1997
- ------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income
(loss)...................... $ (12,000) $ (5,965)
Net realized gain (loss)...... 308,540 294,325
Net change in unrealized
appreciation/depreciation... (408,959) 762,068
----------- -----------
NET INCREASE
(DECREASE)............... (112,419) 1,050,428
----------- -----------
DIVIDENDS AND DISTRIBUTIONS
FROM:
Net investment income......... -- (2,106)
Net realized gain............. (499,326) (56,080)
----------- -----------
TOTAL.................... (499,326) (58,186)
----------- -----------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sales....... 490,054 1,297,311
Reinvestment of dividends and
distributions............... 498,585 58,150
Cost of shares repurchased.... (901,041) (665,910)
----------- -----------
NET INCREASE
(DECREASE)............... 87,598 689,551
----------- -----------
TOTAL INCREASE
(DECREASE)............... (524,147) 1,681,793
NET ASSETS:
Beginning of period........... 3,669,646 1,987,853
----------- -----------
END OF PERIOD............ $3,145,499 $3,669,646
----------- -----------
----------- -----------
UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS)................. $ (12,000) $ --
----------- -----------
----------- -----------
SHARES ISSUED AND REPURCHASED:
Sold.......................... 30,557 91,240
Issued in reinvestment of
dividends and
distributions............... 37,042 4,317
Repurchased................... (54,209) (45,416)
----------- -----------
NET INCREASE (DECREASE)....... 13,390 50,141
----------- -----------
----------- -----------
</TABLE>
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
<TABLE>
<CAPTION>
DIVIDEND GROWTH UTILITIES
---------------------------------- -------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED
JANUARY 31, FOR THE YEAR JANUARY 31, FOR THE YEAR
1998 ENDED 1998 ENDED
(UNAUDITED) JULY 31, 1997 (UNAUDITED) JULY 31, 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income......... $ 901,157 $ 1,722,758 $ 68,390 $ 181,177
Net realized gain (loss)...... 7,240,475 8,642,932 294,455 608,162
Net change in unrealized
appreciation/depreciation... (7,220,599) 21,493,364 335,810 426,820
-------------- ----------------- -------------- --------------
NET INCREASE
(DECREASE)............... 921,033 31,859,054 698,655 1,216,159
-------------- ----------------- -------------- --------------
DIVIDENDS AND DISTRIBUTIONS
FROM:
Net investment income......... (1,056,382) (1,707,024) (99,698) (160,780)
Net realized gain............. (11,483,411) (2,463,125) (626,928) --
-------------- ----------------- -------------- --------------
TOTAL.................... (12,539,793) (4,170,149) (726,626) (160,780)
-------------- ----------------- -------------- --------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sales....... 11,895,670 37,149,898 766,131 2,818,978
Reinvestment of dividends and
distributions............... 12,516,642 4,150,502 725,733 158,903
Cost of shares repurchased.... (21,663,731) (23,440,408) (1,129,385) (6,235,329)
-------------- ----------------- -------------- --------------
NET INCREASE
(DECREASE)............... 2,748,581 17,859,992 362,479 (3,257,448)
-------------- ----------------- -------------- --------------
TOTAL INCREASE
(DECREASE)............... (8,870,179) 45,548,897 334,508 (2,202,069)
NET ASSETS:
Beginning of period........... 115,311,509 69,762,612 5,391,228 7,593,297
-------------- ----------------- -------------- --------------
END OF PERIOD............ $ 106,441,330 $ 115,311,509 $ 5,725,736 $ 5,391,228
-------------- ----------------- -------------- --------------
-------------- ----------------- -------------- --------------
UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS)................. $ 210,699 $ 365,924 $ 22,892 $ 54,200
-------------- ----------------- -------------- --------------
-------------- ----------------- -------------- --------------
SHARES ISSUED AND REPURCHASED:
Sold.......................... 626,873 2,205,684 53,835 222,951
Issued in reinvestment of
dividends and
distributions............... 731,871 255,693 52,861 12,596
Repurchased................... (1,146,677) (1,379,982) (81,367) (488,313)
-------------- ----------------- -------------- --------------
NET INCREASE (DECREASE)....... 212,067 1,081,395 25,329 (252,766)
-------------- ----------------- -------------- --------------
-------------- ----------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS, CONTINUED
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
VALUE-ADDED MARKET GLOBAL EQUITY STRATEGIST
-------------------------- -------------------------- --------------------------
FOR THE SIX FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE YEAR MONTHS ENDED FOR THE YEAR MONTHS ENDED FOR THE YEAR
JANUARY 31, ENDED JANUARY 31, ENDED JANUARY 31, ENDED
1998 JULY 31, 1998 JULY 31, 1998 JULY 31,
(UNAUDITED) 1997 (UNAUDITED) 1997 (UNAUDITED) 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income......... $ 94,079 $ 208,257 $ 48,718 $ 128,358 $ 237,829 $ 615,034
Net realized gain (loss)...... 1,275,998 896,043 (410,156) 811,865 2,217,573 247,627
Net change in unrealized
appreciation/depreciation... (1,029,844) 6,185,067 (828,733) 2,898,751 (2,481,361) 4,379,845
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE
(DECREASE)............... 340,233 7,289,367 (1,190,171) 3,838,974 (25,959) 5,242,506
------------ ------------ ------------ ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS
FROM:
Net investment income......... (190,320) (279,999) (209,613) (70,000) (579,076) (408,002)
Net realized gain............. (940,949) (698,399) (786,673) (367,529) (2,892,000) (699,994)
------------ ------------ ------------ ------------ ------------ ------------
TOTAL.................... (1,131,269) (978,398) (996,286) (437,529) (3,471,076) (1,107,996)
------------ ------------ ------------ ------------ ------------ ------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sales....... 2,714,845 6,558,038 2,499,146 7,696,263 3,032,517 7,519,070
Reinvestment of dividends and
distributions............... 1,094,116 948,925 989,770 435,668 3,467,463 1,107,086
Cost of shares repurchased.... (4,969,740) (10,417,432) (4,559,911) (3,421,423) (7,069,581) (3,796,952)
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE
(DECREASE)............... (1,160,779) (2,910,469) (1,070,995) 4,710,508 (569,601) 4,829,204
------------ ------------ ------------ ------------ ------------ ------------
TOTAL INCREASE
(DECREASE)............... (1,951,815) 3,400,500 (3,257,452) 8,111,953 (4,066,636) 8,963,714
NET ASSETS:
Beginning of period........... 23,779,735 20,379,235 19,797,196 11,685,243 26,459,420 17,495,706
------------ ------------ ------------ ------------ ------------ ------------
END OF PERIOD............ $21,827,920 $ 23,779,735 $16,539,744 $ 19,797,196 $22,392,784 $ 26,459,420
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS)................. $ 4,120 $ 100,361 $ (29,347) $ 131,548 $ 40,488 $ 381,735
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
SHARES ISSUED AND REPURCHASED:
Sold.......................... 145,290 416,960 186,903 606,253 207,847 549,814
Issued in reinvestment of
dividends and
distributions............... 62,095 62,594 80,798 35,887 282,597 83,616
Repurchased................... (268,571) (680,374) (340,834) (265,700) (489,475) (277,595)
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE)....... (61,186) (200,820) (73,133) 376,440 969 355,835
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
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
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Dean Witter Trust FSB
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
DEAN WITTER
RETIREMENT SERIES
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
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.
SEMIANNUAL REPORT
JANUARY 31, 1998
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
PART B
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information relates to the shares of Liquid
Asset Fund Inc. (the "Acquiring Fund") to be issued pursuant to an Agreement
and Plan of Reorganization, dated April 30, 1998, between the Acquiring Fund
and Dean Witter Liquid Asset Series ("Liquid Asset"), one of eleven
portfolios of Dean Witter Retirement Series ("Retirement Series"), in
connection with the acquisition by the Acquiring Fund of substantially all of
the assets, subject to stated liabilities, of Liquid Asset. This Statement of
Additional Information does not constitute a prospectus. This Statement of
Additional Information does not include all information that a shareholder
should consider before voting on the proposals contained in the Proxy
Statement and Prospectus, and, therefore, should be read in conjunction with
the related Proxy Statement and Prospectus, dated June , 1998. A copy of
the Proxy Statement and Prospectus may be obtained without charge by mailing
a written request to the Acquiring Fund at Two World Trade Center, New York,
New York 10048 or by calling Nina Maceda at Dean Witter Trust Company at
(800) 869-NEWS (Toll Free). Please retain this document for future reference.
The date of this Statement of Additional Information is June , 1998.
B-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION ................................... B-3
ADDITIONAL INFORMATION ABOUT ACQUIRING FUND ... B-3
FINANCIAL STATEMENTS ........................... B-4
</TABLE>
B-2
<PAGE>
INTRODUCTION
This Statement of Additional Information is intended to supplement the
information provided in the Proxy Statement and Prospectus dated June , 1998
(the "Proxy Statement and Prospectus"). The Proxy Statement and Prospectus
has been sent to Liquid Asset shareholders in connection with the
solicitation of proxies by the Board of Trustees of Liquid Asset to be voted
at the Special Meeting of Shareholders of Liquid Asset to be held on August
19, 1998. This Statement of Additional Information incorporates by reference
the Statement of Additional Information of the Acquiring Fund dated October
24, 1997 and the Statement of Additional Information of Retirement Series
dated October 31, 1997.
ADDITIONAL INFORMATION ABOUT THE ACQUIRING FUND
INVESTMENT OBJECTIVES AND POLICIES
For additional information about the Acquiring Fund's investment
objectives and policies, see "Investment Practices and Policies" and
"Investment Restrictions" in the Acquiring Fund's Statement of Additional
Information.
MANAGEMENT
For additional information about the Board of Directors, officers and
management personnel of the Acquiring Fund, see "The Fund and Its Management"
and "Directors and Officers" in the Acquiring Fund's Statement of Additional
Information.
INVESTMENT ADVISORY AND OTHER SERVICES
For additional information about the Acquiring Fund's investment manager,
see "The Fund and Its Management" in the Acquiring Fund's Statement of
Additional Information. For additional information about the Acquiring Fund's
independent auditors, see "Independent Accountants" in the Acquiring Fund's
Statement of Additional Information. For additional information about other
services provided to the Acquiring Fund see "Custodian and Transfer Agent"
and "Shareholder Services" in the Acquiring Fund's Statement of Additional
Information.
PORTFOLIO TRANSACTIONS AND BROKERAGE
For additional information about brokerage allocation practices, see
"Portfolio Transactions and Brokerage" in the Acquiring Fund's Statement of
Additional Information.
DESCRIPTION OF FUND SHARES
For additional information about the voting rights and other
characteristics of the shares of the Acquiring Fund, see "Description of
Common Stock" in the Acquiring Fund's Statement of Additional Information.
PURCHASE, REDEMPTION AND PRICING OF SHARES
For additional information about the purchase and redemption of the
Acquiring Fund's shares and the determination of net asset value, see
"Purchase of Fund Shares," "Redemptions and Repurchases," "Financial
Statements" and "Shareholder Services" in the Acquiring Fund's Statement of
Additional Information.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
For additional information about the Acquiring Fund's policies regarding
dividends and distributions and tax matters affecting the Acquiring Fund and
its shareholders, see "Dividends, Distributions and Taxes" and "Financial
Statements" in the Acquiring Fund's Statement of Additional Information.
B-3
<PAGE>
DISTRIBUTION OF SHARES
For additional information about the Acquiring Fund's distributor and the
distribution agreement between the Acquiring Fund and its distributor, see
"Purchase of Fund Shares" in the Acquiring Fund's Statement of Additional
Information.
PERFORMANCE DATA
For additional information about the Acquiring Fund's performance data,
see "Dividends, Distributions and Taxes--Information on Computation of Yield"
in the Acquiring Fund's Statement of Additional Information.
FINANCIAL STATEMENTS
The Acquiring Fund's most recent audited financial statements are set
forth in its Prospectus, dated October 24, 1997, which is attached to and is
incorporated by reference in, the Proxy Statement and Prospectus. Liquid
Asset's most recent audited financial statements are set forth in the Annual
Report for Retirement Series for the fiscal year ended July 31, 1997, which
is incorporated by reference to the Proxy Statement and Prospectus and Liquid
Asset's updated, unaudited financial statements are set forth in its
Semi-Annual Report for the six-month period ended January 31, 1998.
B-4
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION DEAN WITTER
OCTOBER 24, 1997 LIQUID ASSET FUND INC.
- --------------------------------------------------------------------------------
Dean Witter Liquid Asset Fund Inc. (the "Fund") is an open-end diversified
management investment company whose investment objectives are high current
income, preservation of capital and liquidity. The Fund seeks to achieve its
objectives by investing in the following money market instruments: United
States Government securities, obligations of U.S. regulated banks and savings
and loan associations having assets of $1 billion or more, high grade
commercial paper, Certificates of Deposit of $100,000 or less of U.S. regulated
banks and savings institutions having total assets of less than $1 billion
which are fully insured as to principal by the Federal Deposit Insurance
Corporation (the interest may not be insured) and high grade corporate
obligations maturing in thirteen months or less. (See "Investment Practices and
Policies.")
The Fund is authorized to reimburse for specific expenses incurred in
promoting the distribution of the Fund's shares pursuant to a Plan of
Distribution with Dean Witter Distributors Inc. pursuant to Rule 12b-1 under
the Investment Company Act of 1940. Reimbursement may in no event exceed an
amount equal to payments at the annual rate of 0.15% of the average daily net
assets of the Fund.
A Prospectus of the Fund dated October 24, 1997, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge by request of the Fund at its address or at one of the telephone
numbers listed below or from the Fund's Distributor, Dean Witter Distributors
Inc., from Dean Witter Reynolds Inc. at any of its branch offices or from any
Selected Broker-Dealer. This Statement of Additional Information is not a
Prospectus. It contains information in addition to and more detailed than that
set forth in the Prospectus. It is intended to provide additional information
regarding the activities and operations of the Fund, and should be read in
conjunction with the Prospectus.
Dean Witter
Liquid Asset Fund Inc.
Two World Trade Center
New York, New York 10048
212-392-2550 or
800-869-NEWS (toll-free)
<PAGE>
TABLE OF CONTENTS
- ----------------------------------------------------------------------------
The Fund and its Management........................................... 3
Directors and Officers................................................ 6
Investment Practices and Policies..................................... 12
Investment Restrictions............................................... 14
Portfolio Transactions and Brokerage.................................. 15
Purchase of Fund Shares............................................... 17
Redemption of Fund Shares............................................. 25
Dividends, Distributions and Taxes.................................... 26
Description of Common Stock........................................... 27
Custodian and Transfer Agent.......................................... 27
Independent Accountants............................................... 28
Reports to Shareholders............................................... 28
Legal Counsel......................................................... 28
Experts............................................................... 28
Registration Statement................................................ 28
Financial Statements.................................................. 28
Appendix/Ratings...................................................... 29
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
THE FUND
The Fund was incorporated under Maryland law on September 3, 1974, under
the name Standard & Poor's/InterCapital Cash Management Fund, Inc. Its name was
changed to Standard & Poor's/InterCapital Liquid Asset Fund, Inc. on May 13,
1975; changed to InterCapital Liquid Asset Fund Inc. on September 1, 1977;
changed to Dean Witter/Sears Liquid Asset Fund Inc. on March 21, 1983; and
changed to its present name, Dean Witter Liquid Asset Fund Inc., on June 30,
1993.
As of August 31, 1997 no shareholder was known to own beneficially or of
record as much as 5% of the outstanding shares of the Fund. The percentage
ownership of shares of the Fund changes from time to time depending on
purchases and redemptions by shareholders and the total number of shares
outstanding.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. (the "Investment Manager" or "InterCapital"),
a Delaware corporation, whose address is Two World Trade Center, New York, New
York 10048, is the Fund's Investment Manager. InterCapital is a wholly-owned
subsidiary of Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD"), a Delaware
corporation. In an internal reorganization which took place in January, 1993,
InterCapital assumed the investment advisory, administrative and management
activities previously performed by the InterCapital Division of Dean Witter
Reynolds Inc. ("DWR"), a broker-dealer affiliate of InterCapital. (As
hereinafter used in this Statement of Additional Information, the terms
"InterCapital" and "Investment Manager" refer to DWR's InterCapital Division
prior to the internal reorganization and to Dean Witter InterCapital Inc.
thereafter.) The daily management of the Fund and research relating to the
Fund's portfolio are conducted by or under the direction of officers of the
Fund and of the Investment Manager, subject to review by the Fund's Board of
Directors. In addition, Directors of the Fund provide guidance on economic
factors and interest rate trends. Information as to these Directors and
officers is contained under the caption "Directors and Officers."
InterCapital is also the investment manager or investment adviser of the
following investment companies: Active Assets Money Trust, Active Assets
Tax-Free Trust, Active Assets California Tax-Free Trust, Active Assets
Government Securities Trust, InterCapital Income Securities Inc., InterCapital
Insured Municipal Bond Trust, InterCapital Insured Municipal Trust,
InterCapital Insured Municipal Income Trust, InterCapital Insured Municipal
Securities, InterCapital California Insured Municipal Income Trust,
InterCapital Insured California Municipal Securities, InterCapital Quality
Municipal Investment Trust, InterCapital Quality Municipal Income Trust,
InterCapital Quality Municipal Securities, InterCapital California Quality
Municipal Securities, InterCapital New York Quality Municipal Securities, High
Income Advantage Trust, High Income Advantage Trust II, High Income Advantage
Trust III, Dean Witter Government Income Trust, Dean Witter High Yield
Securities Inc., Dean Witter Tax-Free Daily Income Trust, Dean Witter
Tax-Exempt Securities Trust, Dean Witter Dividend Growth Securities Inc., Dean
Witter Natural Resource Development Securities Inc., Dean Witter American Value
Fund, Dean Witter Developing Growth Securities Trust, Dean Witter U.S.
Government Money Market Trust, Dean Witter Variable Investment Series, Dean
Witter World Wide Investment Trust, Dean Witter Select Municipal Reinvestment
Fund, Dean Witter U.S. Government Securities Trust, Dean Witter World Wide
Income Trust, Dean Witter California Tax-Free Income Fund, Dean Witter New York
Tax-Free Income Fund, Dean Witter Convertible Securities Trust, Dean Witter
Federal Securities Trust, Dean Witter Value-Added Market Series, Dean Witter
Utilities Fund, Dean Witter California Tax-Free Daily Income Trust, Dean Witter
Strategist Fund, Dean Witter Intermediate Income Securites, Dean Witter Capital
Growth Securities, Dean Witter Precious Metals and Minerals Trust, Dean Witter
New York Municipal Money Market Trust, Dean Witter European Growth Fund Inc.,
Dean Witter Global Short-Term Income Fund Inc., Dean Witter Pacific Growth Fund
Inc., Dean Witter Multi-State Municipal Series Trust, Dean Witter Short-Term
U.S. Treasury Trust, Dean Witter Diversified Income Trust, Dean Witter Health
Sciences Trust, Dean Witter Retirement Series, Dean Witter Global Dividend
Growth Securities, Dean Witter Limited Term Municipal Trust, Dean Witter
Short-Term Bond Fund, Dean Witter Global Utilities Fund, Dean Witter High
3
<PAGE>
Income Securities, Dean Witter National Municipal Trust, Dean Witter
International SmallCap Fund, Dean Witter Mid-Cap Growth Fund, Dean Witter
Select Dimensions Investment Series, Dean Witter Balanced Growth Fund, Dean
Witter Balanced Income Fund, Dean Witter Hawaii Municipal Trust, Dean Witter
Capital Appreciation Fund, Dean Witter Intermediate Term U.S. Treasury Trust,
Dean Witter Information Fund, Dean Witter Japan Fund, Dean Witter Income
Builder Fund, Dean Witter Special Value Fund, Dean Witter Financial Services
Trust, Dean Witter Market Leader Trust, Dean Witter S&P 500 Index Fund, Dean
Witter Fund of Funds, Municipal Income Trust, Municipal Income Trust II,
Municipal Income Trust III, Municipal Income Opportunities Trust, Municipal
Income Opportunities Trust II, Municipal Income Opportunities Trust III,
Municipal Premium Income Trust and Prime Income Trust. The foregoing investment
companies, together with the Fund, are collectively referred to as the Dean
Witter Funds.
In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned
subsidiary of InterCapital, serves as manager for the following investment
companies for which TCW Funds Management, Inc. is the investment adviser:
TCW/DW Core Equity Trust, TCW/DW North American Government Income Trust, TCW/DW
Latin American Growth Fund, TCW/DW Income and Growth Fund, TCW/DW Small Cap
Growth Fund, TCW/DW Balanced Fund, TCW/DW Total Return Trust, TCW/DW Mid-Cap
Equity Trust, TCW/DW Global Telecom Trust, TCW/DW Strategic Income Trust,
TCW/DW Emerging Markets Opportunities Trust, TCW/DW Term Trust 2000, TCW/DW
Term Trust 2002 and TCW/DW Term Trust 2003 (the "TCW/DW Funds"). InterCapital
also serves as: (i) administrator of The BlackRock Strategic Term Trust Inc., a
closed-end investment company; and (ii) sub-administrator of MassMutual
Participation Investors and Templeton Global Governments Income Trust,
closed-end investment companies.
Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage the
investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager obtains and
evaluates such information and advice relating to the economy, securities
markets, and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objectives and policies.
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 expense, such office space, facilities,
equipment, clerical help, bookkeeping and certain legal services as the Fund
may reasonably require in the conduct of its business, including the services
of personnel in connection with the pricing of the Fund's shares and the
preparation of prospectuses, proxy statements and reports required to be filed
with federal and state securities commissions (except insofar as the
participation or assistance of independent accountants and attorneys is, in the
opinion of the Investment Manager, necessary or desirable). In addition, the
Investment Manager pays the salaries of all personnel, including officers of
the Fund who are employees of the Investment Manager. The Investment Manager
also bears the cost of telephone service, heat, light, power and other
utilities provided to the Fund, and the cost of printing (in excess of costs
borne by the Fund) and distributing prospectuses and supplements thereto of the
Fund used for sales purposes.
Effective December 31, 1993, pursuant to a Services Agreement between
InterCapital and DWSC, DWSC began to provide the administrative services to the
Fund which were previously performed directly by InterCapital. On April 17,
1995, DWSC was reorganized in the State of Delaware, necessitating the entry
into a new Services Agreement by InterCapital and DWSC on that date. The
foregoing internal reorganizations did not result in any change in the nature
or scope of the administrative services being provided to the Fund or any of
the fees being paid by the Fund for the overall services being performed under
the terms of the Agreement.
Expenses not expressly assumed by the Investment Manager under the Agreement
or by the Distributor of the Fund's shares, Dean Witter Distributors Inc.
("Distributors" or the "Distributor"), (see
4
<PAGE>
"Purchase of Fund Shares") will be paid by the Fund. The expenses borne by the
Fund include, but are not limited to: the distribution fee under the Plan
pursuant to Rule 12b-1 (see "Purchase of Fund Shares"); charges and expenses of
any registrar, custodian, stock transfer and dividend disbursing agent;
brokerage commissions; taxes; engraving and printing of stock certificates;
registration costs of the Fund and its shares under federal and state
securities laws; the cost and expense of printing, including typesetting, and
distributing prospectuses of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and directors' meetings and of
preparing, printing, including typesetting, and mailing of proxy statements and
reports to shareholders and prospective shareholders; fees and travel expenses
of Directors or members of any advisory board or committee who are not
employees of the Investment Manager or any corporate affiliate of the
Investment Manager; all expenses incident to any dividend, distribution,
withdrawal or redemption options; fees and expenses of legal counsel including
counsel to the Directors who are not interested persons of the Fund or of the
Investment Manager (not including compensation or expenses of attorneys who are
employees of the Investment Manager) and independent accountants in connection
with any matter relating to the Fund; membership dues of industry associations;
interest on Fund borrowings; postage; insurance premiums on property or
personnel (including officers and Directors) of the Fund which inure to its
benefit; extraordinary expenses (including, but not limited to, legal claims
and liabilities and litigation costs and any indemnification relating thereto);
and all other costs of the Fund's operation.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily by applying the
following annual rates to the net assets of the Fund determined as of the close
of each business day: 0.50% of the portion of the daily net assets not
exceeding $500 million; 0.425% of the portion of the daily net assets exceeding
$500 million but not exceeding $750 million; 0.375% of the portion of the daily
net assets exceeding $750 million but not exceeding $1 billion; 0.35% of the
portion of the daily net assets exceeding $1 billion but not exceeding $1.35
billion; 0.325% of the portion of the daily net assets exceeding $1.35 billion
but not exceeding $1.75 billion; 0.30% of the portion of the daily net assets
exceeding $1.75 billion but not exceeding $2.15 billion; 0.275% of the portion
of the daily net assets exceeding $2.15 billion but not exceeding $2.5 billion;
0.25% of the portion of the daily net assets exceeding $2.5 billion but not
exceeding $15 billion; 0.249% of the portion of daily net assets exceeding $15
billion but not exceeding $17.5 billion; and 0.248% of the portion of the daily
net assets exceeding $17.5 billion. Total compensation paid to the Investment
Manager for the Fund's fiscal years ended August 31, 1995, 1996 and 1997
amounted to $26,483,251, $30,669,867 and $33,616,072, respectively.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder,
the Investment Manager is not liable to the Fund or any of its investors for
any act or omission by the Investment Manager or for any losses sustained by
the Fund or its investors. The Agreement in no way restricts the Investment
Manager from acting as investment manager or adviser to others.
The Agreement was initially approved by the Directors on February 21, 1997
and by the shareholders of the Fund at a Special Meeting of Shareholders held
on May 21, 1997. The Agreement is substantially identical to a prior investment
management agreement which was initially approved by the Directors on October
30, 1992 and by the shareholders of the Fund at a Special Meeting of
Shareholders held on January 12, 1993. The Agreement took effect on May 31,
1997 upon the consummation of the merger of Dean Witter, Discover & Co. with
Morgan Stanley Group Inc. The Agreement may be terminated at any time, without
penalty, on thirty days' notice by the Directors of the Fund, by the holders of
a majority, as defined in the Investment Company Act of 1940, as amended (the
"Act"), of the outstanding shares of the Fund, or by the Investment Manager.
The Agreement will automatically terminate in the event of its assignment (as
defined in the Act).
Under its terms, the Agreement has an initial term ending April 30, 1999
and will continue in effect from year to year thereafter, provided continuance
of the Agreement is approved at least annually by the vote of the holders of a
majority, as defined in the Act, of the outstanding shares of the Fund, or by
the
5
<PAGE>
Directors of the Fund; provided that in either event such continuance is
approved annually by the vote of a majority of the Directors of the Fund who
are not parties to the Agreement or "interested persons" (as defined in the
Act) of any such party (the "Independent Directors"), which vote must be cast
in person at a meeting called for the purpose of voting on such approval.
The Fund has acknowledged that the name "Dean Witter" is a property right
of DWR. The Fund has agreed that DWR or its parent company may use, or at any
time permit others to use, the name "Dean Witter." The Fund has also agreed
that in the event the Agreement is terminated, or if the affiliation between
InterCapital and its parent company is terminated, the Fund will eliminate the
name "Dean Witter" from its name if DWR or its parent company shall so request.
DIRECTORS AND OFFICERS
- --------------------------------------------------------------------------------
The Directors and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital and with the 85 Dean Witter Funds and the 14 TCW/DW Funds are
shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ---------------------------------------------------------------
<S> <C>
Michael Bozic (56) Chairman and Chief Executive Officer of Levitz Furniture
Director Corporation (since November, 1995); Director or Trustee of the
c/o Levitz Furniture Corporation Dean Witter Funds; formerly President and Chief Executive
6111 Broken Sound Parkway, N.W. Officer of Hills Department Stores (May, 1991-July, 1995);
Boca Raton, Florida formerly variously Chairman, Chief Executive Officer, President
and Chief Operating Officer (1987-1991) of the Sears
Merchandise Group of Sears, Roebuck and Co.; Director of
Eaglemark Financial Services Inc., the United Negro College
Fund and Weirton Steel Corporation.
Charles A. Fiumefreddo* (64) Chairman and Chief Executive Officer and Director of In-
Chairman of the Board, terCapital, DWSC and Distributors; Executive Vice President and
President and Chief Executive Director of DWR; Chairman, Director or Trustee, President and
Officer and Director Chief Executive Officer of the Dean Witter Funds; Chairman,
Two World Trade Center Chief Executive Officer and Trustee of the TCW/DW Funds;
New York, New York Chairman and Director of Dean Witter Trust FSB ("DWT");
Director and/or officer of various MSDWD subsidiaries; formerly
Executive Vice President and Director of Dean Witter, Discover
& Co. (until February, 1993).
Edwin J. Garn (65) Director or Trustee of the Dean Witter Funds; formerly United
Director States Senator (R-Utah) (1974-1992) and Chairman, Senate
c/o Huntsman Corporation Banking Committee (1980-1986); formerly Mayor of Salt Lake
500 Huntsman Way City, Utah (1971-1974); formerly Astronaut, Space Shuttle
Salt Lake City, Utah Discovery (April 12-19, 1985); Vice Chairman, Huntsman
Corporation (since January, 1993); Director of Franklin Quest
(time management systems) and John Alden Financial Corp.
(health insurance); Member of the board of various civic and
charitable organizations.
6
<PAGE>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ---------------------------------------------------------------
John R. Haire (72) Chairman of the Audit Committee and Chairman of the Committee
Director of the Independent Directors or Trustees and Director or
Two World Trade Center Trustee of the Dean Witter Funds; Chairman of the Audit
New York, New York Committee and Chairman of the Committee of the Independent
Trustees and Trustee of the TCW/DW Funds; formerly President,
Council for Aid to Education (1978-1989) and Chairman and Chief
Executive Officer of Anchor Corporation, an Investment Adviser
(1964-1978); Director of Washington National Corporation
(insurance).
Wayne E. Hedien (63) Retired; Director or Trustee of the Dean Witter Funds; Director
Director of the PMI Group, Inc. (private mortgage insurance); Trustee
c/o Gordon Altman Butowsky and Vice Chairman of The Field Museum of Natural History;
Weitzen Shalov & Wein formerly associated with the Allstate Companies (1966-1994),
Counsel to the Independent Trustees most recently as Chairman of The Allstate Corporation (March,
114 West 47th Street 1993-December, 1994) and Chairman and Chief Executive Officer
New York, New York of its wholly-owned subsidiary, Allstate Insurance Company
(July, 1989-December, 1994); director of various other business
and charitable organizations.
Dr. Manuel H. Johnson (48) Senior Partner, Johnson Smick International, Inc., a con-
Director sulting firm; Co-Chairman and a founder of the Group of Seven
c/o Johnson Smick International, Inc. Council (G7C), an international economic commission; Director
1133 Connecticut Avenue, N.W. or Trustee of the Dean Witter Funds; Trustee of the TCW/DW
Washington, DC Funds; Director of NASDAQ (since June, 1995); Director of
Greenwich Capital Markets, Inc. (broker-dealer); Trustee of the
Financial Accounting Foundation (oversight organization for the
Financial Accounting Standards Board); formerly Vice Chairman
of the Board of Governors of the Federal Reserve System
(1986-1990) and Assistant Secretary of the U.S. Treasury
(1982-1986).
Michael E. Nugent (61) General Partner, Triumph Capital, L.P., a private investment
Director partnership; Director or Trustee of the Dean Witter Funds;
c/o Triumph Capital, L.P. Trustee of the TCW/DW Funds; formerly Vice President, Bankers
237 Park Avenue Trust Company and BT Capital Corporation (1984-1988); Director
New York, New York of various business organizations.
Philip J. Purcell* (54) Chairman of the Board of Directors and Chief Executive Officer
Director of MSDWD, DWR and Novus Credit Services Inc.; Director of
1585 Broadway InterCapital, DWSC and Distributors; Director or Trustee of the
New York, New York Dean Witter Funds; Director and/or officer of various MSDWD
subsidiaries.
7
<PAGE>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ---------------------------------------------------------------
John L. Schroeder (67) Retired; Director or Trustee of the Dean Witter Funds; Trustee
Director of the TCW/DW Funds; Director of Citizens Utilities Company;
c/o Gordon Altman Butowsky formerly Executive Vice President and Chief Investment Officer
Weitzen Shalov & Wein of the Home Insurance Company (August, 1991-September, 1995).
Counsel to the Independent Directors
114 West 47th Street
New York, New York
Barry Fink (42) Senior Vice President (since March, 1997) and Secretary and
Vice President, General Counsel (since February, 1997) of InterCapital and
Secretary and General Counsel DWSC; Senior Vice President (since March, 1997) and Assistant
Two World Trade Center Secretary and Assistant General Counsel (since February, 1997)
New York, New York of Distributors; Assistant Secretary of DWR (since August,
1996); Vice President, Secretary and General Counsel of the
Dean Witter Funds and the TCW/DW Funds (since February, 1997);
previously First Vice President (June, 1993-February, 1997),
Vice President (until June, 1993) and Assistant Secretary and
Assistant General Counsel of InterCapital and DWSC and
Assistant Secretary of the Dean Witter Funds and TCW/DW Funds.
Jonathan R. Page (51) Senior Vice President of InterCapital; Vice President of
Vice President various Dean Witter Funds.
Two World Trade Center
New York, New York
Thomas F. Caloia (51) First Vice President and Assistant Treasurer of InterCapital
Treasurer and DWSC; Treasurer of the Dean Witter Funds and the TCW/DW
Two World Trade Center Funds.
New York, New York
Two World Trade Center Funds.
New York, New York
</TABLE>
- ------------------------
*Denotes Directors who are "Interested persons," as defined in the Act.
In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWT and
Director of DWT, Mitchell M. Merin, President and Chief Strategic Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWT, and
Director of DWT, Executive Vice President, Chief Administrative Officer and
Director of DWR, and Director of SPS Transaction Services, Inc. and various
other MSDWD subsidiaries, Joseph J. McAlinden, Executive Vice President and
Chief Investment Officer of InterCapital and Director of DWT, Robert S.
Giambrone, Senior Vice President of InterCapital, DWSC, Distributors and DWT
and Director of DWT, and Peter M. Avelar and James F. Willison, Senior Vice
Presidents of InterCapital, are Vice Presidents of the Fund, and Marilyn K.
Cranney, First Vice President and Assistant General Counsel of InterCapital and
DWSC, LouAnne D. McInnis, Carsten Otto and Ruth Rossi, Vice Presidents and
Assistant General Counsels of InterCapital and DWSC, and Frank Bruttomesso and
Todd Lebo, staff attorneys with InterCapital, are Assistant Secretaries of the
Fund.
8
<PAGE>
THE BOARD OF DIRECTORS, THE INDEPENDENT DIRECTORS, AND THE COMMITTEES
The Board of Directors consists of nine (9) directors. These same
individuals also serve as directors or trustees for all of the Dean Witter
Funds, and are referred to in this section as Directors. As of the date of this
Statement of Additional Information, there are a total of 85 Dean Witter Funds,
comprised of 128 portfolios. As of September 30, 1997, the Dean Witter Funds
had total net assets of approximately $98.6 billion and more than six million
shareholders.
Seven Directors (77% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own
any stock or other securities issued by InterCapital's parent company, DWDC.
These are the "disinterested" or "independent" Directors. The other two
Directors (the "management Directors") are affiliated with InterCapital. Four
of the seven independent Directors are also Independent Trustees of the TCW/DW
Funds.
Law and regulation establish both general guidelines and specific duties
for the Independent Directors. The Dean Witter Funds seek as Independent
Directors individuals of distinction and experience in business and finance,
government service or academia; these are people whose advice and counsel are
in demand by others and for whom there is often competition. To accept a
position on the Funds' Boards, such individuals may reject other attractive
assignments because the Funds make substantial demands on their time. Indeed,
by serving on the Funds' Boards, certain Directors who would otherwise be
qualified and in demand to serve on bank boards would be prohibited by law from
doing so.
All of the Independent Directors serve as members of the Audit Committee
and the Committee of the Independent Directors. Three of them also serve as
members of the Derivatives Committee. During the calendar year ended December
31, 1996, the three Committees held a combined total of sixteen meetings. The
Committees hold some meetings at InterCapital's offices and some outside
InterCapital. Management Directors or officers do not attend these meetings
unless they are invited for purposes of furnishing information or making a
report.
The Committee of the Independent Directors is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading among
Funds in the same complex; and approving fidelity bond and related insurance
coverage and allocations, as well as other matters that arise from time to
time. The Independent Directors are required to select and nominate individuals
to fill any Independent Director vacancy on the Board of any Fund that has a
Rule 12b-1 plan of distribution. Most of the Dean Witter Funds have such a
plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of such services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect to
derivative investments, if any, made by the Fund.
9
<PAGE>
DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT DIRECTORS AND AUDIT COMMITTEE
The Chairman of the Committee of the Independent Directors and the Audit
Committee maintains an office at the Funds' headquarters in New York. He is
responsible for keeping abreast of regulatory and industry developments and the
Funds' operations and management. He screens and/or prepares written materials
and identifies critical issues for the Independent Directors to consider,
develops agendas for Committee meetings, determines the type and amount of
information that the Committees will need to form a judgment on various issues,
and arranges to have that information furnished to Committee members. He also
arranges for the services of independent experts and consults with them in
advance of meetings to help refine reports and to focus on critical issues.
Members of the Committees believe that the person who serves as Chairman of
both Committees and guides their efforts is pivotal to the effective
functioning of the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Directors and
with the Funds' independent auditors. He arranges for a series of special
meetings involving the annual review of investment advisory, management and
other operating contracts of the Funds and, on behalf of the Committees,
conducts negotiations with the Investment Manager and other service providers.
In effect, the Chairman of the Committees serves as a combination of chief
executive and support staff of the Independent Directors.
The Chairman of the Committee of the Independent Directors and the Audit
Committee is not employed by any other organization and devotes his time
primarily to the services he performs as Committee Chairman and Independent
Director of the Dean Witter Funds and as an Independent Director and, since
July 1, 1996, as Chairman of the Committee of the Independent Directors and the
Audit Committee of the TCW/DW Funds. The current Committee Chairman has had
more than 35 years experience as a senior executive in the investment company
industry.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT DIRECTORS FOR ALL DEAN
WITTER FUNDS
The Independent Directors and the Funds' management believe that having the
same Independent Directors for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Directors for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Directors of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and
enhances their ability to negotiate on behalf of each Fund with the Fund's
service providers. This arrangement also precludes the possibility of separate
groups of Independent Directors arriving at conflicting decisions regarding
operations and management of the Funds and avoids the cost and confusion that
would likely ensue. Finally, having the same Independent Directors serve on all
Fund Boards enhances the ability of each Fund to obtain, at modest cost to each
separate Fund, the services of Independent Directors, and a Chairman of their
Committees, of the caliber, experience and business acumen of the individuals
who serve as Independent Directors of the Dean Witter Funds.
COMPENSATION OF INDEPENDENT DIRECTORS
The Fund pays each Independent Director an annual fee of $1,000 plus a per
meeting fee of $50 for meetings of the Board of Trustees or committees of the
Board of Directors attended by the Director (the Fund pays the Chairman of the
Audit Committee an annual fee of $750 and pays the Chairman of the Committee of
the Independent Directors an additional annual fee of $1,200). If a Board
meeting and a Committee meeting, or more than one Committee meeting, take place
on a single day, the Directors are paid a single meeting fee by the Fund. The
Fund also reimburses such Directors for travel and other out-of-pocket expenses
incurred by them in connection with attending such meetings. Directors and
officers of the Fund who are or have been employed by the Investment Manager or
an affiliated company receive no compensation or expense reimbursement from the
Fund.
10
<PAGE>
The following table illustrates the compensation paid to the Fund's
Independent Directors by the Fund for the fiscal year ended August 31, 1997.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT DIRECTOR FROM THE FUND
- -------------------------------------------------------------- ---------------
<S> <C>
Michael Bozic................................................. $1,650
Edwin J. Garn................................................. 1,850
John R. Haire................................................. 3,800
Dr. Manuel H. Johnson......................................... 1,800
Michael E. Nugent............................................. 1,850
John L. Schroeder............................................. 1,850
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Directors for the calendar year ended December 31, 1996 for
services to the 82 Dean Witter Funds and, in the case of Messrs. Haire,
Johnson, Nugent and Schroeder, the 14 TCW/DW Funds that were in operation at
December 31, 1996. With respect to Messrs. Haire, Johnson, Nugent and
Schroeder, the TCW/DW Funds are included solely because of a limited exchange
privilege between those Funds and five Dean Witter Money Market Funds. Mr.
Hedien's term as Director of the Dean Witter Funds commenced on September 1,
1997.
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS FOR SERVICE
CHAIRMAN OF AS TOTAL CASH
COMMITTEES OF CHAIRMAN OF COMPENSATION
FOR SERVICE INDEPENDENT COMMITTEES OF FOR SERVICES
AS DIRECTOR OR DIRECTORS/ INDEPENDENT TO
TRUSTEE AND FOR SERVICE AS TRUSTEES AND TRUSTEES AND 82 DEAN
COMMITTEE MEMBER TRUSTEE AND AUDIT AUDIT WITTER
OF 82 DEAN COMMITTEE MEMBER COMMITTEES OF COMMITTEES OF FUNDS AND
NAME OF WITTER OF 14 TCW/DW 82 DEAN WITTER 14 TCW/DW 14 TCW/DW
INDEPENDENT DIRECTOR FUNDS FUNDS FUNDS FUNDS FUNDS
- --------------------------- ---------------- ---------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Michael Bozic.............. $138,850 -- -- -- $138,850
Edwin J. Garn.............. 140,900 -- -- -- 140,900
John R. Haire.............. 106,400 $64,283 $195,450 $ 12,187 378,320
Dr. Manuel H. Johnson...... 137,100 66,483 -- -- 203,583
Michael E. Nugent.......... 138,850 64,283 -- -- 203,133
John L. Schroeder.......... 137,150 69,083 -- -- 206,233
</TABLE>
As of the date of this Statement of Additional Information, 57 of the Dean
Witter Funds, including the Fund, have adopted a retirement program under which
an Independent Director who retires after serving for at least five years (or
such lesser period as may be determined by the Board) as an Independent
Director or Trustee of any Dean Witter Fund that has adopted the retirement
program (each such Fund referred to as an "Adopting Fund" and each such
Director referred to as an "Eligible Director") is entitled to retirement
payments upon reaching the eligible retirement age (normally, after attaining
age 72). Annual payments are based upon length of service. Currently, upon
retirement, each Eligible Director is entitled to receive from the Adopting
Fund, commencing as of his or her retirement date and continuing for the
remainder of his or her life, an annual retirement benefit (the "Regular
Benefit") equal to 25.0% of his or her Eligible Compensation plus 0.4166666% of
such Eligible Compensation for each full month of service as an Independent
Director or Trustee of any Adopting Fund in excess of five years up to a
maximum of 50.0% after ten years of service. The foregoing percentages may be
changed by the Board.(1) "Eligible Compensation" is one-fifth of the total
compensation earned by such Eligible Director for service to the Adopting Fund
in the five year period prior to the date of the Eligible Director's
retirement. Benefits under the retirement program are not secured or funded by
the Adopting Funds.
- ------------------------
(1) An Eligible Director may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Director
and his or her spouse on the date of such Eligible Director's retirement.
The amount estimated to be payable under this method, through the remainder
of the later of the lives of such Eligible Director and spouse, will be the
actuarial equivalent of the Regular Benefit. In addition, the Eligible
Director may elect that the surviving spouse's periodic payment of benefits
will be equal to either 50% or 100% of the previous periodic amount, an
election that, respectively, increases or decreases the previous periodic
amount so that the resulting payments will be the actuarial equivalent of
the Regular Benefit.
11
<PAGE>
The following table illustrates the retirement benefits accrued to the
Fund's Independent Directors by the Fund for the fiscal year ended August 31,
1997 and by the 57 Dean Witter Funds (including the Fund) as of December 31,
1996, and the estimated retirement benefits for the Fund's Independent
Directors, to commence upon their retirement, from the Fund as of August 31,
1997 and from the 57 Dean Witter Funds as of December 31, 1996.
RETIREMENT BENEFITS FROM THE FUND AND ALL DEAN WITTER FUNDS
<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS
-------------------------
ESTIMATED RETIREMENT
CREDITED BENEFITS ESTIMATED ANNUAL
YEARS ACCRUED AS BENEFITS
OF SERVICE ESTIMATED EXPENSES UPON RETIREMENT(2)
AT PERCENTAGE ---------------------- --------------------
RETIREMENT OF BY ALL FROM FROM ALL
(MAXIMUM ELIGIBLE BY THE ADOPTING THE ADOPTING
NAME OF INDEPENDENT DIRECTOR 10) COMPENSATION FUND FUNDS FUND FUNDS
- ------------------------------ ---------- ---------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic................. 10 50.0% $ 346 $ 20,147 $ 875 $ 51,325
Edwin J. Garn................. 10 50.0 489 27,772 875 51,325
John R. Haire................. 10 50.0 (679)(3) 46,952 2,211 129,550
Dr. Manuel H. Johnson......... 10 50.0 207 10,926 875 51,325
Michael E. Nugent............. 10 50.0 349 19,217 875 51,325
John L. Schroeder............. 8 41.7 663 38,700 729 42,771
</TABLE>
- ------------------------
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Director's elections described in Footnote (1)
above.
(3) This number reflects the effect of the extension of Mr. Haire's term as
Director until June 1, 1998.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Directors as a group was less than 1 percent of the Fund's shares
of beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. As discussed in the Prospectus, when cash may be
available to the Fund for only a few days, it may be invested by the Fund in
repurchase agreements until such time as it may otherwise be invested or used
for payments of obligations of the Fund. These agreements, which may be viewed
as a type of secured lending by the Fund, typically involve the acquisition by
the Fund of debt securities from a selling financial institution such as a
bank, savings and loan association or broker-dealer. The agreement provides
that the Fund will sell back to the institution, and that the institution will
repurchase, the underlying security ("collateral"), which is held by the Fund's
custodian bank, at a specified price and at a fixed time in the future, usually
not more than seven days from the date of purchase. The Fund will receive
interest from the institution until the time when the repurchase is to occur.
Although such date is deemed by the Fund to be the maturity date of a
repurchase agreement, the maturities of securities subject to repurchase
agreements are not subject to any limits and may exceed thirteen months. While
repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Fund follows procedures designed to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions,
whose financial conditions will be continually monitored. In addition, the
value of the collateral underlying the repurchase agreement will always be at
least equal to the resale price, which consists of the purchase price paid to
the seller of the securities plus the accrued resale premium which is defined
as the amount specified in the repurchase agreement or the daily amortization
of the difference between the purchase price and the resale price specified in
the repurchase agreement. Such collateral will consist entirely of securities
that are direct obligations of, or that are fully guaranteed as to principal
and interest by, the United States or any agency thereof, and/or certificates
of deposit, bankers' acceptances which are eligible for acceptance by a Federal
Reserve Bank, and, if the seller is a bank, mortgage related securities (as
such term is defined in section 3(a)(41) of the Securities Exchange Act of
1934) that at the time the repurchase agreement is entered into are rated in
the highest rating category
12
<PAGE>
by the "Requisite NRSROs" (see "Purchase of Fund Shares--Determination of Net
Asset Value"). Additionally, the collateral must qualify the repurchase
agreement for preferential treatment under the Federal Deposit Insurance Act of
the Federal Bankruptcy Code. In the event of a default or bankruptcy by a
selling financial institution, the Fund will seek to liquidate such collateral.
However, the exercising of the Fund's right to liquidate such collateral could
involve certain costs or delays and, to the extent that proceeds from any sale
upon a default of the obligation to repurchase were less than the repurchase
price, the Fund could suffer a loss. It is the current policy of the Fund not
to invest in repurchase agreements that do not mature within seven days if any
such investment, together with any other illiquid assets held by the Fund,
amounts to more than 10% of its total assets. The Fund's investments in
repurchase agreements may at times be substantial when, in the view of the
Investment Manager, liquidity or other considerations warrant.
REVERSE REPURCHASE AGREEMENTS. As discussed in the Prospectus, the Fund may
also use reverse repurchase agreements as part of its investment strategy.
Reverse repurchase agreements involve sales by the Fund to repurchase the same
assets at a later date at a fixed price. Generally, the effect of such a
transaction is that the Fund can recover all or most of the cash invested in
the portfolio securities involved during the term of the reverse repurchase
agreement, while it will be able to keep the interest income associated with
those portfolio securities. Such transactions are only advantageous if the
interest cost to the Fund of the reverse repurchase transaction is less than
the cost of obtaining the cash otherwise. Opportunities to achieve this
advantage may not always be available, and the Fund intends to use the reverse
repurchase technique only when it will be to its advantage to do so. The Fund
will establish a segregated account with its custodian bank in which it will
maintain liquid portfolio securities equal in value to its obligations in
respect of reverse repurchase agreements. Reverse repurchase agreements are
considered borrowings by the Fund and for purposes other than meeting
redemptions may not exceed 5% of the Fund's total assets.
PRIVATE PLACEMENTS. As discussed in the Prospectus, the Fund may invest in
commercial paper issued in reliance on the so-called "private placement"
exemption from registration afforded by Section 4(2) of the Securities Act of
1933 (the "Securities Act") and which may be sold to other institutional
investors pursuant to Rule 144A under the Securities Act. The adoption by the
Securities and Exchange Commission of Rule 144A, which permits the resale of
certain restricted securities to institutional investors, had the effect of
broadening and increasing the liquidity of the institutional trading market for
securities subject to restrictions on resale to the general public. Section
4(2) commercial paper sold pursuant to Rule 144A is restricted in that it can
be resold only to qualified institutional investors. However, since
institutions constitute virtually the entire market for such commercial paper,
the market for such Section 4(2) commercial paper is, in reality, as liquid as
that for other commercial paper. While the Fund generally holds to maturity
commercial paper in its portfolio, the advent of Rule 144A has greatly
simplified the ability to sell Section 4(2) commercial paper to other
institutional investors. Under procedures adopted by the Board of Directors of
the Fund, the Fund may purchase Section 4(2) commercial paper without being
subject to the 10% limitation on illiquid investments (see "Investment
Restrictions" in the Prospectus) and will be able to utilize Rule 144A to sell
that paper to other institutional investors. The procedures require that the
Investment Manager consider the following factors in determining that any
restricted security eligible for sale pursuant to Rule 144A be considered
liquid: (1) the frequency of trades and quotes for the security, (2) the number
of dealers willing to purchase or sell the security and the number of other
potential purchasers, (3) dealer undertakings to make a market in the security,
and (4) the nature of the security and the nature of the market place trades
(i.e., the time needed to dispose of the security, the method of soliciting
offers and the mechanics of transfer). The Investment Manager will report to
the Board on a quarterly basis on all restricted securities held by the Fund
with regard to their ongoing liquidity. In the event any Section 4(2)
commercial paper or other restricted security held by the Fund is determined to
be illiquid by the Board and the Investment Manager, that investment would be
included as an illiquid security subject to the 10% limitation on illiquid
investments referred to above.
13
<PAGE>
LENDING OF PORTFOLIO SECURITIES. Subject to Investment Restriction 2 below,
the Fund may lend portfolio securities to brokers, dealers and financial
institutions provided that cash equal to at least 100% of the market value of
the securities loaned is deposited by the borrower with the Fund and is
maintained each business day in a segregated account pursuant to applicable
regulations. The creditworthiness of firms to which the Fund lends its
portfolio securities is monitored on an ongoing basis. While such securities
are on loan, the borrower will pay the Fund any income accruing thereon, and
the Fund may invest the cash collateral in portfolio securities, thereby
earning additional income. The Fund will not lend its portfolio securities if
such loans are not permitted by the laws or regulations of any state in which
its shares are qualified for sale and will not lend more than 10% of the value
of its total assets. Loans would be subject to termination by the Fund in the
normal settlement time, currently five business days after notice, or by the
borrower on one day's notice. Borrowed securities must be returned when the
loan is terminated. Any gain or loss in the market price of the borrowed
securities which occurs during the term of the loan inures to the Fund and its
shareholders. The Fund may pay reasonable finders, borrowers, administrative,
and custodial fees in connection with a loan. During its fiscal year ended
August 31, 1997, the Fund did not lend any of its portfolio securities, and it
has no intention of doing so in the foreseeable future.
VARIABLE AND FLOATING RATE OBLIGATIONS. As stated in the Prospectus, the
Fund may invest in variable and floating rate obligations. The interest rate
payable on a variable rate obligation is adjusted at predesignated periodic
intervals and, on floating rate obligations, whenever there is a change in the
market rate of interest on which the interest rate payable is based. Other
features may include the right whereby the Fund may demand prepayment of the
principal amount of the obligation prior to its stated maturity (a "demand
feature") and the right of the issuer to prepay the principal amount prior to
maturity. The principal benefit of a variable rate obligation is that the
interest rate adjustment minimizes changes in the market value of the
obligation. As a result, the purchase of variable rate and floating rate
obligations should enhance the ability of the Fund to maintain a stable net
asset value per share (see "How Net Asset Value is Determined") and to sell
obligations prior to maturity at a price approximating the full principal
amount of the obligations. The principal benefit to the Fund of purchasing
obligations with a demand feature is that liquidity, and the ability of the
Fund to obtain repayment of the full principal amount of an obligation prior to
maturity, is enhanced. The payment of principal and interest by issuers of
certain obligations purchased by the Fund may be guaranteed by letters of
credit or other credit facilities offered by banks or other financial
institutions. Such guarantees will be considered in determining whether an
obligation meets the Fund's investment quality requirements.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus,
the Fund has adopted certain investment restrictions listed below as
fundamental policies which cannot be changed without the approval of the
holders of a "majority" of the outstanding shares of the Fund, as defined in
the Act. Majority is defined in the Act as the lesser of (a) sixty-seven
percent or more of the shares present at a meeting of shareholders, if the
holders of more than fifty percent of the outstanding shares of the Fund are
present or represented by proxy, or (b) more than fifty percent of the
outstanding shares of the Fund.
These restrictions provide that the Fund may not:
1. Purchase any common stocks or other equity securities;
2. Make loans to others, except through the purchase of the debt
obligations and repurchase agreements referred to under "Investment
Practices and Policies" above and "Investment Objectives and Policies" in
the Prospectus; and loans of portfolio securities in excess of 10% of the
value of the Fund's total assets, made in accordance with guidelines
established by the Fund's Board of Directors, including maintaining
collateral from the borrower equal at all times to the current market value
of the securities loaned;
14
<PAGE>
3. Purchase or sell real estate; however, the Fund may purchase
marketable securities issued by companies which invest in real estate or
interests therein;
4. Purchase securities on margin or sell short;
5. Purchase or sell commodities or commodity futures contracts, or oil,
gas or mineral exploration or development programs;
6. Underwrite securities of other issuers;
7. Purchase warrants, or write, purchase or sell puts, calls,
straddles, spreads, or combinations thereof;
8. Participate on a joint or joint and several basis in any securities
trading account;
9. Purchase the securities of any other investment company;
10. Purchase securities of any issuer for the purpose of exercising
control or management; and
11. Purchase or retain the securities of any issuer if any officer or
director of the Fund is an officer or director of such issuer and owns
beneficially more than 1/2 of 1% of the securities of such issuer and all
of the officers and directors of the Fund and its Investment Manager
together own more than 5% of the securities of such issuer.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objectives by investing all or substantially all
of its assets in another investment company having substantially the same
investment objectives and policies as the Fund.
If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered a
violation of any of the foregoing restrictions.
PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
Subject to the general supervision by the Board of Directors, the
Investment Manager is responsible for decisions to buy and sell securities for
the Fund and arranges for the execution of portfolio security transactions on
behalf of the Fund. Purchases of portfolio securities are made from dealers,
underwriters and issuers; sales, if any, prior to maturity, are made to dealers
and issuers. The Fund does not normally incur any brokerage commission expense
on such transactions. Money market instruments are generally traded on a "net"
basis with dealers acting as principal for their own accounts without a stated
commission, although the price of the security usually includes a profit to the
dealer. Securities purchased in underwritten offerings include a fixed amount
of compensation to the underwriter, generally referred to as the underwriter's
concession or discount. When securities are purchased or sold directly from or
to an issuer, no commissions or discounts are paid. During the Fund's fiscal
years ended August 31, 1995, 1996 and 1997, the Fund did not pay any
underwriter's discounts on principal transactions or brokerage commissions on
agency transactions.
The Investment Manager currently serves as investment manager to a number
of clients, including other investment companies, and may in the future act as
investment manager or adviser to others. It is the practice of the Investment
Manager to cause purchase and sale transactions to be allocated among the Fund
and others whose assets it manages in such manner as it deems equitable. In
making such allocations among the Fund and other client accounts, the various
factors may be considered, including the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held and the opinions of the persons responsible for managing the
portfolios of the Fund and other client accounts. In the case of certain
initial and secondary public offerings, the Investment Manager may utilize a
pro rata allocation process based on the size of the Dean Witter Funds involved
and the number of shares available from the public offering.
15
<PAGE>
The policy of the Fund, regarding purchases and sales of securities for its
portfolio, is that primary consideration be given to obtaining the most
favorable prices and efficient execution of transactions. In seeking to
implement the Fund's policies, the Investment Manager effects transactions with
those brokers and dealers who the Investment Manager believes provide the most
favorable prices and are capable of providing efficient executions. If the
Investment Manager believes such price and executions are obtainable from more
than one broker or dealer, it may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish research and other
services to the Fund or the Investment Manager. Such services may include, but
are not limited to, any one or more of the following: information as to the
availability of securities for purchase or sale; statistical or factual
information or opinions pertaining to investment; wire services; and appraisals
or evaluations of portfolio securities.
The information and services received by the Investment Manager from
brokers and dealers may be of benefit to the Investment Manager in the
management of accounts of some of its other clients and may not, in every case,
benefit the Fund directly. While the receipt of such information and services
is useful in varying degrees and would generally reduce the amount of research
or services otherwise performed by the Investment Manager and thereby reduce
its expenses, it is of indeterminable value and the Fund did not reduce the
management fee it pays to the Investment Manager by any amount that may be
attributable to the value of such services.
Pursuant to an order of the Securities and Exchange Commission, the Fund
may effect principal transactions in certain money market instruments with DWR.
The Fund will limit its transactions with DWR to U.S. Government and Government
Agency Securities, Bank Money Instruments (i.e. Certificates of Deposit and
Banker's Acceptances) and Commercial Paper. Such transactions will be effected
with DWR only when the price available from DWR is better than that available
from other dealers. During its fiscal years ended August 31, 1995, 1996 and
1997, the Fund did not effect any principal transactions with DWR.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through DWR and other brokers and dealers that are affiliates of
the Investment Manager. In order for an affiliated broker or dealer to effect
portfolio transactions for the Fund, the commissions, fees or other
remuneration received by the affiliated broker or dealer must be reasonable and
fair compared to the commissions, fees or other remuneration paid to other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on an exchange during a comparable period of time. This
standard would allow the affiliated broker or dealer to receive no more than
the remuneration which would be expected to be received by an unaffiliated
broker in a commensurate arm's-length transaction. Furthermore, the Directors
of the Fund, including a majority of the Directors who are not "interested"
Directors (as defined in the Act), have adopted procedures which are reasonably
designed to provide that any commissions, fees or other remuneration paid to
DWR are consistent with the foregoing standard. The Fund did not pay any
brokerage commissions or underwriting discounts to an affiliated broker or
dealer or any other broker-dealer during the fiscal years ended August 31,
1995, 1996 and 1997.
Portfolio turnover rate is defined as the lesser of the value of the
securities purchased or securities sold, excluding all securities whose
maturities at time of acquisition were one year or less, divided by the average
monthly value of such securities owned during the year. Based on this
definition, it is anticipated that the Fund's policy of investing in securities
with remaining maturities of thirteen months or less will not result in a
quantifiable portfolio turnover rate. However, because of the short-term nature
of the Fund's portfolio securities, it is anticipated that the number of
purchases and sales or maturities of such securities will be substantial.
Nevertheless, as brokerage commissions are not normally charged on purchases
and sales of such securities, the large number of these transactions does not
have an adverse effect upon the net yield and net asset value of the shares of
the Fund.
16
<PAGE>
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, the Fund offers its shares for sale to the
public on a continuous basis, without a sales charge. Pursuant to a
Distribution Agreement between the Fund and Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager and a wholly-owned
subsidiary of MSDWD, shares of the Fund are distributed by the Distributor and
through certain selected broker-dealers which have entered into selected dealer
agreements with the Distributor ("Selected Broker-Dealers") at an offering
price equal to the net asset value per share next determined following receipt
of an effective purchase order (accompanied by Federal Funds). Dealers in the
securities markets in which the Fund will invest usually require immediate
payment in Federal Funds. Since the payment by a Fund shareholder for his or
her other shares cannot be invested until it is converted into and available to
the Fund in Federal Funds, the Fund requires such payments to be so available
before a share purchase order can be considered effective. All checks submitted
for payment are accepted subject to collection at full face value in United
States funds and must be drawn in United States dollars in a United States
bank.
The Board of Directors of the Fund, including a majority of the Directors
who are not and were not at the time of their vote "interested persons" (as
defined in the Act) of either party to the Distribution Agreement (the
"Independent Directors"), approved, at its meeting held on April 24, 1997, the
current Distribution Agreement appointing the Distributor as exclusive
distributor of the Fund's shares and providing for the Distributor to bear
distribution expenses not borne by the Fund. By its terms, the Distribution
Agreement has an initial term ending April 30, 1998 and will continue in effect
from year to year thereafter if approved by the Directors. The current
Distribution Agreement took effect on May 31, 1997 upon the consummation of the
merger of Dean Witter, Discover & Co. with Morgan Stanley Group Inc. and is
substantially identical to the Fund's prior Distribution Agreement except for
its dates of effectiveness and termination.
SHAREHOLDER INVESTMENT ACCOUNT. Upon the purchase of shares of the Fund, a
Shareholder Investment Account is opened for the investor on the books of the
Fund, maintained by the Fund's Transfer Agent, Dean Witter Trust FSB (the
"Transfer Agent"). This is an open account in which shares owned by the
investor are credited by the Transfer Agent in lieu of issuance of a stock
certificate. If a stock certificate is desired, it must be requested in writing
for each transaction. Certificates are issued only for full shares and may be
redeposited in the account at any time. There is no charge to the investor for
issuance of a certificate. Whenever a shareholder instituted transaction takes
place in the Shareholder Investment Account directly through the Transfer
Agent, the shareholder will be mailed a written confirmation of the
transaction.
DIRECT INVESTMENTS THROUGH TRANSFER AGENT. A shareholder may make
additional investments in Fund shares at any time through the Shareholder
Investment Account by sending a check payable to Dean Witter Liquid Asset Fund
Inc. in any amount, not less than $100, directly to the Transfer Agent. The
shares so purchased will be credited to the Shareholder Investment Account.
ACCOUNT STATEMENTS. All purchases of Fund shares will be credited to the
shareholder in a Shareholder Investment Account maintained for the shareholder
by the Transfer Agent in full and fractional shares of the Fund (rounded to the
nearest 1/100 of a share, with the exception of purchases made through
reinvestment of dividends, which are rounded to the last 1/100 of a share). A
confirmation will be mailed to the shareholder after each shareholder
instituted purchase or redemption transaction effected through the Transfer
Agent. A quarterly statement of the account is sent to all shareholders. Share
certificates will not be issued unless requested in writing by the shareholder.
No certificates will be issued for fractional shares or to shareholders who
have elected the checking account, predesignated bank account or systematic
withdrawal plan methods of withdrawing cash from their accounts.
The Fund reserves the right to reject any order for the purchase of its
shares. In addition, the offering of shares of the Fund may be suspended at any
time and resumed at any time thereafter.
17
<PAGE>
EXCHANGE PRIVILEGE
As discussed in the Prospectus under the caption "Exchange Privilege," an
Exchange Privilege exists whereby investors who have purchased shares of any of
the Dean Witter Funds that are multiple class funds ("Dean Witter Multi-Class
Funds") and Dean Witter Funds sold with either a front-end sales charge ("FSC
funds") or a contingent deferred sales charge ("CDSC funds") will be permitted,
after the shares of the fund acquired by purchase (not by exchange or dividend
reinvestment) have been held for thirty days, to redeem all or part of their
shares in that fund, have the proceeds invested in shares of the Fund, Dean
Witter Tax-Free Daily Income Trust, Dean Witter California Tax-Free Daily
Income Trust, Dean Witter New York Municipal Money Market Trust or Dean Witter
U.S. Government Money Market Trust (these five funds are hereinafter called
"money market funds"), or Dean Witter Short-Term U.S. Treasury Trust, Dean
Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund or Dean
Witter Intermediate Term U.S. Treasury Trust (these nine funds, including the
Fund, are referred to herein as the "Exchange Funds"). There is no waiting
period for exchanges of shares acquired by exchange or dividend reinvestment.
Shares of the Exchange Funds received in an exchange for shares of a Dean
Witter Multi-Class Fund may be redeemed and exchanged only for shares of the
corresponding Class of a Dean Witter Multi-Class Fund or for shares of one of
the other Exchange Funds, provided that shares of the Exchange Funds received
in an exchange for Class A shares of a Dean Witter Multi-Class Fund may also be
redeemed and exchanged for shares of a FSC fund, and shares of the Exchange
Funds received in an exchange for Class B shares of a Dean Witter Multi-Class
Fund may also be redeemed and exchanged for shares of a CDSC fund. In addition,
shares of the Exchange Funds received in an exchange for shares of a FSC fund
may be redeemed and exchanged for Class A shares of a Dean Witter Multi-Class
Fund or for shares of one of the other Exchange Funds, and shares of the
Exchange Funds received in an exchange for shares of a CDSC fund may be
redeemed and exchanged for Class B shares of a Dean Witter Multi-Class Fund or
for shares of one of the other Exchange Funds. Ultimately, any applicable
contingent deferred sales charge ("CDSC") will have to be paid upon redemption
of shares originally purchased from a CDSC fund or a Class of a Dean Witter
Multi-Class Fund that imposes a CDSC. An exchange will be treated for federal
income tax purposes the same as a repurchase or redemption of shares, on which
the shareholder may realize a capital gain or loss.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the
present account, unless the Transfer Agent receives written notification to the
contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit should
not be endorsed.)
When shares of a Dean Witter Multi-Class Fund or any CDSC fund are
exchanged for shares of any Exchange Fund, the exchange is executed at no
charge to the shareholder, without the imposition of the CDSC at the time of
the exchange. During the period of time the shareholder remains in the Exchange
Fund (calculated from the last day of the month in which the Exchange Fund
shares were acquired), the holding period or "year since purchase payment made"
is frozen. When shares are redeemed out of the Exchange Fund, they will be
subject to a CDSC which would be based upon the period of time the shareholder
held shares in a Dean Witter Multi-Class Fund or in a CDSC fund. However, in
the case of shares of a CDSC fund exchanged into an Exchange Fund on or after
April 23, 1990, upon redemption of shares which results in a CDSC being
imposed, a credit (not to exceed the amount of the CDSC) will be given in an
amount equal to the 12b-1 distribution fees incurred on or after that date
which are attributable to those shares. Shareholders acquiring shares of an
Exchange Fund pursuant to this exchange privilege may exchange those shares
back into a Dean Witter Multi-Class Fund or a CDSC fund from the Exchange Fund,
with no CDSC being imposed on such exchange. The holding period previously
frozen when shares were first exchanged for shares of the Exchange Fund resumes
on the last day of the month in which shares of a Dean Witter Multi-Class Fund
or of a CDSC fund are
18
<PAGE>
reacquired. Thus, a CDSC is imposed only upon an ultimate redemption, based
upon the time (calculated as described above) the shareholder was invested in a
Dean Witter Multi-Class Fund or in a CDSC fund. In the case of exchanges of
Class A shares of a Dean Witter Multi-Class Fund which are subject to a CDSC,
the holding period also includes the time (calculated as described above) the
shareholder was invested in a FSC fund.
When shares initially purchased in a Dean Witter Multi-Class Fund or in a
CDSC fund are exchanged for shares of a Dean Witter Multi-Class Fund, shares of
a CDSC Fund, shares of a FSC Fund, or shares of an Exchange Fund, the date of
purchase of the shares of the fund exchanged into, for purposes of the CDSC
upon redemption, will be the last day of the month in which the shares being
exchanged were originally purchased. In allocating the purchase payments
between funds for purposes of the CDSC, the amount which represents the current
net asset value of shares at the time of the exchange which were (i) purchased
more than one, three or six years (depending on the CDSC schedule applicable to
the shares) prior to the exchange, (ii) originally acquired through
reinvestment of dividends or distributions and (iii) acquired in exchange for
shares of FSC funds, or for shares of other Dean Witter Funds for which shares
of FSC funds have been exchanged (all such shares called "Free Shares"), will
be exchanged first. After an exchange, all dividends earned on shares in the
Exchange Fund will be considered Free Shares. If the exchanged amount exceeds
the value of such Free Shares, an exchange is made, on a block-by-block basis,
of non-Free Shares held for the longest period of time (except that if shares
held for identical periods of time but subject to different CDSC schedules are
held in the same Exchange Privilege Account, the shares of that block that are
subject to a lower CDSC rate will be exchanged prior to the shares of that
block that are subject to a higher CDSC rate). Shares equal to any appreciation
in the value of non-Free Shares exchanged will be treated as Free Shares, and
the amount of the purchase payments for the non-Free Shares of the fund
exchanged into will be equal to the lesser of (a) the purchase payments for, or
(b) the current net asset value of, the exchanged non-Free Shares. If an
exchange between funds would result in exchange of only part of a particular
block of non-Free Shares, then shares equal to any appreciation in the value of
the block (up to the amount of the exchange) will be treated as Free Shares and
exchanged first, and the purchase payment for that block will be allocated on a
pro rata basis between the non-Free Shares of that block to be retained and the
non-Free Shares to be exchanged. The prorated amount of such purchase payment
attributable to the retained non-Free Shares will remain as the purchase
payment for such shares, and the amount of purchase payment for the exchanged
non-Free Shares will be equal to the lesser of (a) the prorated amount of the
purchase payment for, or (b) the current net asset value of, those exchanged
non-Free Shares. Based upon the procedures described in the Dean Witter
Multi-Class Fund Prospectus under the caption "Purchase of Fund Shares" and in
the CDSC fund Prospectus under the caption "Contingent Deferred Sales Charge,"
any applicable CDSC will be imposed upon the ultimate redemption of shares of
any fund, regardless of the number of exchanges since those shares were
originally purchased.
Exchange Privilege accounts may also be maintained for shareholders of the
money market funds who acquired their shares in exchange for shares of various
TCW/DW Funds, a group of funds distributed by the Distributor for which TCW
Funds Management, Inc. serves as Adviser, under the terms and conditions
described in the Prospectus and Statement of Additional Information of each
TCW/DW Fund.
With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any other
of the funds and the general administration of the Exchange Privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's
Selected Broker-Dealer, if any, in the performance of such functions. With
respect to exchanges, redemptions or repurchases, the Transfer Agent shall be
liable for its own negligence and not for the default or negligence of its
correspondents or for losses in transit. The Fund shall not be liable for any
default or negligence of the Transfer Agent, the Distributor or any Selected
Broker-Dealer.
The Distributor and any Selected Broker-Dealer have authorized and
appointed the Transfer Agent to act as their agent in connection with the
application of proceeds of any redemption of Fund shares to
19
<PAGE>
the purchase of the shares of any other fund and the general administration of
the Exchange Privilege. No commission or discounts will be paid to the
Distributor or any Selected Broker-Dealer for any transactions pursuant to this
Exchange Privilege.
Shares of the Fund acquired pursuant to the Exchange Privilege will be held
by the Fund's transfer agent in an Exchange Privilege account distinct from any
account of the same shareholder who may have acquired shares of the Fund
directly. A shareholder of the Fund will not be permitted to make additional
investments in such Exchange Privilege account, except through the exchange of
additional shares of the fund in which the shareholder had initially invested,
and the proceeds of any shares redeemed from such Exchange Privilege account
may not thereafter be placed back into that Exchange Privilege account, except
by utilizing the Reinstatement Privilege (see "Redemptions and
Repurchases--Reinstatement Privilege" in the Dean Witter Multi-Class Fund, CDSC
fund, or FSC fund Prospectus). If such a shareholder desires to make any
additional investments in the Fund, a separate account will be maintained for
receipt of such investments. The Fund will have additional costs for account
maintenance if a shareholder has more than one account with the Fund.
The Fund also maintains Exchange Privilege Accounts for shareholders who
acquired their shares of the Fund pursuant to exchange privileges offered by
other investment companies with which the Investment Manager is not affiliated.
The Fund also expects to make available such exchange privilege accounts to
other investment companies that may hereafter be managed by the Investment
Manager.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment for the
Exchange Privilege account of each Class is $10,000 for Dean Witter Short-Term
U.S. Treasury Trust, although that fund may, in its discretion, accept initial
purchases of as low as $5,000, and $5,000 for the Fund, Dean Witter Tax-Free
Daily Income Trust, Dean Witter California Tax-Free Daily Income Trust, and
Dean Witter New York Municipal Money Market Trust, although those funds may, at
their discretion, accept initial investments of as low as $1,000. The minimum
initial investment for the Exchange Privilege account of each Class is $5,000
for Dean Witter Special Value Fund. The minimum initial investment for the
Exchange Privilege account of each Class of all other Funds for which the
Exchange Privilege is available is $1,000.) Upon exchange into an Exchange
Fund, the shares of that fund will be held in a special Exchange Privilege
account separately from accounts of those shareholders who have acquired their
shares directly from that fund. As a result, certain services normally
available to shareholders of those funds, including the check writing feature,
will not be available for funds held in that account.
The Fund and each of the other Funds may limit the number of times this
Exchange Privilege may be exercised by any investor within a specified period
of time. Also, the Exchange Privilege may be terminated or revised at any time
by any of the Dean Witter Funds, upon such notice as may be required by
applicable regulatory agencies (presently sixty days' prior written notice for
termination or material revision), provided that six months' prior written
notice of termination will be given to the shareholders who hold shares of
Exchange Funds or TCW/DW North American Government Income Trust pursuant to
this Exchange Privilege, and provided further that the Exchange Privilege may
be terminated or materially revised at times (a) when the New York Stock
Exchange is closed for other than customary weekends and holidays, (b) when
trading on that Exchange is restricted, (c) when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, (d) during any other period when the
Securities and Exchange Commission by order so permits (provided that
applicable rules and regulations of the Securities and Exchange Commission
shall govern as to whether the conditions prescribed in (b) or (c) exist), or
(e) if the Fund would be unable to invest amounts effectively in accordance
with its investment objective(s), policies and restrictions.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other Selected Broker-Dealer account executive or
the Transfer Agent.
20
<PAGE>
PLAN OF DISTRIBUTION
As discussed in the Prospectus, the Fund has entered into a Plan of
Distribution pursuant to Rule 12b-1 under the Act with the Distributor whereby
the expenses of certain activities in connection with the distribution of
shares of the Fund are reimbursed. The Plan was initially approved by the Board
of Directors on January 18, 1983 and by the Fund's shareholders on March 18,
1983. The vote of the Board of Directors included a majority of the Directors
who are not and were not at the time of their vote interested persons of the
Fund (as defined in the Act) and who have and had at the time of their vote no
direct or indirect financial interest in the operation of the Plan (the
"Independent 12b-1 Directors"), cast in person at a meeting called for the
purpose of voting on such Plan.
The Plan provides that the Distributor will bear the expense of all
promotional and distribution related activities on behalf of the Fund,
including personal services to shareholders and maintenance of shareholder
accounts, except for expenses that the Directors determine to reimburse, as
described below. The Distributor, DWR, its affiliates and any other Selected
Broker-Dealer may be reimbursed for the following expenses and services under
the Plan: (1) compensation to and expenses of account executives and other
employees of the Distributor, DWR, its affiliates and other Selected
Broker-Dealers, including overhead and telephone expenses; (2) sales incentives
and bonuses to sales representatives and to marketing personnel in connection
with promoting sales of the Fund's shares; (3) expenses incurred in connection
with promoting sales of the Fund's shares; (4) preparing and distributing sales
literature; and (5) providing advertising and promotional activities, including
direct mail solicitation and television, radio, newspaper, magazine and other
media advertisements.
The Fund is authorized to reimburse specific expenses incurred or to be
incurred in promoting the distribution of the Fund's shares. Reimbursement is
made through payments at the end of each month. The amount of each monthly
payment may in no event exceed an amount equal to a payment at the annual rate
of 0.15 of 1% of the Fund's average daily net assets during the month. No
interest or other financing charges, if any, incurred on any distribution
expense incurred pursuant to the Plan will be reimbursable under the Plan. In
the case of all expenses other than expenses representing a residual to account
executives, such amounts shall be determined at the beginning of each calendar
quarter by the Directors, including a majority of the Independent 12b-1
Directors. Expenses representing a residual to account executives may be
reimbursed without prior determination. In the event that the Distributor
proposes that monies shall be reimbursed for other than such expenses, then in
making quarterly determinations of the amounts that may be expended by the
Fund, the Distributor will provide and the Directors will review a quarterly
budget of projected incremental distribution expenses to be incurred on behalf
of the Fund, together with a report explaining the purposes and anticipated
benefits of incurring such expenses. The Directors will determine which
particular expenses, and the portions thereof, that may be borne by the Fund,
and in making such a determination shall consider the scope of the
Distributor's commitment to promoting the distribution of the Fund's shares.
The Distributor has informed the Fund that the entire amount of the fees
payable by the Fund each year pursuant to the Plan is characterized as a
"service fee" under the Rules of the Association of the National Association of
Securities Dealers (of which the Distributor is a member). Such fee is a
payment made for personal service and/or maintenance of shareholder accounts.
At their meeting held on October 30, 1992, the Directors of the Fund,
including all of the Independent 12b-1 Directors, approved certain amendments
to the Plan which took effect in January, 1993 and were designed to reflect the
fact that upon an internal reorganization, the share distribution activities
theretofore performed by the Fund or for the Fund by DWR were assumed by the
Distributor and DWR's sales activities are now performed pursuant to the terms
of a selected dealer agreement between the Distributor and DWR. The amendments
provide that payments under the Plan will be made to the Distributor rather
than to the Investment Manager as before the amendment, and that the
Distributor in turn is authorized to make payments to DWR, its affiliates or
other Selected Broker-Dealers (or direct that the Fund pay such entities
directly). The Distributor is also authorized to retain part of such fee as
21
<PAGE>
compensation for its own distribution-related expenses. At their meeting held
on July 23, 1997, the Directors of the Fund, including all of the Independent
12b-1 Directors, approved amendments to the Plan to change the provisions
regarding quarterly budgets.
DWR's account executives are credited with an annual residual commission,
currently a residual of up to 0.10% of the current value of the respective
accounts for which they are the account executives of record. The residual is a
charge which reflects residual commissions paid by DWR to its account
executives and expenses of DWR associated with the sale and promotion of Fund
shares and the servicing of shareholders' accounts, including the expenses of
operating branch offices in connection with the servicing of shareholders'
accounts, which expenses include lease costs, the salaries and employee
benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies and other
expenses relating to branch office servicing of shareholder accounts.
The Fund accrued $11,872,496 to the Distributor pursuant to the Plan, for
the fiscal year ended August 31, 1997. This is 0.10 of 1% of the Fund's average
daily net assets for its fiscal year ended August 31, 1997. Based upon the
total amounts spent by the Distributor during the period, it is estimated that
the amount paid by the Fund for distribution was spent in approximately the
following ways: (i) advertising -- $-0-; (ii) printing and mailing prospectuses
to other than current shareholders -- $-0-; (iii) compensation to underwriters
- -- $-0-; (iv) compensation to dealers -- $-0-; (v) compensation to sales
personnel -- $-0-; and (vi) other, which includes payments to DWR for expenses
substantially all of which relate to compensation of sales personnel and
associated overhead expenses -- $11,872,496.
Under the Plan, the Distributor uses its best efforts in rendering services
to the Fund, but in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations, the Distributor is not
liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.
Under the Plan, the Distributor provides the Fund, for review by the
Directors, and the Directors review, promptly after the end of each calendar
quarter, a written report regarding the incremental distribution expenses
incurred by the Distributor on behalf of the Fund during such calendar quarter,
which report includes: (1) an itemization of the types of expenses and the
purposes therefor; (2) the amounts of such expenses; and (3) a description of
the benefits derived by the Fund. In the Directors' quarterly review of the
Plan they considered its continued appropriateness and the level of
compensation provided therein.
The Plan will continue from year to year, provided such continuance is
approved annually by a vote of the Directors, including a majority of the
Independent 12b-1 Directors. The most recent continuance of the Plan for one
year, until April 30, 1998, was approved by the Board of Directors, including a
majority of the Independent 12b-1 Directors, at their meeting held on April 24,
1997. Any amendment to increase materially the maximum amount authorized to be
spent under the Plan must be approved by the shareholders of the Fund, and all
material amendments to the Plan must be approved by the Directors in the manner
described above. The Plan may be terminated at any time, without payment of any
penalty, by vote of a majority of the Independent 12b-1 Directors or by a vote
of the holders of a majority of the outstanding voting securities of the Fund
(as defined in the Act) on not more than thirty days' written notice to any
other party to the Plan. So long as the Plan is in effect, the selection or
nomination of the Independent 12b-1 Directors is committed to the discretion of
the Independent 12b-1 Directors.
No interested person of the Fund nor any Director of the Fund who is not an
interested person of the Fund, as defined in the Act, had any direct or
indirect financial interest in the operation of the Plan except to the extent
that the Distributor, InterCapital, DWSC, DWR or certain of their employees may
be deemed to have such an interest as a result of benefits derived from the
successful operation of the Plan or as a result of receiving a portion of the
amounts expended thereunder by the Fund.
22
<PAGE>
DETERMINATION OF NET ASSET VALUE
As discussed in the Prospectus, the net asset value of the Fund is
determined as of 4:00 p.m., New York time (or, on days when the New York Stock
Exchange closes prior to 4:00 p.m., at such earlier time), on each day that the
New York Stock Exchange is open. The New York Stock Exchange currently observes
the following holidays: New Year's Day; Reverend Dr. Martin Luther King, Jr.
Day; Presidents' Day; Good Friday; Memorial Day; Independence Day; Labor Day;
Thanksgiving Day; and Christmas Day.
The Fund utilizes the amortized cost method in valuing its portfolio
securities for purposes of determining the net asset value of shares of the
Fund. The Fund utilizes the amortized cost method in valuing its portfolio
securities even though the portfolio securities may increase or decrease in
market value, generally, in connection with changes in interest rates. The
amortized cost method of valuation involves valuing a security at its cost at
the time of purchase adjusted by a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. While this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price the Fund would receive if it
sold the instrument. During such periods, the yield to investors in the Fund
may differ somewhat from that obtained in a similar company which uses mark to
market values for all its portfolio securities. For example, if the use of
amortized cost resulted in a lower (higher) aggregate portfolio value on a
particular day, a prospective investor in the Fund would be able to obtain a
somewhat higher (lower) yield than would result from investment in such a
similar company and existing investors would receive less (more) investment
income. The purpose of this method of calculation is to facilitate the
maintenance of a constant net asset value per share of $1.00.
The Fund's use of the amortized cost method to value its portfolio
securities and the maintenance of the per share net asset value of $1.00 is
permitted by Rule 2a-7 of the Act (the "Rule") and is conditioned on its
compliance with various conditions contained in the Rule including: (a) the
Fund's Board of Directors is obligated, as a particular responsibility within
the overall duty of care owed to the Fund's shareholders, to establish
procedures reasonably designed, taking into account current market conditions
and the Fund's investment objectives, to stabilize the net asset value per
share as computed for the purpose of distribution and redemption at $1.00 per
share; (b) the procedures include (i) calculation, at such intervals as the
Directors determine are appropriate and as are reasonable in light of current
market conditions, of the deviation, if any, between net asset value per share
using amortized cost to value portfolio securities and net asset value per
share based upon available market quotations with respect to such portfolio
securities; (ii) periodic review by the Directors of the amount of deviation as
well as methods used to calculate it; and (iii) maintenance of written records
of the procedures and the Directors' considerations made pursuant to them and
any actions taken upon such consideration; (c) the Board of Directors will
consider what steps should be taken, if any, in the event of a difference of
more than 1/2 of 1% between the two methods of valuation; and (d) the Board of
Directors should take such action as it deems appropriate (such as shortening
the average portfolio maturity, realizing gains or losses or withholding
dividends) to eliminate or reduce to the extent reasonably practicable material
dilution or other unfair results to investors or existing shareholders which
might arise from differences between the two methods of valuation.
Generally, for purposes of the procedures adopted under the Rule, the
maturity of a portfolio instrument is deemed to be the period remaining
(calculated from the trade date or such other date on which the Fund's interest
in the instrument is subject to market action) until the date noted on the face
of the instrument as the date on which the principal amount must be paid, or in
the case of an instrument called for redemption, the date on which the
redemption payment must be made.
A variable rate obligation that is subject to a demand feature is deemed to
have a maturity equal to the longer of the period remaining until the next
readjustment of the interest rate or the period remaining
23
<PAGE>
until the principal amount can be recovered through demand. A floating rate
instrument that is subject to a demand feature is deemed to have a maturity
equal to the period remaining until the principal amount can be recovered
through demand.
A "NRSRO" is a nationally recognized statistical rating organization. The
term "Requisite NRSROs" means (i) any two NRSROs that have issued a rating with
respect to a security or class of debt obligations of an issuer, or (ii) if
only one NRSRO has issued a rating with respect to such security or issuer at
the time a fund purchases or rolls over the security, that NRSRO.
An Eligible Security is generally defined in the Rule to mean (i) a
security with a remaining maturity of 397 calendar days or less that has
received a short-term rating (or that has been issued by an issuer that has
received a short-term rating with respect to a class of debt obligations, or
any debt obligation within that class, that is comparable in priority and
security with the security) by the Requisite NRSROs in one of the two highest
short-term rating categories (within which there may be sub-categories or
gradations indicating relative standing); or (ii) a security; (A) that at the
time of issuance had a remaining maturity of more than 397 calendar days but
that has a remaining maturity of 397 calendar days or less; and (B) whose
issuer has received from the Requisite NRSROs a rating with respect to a class
of debt obligations (or any debt obligation within that class) that is now
comparable in priority and security with the security, in one of the two
highest short-term rating categories (within which there may be sub-categories
or gradations indicating relative standing); or (iii) an unrated security that
is of comparable quality to a security meeting the requirements of (i) or (ii)
above, as determined by the money market fund's board of directors.
As permitted by the Rule, the Board has delegated to the Fund's Investment
Manager, subject to the Board's oversight pursuant to guidelines and procedures
adopted by the Board, the authority to determine which securities present
minimal credit risks and which unrated securities are comparable in quality to
rated securities.
Also, as required by the Rule, the Fund will limit its investments in
securities, other than Government Securities, so that, at the time of purchase:
(a) except as further limited in (b) below with regard to certain securities,
no more than 5% of its total assets will be invested in the securities of any
one issuer; and (b) with respect to Eligible Securities that have received a
rating in less than the highest category by any one of the NRSROs whose ratings
are used to qualify the security as an Eligible Security, or determined to be
of comparable quality: (i) no more than 5% in the aggregate of the Fund's total
assets in all such securities, and (ii) no more than the greater of 1% of total
assets, or $1 million, in the securities of any one issuer.
The presence of a line of credit or other credit facility offered by a bank
or other financial institution which guarantees the payment obligation of the
issuer, in the event of a default in the payment of principal or interest of an
obligation, may be taken into account in determining whether an investment is
an Eligible Security, provided that the guarantee itself is an Eligible
Security.
The Rule further requires that the Fund limit its investments to U.S.
dollar-denominated instruments which the Directors determine present minimal
credit risks and which are Eligible Securities. The Rule also requires the Fund
to maintain a dollar-weighted average portfolio maturity (not more than 90
days) appropriate to its objective of maintaining a stable net asset value of
$1.00 per share and precludes the purchase of any instrument with a remaining
maturity of more than 397 days. Should the disposition of a portfolio security
result in a dollar-weighted average portfolio maturity of more than 90 days,
the Fund will invest its available cash in such a manner as to reduce such
maturity to 90 days or less as soon as is reasonably practicable.
If the Board of Directors determines that it is no longer in the best
interests of the Fund and its shareholders to maintain a stable price of $1.00
per share or if the Board believes that maintaining such price no longer
reflects a market-based net asset value per share, the Board has the right to
change from an amortized cost basis of valuation to valuation based on market
quotations. The Fund will notify shareholders of any such change.
24
<PAGE>
REDEMPTION OF FUND SHARES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, shares of the Fund may be redeemed at their
net asset value at any time. When a redemption is made by check and a check is
presented to the Transfer Agent for payment, the Transfer Agent will redeem a
sufficient number of full and fractional shares in the shareholder's account to
cover the amount of the check. This enables the shareholder to continue earning
daily income dividends until the check has cleared.
A check drawn by a shareholder against his or her other account in the Fund
constitutes a request for redemption of a number of shares sufficient to
provide proceeds equal to the amount of the check. Payment of the proceeds of a
check will normally be made on the next business day after receipt by the
Transfer Agent of the check in proper form. If a check is presented for payment
to the Transfer Agent by a shareholder or payee in person, the Transfer Agent
will make payment by means of a check drawn on the Fund's account or, in the
case of a shareholder payee, to the shareholder's predesignated bank account,
but will not make payment in cash.
The Fund reserves the right to suspend redemptions or postpone the date of
payment: (1) for any periods during which the New York Stock Exchange is closed
(other than for customary weekend and holiday closings), (2) when trading on
that Exchange is restricted or an emergency exists, as determined by the
Securities and Exchange Commission, so that disposal of the Fund's investments
or determination of the Fund's net asset value is not reasonably practicable,
or (3) for such other periods as the Commission by order may permit for the
protection of the Fund's shareholders.
As discussed in the Prospectus, due to the relatively high cost of handling
small investments, the Fund reserves the right to redeem, at net asset value,
the shares of any shareholder (other than shares held in an Individual
Retirement Account or custodial account under Section 403(b)(7) of the Internal
Revenue Code) whose shares due to redemptions by the shareholder have a value
of less than $1,000 or such lesser amounts as may be fixed by the Board of
Directors. However, before the Fund redeems such shares and sends the proceeds
to the shareholder, it will notify the shareholder that the value of his or her
shares is less than $1,000 and allow him or her sixty days to make an
additional investment in an amount which will increase the value of his or her
account to $1,000 or more before the redemption is processed.
It has been and remains the Fund's policy and practice that, if checks for
redemption proceeds remain uncashed, no interest will accrue on amounts
represented by such uncashed checks.
SYSTEMATIC WITHDRAWAL PLAN. As discussed in the Prospectus, a systematic
withdrawal plan is available for shareholders who own or purchase shares of the
Fund having a minimum value of $5,000, which provides for monthly or quarterly
checks in any dollar amount, not less than $25, or in any whole percentage of
the account balance, on an annualized basis. The Transfer Agent acts as agent
for the shareholder in tendering to the Fund for redemption sufficient full and
fractional shares to provide the amount of the periodic withdrawal payment
designated in the application. The shares will be redeemed at their net asset
value determined, at the shareholder's option, on the tenth or twenty-fifth day
(or next business day) of the relevant month or quarter and normally a check
for the proceeds will be mailed by the Transfer Agent within five days after
the date of redemption. The withdrawal plan may be terminated at any time by
the Fund.
Any shareholder who wishes to have payments under the withdrawal plan made
to a third party or sent to an address other than the one listed on the account
must send complete written instructions to the Transfer Agent to enroll in the
withdrawal plan. The shareholder's signature on such instructions must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A shareholder
may, at any time, change the amount and interval of withdrawal payments through
his or her Account Executive or by written notification to the Transfer Agent.
In addition, the party and/or the address to which checks are mailed may be
changed by written notification to the Transfer Agent, with signature
guarantees required in the manner described above. The shareholder may also
terminate the withdrawal plan at any time by written notice to the Transfer
Agent. In the event of such
25
<PAGE>
termination, the account will be continued as a regular shareholder investment
account. The shareholder may also redeem all or part of the shares held in the
withdrawal plan account (see "Redemption of Fund Shares" in the Prospectus) at
any time. If the number of shares redeemed is greater than the number of shares
paid as dividends, such redemptions may, of course, eventually result in
liquidation of all the shares in the account. The automatic cash withdrawal
method of redemption is not available for shares held in an Exchange Privilege
Account.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. As discussed in the Prospectus, the Fund
intends to distribute all of its daily net investment income and net short-term
capital gains, if any, to shareholders of record as of the close of business
the preceding business day. Net income, for dividend purposes, includes accrued
interest and amortization of market discount, plus or minus any gains or losses
realized on sales of portfolio securities, less the amortization of market
premium and the estimated expenses of the Fund. Net income will be calculated
immediately prior to the determination of net asset value per share of the
Fund.
The Board of Directors may revise the dividend policy, or postpone the
payment of dividends, if the Fund should have or anticipate any large
unexpected expense, loss or fluctuation in net assets which, in the opinion of
the Board, might have a significant adverse effect on shareholders.
It has been and remains the Fund's policy and practice that, if checks for
dividends or distributions paid in cash remain uncashed, no interest will
accrue on amounts represented by such uncashed checks.
TAXES. The Fund has qualified and intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code.
If so qualified, the Fund will not be subject to federal income tax provided
that it distributes all of its taxable net investment income and all of its net
realized gains.
Gains or losses on the sales of securities by the Fund will be long-term
capital gains or losses if the securities have been held by the Fund for more
than one year. Gains or losses on the sale of securities held for one year or
less will be short-term capital gains or losses.
Shareholders will be subject to federal income tax on dividends paid from
interest income derived from taxable securities and on distributions of
realized net short-term and long-term capital gains. Such interest and realized
net short-term capital gains dividends and distributions are taxable to the
shareholder as ordinary dividend income regardless of whether the shareholder
receives such distributions in additional shares or in cash. Since the Fund's
income is expected to be derived entirely from interest rather than dividends,
none of such distributions will be eligible for the federal dividends received
deduction available to corporations. Realized net long-term gains
distributions, which are taxable as long-term capital gains, are not eligible
for the dividends received deduction.
The Fund may be subject to tax or taxes in certain states where it does
business. Furthermore, in those states which have income tax laws, the tax
treatment of the Fund and of shareholders with respect to distributions by the
Fund may differ from federal tax treatment.
Shareholders are urged to consult their own tax advisers regarding specific
questions as to federal, state or local taxes.
INFORMATION ON COMPUTATION OF YIELD
The Fund's current yield for the seven days ended August 31, 1997 was
5.13%. The effective annual yield on this date was 5.26%, assuming daily
compounding.
The Fund's annualized current yield, as may be quoted from time to time in
advertisements and other communications to shareholders and potential
investors, is computed by determining, for a stated seven-day period, the net
change, exclusive of capital changes and including the value of additional
26
<PAGE>
shares purchased with dividends and any dividends declared therefrom (which
reflect deductions of all expenses of the Fund such as management fees), in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the period, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period return,
and then multiplying the base period return by (365/7).
The Fund's annualized effective yield, as may be quoted from time to time
in advertisements and other communications to shareholders and potential
investors, is computed by determining (for the same stated seven-day period as
for the current yield) the net change, exclusive of capital changes and
including the value of additional shares purchased with dividends and any
dividends declared therefrom (which reflect deductions of all expenses of the
Fund such as management fees), in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the period, and
dividing the difference by the value of the account at the beginning of the
base period to obtain the base period return, and then compounding the base
period return by adding 1, raising the sum to a power equal to 365 divided by
7, and subtracting 1 from the result.
The yields quoted in any advertisement or other communication should not be
considered a representation of the yields of the Fund in the future since the
yield is not fixed. Actual yields will depend not only on the type, quality and
maturities of the investments held by the Fund and changes in interest rates on
such investments, but also on changes in the Fund's expenses during the period.
Yield information may be useful in reviewing the performance of the Fund
and for providing a basis for comparison with other investment alternatives.
However, unlike bank deposits or other investments which typically pay a fixed
yield for a stated period of time, the Fund's yield fluctuates.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Fund by adding the sum of all
distributions on 10,000, 50,000 or 100,000 shares of the Fund since inception
to $10,000, $50,000 and $100,000, as the case may be. Investments of $10,000,
$50,000 and $100,000 in the Fund at inception would have grown to $50,111,
$250,555 and $501,110, respectively, at August 31, 1997.
DESCRIPTION OF COMMON STOCK
- --------------------------------------------------------------------------------
The Fund has an authorized capital of 25 billion shares of common stock
with a par value of $.01 per share. All shares are of the same class and are
freely transferable. Each outstanding share is entitled to one vote on all
matters submitted to a vote of shareholders and to a pro rata share of the
Fund's net assets in liquidation and of dividends declared. The Fund may also
issue fractional shares.
The shares of the Fund do not have cumulative voting rights, which means
that the holders of more than fifty percent of the shares voting in any
election of directors can, if they choose to do so, elect all of the directors
of the Fund, in which event the holders of the remaining shares will be unable
to elect any person as a director. Shares issued will be fully paid and
non-assessable and will have no preemptive, conversion or sinking rights.
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
The Bank of New York, 90 Washington Street, New York, New York 10286 is the
Custodian of the Fund's assets. Any of the Fund's cash balances in excess of
$100,000 are unprotected by federal deposit insurance. Such balances may, at
times, be substantial.
Dean Witter Trust FSB, Harborside Financial Center, Plaza Two, Jersey City,
New Jersey 07311 is the Transfer Agent of the Fund's shares, Dividend
Disbursing Agent for payment of dividends and distributions on Fund shares, and
Agent for shareholders under various investment plans described herein. Dean
Witter Trust FSB is an affiliate of Dean Witter InterCapital Inc., the Fund's
Investment Manager, and of Dean Witter Distributors Inc., the Fund's
Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean Witter Trust
FSB's responsibilities include maintaining shareholder accounts, including
providing
27
<PAGE>
subaccounting and recordkeeping services for certain retirement accounts;
disbursing cash dividends and reinvesting dividends; processing account
registration changes; handling purchase and redemption transactions; mailing
prospectuses and reports; mailing and tabulating proxies; processing share
certificate transactions; and maintaining shareholder records and lists. For
these services Dean Witter Trust FSB receives a per shareholder account fee.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund. The
independent accountants are responsible for auditing the annual financial
statements of the Fund.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports showing
the Fund's portfolio and other information. An annual report, containing
financial statements together with the report of its independent accountants,
will be sent to shareholders each year.
The Fund's fiscal year ends on August 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Board of Directors.
LEGAL COUNSEL
- --------------------------------------------------------------------------------
Barry Fink, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- --------------------------------------------------------------------------------
The annual financial statements of the Fund for the year ended August 31,
1997, which are included in the Prospectus and incorporated by reference in
this Statement of Additional Information, have been so included and
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of the Fund for the fiscal year ended
August 31, 1997, and the report of the independent accountants thereon, are set
forth in the Fund's Prospectus, and are incorporated herein by reference.
28
<PAGE>
APPENDIX
- --------------------------------------------------------------------------------
Description of the highest commercial paper, bond and other short- and
long-term rating categories assigned by Standard & Poor's Corporation ("S&P"),
Moody's Investors Service, Inc. ("Moody's"), Fitch Investors Service, Inc.
("Fitch"), Duff and Phelps, Inc. ("Duff"), IBCA Limited and IBCA Inc. ("IBCA")
and Thomson BankWatch, Inc. ("Thomson"):
COMMERCIAL PAPER AND SHORT-TERM RATINGS
The designation A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined
to possess overwhelming safety characteristics are denoted with a plus sign (+)
designation. Capacity for timely payment on issues with an A-2 designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
The rating Prime-1 (P-1) is the highest commercial paper rating assigned by
Moody's. Issuers of P-1 paper must have a superior capacity for repayment of
short-term promissory obligations and ordinarily will be evidenced by leading
market positions in well established industries, high rates of return of funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established
access to a range of financial markets and assured sources of alternate
liquidity. Issues rated Prime-2 (P-2) have a strong capacity for repayment of
short-term promissory obligations. This ordinarily will be evidenced by many of
the characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
The rating Fitch-1 (Highest Grade) is the highest commercial paper rating
assigned by Fitch. Paper rated Fitch-1 is regarded as having the strongest
degree of assurance for timely payment. The rating Fitch-2 (Very Good Grade) is
the second highest commercial paper rating assigned by Fitch which reflects an
assurance of timely payment only slightly less in degree than the strongest
issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by good fundamental
protection factors. Risk factors are minor. Duff applies the modifiers (+) and
(-) to the rating Duff-1 in recognition of significant quality differences
within the highest tier. Paper rated Duff-2 is regarded as having good
certainty of timely payment, good access to capital markets and sound liquidity
factors and company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a
very strong capacity for timely repayment. Those obligations rated A1+ are
supported by the highest capacity for timely repayment. The designation A2 by
IBCA indicates that the obligation is supported by a strong capacity for timely
repayment, although such capacity may be susceptible to adverse changes in
business, economic, or financial conditions.
The rating TBW-1 is the highest short-term rating assigned by Thomson and
indicates a very high degree of likelihood that principal and interest will be
paid on a timely basis. The rating TBW-2 by Thomson is its second highest
rating; while the degree of safety regarding timely repayment of principal and
interest is strong, the relative degree of safety is not as high as for issues
rated TBW-1.
BOND AND LONG-TERM RATINGS
Bonds rated AAA are considered by S&P to be the highest grade obligations
and possess an extremely strong capacity to pay interest and repay principal.
Bonds rated AA by S&P are judged by S&P to have a very strong capacity to pay
interest and repay principal, and differ only in small degrees from issues
rated AAA.
29
<PAGE>
Bonds which are rated Aaa by Moody's are judged to be of the best quality.
Bonds rated Aa by Moody's are judged by Moody's to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high-grade bonds. Aa bonds are rated lower than Aaa bonds because margins of
protection may not be as large or fluctuations of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa rated bonds. Moody's applies
numerical modifiers 1, 2 and 3 in the Aa rating category. The modifier 1
indicates a ranking for the security in the higher end of this rating category,
the modifier 2 indicates a mid-range ranking, and the modifier 3 indicates a
ranking in the lower end of the rating category.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade,
broadly marketable, suitable for investment by trustees and fiduciary
institutions and liable to but slight market fluctuation other than through
changes in the money rate. The prime feature of an AAA bond is a showing of
earnings several times or many times interest requirements, with such stability
of applicable earnings that safety is beyond reasonable question whatever
changes occur in conditions. Bonds rated AA by Fitch are judged by Fitch to be
of safety virtually beyond question and are readily salable, whose merits are
not unlike those of the AAA class, but whose margin of safety is less
strikingly broad. The issue may be the obligation of a small company, strongly
secured but influenced as to rating by the lesser financial power of the
enterprise and more local type of market.
Bonds rated AAA by Duff are considered to be of the highest credit quality
with negligible risk factors that are only slightly more than for risk-free
U.S. Treasury debt. Bonds rated AA are judged by Duff to be of high credit
quality with strong protection factors; risk is modest but may vary slightly
from time to time because of economic conditions. Duff applies modifiers of (+)
and (-) to the AA category.
Obligations rated AAA by IBCA have the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk significantly. Obligations rated AA have a
very low expectation of investment risk. Capacity for timely repayment of
principal and interest is substantial. Adverse changes in business, economic or
financial conditions may increase investment risk albeit not very
significantly.
IBCA also assigns a rating to certain international and U.S. banks. An IBCA
bank rating represents IBCA's current assessment of the strength of the bank
and whether such bank would receive support should it experience difficulties.
In its assessment of a bank, IBCA uses a dual rating system comprised of Legal
Ratings and Individual Ratings. In addition, IBCA assigns banks Long- and
Short-Term Ratings as used in the corporate ratings discussed above. Legal
Ratings, which range in gradation from 1 through 5, address the question of
whether the bank would receive support by central banks or shareholders if it
experienced difficulties, and such ratings are considered by IBCA to be a prime
factor in its assessment of credit risk. Individual Ratings, which range in
gradations from A through E, represent IBCA's assessment of a bank's economic
merits and address the question of how the bank would be viewed if it were
entirely independent and could not rely on support from state authorities or
its owners.
Companies rated A are considered by Thomson to possess an exceptionally
strong balance sheet and earnings record, translating into an excellent
reputation and unquestioned access to their natural money markets; if weakness
or vulnerability exists in any aspect of a company's business, it is entirely
mitigated by the strengths of the organization. Companies rated A/B- by Thomson
are judged by Thomson to be financially very solid with a favorable track
record and no readily apparent weakness; their overall risk profiles, while
low, are not quite as favorable as for companies in the highest rating
category.
30
<PAGE>
DEAN WITTER
RETIREMENT SERIES
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 31, 1997
- -----------------------------------------------------------------------------
Dean Witter Retirement Series (the "Fund") is an open-end, no-load,
management investment company which provides a selection of investment
portfolios for institutional and individual investors participating in
various employee benefit plans and Individual Retirement Account rollover
plans. Each Series has its own investment objective and policies. Shares of
the Fund are sold and redeemed at net asset value without the imposition of a
sales charge. Dean Witter Distributors Inc., the Fund's Distributor (the
"Distributor"), and any of its affiliates are authorized, pursuant to a Plan
of Distribution pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended, entered into by the Fund with the Distributor and Dean
Witter Reynolds Inc., to make payments, out of their own resources, for
expenses incurred in connection with the promotion of distribution of shares
of the Fund.
The LIQUID ASSET SERIES seeks high current income, preservation of capital
and liquidity by investing in corporate and government money market
instruments.
The U.S. GOVERNMENT MONEY MARKET SERIES seeks security of principal, high
current income and liquidity by investing primarily in money market
instruments which are issued and/or guaranteed, as to principal and interest,
by the U.S. Government, its agencies or instrumentalities.
The U.S. GOVERNMENT SECURITIES SERIES seeks high current income consistent
with safety of principal by investing in a diversified portfolio of
obligations issued and/or guaranteed by the U.S. Government or its
instrumentalities.
The INTERMEDIATE INCOME SECURITIES SERIES seeks high current income
consistent with safety of principal by investing primarily in intermediate
term, investment grade fixed-income securities.
The AMERICAN VALUE SERIES seeks long-term growth consistent with an effort
to reduce volatility by investing principally in common stock of companies in
industries which, at the time of the investment, are believed to be
attractively valued given their above average relative earnings growth
potential at that time.
The CAPITAL GROWTH SERIES seeks long-term capital growth by investing
primarily in common stocks selected through utilization of a computerized
screening process.
The DIVIDEND GROWTH SERIES seeks to provide reasonable current income and
long-term growth of income and capital by investing primarily in the common
stock of companies with a record of paying dividends and the potential for
increasing dividends.
The STRATEGIST SERIES seeks to maximize its total return by actively
allocating its assets among the major asset categories of equity securities,
fixed-income securities and money market instruments.
The UTILITIES SERIES seeks to provide current income and long-term growth
of income and capital by investing in equity and fixed-income securities of
companies in the public utilities industry.
The VALUE-ADDED MARKET SERIES' investment objective is to achieve a high
level of total return on its assets through a combination of capital
appreciation and current income. It seeks to achieve this objective by
investing, on an equally-weighted basis, in a diversified portfolio of common
stocks of the companies which are represented in the Standard & Poor's 500
Composite Stock Price Index.
The GLOBAL EQUITY SERIES' investment objective is a high level of total
return on its assets, primarily through long-term capital growth and, to a
lesser extent, from income. It seeks to achieve this objective through
investments in all types of common stocks and equivalents, preferred stocks
and bonds and other debt obligations of domestic and foreign companies and
governments and international organizations.
A Prospectus for the Fund dated October 31, 1997, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at the address or telephone numbers listed
below, from the Fund's Distributor, or from Dean Witter Reynolds Inc. at any
of its branch offices. This Statement of Additional Information is not a
Prospectus. It contains information in addition to and more detailed than
that set forth in the Prospectus. It is intended to provide additional
information regarding the activities and operations of the Fund, and should
be read in conjunction with the Prospectus.
Dean Witter
Retirement Series
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
<PAGE>
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
The Fund and its Management.......... 3
Trustees and Officers................ 6
Investment Practices and Policies ... 13
Investment Restrictions.............. 33
Portfolio Transactions and
Brokerage........................... 35
Determination of Net Asset Value .... 37
Purchase of Fund Shares.............. 39
Shareholder Services................. 41
Redemptions and Repurchases.......... 43
Dividends, Distributions and Taxes .. 43
Performance Information.............. 45
Description of Shares................ 48
Custodian and Transfer Agent......... 49
Independent Accountants.............. 49
Reports to Shareholders.............. 49
Legal Counsel........................ 49
Experts.............................. 49
Registration Statement............... 50
Principal Securities Holders......... 50
Financial Statements--July 31, 1997 . 51
Report of Independent Accountants ... 106
Appendix............................. 107
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
THE FUND
The Fund is a trust of the type commonly known as a "Massachusetts
business trust" and was organized under the laws of the Commonwealth of
Massachusetts on May 14, 1992.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. (the "Investment Manager" or
"InterCapital"), a Delaware corporation, whose address is Two World Trade
Center, New York, New York 10048, is the Fund's Investment Manager.
InterCapital is a wholly-owned subsidiary of Morgan Stanley, Dean Witter,
Discover & Co. ("MSDWD"), a Delaware corporation. In an internal
reorganization which took place in January, 1993, InterCapital assumed the
investment advisory, administrative and management activities previously
performed by the InterCapital Division of Dean Witter Reynolds Inc. ("DWR"),
a broker-dealer affiliate of InterCapital. (As hereinafter used in this
Statement of Additional Information, the terms "InterCapital" and "Investment
Manager" refer to DWR's InterCapital Division prior to the internal
reorganization and to Dean Witter InterCapital Inc. thereafter.) The daily
management of the Fund and research relating to the portfolio of each Series
of the Fund are conducted by or under the direction of officers of the Fund
and of the Investment Manager, subject to review of investments by the Fund's
Board of Trustees. Information as to these Trustees and officers is contained
under the caption "Trustees and Officers."
InterCapital is also the investment manager (or investment adviser) of the
following investment companies:
OPEN-END FUNDS
1 Active Assets California Tax-Free Trust Dean Witter Japan
2 Active Assets Government Securities Trust
3 Active Assets Money Trust
4 Active Assets Tax-Free Trust
5 Dean Witter American Value Fund
6 Dean Witter Balanced Growth Fund
7 Dean Witter Balanced Income Fund
8 Dean Witter California Tax-Free Daily Income Trust
9 Dean Witter California Tax-Free Income Fund
10 Dean Witter Capital Appreciation Fund
11 Dean Witter Capital Growth Securities
12 Dean Witter Convertible Securities Trust Dean Witter
13 Dean Witter Developing Growth Securities Trust
14 Dean Witter Diversified Income Trust
15 Dean Witter Dividend Growth Securities Inc.
16 Dean Witter European Growth Fund Inc.
17 Dean Witter Federal Securities Trust
18 Dean Witter Fund of Funds
19 Dean Witter Global Asset Allocation Fund
20 Dean Witter Global Dividend Growth Securities
21 Dean Witter Global Short-Term Income Fund Inc.
22 Dean Witter Global Utilities Fund
23 Dean Witter Hawaii Municipal Trust Dean Witter Tax-Free
24 Dean Witter Health Sciences Trust
25 Dean Witter High Income Securities
26 Dean Witter High Yield Securities Inc.
27 Dean Witter Income Builder Fund
28 Dean Witter Information Fund
29 Dean Witter Intermediate Income Securities
30 Dean Witter Intermediate Term U.S. Treasury Trust
31 Dean Witter International SmallCap Fund
32 Dean Witter Japan Fund
33 Dean Witter Limited Term Municipal Trust
34 Dean Witter Liquid Asset Fund Inc.
35 Dean Witter Market Leader Trust
36 Dean Witter Mid-Cap Growth Fund
37 Dean Witter Multi-State Municipal Series Trust
38 Dean Witter National Municipal Trust
39 Dean Witter Natural Resource Development Securities Inc.
40 Dean Witter New York Municipal Money Market Trust
41 Dean Witter New York Tax-Free Income Fund
42 Dean Witter Pacific Growth Fund Inc.
43 Dean Witter Precious Metals and Minerals Trust
44 Dean Witter Retirement Series
45 Dean Witter S&P 500 Index Fund
46 Dean Witter Select Dimensions Investment Series
47 Dean Witter Select Municipal Reinvestment Fund
48 Dean Witter Short-Term Bond Fund
49 Dean Witter Short-Term U.S. Treasury Trust
50 Dean Witter Special Value Fund
51 Dean Witter Strategist Fund
52 Dean Witter Tax-Exempt Securities Trust
53 Dean Witter Daily Income Trust
54 Dean Witter U.S. Government Money Market Trust
55 Dean Witter U.S. Government Securities Trust
56 Dean Witter Utilities Fund
57 Dean Witter Value-Added Market Series
58 Dean Witter Variable Investment Series
59 Dean Witter World Wide Income Trust
60 Dean Witter World Wide Investment Trust
3
<PAGE>
CLOSED-END FUNDS
1 High Income Advantage Trust
2 High Income Advantage Trust II
3 High Income Advantage Trust III
4 InterCapital Income Securities Inc.
5 Dean Witter Government Income Trust
6 InterCapital Insured Municipal Bond Trust
7 InterCapital Insured Municipal Trust
8 InterCapital Insured Municipal Income Trust
9 InterCapital California Insured Municipal Income Trust
10 InterCapital Insured Municipal Securities
11 InterCapital Insured California Municipal Securities
12 InterCapital Quality Municipal Investment Trust
13 InterCapital Quality Municipal Income Trust
14 InterCapital Quality Municipal Securities
15 InterCapital California Quality Municipal Securities
16 InterCapital New York Quality Municipal Securities
17 Municipal Income Trust
18 Municipal Income Trust II
19 Municipal Income Trust III
20 Municipal Income Opportunities Trust
21 Municipal Income Opportunities II
22 Municipal Income Opportunities III
23 Prime Income Trust
24 Municipal Premium Income Trust
The foregoing investment companies, together with the Fund, are collectively
referred to as the Dean Witter Funds.
In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned
subsidiary of InterCapital, serves as manager for the following investment
companies for which TCW Funds Management, Inc. is the investment adviser (the
"TCW/DW Funds"):
1 TCW/DW Core Equity Trust
2 TCW/DW North American Government Income Trust
3 TCW/DW Latin American Growth Fund
4 TCW/DW Income and Growth Fund
5 TCW/DW Small Cap Growth Fund
6 TCW/DW Balanced Fund
7 TCW/DW Mid-Cap Equity Trust
8 TCW/DW Global Telecom Trust
9 TCW/DW Strategic Income Trust
CLOSED-END FUNDS
10 TCW/DW Term Trust 2000
11 TCW/DW Term Trust 2002
12 TCW/DW Term Trust 2003
13 TCW/DW Total Return Trust
14 TCW/DW Emerging Markets Opportunities Trust
InterCapital also serves as: (i) administrator of The BlackRock Strategic
Term Trust Inc., a closed-end investment company; and (ii) sub-administrator
of MassMutual Participation Investors and Templeton Global Governments Income
Trust, closed-end investment companies.
Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage
the investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager obtains and
evaluates such information and advice relating to the economy, securities
markets, and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objective and policies.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, such office space, facilities,
equipment, clerical help and bookkeeping and certain legal services as the
Fund may reasonably require in the conduct of its business, including the
preparation of prospectuses, statements of additional information, proxy
statements and reports required to be filed with federal and state securities
commissions (except insofar as the participation or assistance of independent
accountants and attorneys is, in the opinion of the Investment Manager,
necessary or desirable). In addition, the Investment Manager pays the
salaries of all personnel, including officers of the Fund, who are employees
of the Investment Manager. The Investment Manager also bears the cost of
telephone service, heat, light, power and other utilities provided to the
Fund.
Effective December 31, 1993, pursuant to a Services Agreement between
InterCapital and DWSC, DWSC began to provide the administrative services to
the Fund which were previously performed
4
<PAGE>
directly by InterCapital. On April 17, 1995, DWSC was reorganized in the
State of Delaware, necessitating the entry into a new Services Agreement by
InterCapital and DWSC on that date. The foregoing internal reorganizations
did not result in any change in the nature or scope of the administrative
services being provided to the Fund or any of the fees being paid by the Fund
for the overall services being performed under the terms of the existing
Management Agreement.
Expenses not expressly assumed by the Investment Manager under the
Management Agreement (see below), or by the Distributor of the Fund's shares,
Dean Witter Distributors Inc. ("Distributors") (see "The Distributor"), will
be paid by the Fund. Each Series pays all other expenses incurred in its
operation and a portion of the Fund's general administration expenses
allocated on the basis of the asset size of the respective Series. Expenses
that are borne directly by a Series include, but are not limited to: charges
and expenses of any registrar, custodian, share transfer and dividend
disbursing agent; brokerage commissions; certain taxes; registration costs of
the Series and its shares under federal and state securities laws;
shareholder servicing costs; charges and expenses of any outside service used
for pricing of the shares of the Series; interest on borrowings by the
Series; fees and expenses of legal counsel, including counsel to the Trustees
who are not interested persons of the Fund or of the Investment Manager) not
including compensation or expenses of attorneys who are employees of the
Investment Manager and independent accountants; and all other expenses
attributable to a particular Series. Expenses which are allocated on the
basis of size of the respective Series include the costs and expenses of
printing, including typesetting, and distributing prospectuses and statements
of additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing proxy statements and reports to shareholders;
fees and travel expenses of Trustees or members of any advisory board or
committee who are not employees of the Investment Manager or any corporate
affiliate of the Investment Manager; state franchise taxes; Securities and
Exchange Commission fees; membership dues of industry associations; postage;
insurance premiums on property or personnel (including officers and Trustees)
of the Fund which inure to its benefit; and all other costs of the Fund's
operations properly payable by the Fund and allocable on the basis of size of
the respective Series. Depending on the nature of a legal claim, liability or
lawsuit, litigation costs, payment of legal claims or liabilities and any
indemnification relating thereto may be directly applicable to the Series or
allocated on the basis of the size of the respective Series. The Trustees
have determined that this is an appropriate method of allocation of expenses.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily by applying each of
the following annual rates to the net assets of the respective Series of the
Fund, each business day: 0.50% (Liquid Asset Series); 0.50% (U.S. Government
Money Market Series); 0.65% (U.S. Government Securities Series); 0.65%
(Intermediate Income Securities Series); 0.85% (American Value Series); 0.85%
(Capital Growth Series); 0.75% (Dividend Growth Series); 0.85% (Strategist
Series); 0.75% (Utilities Series); 0.50% (Value-Added Market Series); and
1.0% (Global Equity Series). The management fees for the American Value,
Capital Growth, Dividend Growth, Strategist, Utilities and Global Equity
Series are higher than those paid by most investment policies.
The Investment Manager assumed all expenses (except for brokerage fees and
a portion of organizational expenses) for each Series and waived the
compensation provided for in the Agreement with respect to each Series during
the fiscal years ended July 31, 1994 and 1995 and the period August 1, 1995
through December 31, 1995 and has assumed all such expenses (except for
brokerage fees and a portion of organizational expenses) and waived the
compensation provided for in its Management Agreement with respect to any
Series to the extent that such expenses and compensation exceeded 1.00% of
the daily net assets of the Series for the period from January 1, 1996
through July 31, 1997. The Investment Manager has undertaken to continue to
assume, until December 31, 1997, all such expenses and waive compensation
with respect to any Series to the extent that such expenses and compensation
exceed 1.00% of the daily net assets of the Series. The Fund's Investment
Manager paid the organizational expenses of the Fund in the amount of
$150,000 ($13,636 allocated to each of the Series), which will be reimbursed
by the Fund net of any amounts waived.
5
<PAGE>
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder,
the Investment Manager is not liable to the Fund or any of its investors for
any act or omission by the Investment Manager or for any losses sustained by
the Fund or its investors. The Agreement in no way restricts the Investment
Manager from acting as investment manager or adviser to others.
The Agreement was initially approved by the Board of Trustees on February
21, 1997 and by the shareholders of the Fund at a Special Meeting of
Shareholders held on May 21, 1997. The Agreement is substantially identical
to a prior investment management agreement which was initially approved by
the Board of Trustees on October 30, 1992 and, subsequently, by DWR as the
then sole shareholder of the Fund on January 12, 1993. The Agreement took
effect on May 31, 1997 upon the consummation of the merger of Dean Witter,
Discover & Co. with Morgan Stanley Group Inc. The Agreement may be terminated
at any time, without penalty, on thirty days' notice by the Board of Trustees
of the Fund, by the holders of a majority, as defined in the Investment
Company Act of 1940 (the "Act"), of the outstanding shares of the Fund, or by
the Investment Manager. The Agreement will automatically terminate in the
event of its assignment (as defined in the Act).
Under its terms, the Agreement had an initial term ending April 30, 1999
and will continue from year to year thereafter with respect to each Series,
provided continuance of the Agreement is approved at least annually by the
vote of the holders of a majority of the outstanding shares of that Series,
as defined in the Act, or by the Trustees of the Fund; provided that in
either event such continuance is approved annually by the vote of a majority
of the Trustees of the Fund who are not parties to the Agreement or
"interested persons" (as defined in the Act) of any such party (the
"Independent Trustees"), which vote must be cast in person at a meeting
called for the purpose of voting on such approval.
The Fund has acknowledged that the name "Dean Witter" is a property right
of DWR. The Fund has agreed that DWR or its parent company may use, or at any
time permit others to use, the name "Dean Witter." The Fund has also agreed
that in the event the Agreement is terminated, or if the affiliation between
InterCapital and its parent company is terminated, the Fund will eliminate
the name "Dean Witter" from its name if DWR or its parent company shall so
request.
TRUSTEES AND OFFICERS
- -----------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital and with the 85 Dean Witter Funds and the 14 TCW/DW Funds are
shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- -------------------------------------------- --------------------------------------------------------
<S> <C>
Michael Bozic (56) Chairman and Chief Executive Officer of Levitz Furniture
Trustee Corporation (since November, 1995); Director or Trustee of
c/o Levitz Furniture Corporation the Dean Witter Funds; formerly President and Chief Executive
6111 Broken Sound Parkway, N.W. Officer of Hills Department Stores (May, 1991-July, 1995);
Boca Raton, Florida formerly variously Chairman, Chief Executive Officer,
President and Chief Operating Officer (1987-1991) of the Sears
Merchandise Group of Sears, Roebuck and Co.; Director of
Eaglemark Financial Services Inc., the United Negro College
Fund and Weirton Steel Corporation.
6
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- -------------------------------------------- --------------------------------------------------------
Charles A. Fiumefreddo* (64) Chairman, Chief Executive Officer and Director of InterCapital,
Chairman, President DWSC and Distributors; Executive Vice President and Director
Chief Executive Officer and Trustee of DWR; Chairman, Director or Trustee, President and Chief
Two World Trade Center Executive Officer of the Dean Witter Funds; Chairman, Chief
New York, New York Executive Officer and Trustee of the TCW/DW Funds; Chairman
and Director of Dean Witter Trust FSB ("DWT"); formerly Executive
Vice President and Director of Dean Witter, Discover & Co.
(until February, 1993); Director of various MSDWD subsidiaries
and affiliates.
Edwin J. Garn (65) Director or Trustee of the Dean Witter Funds; formerly United
Trustee States Senator (R-Utah)(1974-1992) and Chairman, Senate
c/o Huntsman Corporation Banking Committee (1980-1986); formerly Mayor of Salt Lake
500 Huntsman Way City, Utah (1971-1974); formerly Astronaut, Space Shuttle
Salt Lake City, Utah Discovery (April 12-19, 1985); Vice Chairman, Huntsman
Corporation (since January, 1993); Director of Franklin Quest
(time management systems) and John Alden Financial Corp. (health
insurance); Member of the board of various civic and charitable
organizations.
John R. Haire (72) Chairman of the Audit Committee and Chairman of the Committee
Trustee of the Independent Directors or Trustees and Director or Trustee
Two World Trade Center of the Dean Witter Funds; Chairman of the Audit Committee
New York, New York and Chairman of the Committee of the Independent Trustees
and Trustee of the TCW/DW Funds; formerly President, Council
for Aid to Education (1978-1989) and Chairman and Chief Executive
Officer of Anchor Corporation, an Investment Adviser
(1964-1978); Director of Washington National Corporation
(insurance).
Wayne E. Hedien (63) Retired; Director or Trustee of the Dean Witter Funds; Director
Trustee of the PMI Group, Inc. (private mortgage insurance); Trustee
c/o Gordon Altman Butowsky and Vice Chairman of The Field Museum of Natural History;
Weitzen Shalov & Wein formerly associated with the Allstate Companies (1966-1994),
Counsel to the Independent Trustees most recently as Chairman of The Allstate Corporation (March,
114 West 47th Street 1993-December, 1994) and Chairman and Chief Executive Officer
New York, New York of its wholly-owned subsidiary, Allstate Insurance Company
(July, 1989-December, 1994); director of various other business
and charitable organizations.
7
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- -------------------------------------------- --------------------------------------------------------
Dr. Manuel H. Johnson (48) Senior Partner, Johnson Smick International, Inc., a consulting
Trustee firm; Co-Chairman and a founder of the Group of Seven Council
c/o Johnson Smick International, Inc. (G7C), an international economic commission; Director or
1133 Connecticut Avenue, N.W. Trustee of the Dean Witter Funds; Trustee of the TCW/DW Funds;
Washington, DC Director of NASDAQ (since June, 1995); Director of Greenwich
Capital Markets Inc. (broker-dealer); formerly Vice Chairman
of the Board of Governors of the Federal Reserve System
(1986-1990) and Assistant Secretary of the U.S. Treasury
(1982-1986).
Michael E. Nugent (61) General Partner, Triumph Capital, L.P., a private investment
Trustee partnership; Director or Trustee of the Dean Witter Funds;
c/o Triumph Capital, L.P. Trustee of the TCW/DW Funds; formerly Vice President, Bankers
237 Park Avenue Trust Company and BT Capital Corporation (1984-1988); Director
New York, New York of various business organizations.
Philip J. Purcell* (54) Chairman of the Board of Directors and Chief Executive Officer
Trustee of MSDWD, DWR and Novus Credit Services Inc.; Director of
1585 Broadway InterCapital, DWSC and Distributors; Director or Trustee of
New York, New York the Dean Witter Funds; Director and/or officer of various
MSDWD subsidiaries.
John L. Schroeder (67) Retired; Director or Trustee of the Dean Witter Funds; Trustee
Trustee of the TCW/DW Funds; Director of Citizens Utilities Company;
c/o Gordon Altman Butowsky formerly Executive Vice President and Chief Investment Officer
Weitzen Shalov & Wein of the Home Insurance Company (August, 1991-September, 1995).
Counsel to the Independent Trustees
114 West 47th Street
New York, New York
Barry Fink (42) Senior Vice President (since March, 1997) and Secretary and
Vice President, General Counsel (since February, 1997) of InterCapital and
Secretary and General Counsel DWSC; Senior Vice President (since March, 1997) and Assistant
Two World Trade Center Secretary and Assistant General Counsel (since February, 1997)
New York, New York of Distributors; Assistant Secretary of DWR (since August,
1996); Vice President, Secretary and General Counsel of the
Dean Witter Funds and the TCW/DW Funds (since February, 1997);
previously First Vice President (June, 1993-February, 1997),
Vice President (until June, 1993) and Assistant Secretary
and Assistant General Counsel of InterCapital and DWSC and
Assistant Secretary of the Dean Witter Funds and TCW/DW Funds.
Thomas F. Caloia (51) First Vice President and Assistant Treasurer of InterCapital
Treasurer and DWSC; Treasurer of the Dean Witter Funds and the TCW/DW
Two World Trade Center Funds.
New York, New York
</TABLE>
- ------------
* Denotes Trustees who are "interested persons" of the Fund, as defined in
the Act.
8
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- -------------------------------------------- ------------------------------------------------------
<S> <C>
Mark Bavoso (36) Senior Vice President of InterCapital (since June, 1993);
Vice President Vice President of various Dean Witter Funds; previously
Two World Trade Center Vice President of InterCapital.
New York, New York
Patricia A. Cuddy (43) Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds.
Two World Trade Center
New York, New York
Edward F. Gaylor (56) Senior Vice President of InterCapital; Vice President of
Vice President various Dean Witter Funds.
Two World Trade Center
New York, New York
Rajesh K. Gupta (37) Senior Vice President of InterCapital; Vice President of
Vice President various Dean Witter Funds.
Two World Trade Center
New York, New York
Peter Hermann (37) Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds.
Two World Trade Center
New York, New York
Jonathan R. Page (51) Senior Vice President of InterCapital; Vice President of
Vice President various Dean Witter Funds.
Two World Trade Center
New York, New York
Paul D. Vance (61) Senior Vice President of InterCapital; Vice President of
Vice President various Dean Witter Funds.
Two World Trade Center
New York, New York
Anita H. Kolleeny (42) Senior Vice President of InterCapital; Vice President of
Vice President various Dean Witter Funds.
Two World Trade Center
New York, New York
Paula LaCosta (46) Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds.
Two World Trade Center
New York, New York
Rochelle G. Siegel (48) Senior Vice President of InterCapital; Vice President of
Vice President various Dean Witter Funds.
Two World Trade Center
New York, New York
Kenton J. Hinchliffe (53) Senior Vice President of InterCapital; Vice President of
Vice President various Dean Witter Funds.
Two World Trade Center
New York, New York
Alice S. Weiss (49) Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds.
Two World Trade Center
New York, New York
</TABLE>
9
<PAGE>
In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWT and
Director of DWT, Mitchell M. Merin, President and Chief Strategic Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWT and
Director of DWT, Executive Vice President and Director of DWR, and Director
of SPS Transaction Services, Inc. and various other MSDWD subsidiaries,
Joseph J. McAlinden, Executive Vice President and Chief Investment Officer of
InterCapital and Director of DWT and Robert S. Giambrone, Senior Vice
President of InterCapital, DWSC, Distributors and DWT and Director of DWT,
are Vice Presidents of the Fund. Marilyn K. Cranney, First Vice President and
Assistant General Counsel of InterCapital and DWSC, and Lou Anne D. McInnis,
Ruth Rossi and Carsten Otto, Vice Presidents and Assistant General Counsels
of InterCapital and DWSC, and Frank Bruttomesso and Todd Lebo, Staff
Attorneys with InterCapital, are Assistant Secretaries of the Fund.
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees consists of nine (9) trustees. These same
individuals also serve as directors or trustees for all of the Dean Witter
Funds, and are referred to in this section as Trustees. As of the date of
this Statement of Additional Information, there are a total of 85 Dean Witter
Funds, comprised of 128 portfolios. As of September 30, 1997, the Dean Witter
Funds had total net assets of approximately $93.2 billion and more than five
million shareholders.
Seven Trustees (77% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own
any stock or other securities issued by InterCapital's parent company, MSDWD.
These are the "disinterested" or "independent" Trustees. The other two
Trustees (the "management Trustees") are affiliated with InterCapital. Four
of the seven independent Trustees are also Independent Trustees of the TCW/DW
Funds.
Law and regulation establish both general guidelines and specific duties
for the Independent Trustees. The Dean Witter Funds seek as Independent
Trustees individuals of distinction and experience in business and finance,
government service or academia; these are people whose advice and counsel are
in demand by others and for whom there is often competition. To accept a
position on the Funds' Boards, such individuals may reject other attractive
assignments because the Funds make substantial demands on their time. Indeed,
by serving on the Funds' Boards, certain Trustees who would otherwise be
qualified and in demand to serve on bank boards would be prohibited by law
from doing so.
All of the Independent Trustees serve as members of the Audit Committee
and the Committee of the Independent Trustees. Three of them also serve as
members of the Derivatives Committee. During the calendar year ended December
31, 1996, the three Committees held a combined total of sixteen meetings. The
Committees hold some meetings at InterCapital's offices and some outside
InterCapital. Management Trustees or officers do not attend these meetings
unless they are invited for purposes of furnishing information or making a
report.
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading
among Funds in the same complex; and approving fidelity bond and related
insurance coverage and allocations, as well as other matters that arise from
time to time. The Independent Trustees are required to select and nominate
individuals to fill any Independent Trustee vacancy on the Board of any Fund
that has a Rule 12b-1 plan of distribution. Most of the Dean Witter Funds
have such a plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing
engagement; approving professional services provided by the independent
accountants and other accounting firms prior to the performance
10
<PAGE>
of such services; reviewing the independence of the independent accountants;
considering the range of audit and non-audit fees; reviewing the adequacy of
the Fund's system of internal controls; and preparing and submitting
Committee meeting minutes to the full Board.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect
to derivative investments, if any, made by the Fund.
DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT TRUSTEES AND AUDIT
COMMITTEE
The Chairman of the Committee of the Independent Trustees and the Audit
Committee maintains an office at the Funds' headquarters in New York. He is
responsible for keeping abreast of regulatory and industry developments and
the Funds' operations and management. He screens and/or prepares written
materials and identifies critical issues for the Independent Trustees to
consider, develops agendas for Committee meetings, determines the type and
amount of information that the Committees will need to form a judgment on
various issues, and arranges to have that information furnished to Committee
members. He also arranges for the services of independent experts and
consults with them in advance of meetings to help refine reports and to focus
on critical issues. Members of the Committees believe that the person who
serves as Chairman of both Committees and guides their efforts is pivotal to
the effective functioning of the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and
with the Funds' independent auditors. He arranges for a series of special
meetings involving the annual review of investment advisory, management and
other operating contracts of the Funds and, on behalf of the Committees,
conducts negotiations with the Investment Manager and other service
providers. In effect, the Chairman of the Committees serves as a combination
of chief executive and support staff of the Independent Trustees.
The Chairman of the Committee of the Independent Trustees and the Audit
Committee is not employed by any other organization and devotes his time
primarily to the services he performs as Committee Chairman and Independent
Trustee of the Dean Witter Funds and as an Independent Trustee and, since
July 1, 1996, as Chairman of the Committee of the Independent Trustees and
the Audit Committee of the TCW/DW Funds. The current Committee Chairman has
had more than 35 years experience as a senior executive in the investment
company industry.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN
WITTER FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and
enhances their ability to negotiate on behalf of each Fund with the Fund's
service providers. This arrangement also precludes the possibility of
separate groups of Independent Trustees arriving at conflicting decisions
regarding operations and management of the Funds and avoids the cost and
confusion that would likely ensue. Finally, having the same Independent
Trustees serve on all Fund Boards enhances the ability of each Fund to
obtain, at modest cost to each separate Fund, the services of Independent
Trustees, and a Chairman of their Committees, of the caliber, experience and
business acumen of the individuals who serve as Independent Trustees of the
Dean Witter Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund pays each Independent Trustee an annual fee of $1,000 plus a per
meeting fee of $50 for meetings of the Board of Trustees or committees of the
Board of Trustees attended by the Trustee (the Fund pays the Chairman of the
Audit Committee an annual fee of $750 and pays the Chairman of the Committee
of the Independent Trustees an additional annual fee of $1,200). If a Board
meeting and a Committee meeting, or more than one Committee meeting, take
place on a single day, the Trustees are paid a single meeting fee by the
Fund. The Fund also reimburses such Trustees for travel and other
11
<PAGE>
out-of-pocket expenses incurred by them in connection with attending such
meetings. Trustees and officers of the Fund who are or have been employed by
the Investment Manager or an affiliated company receive no compensation or
expense reimbursement from the Fund.
The following table illustrates the compensation paid to the Fund's
Independent Trustees by the Fund for the fiscal year ended July 31, 1997. Mr.
Hedien's term as Trustee did not commence until September 1, 1997.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- --------------------------- ---------------
<S> <C>
Michael Bozic .............. $1,750
Edwin J. Garn .............. 1,750
John R. Haire .............. 3,750
Dr. Manuel H. Johnson ..... 1,800
Michael E. Nugent........... 1,850
John L. Schroeder........... 1,850
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1996 for
services to the 82 Dean Witter Funds and, in the case of Messrs. Haire,
Johnson, Nugent and Schroeder, the 14 TCW/DW Funds that were in operation at
December 31, 1996. With respect to Messrs. Haire, Johnson, Nugent and
Schroeder, the TCW/DW Funds are included solely because of a limited exchange
privilege between those Funds and five Dean Witter Money Market Funds.
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS
CHAIRMAN OF
COMMITTEES OF FOR SERVICE AS
FOR SERVICE INDEPENDENT CHAIRMAN OF TOTAL CASH
AS DIRECTOR FOR SERVICE DIRECTORS/ COMMITTEES OF COMPENSATION
OR TRUSTEE AS TRUSTEE TRUSTEES AND INDEPENDENT PAID
AND COMMITTEE AND COMMITTEE AUDIT TRUSTEES FOR SERVICES TO
MEMBER OF MEMBER OF COMMITTEES OF 82 AND AUDIT 82 DEAN WITTER
NAME OF 82 DEAN WITTER 14 TCW/DW DEAN WITTER COMMITTEES OF 14 FUNDS AND 14
INDEPENDENT TRUSTEE FUNDS FUNDS FUNDS TCW/DW FUNDS TCW/DW FUNDS
- ---------------------- -------------- --------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Michael Bozic ......... $138,850 -- -- -- $138,850
Edwin J. Garn ......... 140,900 -- -- -- 140,900
John R. Haire ......... 106,400 $64,283 $195,450 $12,187 378,320
Dr. Manuel H. Johnson 137,100 66,483 -- -- 203,583
Michael E. Nugent .... 138,850 64,283 -- -- 203,133
John L. Schroeder...... 137,150 69,083 -- -- 206,233
</TABLE>
As of the date of this Statement of Additional Information, 57 of the Dean
Witter Funds, not including the Fund, have adopted a retirement program under
which an Independent Trustee who retires after serving for at least five
years (or such lesser period as may be determined by the Board) as an
Independent Director or Trustee of any Dean Witter Fund that has adopted the
retirement program (each such Fund referred to as an "Adopting Fund" and each
such Trustee referred to as an "Eligible Trustee") is entitled to retirement
payments upon reaching the eligible retirement age (normally, after attaining
age 72). Annual payments are based upon length of service. Currently, upon
retirement, each Eligible Trustee is entitled to receive from the Adopting
Fund, commencing as of his or her retirement date and continuing for the
remainder of his or her life, an annual retirement benefit (the "Regular
Benefit") equal to 25.0% of his or her Eligible Compensation plus 0.4166666%
of such Eligible Compensation for each full month of service as an
Independent Director or Trustee of any Adopting Fund in excess of five years
up to a maximum of 50.0% after ten years of service. The foregoing
percentages may be changed by the
12
<PAGE>
Board.(1) "Eligible Compensation" is one-fifth of the total compensation
earned by such Eligible Trustee for service to the Adopting Fund in the five
year period prior to the date of the Eligible Trustee's retirement. Benefits
under the retirement program are not secured or funded by the Adopting Funds.
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the 57 Dean Witter Funds (not including the
Fund) for the year ended December 31, 1996, and the estimated retirement
benefits for the Fund's Independent Trustees, to commence upon their
retirement, from the 57 Dean Witter Funds as of December 31, 1996. Mr.
Hedien's term did not commence until September 1, 1997.
RETIREMENT BENEFITS FROM ALL DEAN WITTER FUNDS
<TABLE>
<CAPTION>
ESTIMATED
RETIREMENT ANNUAL
ESTIMATED BENEFITS BENEFITS
CREDITED ACCRUED AS UPON
YEARS ESTIMATED EXPENSES RETIREMENT
OF SERVICE AT PERCENTAGE OF BY ALL FROM ALL
RETIREMENT ELIGIBLE ADOPTING ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUNDS FUNDS (2)
- --------------------------- --------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
Michael Bozic .............. 10 50.0% $20,147 $ 51,325
Edwin J. Garn .............. 10 50.0 27,772 51,325
John R. Haire .............. 10 50.0 46,952 129,550
Dr. Manuel H. Johnson ..... 10 50.0 10,926 51,325
Michael E. Nugent .......... 10 50.0 19,217 51,325
John L. Schroeder........... 8 41.7 38,700 42,771
</TABLE>
(1) An Eligible Trustee may elect alternate payments of his or her
retirement benefits based upon the combined life expectancy of such
Eligible Trustee and his or her spouse on the date of such Eligible
Trustee's retirement. The amount estimated to be payable under this
method, through the remainder of the later of the lives of such
Eligible Trustee and spouse, will be the actuarial equivalent of the
Regular Benefit. In addition, the Eligible Trustee may elect that the
surviving spouse's periodic payment of benefits will be equal to either
50% or 100% of the previous periodic amount, an election that,
respectively, increases or decreases the previous periodic amount so
that the resulting payments will be the actuarial equivalent of the
Regular Benefit.
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1)
above.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1 percent of the Fund's shares
of beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- -----------------------------------------------------------------------------
LIQUID ASSET SERIES
Variable and Floating Rate Obligations. As stated in the Prospectus, the
Liquid Asset Series may invest in variable and floating rate obligations. The
interest rate payable on a variable rate obligation is adjusted at
predesignated periodic intervals and, on floating rate obligations, whenever
there is a change in the market rate of interest on which the interest rate
payable is based. Other features may include the right whereby the Liquid
Asset Series may demand prepayment of the principal amount of the obligation
prior to its stated maturity (a "demand feature") and the right of the issuer
to prepay the principal amount prior to maturity. The principal benefit of a
variable rate obligation is that the interest rate adjustment minimizes
changes in the market value of the obligation. As a result, the purchase of
variable rate and floating rate obligations should enhance the ability of the
Liquid Asset Series to maintain a stable net asset value per share (see "How
Net Asset Value is Determined") and to sell obligations prior to maturity at
a price approximating the full principal amount of the obligations. The
principal benefit to the Liquid Asset Series of purchasing obligations with a
demand feature is that liquidity, and the ability of the Liquid Asset Series
to obtain repayment of the full principal amount of an obligation prior to
maturity, is enhanced. The payment of principal and interest by issuers of
certain obligations purchased by the
13
<PAGE>
Liquid Asset Series may be guaranteed by letters of credit or other credit
facilities offered by banks or other financial institutions. Such guarantees
will be considered in determining whether an obligation meets the Liquid
Asset Series' investment quality requirements.
INTERMEDIATE INCOME SECURITIES SERIES
As stated in the Prospectus, the Intermediate Income Securities Series may
invest up to 5% of its net assets in lower rated fixed-income securities,
sometimes referred to as high yield securities. Because of the special nature
of high yield securities, the Investment Manager must take account of certain
special considerations in assessing the risks associated with such
investments. For example, as the high yield securities market is relatively
new, its growth had paralleled a long economic expansion and, until recently,
it had not faced adverse economic and market conditions. Therefore, an
economic downturn or increase in interest rates is likely to have a negative
effect on the high yield bond market and on the value of the high yield
securities held by the Intermediate Income Securities Series, as well as on
the ability of the securities' issuers to repay principal and interest on
their borrowings.
The prices of high yield securities have been found to be less sensitive
to changes in prevailing interest rates than higher-rated investments, but
are likely to be more sensitive to adverse economic changes or individual
corporate developments. During an economic downturn or substantial period of
rising interest rates, highly leveraged issuers may experience financial
stress which would adversely affect their ability to service their principal
and interest payment obligations, to meet their projected business goals or
to obtain additional financing. If the issuer of a fixed-income security
owned by the Intermediate Income Securities Series defaults, the Series may
incur additional expenses to seek recovery. In addition, periods of economic
uncertainty and change can be expected to result in an increased volatility
of market prices of high yield securities and a concomitant volatility in the
net asset value of a share of a Series. Moreover, the market prices of
certain of the Intermediate Income Securities Series' securities which are
structured as zero coupon and payment-in-kind securities are affected to a
greater extent by interest rate changes and thereby tend to be more volatile
than securities which pay interest periodically and in cash (see "Dividends,
Distributions and Taxes" for a discussion of the tax ramifications of
investments in such securities).
The secondary market for high yield securities may be less liquid than the
markets for higher quality securities and, as such, may have an adverse
effect on the market prices of certain securities. The limited liquidity of
the market may also adversely affect the ability of the Fund's Trustees to
arrive at a fair value for certain high yield securities at certain times and
could make it difficult for the Intermediate Income Securities Series to sell
certain securities.
New laws and proposed new laws may have a potentially negative impact on
the market for high yield bonds. For example, recent legislation requires
federally-insured savings and loan associations to divest their investments
in high yield bonds. This legislation and other proposed legislation may have
an adverse effect upon the value of high yield securities and a concomitant
negative impact upon the net asset value of a share of the Intermediate
Income Securities Series.
AMERICAN VALUE SERIES
As discussed in the Prospectus, the American Value Series offers investors
an opportunity to participate in a diversified portfolio of securities,
consisting principally of common stocks. The portfolio reflects an investment
decision-making process developed by the Investment Manager.
Industry Valuation Approach. As stated in the Prospectus, in managing the
American Value Series, the Investment Manager generally seeks to identify
industries, rather than individual companies, as prospects for capital
appreciation. This approach is designed to capitalize on the basic
assumptions that industry trends are a primary force governing company
earnings; conventional forecasts may not fully reflect underlying industry
conditions or changing economic cycles; the market's perception of industry
trends is often transitory or exaggerated; and distortions in relative
valuations beyond their normal ranges may provide significant buying or
selling opportunities.
14
<PAGE>
The Investment Manager generally seeks to invest assets of the American
Value Series in industries it considers to exhibit underappreciated earnings
potential at the time of purchase and to sell those it considers to have
peaked in relative earnings potential.
The Investment Manager also uses models which employ economic indicators
or other financial variables to evaluate the relative attractiveness of
industries. Economic analysis includes traditional business cycle analysis
and such signposts as current Federal Reserve monetary posture, direction of
commodity prices, and global currency and economic trends. Economic
indicators most relevant to particular industries are reviewed. Some
industries analyzed, such as aerospace and energy, do not correlate with
economic indicators and must be analyzed relative to their respective
specific industry cycles. Financial variables under consideration may include
corporate earnings growth and cashflow, corporate and industry asset
valuation, absolute and relative price/earnings ratios and dividend discount
valuations.
Once attractive industries have been identified, stocks to represent those
industries are selected utilizing a multivariate process that includes size
and quality of the company, earnings visibility of the company and various
valuation parameters. Valuation screens may include dividend discount model
values, price-to-book ratios, price to cashflow values, relative and absolute
price-to-earnings ratios and ratios of price to earnings multiples to
earnings growth. Price and earnings momentum ratings derived from external
sources are also factored into the stock selection decision. The Investment
Manager also evaluates fundamental company criteria such as product cycle
analysis, revenue growth, margin analysis, consistency of earnings
profitability, proprietary nature of the product and quality of management.
Stocks may be selected from the three capitalization tiers of the market:
large capitalization, medium capitalization, and small capitalization.
Based on the sum total of this analysis, approximately 40-60 industries
are studied and classified as attractive, moderately attractive or
unattractive. Attractive groups are purchased, moderately attractive groups
are bought or held, and unattractive groups are sold. The Investment Manager
may utilize services that examine historical industry relative
price-to-earnings ranges for input on the Investment Manager's valuation
analysis.
A basic tenet of the industry valuation approach is that there is no
certainty of superior performance in any specific industry selection, but
rather that approximately equal weighting of investments in a group of
industries, each of which has been identified as underappreciated, can
benefit from the performance probabilities of the total group.
The foregoing represents the main outlines of the industry valuation
approach. The following describes its key features, all of which are subject
to modification as described below or as result of applying the asset
allocation disciplines described later.
1. Equal Industry Weightings.
After determining the industries that it considers to be attractive, the
Investment Manager generally attempts to invest approximately equal amounts
of the equity portion of the portfolio in securities of companies in each of
such industries, subject to adjustment for company weightings as set forth in
the next paragraph.
2. Equal Company Weightings.
From the total of all companies included in the industry valuation
process, the Investment Manager selects a limited number from each industry
as representative of that industry. Such selections are made on the basis of
various criteria, including size and quality of a company, the visibility of
earnings, product cycle analysis, historic track record and various valuation
parameters. Valuation screens may include dividend discount model values,
price-to-book ratios, price-to-cashflow values, relative and absolute
price-to-earnings ratios and ratios of price-earnings multiples to earnings
growth. Price and earnings momentum ratings derived from external sources are
also factored into the stock selection decision. Those companies which are in
attractive industries and which the Investment Manager believes to be
attractive investments are finally selected for inclusion in the portfolio.
When final selections are made,
15
<PAGE>
approximately equal amounts of the equity portion of the portfolio are
invested in each of such companies. This may vary depending on whether the
Investment Manager is in the process of building or reducing a stock
position. Consideration will also be given to valuation, capitalization and
liquidity profile. Stocks in industries not characterized as attractive may
be underweighted. Also, smaller capitalization issues may not be equally
weighted due to liquidity considerations.
3. Relative Industry Values.
Industry selection only attempts to identify industries whose securities
might be expected to perform relatively better than the market as represented
by the S&P Index. It does not seek to identify securities which will
experience an absolute increase in value notwithstanding market conditions.
However, the process assumes that, despite interim fluctuations in stock
market prices, the long-term trend in equity security values will be up.
4. Practical Applications.
In applying the industry valuation approach to management of the American
Value Series, the Investment Manager will make adjustments in the Series
which reflect modifications of the underlying concepts whenever, in its
opinion, such adjustments are necessary or desirable to achieve the American
Value Series' objectives. Such adjustments may include, for example,
weighting some industries or companies more or less than others, based upon
the Investment Manager's judgment as to the investment merits of specific
companies. In addition, without specific action by the Investment Manager,
adjustments may result from fluctuations in market prices which distort
previously established industry and company weightings. The portfolio may, at
times, include securities of industries which are unattractive due to
consideration of stage-of-cycle analysis or may not include representation in
industries considered attractive due to considerations such as valuation
criteria, stage-of-cycle analysis or lack of earnings visibility, balance
sheet viability or management quality. Also, independent of the application
of the industry valuation process, the American Value Series continuously
sells and redeems its own shares, and, as a result, securities may have to be
sold at times from the American Value Series' portfolio to meet redemptions
and monies received upon sale of the American Value Series' shares. Such
sales and purchases of portfolio securities will result in a portfolio that
does not completely reflect equal weighting of investment in industries or
companies.
Asset Allocation. Common stocks, particularly those sought for possible
capital appreciation, have historically experienced a great amount of price
fluctuation. The Investment Manager believes it is desirable to attempt to
reduce the risks of extreme price fluctuations even if such an attempt
results, as it likely will at times, in reducing the probabilities of
obtaining greater capital appreciation. Accordingly, the Investment Manager's
investment process incorporates elements which may reduce, although certainly
not eliminate, the volatility of a portfolio. The American Value Series may
hold a portion of its assets in fixed-income securities in an effort to
moderate extremes of price fluctuation. The determination of the appropriate
asset allocation as between equity and fixed-income investments will be made
by the Investment Manager in its discretion, based upon its evaluation of
economic and market conditions.
CAPITAL GROWTH SERIES
As stated in the Prospectus, the money market instruments which the
Capital Growth Series may purchase include U.S. Government securities, bank
obligations, Eurodollar certificates of deposit, obligations of savings
institutions, fully insured certificates of deposit and commercial paper.
Such securities are limited to:
U.S. Government Securities. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as
the Federal Home Loan Bank), including Treasury bills, notes and bonds;
Bank Obligations. Obligations (including certificates of deposit, bankers'
acceptances, commercial paper (see below) and other debt obligations) of
banks subject to regulation by the U.S. Government and having total assets of
$1 billion or more, and instruments secured by such obligations, not
including obligations of foreign branches of domestic banks except as
permitted below;
16
<PAGE>
Eurodollar Certificates of Deposit. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1
billion or more (investments in Eurodollar certificates may be affected by
changes in currency rates or exchange control regulations, or changes in
governmental administration or economic or monetary policy in the United
States and abroad);
Obligations of Savings Institutions. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more (investments in savings institutions above $100,000 in principal amount
are not protected by federal deposit insurance);
Fully Insured Certificates of Deposit. Certificates of deposit of banks
and savings institutions, having total assets of less than $1 billion, if the
principal amount of the obligation is federally insured by the Bank Insurance
Fund or the Savings Association Insurance Fund (each of which is administered
by the FDIC), limited to $100,000 principal amount per certificate and to 15%
or less of the Capital Growth Series' total assets in all such obligations
and in all illiquid assets, in the aggregate;
Commercial Paper. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation ("S&P") or the highest grade by Moody's
Investors Service Inc. ("Moody's") or, if not rated, issued by a company
having an outstanding debt issue rated at least AA by S&P or Aa by Moody's.
GLOBAL EQUITY SERIES
Forward Foreign Currency Exchange Contracts. As discussed in the
Prospectus, the Global Equity Series may enter into forward foreign currency
exchange contracts ("forward contracts") as a hedge against fluctuations in
future foreign exchange rates. The Series will conduct its foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or through entering into
forward contracts to purchase or sell foreign currencies. A forward contract
involves an obligation to purchase or sell a specific currency at a future
date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. These
contracts are traded in the interbank market conducted directly between
currency traders (usually large, commercial and investment banks) and their
customers. Such forward contracts will only be entered into with United
States banks and their foreign branches or foreign banks whose assets total
$1 billion or more. A forward contract generally has no deposit requirement,
and no commissions are charged at any stage for trades.
When management of the Series believes that the currency of a particular
foreign country may suffer a substantial movement against the U.S. dollar, it
may enter into a forward contract to purchase or sell, for a fixed amount of
dollars or other currency, the amount of foreign currency approximating the
value of some or all of the Series' portfolio securities denominated in such
foreign currency. The Series will not enter into such forward contracts or
maintain a net exposure to such contracts where the consummation of the
contracts would obligate the Series to deliver an amount of foreign currency
in excess of the value of the Series' portfolio securities or other assets
denominated in that currency. Under normal circumstances, consideration of
the prospect for currency parities will be incorporated into the longer term
investment decisions made with regard to overall diversification strategies.
However, the management of the Fund believes that it is important to have the
flexibility to enter into such forward contracts when it determines that the
best interests of the Series will be served. The Series' custodian bank will
place cash, U.S. Government securities or other appropriate liquid portfolio
securities in a segregated account of the Series in an amount equal to the
value of the Series' total assets committed to the consummation of forward
contracts entered into under the circumstances set forth above. If the value
of the securities placed in the segregated account declines, additional cash
or securities will be placed in the account on a daily basis so that the
value of the account will equal the amount of the Series' commitments with
respect to such contracts.
Where, for example, the Series is hedging a portfolio position consisting
of foreign fixed-income securities denominated in a foreign currency against
adverse exchange rate moves vis-a-vis the U.S. dollar, at the maturity of the
forward contract for delivery by the Series of a foreign currency, the Series
may either sell the portfolio security and make delivery of the foreign
currency, or it may retain the security and terminate its contractual
obligation to deliver the foreign currency by purchasing an
17
<PAGE>
"offsetting" contract with the same currency trader obligating it to
purchase, on the same maturity date, the same amount of the foreign currency
(however, the ability of the Series to terminate a contract is contingent
upon the willingness of the currency trader with whom the contract has been
entered into to permit an offsetting transaction). It is impossible to
forecast the market value of portfolio securities at the expiration of the
contract. Accordingly, it may be necessary for the Series to purchase
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security is less than the amount of
foreign currency the Series is obligated to deliver and if a decision is made
to sell the security and make delivery of the foreign currency. Conversely,
it may be necessary to sell on the spot market some of the foreign currency
received upon the sale of the portfolio securities if its market value
exceeds the amount of foreign currency the Series is obligated to deliver.
If the Series retains the portfolio securities and engages in an
offsetting transaction, the Series will incur a gain or loss to the extent
that there has been movement in spot or forward contract prices. If the
Series engages in an offsetting transaction, it may subsequently enter into a
new forward contract to sell the foreign currency. Should forward prices
decline during the period between the Series' entering into a forward
contract for the sale of a foreign currency and the date it enters into an
offsetting contract for the purchase of the foreign currency, the Series will
realize a gain to the extent the price of the currency it has agreed to sell
exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Series will suffer a loss to the extent the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell.
If the Series purchases a fixed-income security which is denominated in
U.S. dollars but which will pay out its principal based upon a formula tied
to the exchange rate between the U.S. dollar and a foreign currency, it may
hedge against a decline in the principal value of the security by entering
into a forward contract to sell an amount of the relevant foreign currency
equal to some or all of the principal value of the security.
At times when the Series has written a call option on a security or the
currency in which it is denominated, it may wish to enter into a forward
contract to purchase or sell the foreign currency in which the security is
denominated. A forward contract would, for example, hedge the risk of the
security on which a call option has been written declining in value to a
greater extent than the value of the premium received for the option. The
Series will maintain with its Custodian at all times, cash, U.S. Government
securities, or other appropriate liquid portfolio securities in a segregated
account equal in value to all forward contract obligations and option
contract obligations entered into in hedge situations such as this.
Although the Series values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. It will, however, do so from time to time, and
investors should be aware of the costs of currency conversion. Although
foreign exchange dealers do not charge a fee for conversion, they do realize
a profit based on the spread between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign
currency to the Series at one rate, while offering a lesser rate of exchange
should the Series desire to resell that currency to the dealer.
GENERAL INVESTMENT TECHNIQUES
Repurchase Agreements. When cash may be available for only a few days, it
may be invested by a Series in repurchase agreements until such time as it may
otherwise be invested or used for payments of obligations of the Series. A
repurchase agreement may be viewed as a type of secured lending by the Series
which typically involves the acquisition by the Series of government securities
from a selling financial institution such as a bank, savings and loan
association or broker-dealer. The agreement provides that the Series will sell
back to the institution, and that the institution will repurchase, the
underlying security ("collateral") at a specified price and at a fixed time in
the future, usually not more than seven days from the date of purchase. The
collateral will be maintained in a segregated account and will be marked to
market daily to determine that the full value of the collateral, as specified
in the agreement, does not decrease below the repurchase price plus accrued
interest. If such decrease occurs, additional collateral will be added to the
account to maintain full collateralization. In the event the original seller
defaults on its obligations to repurchase, as a result of its bankruptcy or
otherwise, the
18
<PAGE>
Series will seek to sell the collateral, which action could involve costs or
delays. In such case, the Series' ability to dispose of the collateral to
recover its investment may be restricted or delayed.
The Series will, when received, accrue interest from the institution until
the time when the repurchase is to occur. Although such date is deemed by the
Series to be the maturity date of a repurchase agreement, the maturities of
securities subject to repurchase agreements are not subject to any limits and
may exceed one year.
While repurchase agreements involve certain risks not associated with
direct investments in debt securities, each Series follows procedures
designed to minimize such risks. Repurchase agreements will be transacted
only with large, well-capitalized and well-established financial institutions
whose financial condition will be continuously monitored by the Investment
Manager subject to procedures established by the Trustees. The procedures
also require that the collateral underlying the agreement be specified.
Reverse Repurchase Agreements. As stated in the Prospectus, the Liquid
Asset, U.S. Government Money Market and Intermediate Income Securities Series
may also use reverse repurchase agreements as part of their investment
strategy. Reverse repurchase agreements involve sales by the Series of assets
concurrently with an agreement by the Series to repurchase the same assets at
a later date at a fixed price. Generally, the effect of such a transaction is
that the Series can recover all or most of the cash invested in the portfolio
securities involved during the term of the reverse repurchase agreement,
while it will be able to keep the interest income associated with those
portfolio securities. Such transactions are only advantageous if the interest
cost to the Series of the reverse repurchase transaction is less than the
cost of otherwise obtaining the cash. Opportunities to achieve this advantage
may not always be available, and the Series intend to use the reverse
repurchase technique only when it will be to its advantage to do so. The
Series will establish a segregated account with its custodian bank in which
it will maintain cash, U.S. Government securities or other liquid portfolio
securities equal in value to its obligations in respect of reverse repurchase
agreements. Reverse repurchase agreements are considered borrowings by the
Series and for purposes other than meeting redemptions may not exceed 5% of
the Series' total assets.
When-Issued and Delayed Delivery Securities and Forward Commitments. As
discussed in the Prospectus, from time to time, in the ordinary course of
business, a Series may purchase securities on a when-issued or delayed
delivery basis or may purchase or sell securities on a forward commitment
basis, i.e., delivery and payment can take place a month or more after the
date of the transactions. The securities so purchased are subject to market
fluctuation and no interest accrues to the purchaser during this period.
While a Series will only purchase securities on a when-issued, delayed
delivery or forward commitment basis with the intention of acquiring the
securities, the Series may sell the securities before the settlement date, if
it is deemed advisable. At the time the Series makes the commitment to
purchase securities on a when-issued or delayed delivery basis, the Series
will record the transaction and thereafter reflect the value, each day, of
such security in determining the net asset value of the Series. At the time
of delivery of the securities, the value may be more or less than the
purchase price. The Series will also establish a segregated account with the
Series' custodian bank in which it will continuously maintain cash or U.S.
Government securities or other liquid portfolio securities equal in value to
commitments for such when-issued or delayed delivery securities; subject to
this requirement, the Series may purchase securities on such basis without
limit. An increase in the percentage of the Series' assets committed to the
purchase of securities on a when-issued or delayed delivery basis may
increase the volatility of the Series' net asset value. The Investment
Manager and the Trustees do not believe that any Series' net asset value or
income will be adversely affected by its purchase of securities on such
basis.
When, As and If Issued Securities. As discussed in the Prospectus, each
Series (with the exception of the U.S. Government Money Market Series) may
purchase securities on a "when, as and if issued" basis under which the
issuance of the security depends upon the occurrence of a subsequent event,
such as approval of a merger, corporate reorganization, leveraged buyout or
debt restructuring. The commitment for the purchase of any such security will
not be recognized by the Series until the Investment Manager determines that
issuance of the security is probable. At such time, the Series will
19
<PAGE>
record the transaction and, in determining its net asset value, will reflect
the value of the security daily. At such time, the Series will also establish
a segregated account with its custodian bank in which it will continuously
maintain cash or U.S. Government securities or other liquid portfolio
securities equal in value to recognized commitments for such securities.
Settlement of the trade will occur within five business days of the
occurrence of the subsequent event. The value of the Series' commitments to
purchase the securities of any one issuer, together with the value of all
securities of such issuer owned by the Series, may not exceed 5% of the value
of the Series' total assets at the time the initial commitment to purchase
such securities is made (see "Investment Restrictions"). Subject to the
foregoing restrictions, any Series may purchase securities on such basis
without limit. An increase in the percentage of the Series' assets committed
to the purchase of securities on a "when, as and if issued" basis may
increase the volatility of its net asset value. The Investment Manager and
the Trustees do not believe that the net asset value of any Series will be
adversely affected by its purchase of securities on such basis.
Zero Coupon Securities. A portion of the U.S. Government securities
purchased by each Series of the Fund may be "zero coupon" Treasury
securities. These are U.S. Treasury bills, notes and bonds which have been
stripped of their unmatured interest coupons and receipts or which are
certificates representing interests in such stripped debt obligations and
coupons. In addition, a portion of the fixed-income securities purchased by
such Series may be "zero coupon" securities. "Zero coupon" securities are
purchased at a discount from their face amount, giving the purchaser the
right to receive their full value at maturity. A zero coupon security pays no
interest to its holder during its life. Its value to an investor consists of
the difference between its face value at the time of maturity and the price
for which it was acquired, which is generally an amount significantly less
than its face value (sometimes referred to as a "deep discount" price).
The interest earned on such securities is, implicitly, automatically
compounded and paid out at maturity. While such compounding at a constant
rate eliminates the risk of receiving lower yields upon reinvestment of
interest if prevailing interest rates decline, the owner of a zero coupon
security will be unable to participate in higher yields upon reinvestment of
interest received if prevailing interest rates rise. For this reason, zero
coupon securities are subject to substantially greater market price
fluctuations during periods of changing prevailing interest rates than are
comparable debt securities which make current distributions of interest.
Current federal tax law requires that a holder (such as the Series) of a zero
coupon security accrue a portion of the discount at which the security was
purchased as income each year even though the Series receives no interest
payments in cash on the security during the year.
Currently, the only U.S. Treasury security issued without coupons is the
Treasury bill. However, in the last few years a number of banks and brokerage
firms have separated ("stripped") the principal portions from the coupon
portions of the U.S. Treasury bonds and notes and sold them separately in the
form of receipts or certificates representing undivided interests in these
instruments (which instruments are generally held by a bank in a custodial or
trust account).
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements and subject to Investment Restriction (11) below, each Series of
the Fund may lend its portfolio securities to brokers, dealers and other
financial institutions, provided that such loans are callable at any time by
the Series, and are at all times secured by cash or money market instruments,
which are maintained in a segregated account pursuant to applicable
regulations and that are equal to at least the market value, determined
daily, of the loaned securities. The advantage of such loans is that the
Series continues to receive the income on the loaned securities while at the
same time earning interest on the cash amounts deposited as collateral, which
will be invested in short-term obligations. A Series will not lend portfolio
securities having a value of more than 10% of its total assets.
A loan may be terminated by the borrower on one business day's notice, or
by a Series on four business days' notice. If the borrower fails to deliver
the loaned securities within four days after receipt of notice, the Series
could use the collateral to replace the securities while holding the borrower
liable
20
<PAGE>
for any excess of replacement cost over collateral. As with any extensions of
credit, there are risks of delay in recovery and in some cases even loss of
rights in the collateral should the borrower of the securities fail
financially. However, these loans of portfolio securities will only be made
of firms deemed by the Fund's management to be creditworthy and when the
income which can be earned from such loans justifies the attendant risks.
Upon termination of the loan, the borrower is required to return the
securities to the Fund. Any gain or loss in the market price during the loan
period would inure to the Series.
When voting or consent rights which accompany loaned securities pass to
the borrower, a Series will follow the policy of calling the loaned
securities, in whole or in part as may be appropriate, to be delivered within
one day after notice, to permit the exercise of such rights if the matters
involved would have a material effect on the Series' investment in such
loaned securities. A Series will pay reasonable finder's, administrative and
custodial fees in connection with a loan of its securities. No Series lent
any of its portfolio securities during the fiscal period ended July 31, 1997
and no Series has any intention of lending any of its porfolio securities
during the current fiscal year of the Fund.
U.S. Government Securities. As stated in the Prospectus, the Intermediate
Income Securities and Utilities Series may invest in U.S. Government
securities. Securities issued by the U.S. Government, its agencies or
instrumentalities in which the Intermediate Income Securities and Utilities
Series may invest include:
(1) U.S. Treasury bills (maturities of one year or less), U.S. Treasury
notes (maturities of one to ten years) and U.S. Treasury bonds (generally
maturities of greater than ten years), all of which are direct obligations
of the U.S. Government and, as such, are backed by the "full faith and
credit" of the United States.
(2) Securities issued by agencies and instrumentalities of the U.S.
Government which are backed by the full faith and credit of the United
States. Among the agencies and instrumentalities issuing such obligations
are the Federal Housing Administration, the Government National Mortgage
Association ("GNMA"), the Department of Housing and Urban Development, the
Export Import Bank, the Farmers Home Administration; the General Services
Administration, the Maritime Administration and the Small Business
Administration. The maturities of such obligations range from three months
to thirty years although the Fund may not invest in securities with
maturities of more than twelve years.
(3) Securities issued by agencies and instrumentalies which are not
backed by the full faith and credit of the United States, but whose issuing
agency or instrumentality has the right to borrow, to meet its obligations,
from an existing line of credit with the U.S. Treasury. Among the agencies
and instrumentalities issuing such obligations are the Tennessee Valley
Authority, the Federal National Mortgage Association ("FNMA"), the Federal
Home Loan Mortgage Corporation ("FHLMC") and the U.S. Postal Service.
(4) Securities issued by agencies and instrumentalities which are not
backed by the full faith and credit of the United States, but which are
backed by the credit of the issuing agency or instrumentality. Among the
agencies and instrumentalities issuing such obligations are the Federal Farm
Credit System and the Federal Home Loan Bank.
OPTIONS AND FUTURES TRANSACTIONS
As discussed in the Prospectus, each of the Intermediate Income
Securities, American Value, Capital Growth, Strategist, Utilities and Global
Equity Series may write covered call options against securities held in its
portfolio and covered put options on eligible portfolio securities (the
Capital Growth Series may also write covered put and call options on stock
and bond indexes) and purchase options of the same series to effect closing
transactions, and may hedge against potential changes in the market value of
investments (or anticipated investments) by purchasing put and call options
on portfolio (or eligible portfolio) securities and engaging in transactions
involving futures contracts and options on such
21
<PAGE>
contracts. The Global Equity Series may also hedge against potential changes
in the market value of the currencies in which its investments (or
anticipated investments) are denominated by purchasing put and call options
on currencies and engage in transactions involving currency futures contracts
and options on such contracts.
Call and put options on U.S. Treasury notes, bonds and bills and equity
securities are listed on Exchanges and are written in over-the-counter
transactions ("OTC options"). Listed options are issued by the Options
Clearing Corporation ("OCC") and other clearing entities including foreign
exchanges. Ownership of a listed call option gives a Series the right to buy
from the OCC the underlying security covered by the option at the stated
exercise price (the price per unit of the underlying security) by filing an
exercise notice prior to the expiration date of the option. The writer
(seller) of the option would then have the obligation to sell to the OCC the
underlying security at that exercise price prior to the expiration date of
the option, regardless of its then current market price. Ownership of a
listed put option would give the Series the right to sell the underlying
security to the OCC at the stated exercise price. Upon notice of exercise of
the put option, the writer of the put would have the obligation to purchase
the underlying security from the OCC at the exercise price.
Options on Treasury Bonds and Notes. Because trading in options written on
Treasury bonds and notes tends to center on the most recently auctioned
issues, the exchanges on which such securities trade will not continue
indefinitely to introduce options with new expirations to replace expiring
options on particular issues. Instead, the expirations introduced at the
commencement of options trading on a particular issue will be allowed to run
their course, with the possible addition of a limited number of new
expirations as the original ones expire. Options trading on each issue of
bonds or notes will thus be phased out as new options are listed on more
recent issues, and options representing a full range of expirations will not
ordinarily be available for every issue on which options are traded.
Options on Treasury Bills. Because a deliverable Treasury bill changes
from week to week, writers of Treasury bill calls cannot provide in advance
for their potential exercise settlement obligations by acquiring and holding
the underlying security. However, if a Series holds a long position in
Treasury bills with a principal amount of the securities deliverable upon
exercise of the option, the position may be hedged from a risk standpoint by
the writing of a call option. For so long as the call option is outstanding,
the Series will hold the Treasury bills in a segregated account with its
Custodian, so that they will be treated as being covered.
Options on GNMA Certificates. Currently, options on GNMA Certificates are
only traded over-the-counter. Since the remaining principal balance of GNMA
Certificates declines each month as a result of mortgage payments, a Series,
as a writer of a GNMA call holding GNMA Certificates as "cover" to satisfy
its delivery obligation in the event of exercise, may find that the GNMA
Certificates it holds no longer have a sufficient remaining principal balance
for this purpose. Should this occur, the Series will purchase additional GNMA
Certificates from the same pool (if obtainable) or replacement GNMA
Certificates in the cash market in order to maintain its cover. A GNMA
Certificate held by the Series to cover an option position in any but the
nearest expiration month may cease to represent cover for the option in the
event of a decline in the GNMA coupon rate at which new pools are originated
under the FHA/VA loan ceiling in effect at any given time, as such decline
may increase the prepayments made on other mortgage pools. If this should
occur, the Series will no longer be covered, and the Series will either enter
into a closing purchase transaction or replace such Certificate with a
Certificate which represents cover. When the Series closes out its position
or replaces such Certificate, it may realize an unanticipated loss and incur
transaction costs.
Options on Foreign Currencies. The Global Equity Series may purchase and
write options on foreign currencies for purposes similar to those involved
with investing in forward foreign currency exchange contracts. For example,
in order to protect against declines in the dollar value of portfolio
securities which are denominated in a foreign currency, the Global Equity
Series may purchase put options on an amount of such foreign currency
equivalent to the current value of the portfolio securities involved. As a
result, the Global Equity Series would be enabled to sell the foreign
currency for a fixed amount of U.S. dollars, thereby "locking in" the dollar
value of the portfolio securities (less the amount
22
<PAGE>
of the premiums paid for the options). Conversely, the Global Equity Series
may purchase call options on foreign currencies in which securities it
anticipates purchasing are denominated to secure a set U.S. dollar price for
such securities and protect against a decline in the value of the U.S. dollar
against such foreign currency. The Global Equity Series may also purchase
call and put options to close out written option positions.
The Global Equity Series may also write call options on foreign currency
to protect against potential declines in its portfolio securities which are
denominated in foreign currencies. If the U.S. dollar value of the portfolio
securities falls as a result of a decline in the exchange rate between the
foreign currency in which a security is denominated and the U.S. dollar, then
a loss to the Series occasioned by such value decline would be ameliorated by
receipt of the premium on the option sold. At the same time, however, the
Series gives up the benefit of any rise in value of the relevant portfolio
securities above the exercise price of the option and, in fact, only receives
a benefit from the writing of the option to the extent that the value of the
portfolio securities falls below the price of the premium received. The
Global Equity Series may also write options to close out long call option
positions.
The markets in foreign currency options are relatively new and the Global
Equity Series' ability to establish and close out positions on such options
is subject to the maintenance of a liquid secondary market. Although the
Series will not purchase or write such options unless and until, in the
opinion of management of the Series, the market for them has developed
sufficiently to ensure that the risks in connection with such options are not
greater than the risks in connection with the underlying currency, there can
be no assurance that a liquid secondary market will exist for a particular
option at any specific time. In addition, options on foreign currencies are
affected by all of those factors which influence foreign exchange rates and
investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of
the option position may vary with changes in the value of either or both
currencies and have no relationship to the investment merits of a foreign
security, including foreign securities held in a "hedged" investment
portfolio. Because foreign currency transactions occurring in the interbank
market involve substantially larger amounts than those that may be involved
in the use of foreign currency options, investors may be disadvantaged by
having to deal in an odd lot market (generally consisting of transactions of
less than $1 million) for the underlying foreign currencies at prices that
are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Quotation information available is generally representative of very large
transactions in the interbank market and thus may not reflect relatively
smaller transactions (i.e., less than $1 million) where rates may be less
favorable. The interbank market in foreign currencies is a global,
around-the-clock market. To the extent that the U.S. options markets are
closed while the markets for the underlying currencies remain open,
significant price and rate movements may take place in the underlying markets
that are not reflected in the options market.
OTC Options. Exchange-listed options are issued by the OCC (in the U.S.)
or other clearing corporation or exchange which assures that all transactions
in such options are properly executed. OTC options are purchased from or sold
(written) to dealers or financial institutions which have entered into direct
agreements with the relevant Series of the Fund. With OTC options, such
variables as expiration date, exercise price and premium will be agreed upon
between a Series and the transacting dealer, without the intermediation of a
third party such as the OCC. If the transacting dealer fails to make or take
delivery of the securities or amount of foreign currency underlying an option
it has written, in accordance with the terms of the option, the Series would
lose the premium paid for the option as well as any anticipated benefit of
the transaction. The Fund will engage in OTC option transactions only with
member banks of the Federal Reserve System or primary dealers in U.S.
Government securities or with affiliates of such banks or dealers which have
capital of at least $50 million or whose obligations are guaranteed by an
entity having capital of at least $50 million.
23
<PAGE>
Covered Call Writing. As stated in the Prospectus, the Series are
permitted to write covered call options on portfolio securities, and the
Global Equity Series is permitted to write covered call options on the U.S.
dollar and foreign currencies, in each case without limit, in order to aid in
achieving their investment objectives. Generally, a call option is "covered"
if the Series owns, or has the right to acquire, without additional cash
consideration (or for additional cash consideration held for the Series by
its Custodian in a segregated account) the underlying security (currency)
subject to the option except that in the case of call options on U.S.
Treasury Bills, a Series might own U.S. Treasury Bills of a different series
from those underlying the call option, but with a principal amount and value
corresponding to the exercise price and a maturity date no later than that of
the securities (currency) deliverable under the call option. A call option is
also covered if the Series holds a call on the same security (currency) as
the underlying security of the written option, where the exercise price of
the call used for coverage is equal to or less than the exercise price of the
call written or greater than the exercise price of the call written if the
mark-to-market difference is maintained by the Series in cash, U.S.
Government securities or other liquid portfolio securities which the Series
holds in a segregated account maintained with the Series' Custodian.
The Series will receive from the purchaser, in return for a call it has
written, a "premium," i.e., the price of the option. Receipt of these
premiums may better enable the Series to achieve a high current income return
for their shareholders or achieve a more consistent average total return than
would be realized from holding the underlying securities (and, in the case of
the Global Equity Series, currencies) alone. Moreover, the premium received
will offset a portion of the potential loss incurred by the Series if the
securities (currencies) underlying the option are ultimately sold (exchanged)
by the Series at a loss. The value of the premium received will fluctuate
with varying economic market conditions. If the market value of the portfolio
securities (or the currencies in which they are denominated) upon which call
options have been written increases, a Series may receive less total return
from the portion of its portfolio upon which calls have been written than it
would have had such calls not been written.
As regards listed options and certain over-the-counter ("OTC") options,
during the option period, the Series may be required, at any time, to deliver
the underlying security (currency) against payment of the exercise price on
any calls it has written (exercise of certain listed and OTC options may be
limited to specific expiration dates). This obligation is terminated upon the
expiration of the option period or at such earlier time when the writer
effects a closing purchase transaction. A closing purchase transaction is
accomplished by purchasing an option of the same series as the option
previously written. However, once the Series has been assigned an exercise
notice, the Series will be unable to effect a closing purchase transaction.
Closing purchase transactions are ordinarily effected to realize a profit
on an outstanding call option, to prevent an underlying security (currency)
from being called, to permit the sale of an underlying security (or the
exchange of the underlying currency) or to enable the Series to write another
call option on the underlying security (currency) with either a different
exercise price or expiration date or both. Also, effecting a closing purchase
transaction will permit the cash or proceeds from the concurrent sale of any
securities subject to the option to be used for other investments by the
Series. The Series may realize a net gain or loss from a closing purchase
transaction depending upon whether the amount of the premium received on the
call option is more or less than the cost of effecting the closing purchase
transaction. Any loss incurred in a closing purchase transaction may be
wholly or partially offset by unrealized appreciation in the market value of
the underlying security (currency). Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part or exceeded
by a decline in the market value of the underlying security (currency).
If a call option expires unexercised, the Series realizes a gain in the
amount of the premium on the option less the commission paid. Such a gain,
however, may be offset by depreciation in the market value of the underlying
security (currency) during the option period. If a call option is exercised,
the Series realizes a gain or loss from the sale of the underlying security
(currency) equal to the difference between the purchase price of the
underlying security (currency) and the proceeds of the sale of the security
(currency) plus the premium received when the option was written, less the
commission paid.
24
<PAGE>
Options written by a Series normally have expiration dates of up to
eighteen months from the date written. The exercise price of a call option
may be below, equal to or above the current market value of the underlying
security (currency) at the time the option is written. See "Risks of Options
and Futures Transactions," below.
The Series may also purchase put options to close out written put
positions in a manner similar to call options closing purchase transactions.
In addition, a Series may sell a put option which it has previously purchased
prior to the sale of the securities (currency) underlying such option. Such a
sale would result in a net gain or loss depending on whether the amount
received on the sale is more or less than the premium and other transaction
costs paid on the put option which is sold. Any such gain or loss could be
offset in whole or in part by a change in the market value of the underlying
security (currency). If a put option purchased by a Series expired without
being sold or exercised, the premium would be lost.
Covered Put Writing. As stated in the Prospectus, as a writer of a covered
put option, the Series incurs an obligation to buy the security underlying
the option from the purchaser of the put, at the option's exercise price at
any time during the option period, at the purchaser's election (certain
listed and OTC put options written by the Series will be exercisable by the
purchaser only on a specific date). A put is "covered" if the Series
maintains, at all times, in a segregated account maintained on its behalf at
its Custodian, cash, U.S. Government securities or other liquid portfolio
securities in an amount equal to at least the exercise price of the option,
at all times during the option period. Similarly, a written put position
could be covered by the Series by its purchase of a put option on the same
security as the underlying security of the written option, where the exercise
price of the purchased option is equal to or more than the exercise price of
the put written or less than the exercise price of the put written if the
mark-to-market difference is maintained by the Series in cash, U.S.
Government securities or other liquid portfolio securities which the Series
holds in a segregated account maintained at its Custodian. In writing puts, a
Series assumes the risk of loss should the market value of the underlying
security decline below the exercise price of the option (any loss being
decreased by the receipt of the premium on the option written). In the case
of listed options, during the option period, the Series may be required, at
any time, to make payment of the exercise price against delivery of the
underlying security. The operation of and limitations on covered put options
in other respects are substantially identical to those of call options.
A Series will write put options for two purposes: (1) to receive the
income derived from the premiums paid by purchasers; and (2) when the
Investment Manager wishes to purchase the security underlying the option at a
price lower than its current market price, in which case the Series will
write the covered put at an exercise price reflecting the lower purchase
price sought. The potential gain on a covered put option is limited to the
premium received on the option (less the commissions paid on the transaction)
while the potential loss equals the difference between the exercise price of
the option and the current market price of the underlying securities when the
put is exercised, offset by the premium received (less the commissions paid
on the transaction).
Purchasing Call and Put Options. As stated in the Prospectus, the Series
may purchase listed and OTC call and put options in amounts equalling up to
10% of the total assets of the Series. The Series may purchase call options
in order to close out a covered call position (see "Covered Call Writing"
above) or purchase call options on securities they intend to purchase. The
Global Equity Series may purchase a call option on foreign currency to hedge
against an adverse exchange rate move of the currency in which the security
it anticipates purchasing is denominated vis-a-vis the currency in which the
exercise price is denominated. The purchase of the call option to effect a
closing transaction or a call written over-the-counter may be a listed or an
OTC option. In either case, the call purchased is likely to be on the same
securities (currencies) and have the same terms as the written option. If
purchased over-the-counter, the option would generally be acquired from the
dealer or financial institution which purchased the call written by the
Series.
Each Series may purchase put options on securities (and, in the case of
the Global Equity Series, on currencies) which it holds (or has the right to
acquire) in its portfolio only to protect itself against a decline in the
value of the security (currency). If the value of the underlying security
(currency) were to fall below the exercise price of the put purchased in an
amount greater than the premium paid for the
25
<PAGE>
option, the Series would incur no additional loss. A Series may also purchase
put options to close out written put positions in a manner similar to call
options closing purchase transactions. In addition, a Series may sell a put
option which it has previously purchased prior to the sale of the securities
(currencies) underlying such option. Such a sale would result in a net gain
or loss depending on whether the amount received on the sale is more or less
than the premium and other transaction costs paid on the put option when it
was purchased. Any such gain or loss could be offset in whole or in part by a
change in the market value of the underlying security (currency). If a put
option purchased by a Series expired without being sold or exercised, the
Series would realize a loss.
Risks of Options Transactions. The successful use of options depends on
the ability of the Investment Manager to forecast correctly interest rates
and market movements. If the market value of the portfolio securities (or, in
the case of the Global Equity Series, the currencies in which they are
denominated) upon which call options have been written increases, the Series
may receive a lower total return from the portion of its portfolio upon which
calls have been written than it would have had such calls not been written.
In writing puts, the Series assumes the risk of loss should the market value
of the underlying securities (or, in the case of the Global Equity Series,
the currencies in which they are denominated) decline below the exercise
price of the option (any loss being decreased by the receipt of the premium
on the option written). During the option period, the covered call writer
has, in return for the premium on the option, given up the opportunity for
capital appreciation above the exercise price should the market price of the
underlying security (or, in the case of the Global Equity Series, the value
of the security's denominated currency) increase, but has retained the risk
of loss should the price of the underlying security (or, in the case of the
Global Equity Series, the value of the security's denominated currency)
decline. The covered put writer also retains the risk of loss should the
market value of the underlying security decline below the exercise price of
the option less the premium received on the sale of the option. In both
cases, the writer has no control over the time when it may be required to
fulfill its obligation as a writer of the option. Once an option writer has
received an exercise notice, it cannot effect a closing purchase transaction
in order to terminate its obligation under the option and must deliver or
receive the underlying securities at the exercise price. A covered put option
writer who is unable to effect a closing purchase transaction or to purchase
an offsetting OTC option would continue to bear the risk of decline in the
market price of the underlying security (or, in the case of the Global Equity
Series, currency) until the option expires or is exercised. In addition, a
covered put writer would be unable to utilize the amount held in cash or U.S.
Government or other liquid portfolio securities as security for the put
option for other investment purposes until the exercise or expiration of the
option.
Prior to exercise or expiration, an option position can only be terminated
by entering into a closing purchase or sale transaction. If a covered put
call option writer is unable to effect a closing purchase transaction or to
purchase an offsetting OTC option, it cannot sell the underlying security
until the option expires or the option is exercised. Accordingly, a covered
call option writer may not be able to sell an underlying security (or, in the
case of the Global Equity Series, currency) at a time when it might otherwise
be advantageous to do so.
A Series' ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on option
exchanges. There is no assurance that such a market will exist, particularly
in the case of OTC options, as such options will generally only be closed out
by entering into a closing purchase transaction with the purchasing dealer.
However, a Series may be able to purchase an offsetting option which does not
close out its position as a writer but constitutes an asset of equal value to
the obligation under the option written. If the Series is not able to either
enter into a closing purchase transaction or purchase an offsetting position,
it will be required to maintain the securities subject to the call, or the
collateral underlying the put, even though it might not be advantageous to do
so, until a closing transaction can be entered into (or the option is
exercised or expires).
Among the possible reasons for the absence of a liquid secondary market on
an exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes
or series of options or underlying securities; (iv) interruption of the
normal operations on an exchange; (v) inadequacy of the facilities of an
exchange or the Options Clearing Corporation ("OCC") to handle
26
<PAGE>
current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that exchange (or in that
class or series of options) would cease to exist, although outstanding
options on that exchange that had been issued by the OCC as a result of
trades on that exchange would generally continue to be exercisable in
accordance with their terms.
In the event of the bankruptcy of a broker through which a Series engages
in transactions in options, the Series could experience delays and/or losses
in liquidating open positions purchased or sold through the broker and/or
incur a loss of all or part of its margin deposits with the broker.
Similarly, in the event of the bankruptcy of the writer of an OTC option
purchased by a Series, the Series could experience a loss of all or part of
the value of the option. Transactions are entered into by a Series only with
brokers or financial institutions deemed creditworthy by the Fund's
management.
Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security or futures
contract (whether or not covered) which may be written by a single investor,
whether acting alone or in concert with others (regardless of whether such
options are written on the same or different exchanges or are held or written
on one or more accounts or through one or more brokers). An exchange may
order the liquidation of positions found to be in violation of these limits
and it may impose other sanctions or restrictions. These position limits may
restrict the number of listed options which a Series may write.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be
reflected in the option markets.
Stock Index Options. Series may also invest in options on stock indexes.
As stated in the Prospectus, options on stock indexes are similar to options
on stock except that, rather than the right to take or make delivery of stock
at a specified price, an option on a stock index gives the holder the right
to receive, upon exercise of the option, an amount of cash if the closing
level of the stock index upon which the option is based is greater than, in
the case of a call, or less than, in the case of a put, the exercise price of
the option. This amount of cash is equal to such difference between the
closing price of the index and the exercise price of the option expressed in
dollars times a specified multiple (the "multiplier"). The multiplier for an
index option performs a function similar to the unit of trading for a stock
option. It determines the total dollar value per contract of each point in
the difference between the exercise price of an option and the current level
of the underlying index. A multiplier of 100 means that a one-point
difference will yield $100. Options on different indexes may have different
multipliers. The writer of the option is obligated, in return for the premium
received, to make delivery of this amount. Unlike stock options, all
settlements are in cash and a gain or loss depends on price movements in the
stock market generally (or in a particular segment of the market) rather than
the price movements in individual stocks. Currently, options are traded on,
among other indexes, the Standard & Poor's 100 Index and the Standard &
Poor's 500 Index on the Chicago Board Options Exchange, the Major Market
Index and the Computer Technology Index, Oil Index and Institutional Index on
the American Stock Exchange and the NYSE Index and NYSE Beta Index on the New
York Stock Exchange). The Financial News Composite Index on the Pacific Stock
Exchange and the Value Line Index, National O-T-C Index and Utilities Index
on the Philadelphia Stock Exchange, each of which and any similar index on
which options are traded in the future which include stocks that are not
limited to any particular industry or segment of the market is referred to as
a "broadly based stock market index." Options on broad-based stock indexes
provide the Series with a means of protecting the Series against the risk of
market-wide price movements. If the Investment Manager anticipates a market
decline, the Series could purchase a stock index put option. If the expected
market decline materialized, the resulting decrease in the value of the
Series' portfolio would be offset to the extent of the increase in the value
of the put option. If the Investment Manager anticipates a market rise, the
Series may purchase a stock index call option to enable the Series to
participate in such rise until completion of anticipated common stock
purchases by the Series. Purchases and sales of stock index options also
enable the Investment Manager to more speedily achieve changes in a Series'
equity positions.
27
<PAGE>
Series will be able to write put options on stock indexes only if such
positions are covered by cash, U.S. Government securities or other liquid
portfolio securities equal to the aggregate exercise price of the puts, or by
a put option on the same stock index with a strike price no lower than the
strike price of the put option sold by the Series, which cover is held by the
Series in a segregated account maintained for it by its Custodian. All call
options on stock indexes written by a Series will be covered either by a
portfolio of stocks substantially replicating the movement of the index
underlying the call option or by holding a separate call option on the same
stock index with a strike price no higher than the strike price of the call
option sold by the Series.
Risks of Options on Indexes. Because exercises of stock index options are
settled in cash, the Series, as a call writer, would not be able to provide
in advance for their potential settlement obligations by acquiring and
holding the underlying securities. A call writer can offset some of the risk
of its position by holding a diversified portfolio of stocks similar to those
on which the underlying index is based. However, most investors cannot, as a
practical matter, acquire and hold a portfolio containing exactly the same
stocks as the underlying index, and, as a result, bear a risk that the value
of the securities held will vary from the value of the index. Even if an
index call writer could assemble a stock portfolio that exactly reproduced
the composition of the underlying index, the writer still would not be fully
covered from a risk standpoint because of the "timing risk" inherent in
writing index options. When an index option is exercised, the amount of cash
that the holder is entitled to receive is determined by the difference
between the exercise price and the closing index level on the date when the
option is exercised. As with other kinds of options, the writer will not
learn that it has been assigned until the next business day, at the earliest.
The time lag between exercise and notice of assignment poses no risk for the
writer of a covered call on a specific underlying security, such as a common
stock, because there the writer's obligation is to deliver the underlying
security, not to pay its value as of a fixed time in the past. So long as the
writer already owns the underlying security, it can satisfy its settlement
obligations by simply delivering it, and the risk that its value may have
declined since the exercise date is borne by the exercising holder. In
contrast, even if the writer of an index call holds stocks that exactly match
the composition of the underlying index, it will not be able to satisfy its
assignment obligations by delivering those stocks against payment of the
exercise price. Instead, it will be required to pay cash in an amount based
on the closing index value on the exercise date; and by the time it learns
that it has been assigned, the index may have declined, with a corresponding
decline in the value of its stock portfolio. This "timing risk" is an
inherent limitation on the ability of index call writers to cover their risk
exposure by holding stock positions.
A holder of an index option who exercises it before the closing index
value for that day is available runs the risk that the level of the
underlying index may subsequently change. If such a change causes the
exercised option to fall out-of-the-money, the exercising holder will be
required to pay the difference between the closing index value and the
exercise price of the option (times the applicable multiplier) to the
assigned writer.
If dissemination of the current level of an underlying index is
interrupted, or if trading is interrupted in stocks accounting for a
substantial portion of the value of an index, the trading of options on that
index will ordinarily be halted. If the trading of options on an underlying
index is halted, an exchange may impose restrictions prohibiting the exercise
of such options.
Futures Contracts. As stated in the Prospectus, the Utilities, American
Value, Capital Growth, Strategist, Value-Added Market, Intermediate Income
Securities and Global Equity Series may purchase and sell interest rate
futures contracts that are traded, or may in the future be traded, on U.S.
(and in the case of Global Equity Series, foreign) commodity exchanges on
such underlying securities as U.S. Treasury bonds, notes, bills and GNMA
Certificates and stock and bond index futures contracts that are traded, or
may in the future be traded, on U.S. commodity exchanges on such indexes as
the Moody's Investment-Grade Corporate Bond Index, S&P 500 Index and the New
York Stock Exchange Composite Index.
As a futures contract purchaser, a Series incurs an obligation to take
delivery of a specified amount of the obligation underlying the contract at a
specified time in the future for a specified price. As a seller of a futures
contract, a Series incurs an obligation to deliver the specified amount of
the underlying obligation at a specified time in return for an agreed upon
price.
28
<PAGE>
Series will purchase or sell interest rate futures contracts for the
purpose of hedging their fixed-income portfolio (or anticipated portfolio)
securities against changes in prevailing interest rates or, to alter the
Series' asset allocation in fixed-income securities. If it is anticipated
that interest rates may rise and, concomitantly, the price of certain of its
portfolio securities fall, a Series may sell an interest rate futures
contract or a bond index futures contract. If declining interest rates are
anticipated, or if the Investment Manager wishes to increase the Series'
allocation of fixed-income securities, a Series may purchase an interest rate
futures contract or a bond index futures contract to protect against a
potential increase in the price of securities the Series intends to purchase.
Subsequently, appropriate securities may be purchased by the Series in an
orderly fashion; as securities are purchased, corresponding futures positions
would be terminated by offsetting sales of contracts.
Series will purchase or sell stock index futures contracts for the purpose
of hedging their equity portfolio (or anticipated portfolio) securities
against changes in their prices. If the Investment Manager anticipates that
the prices of stock held by a Series may fall or wishes to decrease the
Series' asset allocation in equity securities, the Series may sell a stock
index futures contract. Conversely, if the Investment Manager wishes to
increase the assets of the Series which are invested in stocks or as a hedge
against anticipated prices rises in those stocks which the Series intends to
purchase, the Series may purchase stock index futures contracts. This allows
the Series to purchase equities, in accordance with the asset allocations of
the Series management, in an orderly and efficacious manner.
The Global Equity Series will purchase or sell futures contracts on
currencies in which its portfolio securities (or anticipated portfolio
securities) are denominated for the purposes of hedging against anticipated
changes in currency exchange rates. The Global Equity Series will enter into
currency futures contracts for the same reasons as set forth under the
heading "Forward Foreign Currency Exchange Contracts" under "The Global
Equity Series" above for entering into forward foreign currency contracts;
namely, to "lock-in" the value of a security purchased or sold in a given
currency vis-a-vis a different currency or to hedge against an adverse
currency exchange rate movement of a portfolio security's (or anticipated
portfolio security's) denominated currency vis-a-vis a different currency.
In addition to the above, interest rate and bond index and stock index
(and currency) futures contracts will be bought or sold in order to close out
a short or long position in a corresponding futures contract.
Although most interest rate futures contracts call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. Index futures
contracts provide for the delivery of an amount of cash equal to a specified
dollar amount times the difference between the index value at the open or
close of the last trading day of the contract and the futures contract price.
A futures contract sale is closed out by effecting a futures contract
purchase for the same aggregate amount of the specific type of security (or,
in the case of the Global Equity Series, currency) and the same delivery
date. If the sale price exceeds the offsetting purchase price, the seller
would be paid the difference and would realize a gain. If the offsetting
purchase price exceeds the sale price, the seller would pay the difference
and would realize a loss. Similarly, a futures contract purchase is closed
out by effecting a futures contract sale for the same aggregate amount of the
specific type of security (currency) and the same delivery date. If the
offsetting sale price exceeds the purchase price, the purchaser would realize
a gain, whereas if the purchase price exceeds the offseting sale price, the
purchaser would realize a loss. There is no assurance that a Series will be
able to enter into a closing transaction.
When a Series enters into a futures contract it is initially required to
deposit with its Custodian, in an account in the name of the broker
performing the transaction, an "initial margin" of cash or U.S. Government
securities or other high grade short-term obligations equal to approximately
2% (for interest rate futures contracts) of the contract amount. Initial
margin requirements are established by the Exchanges on which futures
contracts trade and may, from time to time, change. In addition, brokers may
establish margin deposit requirements in excess of those required by the
Exchanges.
Initial margin in futures contract transactions is different from margin
in securities transactions in that initial margin does not involve the
borrowing of funds by a broker's client but is, rather, a good faith
29
<PAGE>
deposit on the futures contract which will be returned to the Series upon the
proper termination of the futures contract. The margin deposits made are
marked-to-market daily and the Series may be required to make subsequent
deposits of cash or U.S. Government securities, called "variation margin,"
with the Series' futures contract clearing broker, which are reflective of
price fluctuations in the futures contract. Currently, interest rate futures
contracts can be purchased on debt securities such as U.S. Treasury Bills and
Bonds, U.S. Treasury Notes with maturities between 6-1/2 and 10 years, GNMA
Certificates and Bank Certificates of Deposit.
Index Futures. As discussed in the Prospectus, the Series may also invest
in stock index futures contracts. An index futures contract sale creates an
obligation by the Series, as seller, to deliver cash at a specified future
time. An index futures contract purchase would create an obligation by the
Series, as purchaser, to take delivery of cash at a specified future time.
Futures contracts on indexes do not require the physical delivery of
securities, but provide for a final cash settlement on the expiration date
which reflects accumulated profits and losses credited or debited to each
party's account.
The Series is required to maintain margin deposits with brokerage firms
through which it effects index futures contracts in a manner similar to that
described above for interest rate futures contracts. Currently, the initial
margin requirements range from 3% to 10% of the contract amount for index
futures. In addition, due to current industry practice, daily variations in
gains and losses on open contracts are required to be reflected in cash in
the form of variation margin payments. The Series may be required to make
additional margin payments during the term of the contract.
At any time prior to expiration of the futures contract, the Series may
elect to close the position by taking an opposite position which will operate
to terminate the Series' position in the futures contract. A final
determination of variation margin is then made, additional cash is required
to be paid by or released to the Series and the Series realizes a loss or a
gain.
Currently, index futures contracts can be purchased or sold with respect
to, among others, the Standard & Poor's 500 Stock Price Index and the
Standard & Poor's 100 Stock Price Index on the Chicago Mercantile Exchange,
the New York Stock Exchange Composite Index on the New York Futures Exchange,
the Major Market Index on the American Stock Exchange, the Value Line Stock
Index on the Kansas City Board of Trade and the Moody's Investment-Grade
Corporate Bond Index on the Chicago Board of Trade.
Currency Futures. As noted above, the Global Equity Series may invest in
foreign currency futures. Generally, foreign currency futures provide for the
delivery of a specified amount of a given currency, on the exercise date, for
a set exercise price denominated in U.S. dollars or other currency. Foreign
currency futures contracts would be entered into for the same reason and
under the same circumstances as forward foreign currency exchange contracts.
The Global Equity Series' management will assess such factors as cost
spreads, liquidity and transaction costs in determining whether to utilize
futures contracts or forward contracts in its foreign currency transactions
and hedging strategy. Currently, currency futures exist for, among other
foreign currencies, the Japanese yen, German mark, Canadian dollar, British
pound, Swiss franc and European currency unit.
Purchasers and sellers of foreign currency futures contracts are subject
to the same risks that apply to the buying and selling of futures generally.
In addition, there are risks associated with foreign currency futures
contracts and their use as a hedging device similar to those associated with
options on foreign currencies described above. Further, settlement of a
foreign currency futures contract must occur within the country issuing the
underlying currency. Thus, the Global Equities Series must accept or make
delivery of the underlying foreign currency in accordance with any U.S. or
foreign restrictions or regulation regarding the maintenance of foreign
banking arrangements by U.S. residents and may be required to pay any fees,
taxes or charges associated with such delivery which are assessed in the
issuing country.
Options on foreign currency futures contracts may involve certain
additional risks. Trading options on foreign currency futures contracts is
relatively new. The ability to establish and close out positions on such
options is subject to the maintenance of a liquid secondary market. To reduce
this risk, the Global
30
<PAGE>
Equity Series will not purchase or write options on foreign currency futures
contracts unless and until, in the opinion of the Series' management, the
market for such options has developed sufficiently that the risks in
connection with such options are not greater than the risks in connection
with transactions in the underlying foreign currency futures contracts.
Options on Futures Contracts. The Series may purchase and write call and
put options on futures contracts which are traded on an exchange and enter
into closing transactions with respect to such options to terminate an
existing position. An option on a futures contract gives the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the term of
the option. Upon the exericse of the option, the delivery of the futures
position by the writer of the option to the holder of the option is
accompanied by delivery of the accumulated balance in the writer's futures
margin account, which represents the amount by which the market price of the
futures contract at the time of exercise exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract.
The Series will only purchase and write options on futures contracts for
identical purposes to those set forth above for the purchase of a futures
contract (purchase of a call option or sale of a put option) and the sale of
a futures contract (purchase of a put option or sale of a call option), or to
close out a long or short position in futures contracts. If, for example, the
Investment Manager wished to protect against an increase in interest rates
and the resulting negative impact on the value of a portion of a Series'
fixed-income portfolio, it might write a call option on an interest rate
futures contract, the underlying security of which correlates with the
portion of the portfolio the Series' management seeks to hedge. Any premiums
received in the writing of options on futures contracts may, of course,
augment the income of the Series and thereby provide a further hedge against
losses resulting from price declines in portions of its portfolio.
The writer of an option on a futures contract is required to deposit
initial and variation margin pursuant to requirements similar to those
applicable to futures contracts. Premiums received from the writing of an
option on a futures contract are included in initial margin deposits.
Limitations on Futures Contracts and Options on Futures. The Series may
not enter into futures contracts or purchase related options thereon if,
immediately thereafter, the amount committed to initial margin plus the
amount paid for premiums for unexpired options on futures contracts exceeds
5% of the value of the Series' total assets, after taking into account
unrealized gains and unrealized losses on such contracts it has entered into,
provided, however, that in the case of an option that is in-the-money (the
exercise price of the call (put) option is less (more) than the market price
of the underlying security) at the time of purchase, the in-the-money amount
may be excluded in calculating the 5%. However, there is no overall
limitation on the percentage of a Series' assets which may be subject to a
hedge position. In addition, in accordance with the regulations of the
Commodity Futures Trading Commission ("CFTC") under which the Fund is
exempted from registration as a commodity pool operator, Series may only
enter into futures contracts and options on futures contracts transactions
for purposes of hedging a part or all of the Series' portfolio. If the CFTC
changes its regulations so that the Fund would be permitted to write options
on futures contracts for income purposes without CFTC registration, these
Series may engage in such transactions for those purposes. Except as
described above, there are no other limitations on the use of futures and
options thereon by these Series.
Risks of Transactions in Futures Contracts and Related Options. The
successful use of futures and related options depends on the ability of the
Investment Manager to accurately predict market and interest rate movements.
As stated in the Prospectus, a Series may sell a futures contract to protect
against the decline in the value of securities (or, in the case of the Global
Equity Series, the currency in which securities are denominated) held by the
Series. However, it is possible that the futures market may advance and the
value of securites (or, in the case of the Global Equity Series, the currency
in which they are denominated) held in the Series may decline. If this
occurred, the Series would lose money on the futures contract and also
experience a decline in value of its portfolio securities. However, while
this could occur for a very brief period or to a very small degree, over time
the value of a diversified portfolio will tend to move in the same direction
as the futures contracts.
31
<PAGE>
If the Series purchases a futures contract to hedge against the increase
in value of securities it intends to buy (or the currency in which they are
denominated), and the value of such securities (currency) decreases, then the
Series may determine not to invest in the securities as planned and will
realize a loss on the futures contract that is not offset by a reduction in
the price of the securities.
If a Series maintains a short position in a futures contract or has sold a
call option on a futures contract, it will cover this position by holding, in
a segregated account maintained at its Custodian, cash, U.S. Government
securities or other high grade debt obligations equal in value (when added to
any initial or variation margin on deposit) to the market value of the
securities (currencies) underlying the futures contract or the exercise price
of the option. Such a position may also be covered by owning the securities
(currencies) underlying the futures contract (in the case of a stock index
futures contract a portfolio of securities substantially replicating the
relevant index), or by holding a call option permitting the Series to
purchase the same contract at a price no higher than the price at which the
short position was established.
In addition, if a Series holds a long position in a futures contract or
has sold a put option on a futures contract, it will hold cash, U.S.
Government securities or other liquid portfolio securities equal to the
purchase price of the contract or the exercise price of the put option (less
the amount of initial or variation margin on deposit) in a segregated account
maintained for the Series by its Custodian. Alternatively, the Series could
cover its long position by purchasing a put option on the same futures
contract with an exercise price as high or higher than the price at which the
short position was established.
In addition, if a Series holds a long position in a futures contract or
has sold a put option on a futures contract, it will hold cash, U.S.
Government securities or other liquid portfolio securities equal to the
purchase price of the contract or the exercise price of the put option (less
the amount of initial or variation margin on deposit) in a segregated account
maintained for the Series by its Custodian. Alternatively, the Series could
cover its long position by purchasing a put option on the same futures
contract with an exercise price as high or higher than the price of the
contract held by the Series.
Exchanges limit the amount by which the price of a futures contract may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased. In the event of adverse price movements, the Series
would continue to be required to make daily cash payments of variation margin
on open futures positions. In such situations, if the Series has insufficient
cash, it may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. In addition,
the Series may be required to take or make delivery of the instruments
underlying interest rate futures contracts it holds at a time when it is
disadvantageous to do so. The inability to close out options and futures
positions could also have an adverse impact on the Series' ability to
effectively hedge its portfolio.
With regard to the Global Equity Series, futures contracts and options
thereon which are purchased or sold on foreign commodities exchanges may have
greater price volatility than their U.S. counterparts. Furthermore, foreign
commodities exchanges may be less regulated and under less governmental
scrutiny than U.S. exchanges. Brokerage commissions, clearing costs and other
transaction costs may be higher on foreign exchanges. Greater margin
requirements may limit the Global Equity Series' ability to enter into
certain commodity transactions on foreign exchanges. Moreover, differences in
clearance and delivery requirements on foreign exchanges may occasion delays
in the settlement of the Series' transactions effected on foreign exchanges.
In the event of the bankruptcy of a broker through which the Series
engages in transactions in futures or options thereon, the Series could
experience delays and/or losses in liquidating open positions purchased or
sold through the broker and/or incur a loss of all or part of its margin
deposits with the broker. Similarly, in the event of the bankruptcy of the
writer of an OTC option purchased by the Series, the Series could experience
a loss of all or part of the value of the option. Transactions are entered
into by a Series only with brokers or financial institutions deemed
creditworthy by the Series' management.
While the futures contracts and options transactions to be engaged in by a
Series for the purpose of hedging the Series' portfolio securities are not
speculative in nature, there are risks inherent in the use
32
<PAGE>
of such instruments. One such risk which may arise in employing futures
contracts to protect against the price volatility of portfolio securities
(and, for the Global Equity Series, the currencies in which they are
denominated) is that the prices of securities and indexes subject to futures
contracts (and thereby the futures contract prices) may correlate imperfectly
with the behavior of the cash prices of the Series' portfolio securities (and
the currencies in which they are denominated). Another such risk is that
prices of interest rate futures contracts may not move in tandem with the
changes in prevailing interest rates against which the Series seeks a hedge.
A correlation may also be distorted by the fact that the futures market is
dominated by short-term traders seeking to profit from the difference between
a contract or security price objective and their cost of borrowed funds. Such
distortions are generally minor and would diminish as the contract approached
maturity.
As stated in the Prospectus, there may exist an imperfect correlation
between the price movements of futures contracts purchased by the Series and
the movements in the prices of the securities (currencies) which are the
subject of the hedge. If participants in the futures market elect to close
out their contracts through offsetting transactions rather than meet margin
deposit requirements, distortions in the normal relationship between the debt
securities and futures markets could result. Price distortions could also
result if investors in futures contracts opt to make or take delivery of
underlying securities rather than engage in closing transactions due to the
resultant reduction in the liquidity of the futures market. In addition, due
to the fact that, from the point of view of speculators, the deposit
requirements in the futures markets are less onerous than margin requirements
in the cash market, increased participation by speculators in the futures
market could cause temporary price distortions. Due to the possibility of
price distortions in the futures market and because of the imperfect
correlation between movements in the prices of securities and movements in
the prices of futures contracts, a correct forecast of interest rate trends
may still not result in a successful hedging transaction.
As stated in the Prospectus, there is no assurance that a liquid secondary
market will exist for futures contracts and related options in which Series
may invest. In the event a liquid market does not exist, it may not be
possible to close out a futures position, and in the event of adverse price
movements, a Series would continue to be required to make daily cash payments
of variation margin. In addition, limitations imposed by an exchange or board
of trade on which futures contracts are traded may compel or prevent a Series
from closing out a contract which may result in reduced gain or increased
loss to the Series. The absence of a liquid market in futures contracts might
cause the Series to make or take delivery of the underlying securities
(currencies) at a time when it may be disadvantageous to do so.
The extent to which the Series may enter into transactions involving
futures contracts and options thereon may be limited by the Internal Revenue
Code's requirements for qualification as a regulated investment company and
the Fund's intention to qualify each Series as such (see "Dividends,
Distributions and Taxes" in the Prospectus).
Compared to the purchase or sale of futures contracts, the purchase of
call or put options on futures contracts involves less potential risk to a
Series because the maximum amount at risk is the premium paid for the options
(plus transaction costs). However, there may be circumstances when the
purchase of a call or put option on a futures contract would result in a loss
to the Series notwithstanding that the purchase or sale of a futures contract
would not result in a loss, as in the instance where there is no movement in
the prices of the futures contract or underlying securities (currencies).
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus,
the investment restrictions listed below have been adopted by the Fund as
fundamental policies of the Series, except as otherwise indicated. Under the
Act, a fundamental policy may not be changed with respect to a Series without
the vote of a majority of the outstanding voting securities of that Series,
as defined in the Act. Such a majority is defined as the lesser of (a) 67% or
more of the shares of the Series present at a meeting of shareholders of the
Fund, if the holders of more than 50% of the outstanding shares of the Series
are present or represented by proxy or (b) more than 50% of the outstanding
shares of the Series. For purposes of the following restrictions and those
contained in the Prospectus: (i) all percentage limitations
33
<PAGE>
apply immediately after a purchase or initial investment; and (ii) any
subsequent change in any applicable percentage resulting from market
fluctuations or other changes in the amount of total or net assets does not
require elimination of any security from the portfolio.
RESTRICTIONS APPLICABLE TO ALL SERIES
Each Series of the Fund may not:
1. Borrow money, except from banks for temporary or emergency purposes,
including the meeting of redemption requests which might otherwise require
the untimely disposition of securities; or through its transactions in
reverse repurchase agreements. Borrowing in the aggregate, including reverse
repurchase agreements, may not exceed 5% (10% for Liquid Asset Series and 15%
for U.S. Government Money Market Series), and borrowing for purposes other
than meeting redemptions may not exceed 5% (10% for Liquid Asset Series) of
the value of the Series' total assets (including the amount borrowed), less
liabilities (not including the amount borrowed) at the time the borrowing is
made.
2. Pledge its assets or assign or otherwise encumber them except to secure
borrowings effected within the limitations set forth in restriction (1). For
the purpose of this restriction, collateral arrangements with respect to the
writing of options and collateral arrangements with respect to initial or
variation margin for futures are not deemed to be pledges of assets.
3. Make short sales of securities.
4. Engage in the underwriting of securities, except insofar as the Series
may be deemed an underwriter under the Securities Act of 1933 in disposing of
a portfolio security.
5. Purchase or sell commodities or commodities contracts, except that the
Series may purchase or write interest rate, currency and stock and bond index
futures contracts and related options thereon.
6. Purchase or sell real estate or interests therein (including real
estate limited partnerships), although the Series may purchase securities of
issuers which engage in real estate operations and securities secured by real
estate or interests therein (as such, in case of default of such securities,
a Series may hold the real estate securing such security).
7. Purchase oil, gas or other mineral leases, rights or royalty contracts
or exploration or development programs, except that the Series may invest in
the securities or companies which operate, invest in, or sponsor such
programs.
8. Purchase securities on margin (but the Series may obtain such
short-term loans as are necessary for the clearance of transactions). The
deposit or payment by a Series of initial or variation margin in connection
with futures contracts or related options thereon is not considered the
purchase of a security on margin.
9. Issue senior securities as defined in the Act, except insofar as the
Series may be deemed to have issued a senior security by reason of (a)
entering into any repurchase or reverse repurchase agreement; (b) purchasing
any securities on a when-issued or delayed delivery basis; (c) purchasing or
selling futures contracts, forward foreign exchange contracts or options; (d)
borrowing money in accordance with restrictions described above; or (e)
lending portfolio securities.
10. Purchase securities of any issuer for the purpose of exercising
control or management.
11. Make loans of money or securities, except: (a) by the purchase of
publicly distributed debt obligations in which the Series may invest
consistent with its investment objectives and policies; (b) by investment in
repurchase agreements; or (c) by lending its portfolio securities.
12. Participate on a joint or a joint and several basis in any securities
trading account. The "bunching" of orders of two or more Series (or of one or
more Series and of other accounts under the investment management of the
Investment Manager) for the sale or purchase of portfolio securities shall
not be considered participating in a joint securities trading account.
34
<PAGE>
13. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets or in accordance with the provisions of Section 12(d) of the Act and
any Rules promulgated thereunder.
In addition, as a nonfundamental policy, the Fund may not invest in
securities of any issuer if, to the knowledge of the Fund, any officer or
trustee of the Fund or any officer or director of the Investment Manager owns
more than 1/2 of 1% of the outstanding securities of such issuer, and such
officers, trustees and directors who own more than 1/2 of 1% own in the
aggregate more than 5% of the outstanding securities of such issuers.
PORTFOLIO TRANSACTIONS AND BROKERAGE
- -----------------------------------------------------------------------------
Subject to the general supervision of the Board of Trustees, the
Investment Manager is responsible for decisions to buy and sell securities
for each Series of the Fund, the selection of brokers and dealers to effect
the transactions, and the negotiation of brokerage commissions, if any.
Purchases and sales of securities on a stock exchange are effected through
brokers who charge a commission for their services. In the over-the-counter
market, securities are generally traded on a "net" basis with dealers acting
as principal for their own accounts without a stated commission, although the
price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are purchased at a fixed price which
includes an amount of compensation to the underwriter, generally referred to
as the underwriter's concession or discount. When securities are purchased or
sold directly from or to an issuer, no commissions or discounts are paid. For
the fiscal years ended July 31, 1995, 1996 and 1997, the Series of the Fund
paid brokerage commissions as follows:
<TABLE>
<CAPTION>
BROKERAGE COMMISSIONS BROKERAGE COMMISSIONS BROKERAGE COMMISSIONS
PAID FOR FISCAL YEAR PAID FOR FISCAL YEAR PAID FOR FISCAL YEAR
NAME OF SERIES ENDED 7/31/95 ENDED 7/31/96 ENDED 7/31/97
- -------------- ------------- ------------- -------------
<S> <C> <C> <C>
American Value Series .... $66,581 $140,058 $192,907
Capital Growth Series .... 629 3,207 8,366
Dividend Growth Series ... 37,711 51,116 79,426
Strategist Series......... 6,628 17,146 12,242
Utilities Series.......... 4,444 4,668 16,017
Value-Added Market
Series................... 7,693 7,588 10,509
Global Equity Series ..... 28,597 78,153 71,144
</TABLE>
Purchases of money market instruments are made from dealers, underwriters
and issuers; sales, if any, prior to maturity, are made to dealers and
issuers. The Fund does not normally incur brokerage commission expense on
such transactions. Money market instruments are generally traded on a "net"
basis with dealers acting as principal for their own accounts without a
stated commission, although the price of the security usually includes a
profit to the dealer.
The Investment Manager serves as investment adviser to a number of
clients, including other investment companies, and may in the future act as
investment manager or adviser to others. It is the practice of the Investment
Manager to cause purchase and sale transactions to be allocated among the
Series of the Fund and others whose assets it manages in such manner as it
deems equitable. In making such allocations among the Series of the Fund and
other client accounts, various factors may be considered, including the
respective investment objectives, the relative size of portfolio holdings of
the same or comparable securities, the availability of cash for investment,
the size of investment commitments generally held and the opinions of the
persons responsible for managing the portfolios of the Fund and other client
accounts. In the case of certain initial and secondary public offerings, the
Investment Manager may utilize a pro rata allocation process based on the
size of the Dean Witter Funds involved and the number of shares available
from the public offering. This procedure may, under certain circumstances,
have an adverse effect on the Fund or any of its Series.
The policy of the Fund regarding purchases and sales of securities for the
various Series is that primary consideration will be given to obtaining the
most favorable prices and efficient executions of transactions. Consistent
with this policy, when securities transactions are effected on a stock
exchange,
35
<PAGE>
the Fund's policy is to pay commissions which are considered fair and
reasonable without necessarily determining that the lowest possible
commissions are paid in all circumstances. The Fund believes that a
requirement always to seek the lowest possible commission cost could impede
effective portfolio management and preclude the Fund and the Investment
Manager from obtaining a high quality of brokerage and research services. In
seeking to determine the reasonableness of brokerage commissions paid in any
transaction, the Investment Manager relies upon its experience and knowledge
regarding commissions generally charged by various brokers and on its
judgment in evaluating the brokerage and research services received from the
broker effecting the transaction. Such determinations are necessarily
subjective and imprecise, as in most cases an exact dollar value for those
services is not ascertainable.
The Fund anticipates that certain of its transactions involving foreign
securities will be effected on foreign securities exchanges. Fixed
commissions on such transactions are generally higher than negotiated
commissions on domestic transactions. There is also generally less government
supervision and regulation of foreign securities exchanges and brokers than
in the United States.
In seeking to implement the policies of the Series of the Fund, the
Investment Manager effects transactions with those brokers and dealers who
the Investment Manager believes provide the most favorable prices and are
capable of providing efficient executions. If the Investment Manager believes
such price and execution are obtainable from more than one broker or dealer,
it may give consideration to placing portfolio transactions with those
brokers and dealers who also furnish research and other services to the Fund
or the Investment Manager. Such services may include, but are not limited to,
any one or more of the following: information as to the availability of
securities for purchase or sale; statistical or factual information or
opinions pertaining to investment; wire services; and appraisals or
evaluations of portfolio securities. The Fund will give no weight to any
research services provided by a dealer, transacting with the Fund as
principal, in determining the price of a security purchased from or sold to
that dealer.
The information and services received by the Investment Manager from
brokers and dealers may be of benefit to the Investment Manager or in the
management of accounts of some of its other clients and may not in all cases
benefit a Series of the Fund directly. While the receipt of such information
and services is useful in varying degrees and would generally reduce the
amount of research or services otherwise performed by the Investment Manager
and thus reduce its expenses, it is of indeterminable value and the fees paid
to the Investment Manager are not reduced by any amount that may be
attributable to the value of such services. For the fiscal year ended July
31, 1997, the Series of the Fund directed the payment of commissions in
connection with transactions in the following aggregate amounts to brokers
because of research services provided:
<TABLE>
<CAPTION>
BROKERAGE COMMISSIONS AGGREGATE DOLLAR
DIRECTED IN CONNECTION AMOUNT OF TRANSACTIONS
WITH RESEARCH SERVICES FOR WHICH SUCH
PROVIDED COMMISSIONS WERE PAID
FOR FISCAL YEAR FOR FISCAL YEAR
NAME OF SERIES ENDED 7/31/97 ENDED 7/31/97
- ---------------------- ---------------------- ----------------------
<S> <C> <C>
American Value Series . $160,636 $123,574,975
Capital Growth Series . 6,645 3,724,582
Dividend Growth
Series................ 35,869 24,046,647
Strategist Series...... 5,214 1,707,539
Utilities Series....... 2,002 821,559
Global Equity Series .. 61,879 15,783,096
</TABLE>
Pursuant to an order of the Securities and Exchange Commission, the Fund
may effect principal transactions in certain money market instruments with
DWR. The Fund will limit its transactions with DWR to U.S. Government and
Government Agency Securities, Bank Money Instruments (i.e., Certificates of
Deposit and Bankers' Acceptance) and Commercial Paper. Such transactions will
be effected with DWR only when the price available from DWR is better than
that available from other dealers.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through DWR and Morgan Stanley & Co., Inc.
36
<PAGE>
("Morgan Stanley"), another broker-dealer affiliate of the Investment
Manager. In order for an affiliated broker-dealer to effect any portfolio
transactions for the Fund, the commissions, fees or other remuneration
received by the affiliated broker-dealer must be reasonable and fair compared
to the commissions, fees or other remuneration paid to other brokers in
connection with comparable transactions involving similar securities being
purchased or sold on an exchange during a comparable period of time. This
standard would allow the affiliated broker-dealer to receive no more than the
remuneration which would be expected to be received by an unaffiliated broker
in a commensurate arm's-length transaction. Furthermore, the Trustees of the
Fund, including a majority of the Trustees who are not "interested" persons
of the Fund, as defined in the Act, have adopted procedures which are
reasonably designed to provide that any commissions, fees or other
remuneration paid to these brokers are consistent with the foregoing
standard. The Fund does not reduce the management fee it pays to the
Investment Manager by any amount of the brokerage commissions it may pay to
these affiliated brokers. For the fiscal year ended July 31, 1995, the Series
paid the following dollar amounts of brokerage commissions to DWR: American
Value Series: $18,882; Capital Growth Series: $519; Dividend Growth Series:
$28,711; Strategist Series: $5,710; Utilities Series: $3,970; and Global
Equity Series: $3,713. For the fiscal year ended July 31, 1996, the Series
paid the following dollar amounts of brokerage commissions to DWR: American
Value Series: $67,847; Capital Growth Series: $1,774; Dividend Growth Series:
$30,759; Strategist Series: $10,751; Utilities Series: $4,140; and Global
Equity Series: $5,635. For the fiscal year ended July 31, 1997, the Series
paid brokerage commissions to DWR for transactions as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF AGGREGATE
DOLLAR AMOUNT OF
EXECUTED TRADES ON
BROKERAGE COMMISSIONS PERCENTAGE OF AGGREGATE WHICH BROKERAGE
PAID TO DWR FOR FISCAL BROKERAGE COMMISSIONS COMMISSIONS WERE PAID
YEAR FOR FISCAL YEAR ENDED FOR FISCAL YEAR ENDED
NAME OF SERIES ENDED 7/31/97 7/31/97 7/31/97
- ---------------------- ---------------------- ----------------------- -----------------------
<S> <C> <C> <C>
American Value Series . $25,735 13.34% 17.28%
Capital Growth Series . 1,487 17.77 22.77
Dividend Growth
Series................ 43,558 54.84 65.14
Strategist Series...... 6,861 56.04 80.35
Utilities Series....... 13,830 86.35 90.59
Global Equity Series .. 9,201 12.93 30.64
</TABLE>
For the period June 1, 1997 through July 31, 1997, the Series paid
brokerage commissions to Morgan Stanley as set forth in the chart below.
Morgan Stanley became an affiliate of the Investment Manager on May 31, 1997
upon consummation of the merger of Dean Witter, Discover & Co. with Morgan
Stanley Group, Inc.
<TABLE>
<CAPTION>
PERCENTAGE OF AGGREGATE
DOLLAR AMOUNT OF
EXECUTED TRADES ON
BROKERAGE COMMISSIONS PERCENTAGE OF AGGREGATE WHICH BROKERAGE
PAID TO MORGAN STANLEY BROKERAGE COMMISSIONS COMMISSIONS WERE PAID
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
NAME OF SERIES 6/1/97-7/31/97 6/1/97-7/31/97 6/1/97-7/31/97
- --------------------- ---------------------- ----------------------- -----------------------
<S> <C> <C> <C>
American Value
Series............... $1,365 0.71% 0.71%
Capital Growth
Series............... 270 3.23 2.76
Global Equity Series . 168 0.24 0.42
</TABLE>
During the fiscal year ended July 31, 1997, the American Value Series held
common stock issued by Merrill Lynch & Co., Inc. with a market value of
$563,500 and common stock issued by Lehman Brothers with a market value of
$797,000.
DETERMINATION OF NET ASSET VALUE
- -----------------------------------------------------------------------------
As discussed in the Prospectus, the net asset value of the shares of each
Series is determined once daily at 4:00 p.m., New York time (or, on days when
the New York Stock Exchange closes prior to
37
<PAGE>
4:00 p.m., at such earlier time), on each day that the New York Stock
Exchange is open for trading. The New York Stock Exchange currently observes
the following holidays: New Year's Day, Reverend Dr. Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
As discussed in the Prospectus, the Liquid Asset and U.S. Government Money
Market Series each utilize the amortized cost method in valuing their
portfolio securities for purposes of determining the net asset value of its
shares. The Series utilize the amortized cost method in valuing their
portfolio securities even though the portfolio securities may increase or
decrease in market value, generally in connection with changes in interest
rates. The amortized cost method of valuation involves valuing a security at
its cost at the time of purchase adjusted by a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. While this method
provides certainty in valuation, it may result in periods during which value,
as determined by amortized cost, is higher or lower than the price the Series
would receive if they sold the investment. During such periods, the yield to
investors in the Series may differ somewhat from that obtained in a similar
company which uses mark-to-market values for all of its portfolio securities.
For example, if the use of amortized cost resulted in a lower (higher)
aggregate portfolio value on a particular day, a prospective investor in a
Series would be able to obtain a somewhat higher (lower) yield than would
result from investment in such a similar company and existing investors would
receive less (more) investment income. The purpose of this method of
calculation is to facilitate the maintenance of a constant net asset value
per share of $1.00.
The use of the amortized cost method to value the portfolio securities of
the Liquid Asset and U.S. Government Money Market Series and the maintenance
of the per share net asset value of $1.00 is permitted pursuant to Rule 2a-7
under the Act (the "Rule") and is conditioned on its compliance with various
conditions contained in the Rule including: (a) the Trustees are obligated,
as a particular responsibility within the overall duty of care owed to the
Series' shareholders, to establish procedures reasonably designed, taking
into account current market conditions and the Series' investment objectives,
to stabilize the net asset value per share as computed for the purpose of
distribution and redemption at $1.00 per share; (b) the procedures include
(i) calculation, at such intervals as the Trustees determine are appropriate
and as are reasonable in light of current market conditions, of the
deviation, if any, between net asset value per share using amortized cost to
value portfolio securities and net asset value per share based upon available
market quotations with respect to such portfolio securities; (ii) periodic
review by the Trustees of the amount of deviation as well as methods used to
calculate it; and (iii) maintenance of written records of the procedures, and
the Trustees' considerations made pursuant to them and any actions taken upon
such consideration; (c) the Trustees should consider what steps should be
taken, if any, in the event of a difference of more than 1/2 of 1% between
the two methods of valuation; and (d) the Trustees should take such action as
they deem appropriate (such as shortening the average portfolio maturity,
realizing gains or losses, withholding dividends or, as provided by the
Declaration of Trust, reducing the number of outstanding shares of a Series)
to eliminate or reduce to the extent reasonably practicable material dilution
or other unfair results to investors or existing shareholders which might
arise from differences between the two methods of valuation. Any reduction of
outstanding shares will be effected by having each shareholder
proportionately contribute to the Series' capital the necessary shares that
represent the amount of excess upon such determination.
Generally, for purposes of the procedures adopted under the Rule, the
maturity of a portfolio instrument is deemed to be the period remaining
(calculated from the trade date or such other date on which the Series'
interest in the instrument is subject to market action) until the date noted
on the face of the instrument as the date on which the principal amount must
be paid, or in the case of an instrument called for redemption, the date on
which the redemption payment must be made.
A variable rate obligation that is subject to a demand feature is deemed
to have a maturity equal to the longer of the period remaining until the next
readjustment of the interest rate or the period remaining until the principal
amount can be recovered through demand. A floating rate instrument that is
subject to a demand feature is deemed to have a maturity equal to the period
remaining until the principal amount can be recovered through demand.
38
<PAGE>
An Eligible Security is defined in the Rule to mean a security which: (a)
has a remaining maturity of thirteen months or less; (b)(i) is rated in the
two highest short-term rating categories by any two nationally recognized
statistical rating organizations ("NRSROs") that have issued a short-term
rating with respect to the security or class of debt obligations of the
issuer; or (ii) if only one NRSRO has issued a short-term rating with respect
to the security, then by that NRSRO; (c) was a long-term security at the time
of issuance whose issuer has outstanding a short-term debt obligation which
is comparable in priority and security and has a rating as specified in
clause (b) above; or (d) if no rating is assigned by any NRSRO as provided in
clauses (b) and (c) above, the unrated security is determined by the Board to
be of comparable quality to any such rated security. The Liquid Asset and
U.S. Government Money Market Series will limit their investments to
securities that meet the requirements for Eligible Securities including the
required ratings by S&P or Moody's, as set forth in the prospectus.
As permitted by the Rule, the Board has delegated to the Fund's Investment
Manager, subject to the Board's oversight pursuant to guidelines and
procedures adopted by the Board, the authority to determine which securities
present minimal credit risks and which unrated securities are comparable in
quality to rated securities.
Also, as required by the Rule, the Series will limit their investments in
securities, other than Government securities, so that, at the time of
purchase: (a) except as further limited in (b) below with regard to certain
securities, no more than 5% of their total assets will be invested in the
securities of any one issuer; and (b) with respect to Eligible Securities
that have received a rating in less than the highest category by any one of
the NRSROs whose ratings are used to qualify the security as an Eligible
Security, or that have been determined to be of comparable quality: (i) no
more than 5% in the aggregate of the Series' total assets in all such
securities, and (ii) no more than the greater of 1% of total assets, or $1
million, in the securities on any one issuer.
The presence of a line of credit or other credit facility offered by a
bank or other financial institution which guarantees the payment obligation
of the issuer, in the event of a default in the payment of principal or
interest of an obligation, may be taken into account in determining whether
an investment is an Eligible Security, provided that the guarantee itself is
an Eligible Security.
The Rule further requires that the Series limit their investments to U.S.
dollar-denominated instruments which the Trustees determine present minimal
credit risks and which are Eligible Securities. The Rule also requires the
Series to maintain a dollar-weighted average portfolio maturity (not more
than 90 days) appropriate to its objective of maintaining a stable net asset
value of $1.00 per share and precludes the purchase of any instrument with a
remaining maturity of more than 397 days. Should the disposition of a
portfolio security result in a dollar-weighted average portfolio maturity of
more than 90 days, the Series will invest its available cash in such a manner
as to reduce such maturity to 90 days or less as soon as is reasonably
practicable.
If the Board determines that it is no longer in the best interests of the
Series and its shareholders to maintain a stable price of $1 per share or if
the Board believes that maintaining such price no longer reflects a
market-based net asset value per share, the Board has the right to change
from an amortized cost basis of valuation to valuation based on market
quotations. The Fund will notify shareholders of the Series of any such
change.
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
As discussed in the Prospectus, shares of the Fund are offered for sale on
a continuous basis at an offering price equal to the net asset value per
share of each Series next determined following a receipt of an order. The
Trustees of the Fund have approved a Distribution Agreement appointing Dean
Witter Distributors Inc. (the "Distributor") as exclusive distributor of the
Fund's shares. The Distributor has entered into a selected dealer agreement
with DWR, which through its own sales organization sells shares of the Fund.
In addition, the Distributor may enter into similar agreements with other
selected broker-dealers. The Distributor, a Delaware corporation, is a
wholly-owned subsidiary of MSDWD. The Trustees who are not, and were not at
the time they voted, interested persons of the Fund, as defined in the Act,
(the "Independent Trustees") approved, at their meeting held on April 24,
1997, the current
39
<PAGE>
Distribution Agreement appointing the Distributor as exclusive distributor of
the Fund's shares and providing for the Distributor to bear distribution
expenses not borne by the Fund. The Distribution Agreement took effect on May
31, 1997 upon the consummation of the merger of Dean Witter, Discover & Co.
with Morgan Stanley Group Inc. The Distribution Agreement is substantially
identical to the Fund's previous distribution agreement which was approved by
the Independent Trustees at their meeting held on October 30, 1992. By its
terms, the Distribution Agreement has an initial term ending April 30, 1998
and will remain in effect from year to year thereafter if approved by the
Trustees.
The Distributor has agreed to pay certain expenses of the offering of the
Fund's shares, including the costs of printing and distributing prospectuses
and supplements thereto used in connection with the offering and sale of the
Fund's shares. The Fund will bear the costs of initial typesetting, printing
and distribution to shareholders. The Fund and the Distributor have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act of 1933, as amended.
PLAN OF DISTRIBUTION
As discussed in the Prospectus, the Fund has entered into a Plan of
Distribution pursuant to Rule 12b-1 under the Act (the "Plan") with the
Distributor and DWR whereby the Distributor and any of its affiliates are
authorized to utilize their own resources to finance certain activities in
connection with the distribution of shares of the Fund. The Plan was
initially approved by the Trustees of the Fund on July 29, 1992 and,
subsequently, by DWR as the then sole shareholder of the Fund. The vote of
the Trustees included a majority of the Trustees who are not and were not at
the time of their votes interested persons of the Fund and who have and had
at the time of their votes no direct or indirect financial interest in the
operation of the Plan (the "Independent 12b-1 Trustees"), cast in person at a
meeting called for the purpose of voting on such Plan. In determining to
approve the Plan, the Trustees, including the Independent 12b-1 Trustees,
concluded that, in their judgment, there is a reasonable likelihood that the
Plan will benefit the Fund and its shareholders.
The Plan provides that the Fund authorizes the Distributor and DWR to bear
the expense of all promotional and distribution-related activities on behalf
of the Fund, except for expenses that the Trustees determine to reimburse.
Among the activities and services which may be provided by the Distributor
under the Plan are: (1) compensation to and expenses of account executives
and other employees of the Distributor and other broker-dealers, including
overhead and telephone expenses; (2) sales incentives and bonuses to sales
representatives and to marketing personnel in connection with promoting sales
of the Fund's shares; (3) expenses incurred in connection with promoting
sales of the Fund's shares; (4) preparing and distributing sales literature;
and (5) providing advertising and promotional activities, including direct
mail solicitation and television, radio, newspaper, magazine and other media
advertisements.
DWR's account executives are paid a monthly residual commission,
calculated based upon the current value of the respective accounts for which
they are the account executives of record. The "gross residual" is a charge
which reflects residual commissions paid by DWR to its account executives and
DWR's expenses associated with the servicing of shareholders' accounts,
including the expenses of operating DWR's branch offices in connection with
the servicing of shareholders' accounts, which expenses include lease costs,
the salaries and employee benefits of operations and sales support personnel,
utility costs, communications costs and the costs of stationery and supplies
and other expenses relating to branch office servicing of shareholder
accounts.
Under the Plan, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment
or mistake of law or for any act or omission or for any losses sustained by
the Fund or its shareholders.
Under its terms, the Plan had an initial term ending April 30, 1993 and
will remain in effect from year to year thereafter, provided such continuance
is approved annually by a vote of the Trustees, including a majority of the
Independent 12b-1 Trustees. An amendment to increase materially the maximum
amount authorized to be spent under the Plan on behalf of any Series must be
approved by the
40
<PAGE>
shareholders of such Series, and all material amendments to the Plan must be
approved by the Trustees in the manner described above. The Plan may be
terminated on behalf of any Series at any time, without payment of any
penalty, by vote of the majority of the Independent 12b-1 Trustees or by a
vote of a majority of the outstanding voting securities of such Series (as
defined in the Act) on not more than 30 days written notice to any other
party to the Plan. The authority for the Distributor to finance distribution
activities automatically terminates in the event of an assignment (as defined
in the Act). After such an assignment, the Fund's authority to make payments
to its Distributor would resume, subject to certain conditions. So long as
the Plan is in effect, the selection or nomination of the Independent 12b-1
Trustees is committed to the discretion of the Independent 12b-1 Trustees.
Continuation of the Plan was most recently approved by the Trustees,
including a majority of the Independent 12b-1 Trustees, on April 24, 1997, at
a meeting called for the purpose of voting on such Plan.
No interested person of the Fund nor any Trustee of the Fund who is not an
interested person of the Fund, as defined in the Act, has any direct or
indirect financial interest in the operation of the Plan except to the extent
that the Distributor or DWR or certain of their employees may be deemed to
have such an interest as a result of benefits derived from the successful
operation of the Plan or as a result of receiving a portion of the amounts
expended thereunder by the Distributor.
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
Shareholder Investment Account. Upon purchase of shares of the Fund, a
Shareholder Investment Account is opened for the investor on the books of
each Series of the Fund owned by the investor, maintained by Dean Witter
Trust FSB (the "Transfer Agent"), in full and fractional shares of the Series
(rounded to the nearest 1/100 of a share). This is an open account in which
shares owned by the investor are credited by the Transfer Agent in lieu of
issuance of a share certificate. If a share certificate is desired, it must
be requested in writing for each transaction. Certificates are issued only
for full shares and may be redeposited in the account at any time. There is
no charge to the investor for issuance of a certificate. No certificates will
be issued for fractional shares or to shareholders who have elected the
Systematic Withdrawal Plan or check writing privilege of withdrawing cash
from their accounts. Whenever a shareholder-instituted transaction takes
place in the Shareholder Investment Account, the shareholder will be mailed a
statement by DWR or other selected broker-dealer, the Distributor or the
Transfer Agent reflecting the status of such Account.
Automatic Investment of Dividends and Distributions. All dividends and
capital gains distributions are automatically paid in full and fractional
shares of the Fund, unless the shareholder requests that they be paid in
cash. Each purchase of shares of the Fund is made upon the condition that the
Transfer Agent is thereby automatically appointed as agent of the investor to
receive all dividends and capital gains distributions on shares owned by the
investor. An investor may terminate such agency at any time and may request
the Transfer Agent in writing to have subsequent dividends and/or capital
gains distributions paid in cash rather than shares. Such request must be
received by the Transfer Agent at least five (5) business days prior to the
record date for which it commences to take effect. In case of recently
purchased shares for which registration instructions have not been received
on the record date, cash payments will be made to the Distributor. It has
been and remains the Fund's policy and practice that, if checks for dividends
or distributions paid in cash remain uncashed, no interest will accrue on
amounts represented by such uncashed checks.
Systematic Withdrawal Plan. As discussed in the Prospectus, a systematic
withdrawal plan (the "Withdrawal Plan") is available for shareholders who own
or purchase shares of the Fund having a minimum value of $10,000 based upon
the then current offering price. The Withdrawal Plan provides for monthly or
quarterly (March, June, September and December) checks in any amount, not
less than $25, or in any whole percentage of the account balance, on an
annualized basis.
Dividends and capital gains distributions on shares held under the
Withdrawal Plan will be invested in additional full and fractional shares at
net asset value. Shares will be credited to an open account for the investor
by the Transfer Agent; no share certificates will be issued. A shareholder is
entitled to a share certificate upon written request to the Transfer Agent,
although in that event the shareholder's Withdrawal Plan will be terminated.
41
<PAGE>
The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the
amount of the periodic withdrawal payment designated in the application. The
shares will be redeemed at their net asset value determined, at the
shareholder's option, on the tenth or twenty-fifth day (or next following
business day) of the relevant month or quarter and normally a check for the
proceeds will be mailed by the Transfer Agent within five business days after
the date of redemption. The Withdrawal Plan may be terminated at any time by
the Fund.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net
investment income and net capital gains, the shareholder's original
investment will be correspondingly reduced and ultimately exhausted.
A shareholder may, at any time change the amount and interval of
withdrawal payments and the address to which checks are mailed by written
notification to the Transfer Agent. The shareholder's signature on such
notification must be guaranteed by an eligible guarantor acceptable to the
Transfer Agent (shareholders should contact the Transfer Agent for a
determination as to whether a particular institution is such an eligible
guarantor). The shareholder may also terminate the Withdrawal Plan at any
time by written notice to the Transfer Agent. In the event of such
termination, the account will be continued as a Shareholder Investment
Account. The shareholder may also redeem all or part of the shares held in
the Withdrawal Plan account (see "Redemptions and Repurchases" in the
Prospectus) at any time. Shareholders wishing to enroll in the Withdrawal
Plan should contact their account executive or the Transfer Agent.
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its
shareholders an Exchange Privilege whereby shareholders of any Series of the
Fund may exchange their shares for shares of any other Series of the Fund.
There is no holding period for exchanges of shares. An exchange will be
treated for federal income tax purposes the same as a repurchase or
redemption of shares, on which the shareholder may realize a capital gain or
loss, unless shares are held in a qualified retirement plan which is not
subject to taxation.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the
present account, unless the Transfer Agent receives written notification to
the contrary. For telephone exchanges, the exact registration of the existing
Account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit
should not be endorsed.)
The Transfer Agent acts as agent for shareholders of the Fund in effecting
redemptions of Fund shares and in applying the proceeds to the purchase of
other fund shares. In the absence of negligence on its part, neither the
Transfer Agent nor the Fund shall be liable for any redemption of Fund shares
caused by unauthorized telephone or telegraph instructions. Accordingly, in
such event the investor shall bear the risk of loss. The staff of the
Securities and Exchange Commission is currently considering the propriety of
such a policy.
With respect to the redemption or repurchase of shares of any Series of
the Fund, the application of proceeds to the purchase of new shares in the
Fund and the general administration of the Exchange Privilege, the Transfer
Agent acts as agent for the Distributor and for the shareholder's selected
broker-dealer, if any, in the performance of such functions. With respect to
exchanges, redemptions or repurchases, the Transfer Agent shall be liable for
its own negligence and not for the default or negligence of its
correspondents or for losses in transit. The Fund shall not be liable for any
default or negligence of the Transfer Agent, the Distributor or any selected
broker-dealer.
The Distributor and any selected broker-dealer have authorized and
appointed the Transfer Agent to act as their agent in connection with the
application of proceeds of any redemption of Fund shares to the purchase of
shares of any other Series and the general administration of the Exchange
Privilege. No commission or discounts will be paid to the Distributor or any
selected broker-dealer for any transactions pursuant to this Exchange
Privilege.
42
<PAGE>
The Fund may limit the number of times this Exchange Privilege may be
exercised by any investor within a specified period of time. Also, the
Exchange Privilege may be terminated or revised at any time by the Fund, upon
such notice as may be required by applicable regulatory agencies (presently
sixty days' prior written notice for termination or material revision),
provided that the Exchange Privilege may be terminated or materially revised
without notice at times (a) when the New York Stock Exchange is closed for
other than customary weekends and holidays, (b) when trading on that Exchange
is restricted, (c) when an emergency exists as a result of which disposal by
the Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, (d) during any other period when the Securities and Exchange
Commission by order so permits (provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to
whether the conditions prescribed in (b) or (c) exist), or (e) if the Fund
would be unable to invest amounts effectively in accordance with its
investment objective, policies and restrictions.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other selected broker-dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
As discussed in the Prospectus, shares of the Fund may be redeemed at net
asset value on any day the New York Stock Exchange is open (see
"Determination of Net Asset Value"). Redemptions will be effected at the net
asset value per share next determined after the receipt of a redemption
request meeting the applicable requirements discussed in the Prospectus. When
a redemption is made by check and a check is presented to the Transfer Agent
for payment, the Transfer Agent will redeem a sufficient number of full and
fractional shares in the shareholder's account to cover the amount of the
check. This enables the shareholder to continue earning daily income
dividends until the check has cleared. It has been and remains the Fund's
policy and practice that, if checks for redemption proceeds remain uncashed,
no interest will accrue on amounts represented by such uncashed checks.
A check drawn by a shareholder against his or her account in the Fund
constitutes a request for redemption of a number of shares sufficient to
provide proceeds equal to the amount of the check. Payment of the proceeds of
a check will normally be made on the next business day after receipt by the
Transfer Agent of the check in proper form. If a check is presented for
payment to the Transfer Agent by a shareholder or payee in person, the
Transfer Agent will make payment by means of a check drawn on the Fund's
account or, in the case of a shareholder payee, to the shareholder's
predesignated bank account, but will not make payment in cash.
The Fund reserves the right to suspend redemptions or postpone the date of
payment (1) for any periods during which the New York Stock Exchange is
closed (other than for customary weekend and holiday closings), (2) when
trading on that Exchange is restricted or an emergency exists, as determined
by the Securities and Exchange Commission, so that disposal of the Fund's
investments or determination of the Fund's net asset value is not reasonably
practicable, or (3) for such other periods as the Commission by order may
permit for the protection of the Fund's shareholders.
The Transfer Agent acts as agent for shareholders of the Fund in effecting
redemptions of shares of the Fund. In the absence of negligence on its part,
neither the Transfer Agent nor the Fund shall be liable for any redemption of
Fund shares caused by unauthorized telephone or telegraph instructions.
The Prospectus describes redemption procedures by check, telephone or wire
instructions with payment to a predesignated bank account, or by mail.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
Liquid Asset Series and U.S. Government Money Market Series. As discussed
in the Prospectus, dividends from net income on the Liquid Asset and U.S.
Government Money Market Series will be declared payable on each day the New
York Stock Exchange is open for business to shareholders of record as of the
close of business the preceding business day. Net income, for dividend
purposes, includes accrued interest and amortization of original issue and
market discount, less the amortization of market premium and the estimated
expenses of the Series. Net income will be calculated immediately
43
<PAGE>
prior to the determination of net asset value per share of the Series (see
"Determination of Net Asset Value" above and in the Prospectus). The amount
of dividend may fluctuate from day to day and may be omitted on some days if
realized losses on portfolio securities exceed the Series' net investment
income. The Trustees may revise the above dividend policy, or postpone the
payment of dividends, if either Series should have or anticipate any large
unexpected expense, loss or fluctuation in net assets which in the opinion of
the Trustees might have a significant adverse effect on shareholders. On
occasion, in order to maintain a constant $1.00 per share net asset value,
the Trustees may direct that the number of outstanding shares of either
Series be reduced in each shareholder's account. Such reduction may result in
taxable income to a shareholder in excess of the net increase (i.e.,
dividends, less such reductions), if any, in the shareholder's account for a
period. Furthermore, such reduction may be realized as a capital loss when
the shares are liquidated. Any net realized capital gains will be declared
and paid at least once per calendar year, except that net short-term gains
may be paid more frequently, with the distribution of dividends from net
investment income.
Other Series. The dividend policies of the U.S. Government Securities,
Intermediate Income Securities, American Value, Capital Growth, Dividend
Growth, Strategist, Utilities, Value-Added Market and Global Equity Series
are discussed in the Prospectus. In computing interest income, these Series
will not amortize any discount or premium resulting from the purchase of debt
securities except those original issue discounts for which amortization is
required for federal income tax purposes. Gains or losses resulting from
unamortized market discount or premium on securities issued prior to July 19,
1984 will be treated as capital gains or losses when realized. With respect
to market discount on bonds issued after July 18, 1984, a portion of any
capital gain realized upon disposition may be recharacterized as taxable
ordinary income in accordance with the provisions of the Internal Revenue
Code (the "Code"). Dividends, interest and capital gains received by Series
holding foreign securities may give rise to withholding and other taxes
imposed by foreign countries.
Options and Futures. Exchange-traded futures contracts, listed options on
futures contracts and certain listed options are classified as "Section 1256"
contracts under the Code. Unless the Series makes an election as discussed
below, the character of gain or loss resulting from the sale, disposition,
closing out, expiration or other termination of Section 1256 contracts would
generally be treated as long-term capital gain or loss to the extent of 60
percent thereof and short-term capital gain or loss to the extent of 40
percent thereof and such Section 1256 contracts would also be required to be
marked-to-market at the end of the Fund's fiscal year, for purposes of
federal income tax calculations.
Over-the-counter options are not classified as Section 1256 contracts and
are not subject to the mark-to-market or 60 percent-40 percent taxation
rules. When call options written by a Series, or put options purchased by a
Series, are exercised, the gain or loss realized on the sales of the
underlying securities may be either short-term or long-term, depending upon
the holding period of the securities. In determining the amount of gain or
loss, the sales proceeds are reduced by the premium paid for over-the-counter
puts or increased by the premium received for over-the-counter calls.
If a Series holds a security which is offset by a Section 1256 contract,
the Series would by deemed to hold a "mixed straddle" position, as such is
defined in the Code. A Series may elect to identify its mixed straddle
positions pursuant to Section 1256(d) of the Code and thereby avoid
application of both the mark-to-market and 60 percent/40 percent taxation
rules. The Series may also make certain other elections with respect to mixed
straddles which could avoid or limit the application of certain rules which
could, in certain circumstances, cause deferral or disallowance of losses,
change long-term capital gains into short-term capital gains, or change
short-term capital losses into long-term capital losses.
Whether the portfolio security constituting part of the identified mixed
straddle is deemed to have been held for less than three months for purposes
of determining qualification of the Series as a regulated investment company
will be determined generally by the actual holding period of the security. In
certain circumstances, entering into a mixed straddle could result in the
recognition of unrealized gain or loss which would be taken into account in
determining the amount of income available for the Series' distributions, and
can result in an amount which is greater or less than the Series' net
realized gains being available for distribution. If an amount which is less
than the Series' net realized gains is available for distribution, the Series
may elect to distribute more than such available amount, up to the full
amount
44
<PAGE>
of such net realized gains. Such a distribution may, in part, constitute a
return of capital to the shareholders. If the Series does not elect to
identify a mixed straddle, no recognition of gain or loss on the securities
in its portfolio will result when the mixed straddle is entered into.
However, any losses realized on the straddle will be governed by a number of
tax rules which might, under certain circumstances, defer or disallow the
losses in whole or in part, change long-term gains into short-term gains, or
change short-term losses into long-term losses. A deferral or disallowance of
recognition of a realized loss may result in an amount being available for
the Series' distributions which is greater than the Series' net realized
gains.
Special Rules for Certain Foreign Currency Transactions (Global Equity
Series). In general, gains from foreign currencies and from foreign currency
options, foreign currency futures and forward foreign exchange contracts
relating to investments in stock, securities or foreign currencies are
currently considered to be qualifying income for purposes of determining
whether the Global Equity Series qualifies as a regulated investment company.
It is currently unclear, however, who will be treated as the issuer of
certain foreign currency instruments or how foreign currency options,
futures, or forward foreign currency contracts will be valued for purposes of
the regulated investment company diversification requirements applicable to
the Series. The Global Equity Series may request a private letter ruling from
the Internal Revenue Service on some or all of these issues.
Under Code Section 988, special rules are provided for certain
transactions in a foreign currency other than the taxpayer's functional
currency (i.e., unless certain special rules apply, currencies other than the
U.S. dollar). In general, foreign currency gains or losses from forward
contracts, from futures contracts that are not "regulated futures contracts",
and from unlisted options will be treated as ordinary income or loss under
Code Section 988. Also, certain foreign exchange gains or losses derived with
respect to foreign fixed-income securities are also subject to Section 988
treatment. In general, therefore, Code Section 988 gains or losses will
increase or decrease the amount of the Global Equity Series' investment
company taxable income available to be distributed to shareholders as
ordinary income, rather than increasing or decreasing the amount of the
Global Equity Series' net capital gain. Additionally, to the extent that Code
Section 988 losses exceeded other investment company taxable income during a
taxable year, the Global Equity Series' distributions for that year could
constitute a return of capital (i.e., a return of the shareholder's
investment).
If the Global Equity Series invests in an entity which is classified as a
"passive foreign investment company" ("PFIC") for U.S. tax purposes, the
application of certain technical tax provisions applying to such companies
could result in the imposition of federal income tax with respect to such
investments at the Series level which could not be eliminated by
distributions to shareholders. The Taxpayer Relief Act of 1997 and,
previously, the U.S.-Treasury issued proposed regulation section 1.1291-8
establishes a mark-to-market regime which allows investment companies
investing in PFICs to avoid most, if not all, of the difficulties posed by
the PFIC rules. In any event, it is not anticipated that taxes on the Global
Equity Series with respect to investments in PFICs would be significant.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
The annualized current yield of the Liquid Asset Series and U.S.
Government Money Market Series, as may be quoted from time to time in
advertisements and other communications to shareholders and potential
investors, is computed by determining, for a stated seven-day period, the net
change, exclusive of capital changes and including the value of additional
shares purchased with dividends and any dividends declared therefrom, in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the period, subtracting a hypothetical charge which reflects
deductions from shareholder accounts (such as management fees), and dividing
the difference by the value of the account at the beginning of the base
period to obtain the base period return, and then multiplying the base period
return by (365/7).
The Liquid Asset and U.S. Government Money Market Series' annualized
effective yield, as may be quoted from time to time in advertisements and
other communications to shareholders and potential investors, is computed by
determining (for the same stated seven-day period as for the current yield),
the net change, exclusive of capital changes and including the value of
additional shares purchased with
45
<PAGE>
dividends and any dividends declared therefrom, in the value of a
hypothetical pre-existing account having a balance of one share at the
beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the
value of the account at the beginning of the base period to obtain the base
period return, and then compounding the base period return by adding 1,
raising the sum to a power equal to 365 divided by 7, and subtracting 1 from
the result. The annualized and effective yields for the seven-days ended July
31, 1997 for the Liquid Asset and U.S. Government Money Market Series, were
as follows: 4.65% and 4.76% for the Liquid Asset Series; and 4.65% and 4.67%
for the U.S. Government Money Market Series. Had the Series been paying their
investment management fees and had the Investment Manager not been assuming
any of their expenses during the period, the annualized and effective yields
for the Liquid Asset and U.S. Government Money Market Series would have been
4.36% and 4.45%, and 3.51% and 3.56%, respectively.
As discussed in the Prospectus, from time to time the U.S. Government
Securities and Intermediate Income Securities Series may quote their "yields"
in advertisements and sales literature. Yield is calculated for any 30-day
period as follows: the amount of interest and/or dividend income for each
security in the Series' portfolio is determined in accordance with regulatory
requirements; the total for the entire portfolio constitutes the Series'
gross income for the period. Expenses accrued during the period are
subtracted to arrive at "net investment income". The resulting amount is
divided by the product of the net asset value per share on the last day of
the period multiplied by the average number of Fund shares outstanding during
the period that were entitled to dividends. This amount is added to 1 and
raised to the sixth power. 1 is then subtracted from the result and the
difference is multiplied by 2 to arrive at the annualized yield. For the
30-day period ended July 31, 1997, the yields of the U.S. Government
Securities and Intermediate Income Series were 6.03% and 5.65%, respectively,
calculated pursuant to the above formula. Had these Series been paying their
investment management fees and had the Investment Manager not been assuming
any expenses during the period, the 30-day period yields for the U.S.
Government Securities and the Intermediate Income Securities Series would
have been 5.52% and 2.15%, respectively.
46
<PAGE>
As discussed in the Prospectus, each Series of the Fund may quote its
"total return" in advertisements and sales literature. A Series' "average
annual return" represents an annualization of the Series' total return over a
particular period and is computed by finding the annual percentage rate which
will result in the ending redeemable value of a hypothetical $1,000
investment made at the beginning of a one year period, or for the period from
the date of commencement of the Series' operations, if shorter than any of
the foregoing. For the purpose of this calculation, it is assumed that all
dividends and distributions are reinvested. The formula for computing the
average annual total return involves a percentage obtained by dividing the
ending redeemable value by the amount of the initial investment, taking a
root of the quotient (where the root is equivalent to the number of years in
the period) and subtracting 1 from the result. The average annual total
returns for the period from commencement of the Series' operations through
July 31, 1997 and for the fiscal year ended July 31, 1997 were:
<TABLE>
<CAPTION>
WITHOUT FEE WAIVER AND
EXPENSE ASSUMPTION
-------------------------------------
AVERAGE ANNUAL AVERAGE ANNUAL AVERAGE ANNUAL
TOTAL RETURN FOR AVERAGE ANNUAL TOTAL RETURN FOR TOTAL RETURN
PERIOD FROM TOTAL RETURN PERIOD FROM FOR
COMMENCEMENT OF FOR FISCAL YEAR COMMENCEMENT OF FISCAL YEAR
COMMENCEMENT OPERATIONS THROUGH ENDED OPERATIONS THROUGH ENDED
SERIES OF OPERATIONS JULY 31, 1997 JULY 31, 1997 JULY 31, 1997 JULY 31, 1997
------ ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
U.S. Government Securities .... 1/8/93 5.16% 9.70% 4.53% 9.03%
Intermediate Income Securities 1/12/93 5.16 8.63 4.29 7.06
American Value ................. 2/1/93 17.63 41.62 17.37 41.37
Capital Growth ................. 2/2/93 14.93 43.46 14.30 41.19
Dividend Growth ................ 1/7/93 20.09 41.92 -- --
Strategist ..................... 1/7/93 12.81 27.35 12.55 26.93
Utilities ...................... 1/8/93 10.76 19.87 9.74 18.74
Value-Added Market ............. 2/1/93 18.46 43.12 18.25 43.05
Global Equity .................. 1/8/93 9.96 26.66 9.52 25.87
</TABLE>
In addition to the foregoing, a Series may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or
other types of total return figures. A Series may also compute its aggregate
total return for specified periods by determining the aggregate percentage
rate which will result in the ending value of a hypothetical $1,000
investment made at the beginning of the period. For the purpose of this
calculation, it is assumed that all dividends and distributions are
reinvested. The formula for computing aggregate total return involves a
percentage obtained by dividing the ending value by the initial $1,000
investment and subtracting 1 from the result. Based on the foregoing
calculation, the total returns of the period from commencement of operations
through July 31, 1997 and for the fiscal year ended July 31, 1997 were:
<TABLE>
<CAPTION>
TOTAL RETURN FROM TOTAL RETURN FOR
COMMENCEMENT OF OPERATIONS FISCAL YEAR
THROUGH ENDED
SERIES JULY 31, 1997 JULY 31, 1997
- ------------------------------- -------------------------- ----------------
<S> <C> <C>
U.S. Government Securities .... 25.79% 9.70%
Intermediate Income Securities 25.72 8.63
American Value ................. 107.40 41.62
Capital Growth ................. 86.80 43.46
Dividend Growth ................ 130.51 41.92
Strategist ..................... 73.30 27.35
Utilities ...................... 59.33 19.87
Value-Added Market ............. 114.05 43.12
Global Equity .................. 54.16 26.66
</TABLE>
A Series may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Series by adding 1 to the
Series' aggregate total return to date (expressed as
47
<PAGE>
a decimal) and multiplying by 10,000, 50,000 or 100,000, as the case may be.
Investments at commencement of operations of $10,000, $50,000 and $100,000 in
each Series of the Fund would have grown to the following amounts as of July
31, 1997:
<TABLE>
<CAPTION>
INVESTMENT AT
COMMENCEMENT OF OPERATIONS OF
--------------------------------
SERIES $10,000 $50,000 $100,000
- ------------------------------- --------- --------- ----------
<S> <C> <C> <C>
Liquid Asset.................... $12,297 $ 61,485 $122,970
U.S. Government Money Market ... 12,103 60,515 121,030
U.S. Government Securities .... 12,579 62,895 125,790
Intermediate Income Securities 12,572 62,860 125,720
American Value ................. 20,740 103,700 207,400
Capital Growth ................. 18,680 93,400 186,800
Dividend Growth ................ 23,051 115,255 230,510
Strategist ..................... 17,330 86,650 173,300
Utilities ...................... 15,933 79,665 159,330
Value-Added Market ............. 21,405 107,025 214,050
Global Equity .................. 15,416 77,080 154,160
</TABLE>
The yields quoted in any advertisement or other communication should not
be considered a representation of the yields of the Liquid Asset and U.S.
Government Money Market Series in the future since the yield is not fixed.
Actual yields will depend not only on the type, quality and maturities of the
investments held by the Series and changes in interest rates on such
investments, but also on changes in the Series' expenses during the period.
Yield information may be useful in reviewing the performance of the Liquid
Asset and U.S. Government Money Market Series and for providing a basis for
comparison with other investment alternatives. However unlike bank deposits
or other investments which typically pay a fixed yield for a stated period of
time, the Liquid Asset and U.S. Government Money Market Series yields
fluctuate.
The Fund may, from time to time, advertise the performance of a Series
relative to certain performance rankings and indices compiled by independent
organizations.
DESCRIPTION OF SHARES
- -----------------------------------------------------------------------------
As discussed in the Prospectus, the shareholders of each Series of the
Fund are entitled to a full vote for each full share held. The Trustees
themselves have the power to alter the number and the terms of office of the
Trustees as provided for in the Declaration of Trust, and they may at any
time lengthen their own terms or make their terms of unlimited duration and
appoint their own successors, provided that always at least a majority of the
Trustees has been elected by the shareholders of the Fund. Under certain
circumstances, Trustees may be removed by action of the Trustees. The
shareholders also have the right under certain circumstances to remove the
Trustees. The voting rights of shareholders are not cumulative, so that
holders of more than 50 percent of the shares voting can, if they choose,
elect all Trustees being elected, while the holders of the remaining shares
would be unable to elect any Trustees.
The Fund is not required to hold Annual Meetings of Shareholders and, in
ordinary circumstances, the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholders
vote as may be required by the Act or the Fund's Declaration of Trust.
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series (which would be used to distinguish among the rights of
different categories of shareholders). The Trustees have not authorized any
such additional series or classes of shares.
48
<PAGE>
The Declaration of Trust further provides that no Trustee, officer,
employee or agent of the Fund is liable to the Fund or to a shareholder, nor
is any Trustee, officer, employee or agent liable to any third persons in
connection with the affairs of the Fund, except as such liability may arise
from his/her or its own bad faith, willful misfeasance, gross negligence, or
reckless disregard of his/her or its duties. It also provides that all third
persons shall look solely to the Fund's property for satisfaction of claims
arising in connection with the affairs of the Fund. With the exceptions
stated, the Declaration of Trust provides that a Trustee, officer, employee
or agent is entitled to be indemnified against all liability in connection
with the affairs of the Fund.
The Fund shall be of unlimited duration subject to the provisions in the
Declaration of Trust concerning termination by action of the shareholders.
CUSTODIAN AND TRANSFER AGENT
- -----------------------------------------------------------------------------
The Bank of New York, 90 Washington Street, New York, New York, 10286 is
the Custodian of the Fund's assets. Any of the Fund's cash balances in excess
of $100,000 are unprotected by federal deposit insurance. Such balances may,
at times, be substantial.
Dean Witter Trust FSB, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and
Dividend Disbursing Agent for payment of dividends and distributions of Fund
shares and Agent for shareholders under various investment plans described
herein. Dean Witter Trust FSB is an affiliate of Dean Witter InterCapital
Inc., the Fund's Investment Manager, and of Dean Witter Distributors Inc.,
the Fund's Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean
Witter Trust FSB's responsibilities include maintaining shareholder accounts,
including providing subaccounting and recordkeeping services for certain
retirement accounts; disbursing cash dividends and distributions and
reinvesting dividends and distributions; processing account registration
changes; handling purchase and redemption transactions; mailing prospectuses
and reports; mailing and tabulating proxies; processing share certificate
transactions; and maintaining shareholder records and lists. For these
services, Dean Witter Trust FSB receives a per shareholder account fee from
the Fund.
INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund.
The independent accountants are responsible for auditing the annual financial
statements of each Series of the Fund.
REPORTS TO SHAREHOLDERS
- -----------------------------------------------------------------------------
The Fund, on behalf of each Series, will send to shareholders, at least
semi-annually, reports showing each Series' portfolio and other information.
An annual report, containing financial statements audited by independent
accountants, together with their report, will be sent to shareholders each
year.
The Fund's fiscal year ends on July 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Trustees.
LEGAL COUNSEL
- -----------------------------------------------------------------------------
Barry Fink, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- -----------------------------------------------------------------------------
The annual financial statements of each Series of the Fund for the year
ended July 31, 1997, which are included in this Statement of Additional
Information and incorporated by reference in the Prospectus, have been so
included and incorporated by reference in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.
49
<PAGE>
REGISTRATION STATEMENT
- -----------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
PRINCIPAL SECURITIES HOLDERS
- -----------------------------------------------------------------------------
The following parties held, as of September 30, 1997, five percent or more
of the voting securities of the Series indicated, in the percentage amount
indicated: Great Bay Distributors Inc., 2310 Starkey Road, Largo, FL (Liquid
Asset Series: 7.4%); DWTC as Trustee for Willdan Association Profit Sharing
Plan, Products 401(k) Plan, P.O. Box 957, Jersey City, NJ (Liquid Asset
Series: 9.7%); DWTC as Trustee for Fenner Manheim Inc., Profit Sharing Plan,
P.O. Box 957, Jersey City, NJ (Liquid Asset Series: 5.0%); DWTC as Trustee
for Cygnus 401(k) Plan, P.O. Box 957, Jersey City, NJ (U.S. Government Money
Market Series: 19.0%); Cartwright Employee Insurance Benefit Account, 3401
North 67th Avenue, Phoenix, AZ (U.S. Government Money Market Series: 17.4%);
Emjayco as Trustee for the benefit of Geer Tank Trucks Inc., 401(k) Plan
90235, P.O. Box 17909, Milwaukee, WI (U.S. Government Money Market Series:
5.6%); DWTC as Trustee for Willdan Association Profit Sharing Plan, Products
401(k) Plan, P.O. Box 957, Jersey City, NJ (U.S. Government Securities
Series: 9.4%); DWTC as Trustee for VVP America Inc. Retirement Plan, P.O. Box
957, Jersey City, NJ (U.S. Government Securities Series: 6.6%); DWTC as
Trustee for Foulke Management Corporation 401(k) Plan, P.O. Box 957, Jersey
City, NJ (U.S. Government Securities Series: 10.6%); DWTC as Trustee for
Bulkmatic Transport Company, Profit Sharing Plan, P.O. Box 957, Jersey City,
NJ (U.S. Government Securities Series: 12.7%); DWTC as Trustee for Cygnus
401(k) Plan, P.O. Box 957, Jersey City, NJ (Intermediate Income Securities
Series: 7.5%); DWTC as Trustee for Zeus 401(k) Plan, P.O. Box 957, Jersey
City, NJ (Intermediate Income Securities Series: 7.0%); DWTC as Trustee for
Integrated Medical Systems 401(k) Plan, P.O. Box 957, Jersey City, NJ
(Intermediate Income Securities: 8.6%); Dean Witter as Trustee for Private
Business Inc., 401(k) Plan, 9010 Overlook Boulevard, Brentwood, TN
(Intermediate Income Securities: 23.3%); DWTC as Trustee for the benefit of
VVP America Inc., Deferred Compensation Plan, P.O. Box 957, Jersey City, NJ
(Intermediate Income Securities: 7.1%); DWTC as Trustee for VVP America Inc.
Retirement Plan, P.O. Box 957, Jersey City, NJ (American Value Series:
12.0%); Charles E. Behr as Trustee of Charles E. Behr Trust, DTD 6/30/94, 802
N. Ft. Harrison Avenue, Clearwater, FL (American Value Series: 6.2%); DWTC as
Trustee for Bulkmatic Transport Company, Profit Sharing Plan, P.O. Box 957,
Jersey City, NJ (American Value Series: 7.7%); DWTC as Trustee for St.
Petersburg Kennel Club, 401(k) Plan, P.O. Box 957, Jersey City, NJ (Capital
Growth Series: 11.0%); DWTC as Trustee for the benefit of VVP America Inc.,
Deferred Compensation Plan, P.O. Box 957, Jersey City, NJ (Capital Growth
Series: 6.7%); DWR as Custodian for Candies for the benefit of Neil Cole and
Gary Klein, VIP Plus 401(k) Plan, DTD 11/15/95, 2975 Westchester Avenue,
Purchase, NY (Capital Growth Series: 7.2%); Cozad State Bank Co., 401(k)
Profit Sharing Plan, DTD 12/5/65, Investment Manager Capital Growth Fund, Box
2000, Cozad, NE (Capital Growth Series: 15.2%); The Chase Manhattan Bank,
N.A. as Trustee for the benefit of The NFL Player Second Career Savings Plan,
3 Chase Metrotech Center, Brooklyn, NY (Dividend Growth Series: 19.7%); DWTC
as Trustee for VVP America Inc. Retirement Plan, P.O. Box 957, Jersey City,
NJ (Dividend Growth Series: 9.5%); DWTC as Trustee for Pizzagalli
Construction, 401(k) Plan, Harborside Financial Center, Jersey City, NJ
(Dividend Growth Series: 9.2%); DWTC as Trustee for Fenner Manheim Inc.,
Profit Sharing Plan, P.O. Box 957, Jersey City, NJ (Strategist Series: 8.3%);
DWTC as Trustee for VVP America Inc. Retirement Plan, P.O. Box 957, Jersey
City, NJ (Strategist Series: 16.6%); DWTC as Trustee for Pizzagalli
Construction, 401(k) Plan, Harborside Financial Center, Jersey City, NJ
(Strategist Series: 24.8%); DWTC as Trustee for Bulkmatic Transport Company,
Profit Sharing Plan, P.O. Box 957, Jersey City, NJ (Strategist Series: 7.0%);
DWTC as Trustee for St. Petersburg Kennel Club, 401(k) Plan, P.O. Box 957,
Jersey City, NJ (Utilities Series: 7.2%); DWTC as Trustee for Zeus 401(k)
Plan, P.O. Box 957, Jersey City, NJ (Utilities Series: 11.9%); DWTC as
Trustee for Integrated Medical Systems 401(k) Plan, P.O. Box 957, Jersey
City, NJ (Utilities Series: 7.7%); DWTC as Trustee for Foulke Management
Corporation 401(k) Plan, P.O. Box 957, Jersey City, NJ (Utilities Series:
11.2%); DWTC as Trustee for D&H Manufacturing Co. 401(k) Plan, P.O. Box 957,
Jersey City, NJ (Utilities Series: 17.4%); DWTC as Trustee for the benefit of
Sunnyvale Value and Fitting Company, P.O. Box 957, Jersey City, NJ (Utilities
Series: 5.7%).
In addition, at September 30, 1997, InterCapital held 5.2% of the
outstanding shares of Intermediate Income Securities Series and 5.7% of the
outstanding shares of Capital Growth Series.
50
<PAGE>
DEAN WITTER RETIREMENT SERIES - LIQUID ASSET
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (64.4%)
Automotive-Finance (8.5%)
$500 Ford Motor Credit Co. ........................................... 5.61% 08/25/97 $ 498,150
1,000 General Motors Acceptance Corp. ................................. 5.48-5.97 08/25/97-10/20/97 991,779
311 Toyota Motor Credit Corp. ....................................... 5.71 08/14/97 310,360
-------------
1,800,289
-------------
Bank Holding Companies (7.0%)
500 Bankers Trust New York Corp. .................................... 5.72 01/08/98 487,644
1,000 Barnett Banks, Inc. ............................................ 5.55 08/21/97 996,933
-------------
1,484,577
-------------
Banks-Commercial (18.6%)
465 ABN-AMRO North America Finance Inc. ............................. 5.74 09/05/97 462,446
500 Commerzbank U.S. Finance Inc. .................................. 5.52 08/15/97 498,931
1,000 Internationale Nederlanden (U.S.) Funding Corp. ................. 5.60 08/01/97 1,000,000
400 KfW International Finance Inc. .................................. 5.54 09/02/97 398,044
500 Societe Generale N.A., Inc. ..................................... 5.61 09/10/97 496,917
600 UBS Finance (Delaware) Inc. .................................... 5.53 08/07/97 599,449
500 WestPac Capital Corp. .......................................... 5.54 09/05/97 497,326
-------------
3,953,113
-------------
Brokerage (4.7%)
1,000 Goldman Sachs Group L.P. ....................................... 5.63-5.64 08/04/97-09/03/97 997,215
-------------
Finance-Consumer (6.4%)
400 American Express Credit Corp. ................................... 5.63 08/01/97 400,000
950 American General Finance Corp. .................................. 5.64 08/05/97 949,409
-------------
1,349,409
-------------
Finance-Diversified (8.4%)
400 Associates Corp. of North America ............................... 5.65 08/05/97 399,751
750 Commercial Credit Co. ........................................... 5.53 08/27/97 747,021
650 General Electric Capital Corp. .................................. 5.55-5.61 09/16/97-10/14/97 644,124
-------------
1,790,896
-------------
Industrials (2.0%)
425 Weyerhaeuser Co. ................................................ 5.54 08/20/97 423,764
-------------
SEE NOTES TO FINANCIAL STATEMENTS
51
<PAGE>
DEAN WITTER RETIREMENT SERIES - LIQUID ASSET
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
Office Equipment (4.7%)
$1,000 Xerox Credit Corp. .............................................. 5.51% 08/19/97 $ 997,260
-------------
Utilities-Finance (4.1%)
866 National Rural Utilities Cooperative Finance Corp. ............. 5.57-5.62 08/22/97-09/11/97 861,971
-------------
TOTAL COMMERCIAL PAPER (Amortized Cost $13,658,494) ............................................ 13,658,494
-------------
U.S. GOVERNMENT AGENCY (23.2%)
4,930 Federal Home Loan
Mortgage Corp.
(Amortized Cost $4,926,600) .................................... 5.47-5.75 08/01/97-09/19/97 4,926,600
-------------
BANKERS' ACCEPTANCES (7.2%)
1,014 BostonBank, N.A. ................................................ 5.71-5.88 09/30/97-01/20/98 993,499
541 Union Bank of California, N.A. .................................. 5.59 10/15/97 534,804
-------------
TOTAL BANKERS' ACCEPTANCES (Amortized Cost $1,528,303) .......................................... 1,528,303
-------------
TOTAL INVESTMENTS
(Amortized Cost $20,113,397)(a) ............................................... 94.8% 20,113,397
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ............................... 5.2 1,099,631
----- -------------
NET ASSETS .................................................................... 100.0% $21,213,028
===== =============
</TABLE>
- --------------
(a) Cost is the same for federal income tax purposes.
SEE NOTES TO FINANCIAL STATEMENTS
52
<PAGE>
DEAN WITTER RETIREMENT SERIES - U.S. GOVERNMENT MONEY MARKET
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCIES
(98.7%)
$1,000 Federal Farm Credit Bank .. 5.52-5.77% 08/04/97-11/25/97 $ 991,289
1,690 Federal Home Loan Banks ... 5.42-5.66 08/07/97-09/02/97 1,687,131
725 Federal Home Loan Mortgage
Corp. .................... 5.59-5.75 08/01/97-10/17/97 720,019
590 Federal National Mortgage
Association .............. 5.38-5.49 08/04/97-08/07/97 589,647
----------
TOTAL U.S. GOVERNMENT AGENCIES
(Amortized Cost $3,988,086) .............................. 3,988,086
----------
U.S. GOVERNMENT OBLIGATION (1.2%)
50 U.S. Treasury Bill
(Amortized Cost $48,650) .. 5.32 02/05/98 48,650
----------
TOTAL INVESTMENTS
(Amortized Cost $4,036,736)(a).......... 99.9% 4,036,736
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES ......................... 0.1 4,560
----- ----------
NET ASSETS.............................. 100.0% $4,041,296
====== ==========
</TABLE>
- --------------
(a) Cost is the same for federal income tax purposes.
SEE NOTES TO FINANCIAL STATEMENTS
53
<PAGE>
DEAN WITTER RETIREMENT SERIES - U.S. GOVERNMENT SECURITIES
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS (98.6%)
Government National
Mortgage Assoc. I (71.4%)
$3,684 ................................................................. 7.00 % 06/15/23-03/15/27 $ 3,688,923
3,737 ................................................................. 7.50 01/15/24-01/15/27 3,802,491
------------
7,491,414
------------
971 Government National
Mortgage Assoc. II (9.2%) ...................................... 7.00 03/20/26 968,255
------------
U.S. Treasury Notes (12.6%)
1,200 ................................................................. 6.375 09/30/01 1,221,852
100 ................................................................. 6.250 06/30/02 101,434
------------
1,323,286
------------
600 U.S. Treasury Principal Strips (5.4%) ........................... 0.00 08/15/98 567,120
------------
TOTAL INVESTMENTS
(Identified Cost $10,212,454)(a) ......................................... 98.6% 10,350,075
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ........................... 1.4 146,232
----- ------------
NET ASSETS ............................................................... 100.0% $10,496,307
===== ============
</TABLE>
- --------------
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$202,248 and the aggregate gross unrealized depreciation is $64,627,
resulting in net unrealized appreciation of $137,621.
SEE NOTES TO FINANCIAL STATEMENTS
54
<PAGE>
DEAN WITTER RETIREMENT SERIES - INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (56.8%)
Automobile-Rentals (4.0%)
$100 Hertz Corp. ..................................................... 6.00 % 01/15/03 $ 97,979
------------
Automotive (0.8%)
20 Chrysler Corp. .................................................. 10.40 08/01/99 20,005
------------
Automotive-Finance (1.1%)
25 General Motors Acceptance Corp. ................................. 8.40 10/15/99 26,177
------------
Banks (9.5%)
100 Bank One Corp. .................................................. 7.60 05/01/07 106,545
100 Long Island Savings Bank ....................................... 7.00 06/13/02 102,145
25 Star Bank N.A. .................................................. 6.375 03/01/04 24,764
------------
233,454
------------
Brokerage (4.1%)
100 Bear Stearns Companies, Inc. ................................... 6.75 08/15/00 101,506
------------
Data Processing (4.1%)
100 Oracle Corp. ................................................... 6.91 02/15/07 101,719
------------
Financial (8.4%)
100 Ikon Capital Inc. ............................................... 6.73 06/15/01 101,477
100 Nac Re Corp ..................................................... 8.00 06/15/99 103,259
------------
204,736
------------
Foreign Government (4.0%)
100 State of Israel ................................................ 6.375 12/15/05 97,826
------------
Healthcare (1.0%)
25 Columbia/HCA Healthcare Corp. .................................. 6.87 09/15/03 25,403
------------
Industrials (4.1%)
100 Millennium America Inc. ........................................ 7.00 11/15/06 100,710
------------
Leisure (4.4%)
100 Royal Caribbean Cruises ......................................... 8.25 04/01/05 108,221
------------
Manufacturing (2.0%)
50 Reebok International plc
(United Kingdom) ............................................... 6.75 09/15/05 49,374
------------
Paper & Forest Products (4.1%)
100 Noranda Forest, Inc. (Canada) ................................... 6.875 11/15/05 100,602
------------
Textiles (1.0%)
25 Burlington Industries, Inc. .................................... 7.25 09/15/05 25,313
------------
Utilities - Electric (4.2%)
100 Connecticut Light & Power Co. .................................. 7.875 06/01/01 102,208
------------
TOTAL CORPORATE BONDS
(Identified Cost $1,371,214) ........................................................ 1,395,233
------------
SEE NOTES TO FINANCIAL STATEMENTS
55
<PAGE>
DEAN WITTER RETIREMENT SERIES - INTERMEDIATE INCOME SECURITIES
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS (34.7%)
$100 U.S. Treasury Note .............................................. 6.125% 03/31/98 $ 100,396
300 U.S. Treasury Note .............................................. 5.75 10/31/00 299,463
300 U.S. Treasury Note .............................................. 5.875 11/30/01 299,868
150 U.S. Treasury Note .............................................. 6.25 01/31/02 152,100
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Identified Cost $843,820) .......................................................... 851,827
------------
SHORT-TERM INVESTMENT (a)(4.1%)
U.S. GOVERNMENT AGENCY
100 Federal Home Loan Banks
(Amortized Cost $100,000) ....................................... 5.39 08/01/97 100,000
------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $2,315,034)(b) ......................................... 95.6% 2,347,060
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................... 4.4 108,712
-------- -----------
NET ASSETS .............................................................. 100.0% $2,455,772
======== ===========
</TABLE>
- --------------
(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
$36,736 and the aggregate gross unrealized depreciation is $4,710,
resulting in net unrealized appreciation of $32,026.
SEE NOTES TO FINANCIAL STATEMENTS
56
<PAGE>
DEAN WITTER RETIREMENT SERIES - AMERICAN VALUE
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (97.7%)
Agriculture Related (4.4%)
4,500 Case Corp. ..................................................... $ 280,969
4,500 Deere & Co. .................................................... 255,937
5,500 Dekalb Genetics Corp. (Class B) ................................. 420,406
7,000 Delta & Pine Land Co. .......................................... 266,000
14,000 Monsanto Co. ................................................... 697,375
6,500 Pioneer Hi-Bred International, Inc. ............................. 481,000
-------------
2,401,687
-------------
Banks (7.1%)
6,000 Bank of New York Co., Inc. ..................................... 291,375
7,000 BankAmerica Corp. .............................................. 528,500
4,000 Bankers Trust New York Corp. .................................... 404,750
250,000 Credito Italiano Spa (Italy) ................................... 497,644
4,000 First Chicago NBD Corp. ........................................ 303,500
6,000 Fleet Financial Group, Inc. .................................... 407,250
10,000 Mellon Bank Corp. .............................................. 504,375
7,200 NationsBank Corp. .............................................. 512,550
6,000 Washington Mutual, Inc. ........................................ 414,000
-------------
3,863,944
-------------
Basic Cyclicals (0.7%)
2,300 Champion International Corp. .................................... 142,600
3,000 Reynolds Metals Co. ............................................ 234,000
-------------
376,600
-------------
Biotechnology (2.4%)
21,000 Biochem Pharma, Inc. (Canada)* ................................. 603,750
13,000 Centocor, Inc.* ................................................ 499,687
2,000 Gilead Sciences, Inc.* ......................................... 56,250
3,500 Vertex Pharmaceuticals, Inc.* .................................. 122,062
-------------
1,281,749
-------------
Capital Equipment (4.3%)
2,000 Aeroquip-Vickers, Inc. .......................................... 109,625
5,500 Boeing Co. ..................................................... 323,469
3,000 Crane Co. ...................................................... 136,312
6,000 General Electric Co. ........................................... 421,125
4,500 Kuhlman Corp. .................................................. 139,500
3,200 Parker-Hannifin Corp. .......................................... 206,000
2,200 Sundstrand Corp. ............................................... 136,400
10,000 Timken Co. ..................................................... 351,875
2,000 Tyco International Ltd. ......................................... 162,000
4,000 United Technologies Corp. ...................................... 338,250
-------------
2,324,556
-------------
Communications Equipment (9.4%)
2,000 Advanced Fibre Communications, Inc.* ........................... $ 139,250
21,000 Bay Networks, Inc.* ............................................ 640,500
15,000 Brightpoint, Inc.* ............................................. 447,187
3,000 CIENA Corp.* ................................................... 168,000
6,000 Cisco Systems, Inc.* ........................................... 476,625
700 Corsair Communications, Inc.* .................................. 13,738
11,500 Ericsson (L.M.) Telephone Co. (Class B)(ADR)(Sweden) ........... 520,375
7,000 Lucent Technologies Inc. ....................................... 594,562
10,000 Newbridge Networks Corp. (Canada)* .............................. 521,250
6,000 Nokia Corp. (ADR)(Finland) ...................................... 513,750
5,000 Northern Telecom Ltd. (Canada) .................................. 522,812
2,000 Tekelec* ....................................................... 123,000
7,000 Tellabs, Inc.* ................................................. 418,687
-------------
5,099,736
-------------
Computer Equipment (3.1%)
4,000 Dell Computer Corp.* ........................................... 342,000
12,000 EMC Corp.* ..................................................... 606,000
9,000 Kemet Corp.* ................................................... 230,625
6,500 SCI Systems, Inc.* ............................................. 516,344
-------------
1,694,969
-------------
Computer Software (4.3%)
15,000 BEA Systems, Inc.* ............................................. 290,625
5,000 Compuware Corp.* ............................................... 308,125
400 Great Plains Software, Inc.* ................................... 10,700
4,100 Microsoft Corp.* ............................................... 579,381
7,000 Oracle Corp.* .................................................. 380,187
5,000 Peoplesoft, Inc.* .............................................. 291,875
8,000 Veritas Software Corp.* ........................................ 494,000
-------------
2,354,893
-------------
Consumer-Noncyclical (4.5%)
9,000 Alberto-Culver Co. (Class B) ................................... 252,562
2,500 Avon Products, Inc. ............................................ 181,406
3,800 Coca Cola Co. .................................................. 263,150
1,600 Coca Cola FEMSA S.A. de C.V. (ADR)(Mexico) ...................... 89,800
8,000 Colgate-Palmolive Co. .......................................... 606,000
10,000 PanAmerican Beverages, Inc. (Class A)(Mexico) ................... 335,000
SEE NOTES TO FINANCIAL STATEMENTS
57
<PAGE>
DEAN WITTER RETIREMENT SERIES - AMERICAN VALUE
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
3,000 Procter & Gamble Co. ........................................... $ 456,375
7,000 Sunbeam Corporation ............................................ 273,875
-------------
2,458,168
-------------
Consumer Business Services (1.4%)
8,000 AccuStaff, Inc.* ............................................... 218,000
7,400 Browning-Ferris Industries, Inc. ............................... 273,800
5,000 Corrections Corp. of America* .................................. 221,562
2,000 Service Corp. International ..................................... 68,000
-------------
781,362
-------------
Consumer Products (2.6%)
5,000 CVS Corp. ....................................................... 284,375
4,000 Philips Electronics NV (Netherlands) ........................... 327,250
3,500 Philips Electronics NV (Netherlands) ........................... 283,962
1,900 Sony Corp. (Japan) ............................................. 189,134
3,100 Sony Corp. (ADR)(Japan) ........................................ 315,619
-------------
1,400,340
-------------
Drugs (4.0%)
5,000 Dura Pharmaceuticals, Inc.* .................................... 194,062
4,500 Lilly (Eli) & Co. .............................................. 508,500
5,000 Medicis Pharmaceutical Corp. (Class A)* ........................ 225,000
280 Novartis (Switzerland) .......................................... 449,742
4,400 Pfizer, Inc. ................................................... 262,350
3,600 Warner-Lambert Co. ............................................. 502,875
-------------
2,142,529
-------------
Energy (5.9%)
9,000 Baker Hughes, Inc. .............................................. 396,563
8,000 Cooper Cameron Corp.* .......................................... 469,000
2,500 Diamond Offshore Drilling, Inc. ................................. 233,125
5,000 EVI, Inc.* ..................................................... 244,375
8,000 Falcon Drilling Company, Inc.* ................................. 231,000
12,000 Halliburton Co. ................................................ 552,000
5,000 Halter Marine Group, Inc.* ..................................... 153,125
8,200 Schlumberger, Ltd. ............................................. 626,275
4,000 Smith International, Inc.* ..................................... 286,750
-------------
3,192,213
-------------
Financial-Miscellaneous (7.1%)
400 Advanta Corp. (Class A) ........................................ 14,400
7,000 American Express Co. ............................................ 586,250
15,000 Hambrecht & Quist Group* ....................................... 447,188
2,000 Kansas City Southern Industries, Inc. .......................... 150,750
4,000 Legg Mason, Inc. ............................................... $ 245,750
16,000 Lehman Brothers Holdings, Inc. .................................. 797,000
8,000 Merrill Lynch & Co., Inc. ....................................... 563,500
8,000 Paine Webber Group, Inc. ........................................ 320,000
1,000 Price (T.) Rowe Associates, Inc. ................................ 54,250
10,000 Providian Financial Corp.* ..................................... 391,875
4,500 Salomon, Inc. .................................................. 285,469
-------------
3,856,432
-------------
Healthcare Products & Services (2.9%)
7,000 HBO & Co. ...................................................... 540,750
16,000 Health Management Associates, Inc. (Class A)* .................. 511,000
20,000 Healthsouth Corp.* ............................................. 530,000
-------------
1,581,750
-------------
Insurance (2.3%)
3,000 Hartford Financial Services Group, Inc. ........................ 261,375
7,000 Marsh & McLennan Companies, Inc. ............................... 542,063
5,000 Nationwide Financial Services, Inc. (Class A) .................. 151,250
4,000 Travelers Group, Inc. ........................................... 287,750
-------------
1,242,438
-------------
Internet (3.0%)
10,000 America Online, Inc.* .......................................... 675,000
10,000 E*TRADE Group, Inc.* ........................................... 305,000
10,000 Sterling Commerce, Inc.* ....................................... 376,875
5,000 Yahoo! Inc.* ................................................... 281,250
-------------
1,638,125
-------------
Media Group (4.1%)
6,600 Clear Channel Communications, Inc.* ............................ 410,850
8,000 Evergreen Media Corp. (Class A)* ............................... 367,000
10,000 Jacor Communications, Inc.* .................................... 428,750
13,200 Outdoor Systems, Inc.* ......................................... 343,200
2,000 Univision Communications, Inc. (Class A)* ...................... 86,000
25,000 Westinghouse Electric Corp. ..................................... 601,563
-------------
2,237,363
-------------
Medical Supplies (2.4%)
6,000 Boston Scientific Corp.* ....................................... 430,500
5,500 Guidant Corp. .................................................. 501,875
4,000 Medtronic, Inc. ................................................ 349,000
-------------
1,281,375
-------------
SEE NOTES TO FINANCIAL STATEMENTS
58
<PAGE>
DEAN WITTER RETIREMENT SERIES - AMERICAN VALUE
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
Retail (5.8%)
3,000 Barnes & Noble, Inc.* .......................................... $ 150,000
13,500 Costco Companies Inc.* ......................................... 511,313
10,000 Dayton-Hudson Corp. ............................................ 646,250
5,000 Dollar General Corp. ............................................ 220,000
10,000 Family Dollar Stores, Inc. ..................................... 325,625
6,000 General Nutrition Companies, Inc.* ............................. 171,000
7,800 Home Depot, Inc. ............................................... 389,025
3,000 Ross Stores, Inc. .............................................. 94,500
17,000 Wal-Mart Stores, Inc. .......................................... 638,563
-------------
3,146,276
-------------
Semiconductor Equipment (5.7%)
9,000 Applied Materials, Inc.* ....................................... 826,313
2,000 ASM Lithography Holding NV (Netherlands)* ....................... 162,000
5,000 CFM Technologies, Inc.* ........................................ 129,375
1,000 DuPont Photomasks, Inc.* ........................................ 50,750
3,000 Etec Systems, Inc.* ............................................ 160,875
13,000 KLA-Tencor Corp.* .............................................. 786,500
7,000 LAM Research Corp.* ............................................ 370,125
7,000 PRI Automation, Inc.* .......................................... 345,625
5,000 Teradyne, Inc.* ................................................ 233,750
-------------
3,065,313
-------------
Semiconductors (9.2%)
4,000 Altera Corp. ................................................... 241,000
17,000 Analog Devices, Inc.* .......................................... 534,438
10,000 Burr-Brown Corp.* .............................................. 348,125
700 Galileo Technology Ltd. (Israel)* ............................... 16,975
2,000 Intel Corp. .................................................... 183,500
5,000 Lattice Semiconductor Corp.* ................................... 335,625
5,000 Linear Technology Corp. ........................................ 333,750
8,000 Maxim Integrated Products, Inc.* ................................ 553,000
2,500 MEMC Electronic Materials, Inc.* ................................ 72,500
4,000 Micrel, Inc.* .................................................. 259,000
9,000 Micron Technology, Inc. * ...................................... 438,188
6,000 Motorola, Inc. ................................................. 481,875
6,000 Texas Instruments, Inc. ......................................... 690,000
10,000 Vitesse Semiconductor Corp.* ................................... 483,750
-------------
4,971,726
-------------
Transportation (1.1%)
900 Continental Airlines, Inc. (Class B)* .......................... $ 33,525
4,000 PACCAR, Inc. .................................................... 197,000
1,400 Ryanair Holdings PLC (ADR)(Ireland)* ........................... 39,375
3,000 Teekay Shipping Corp. .......................................... 104,813
6,000 US Airways Group, Inc.* ........................................ 229,877
-------------
604,590
-------------
TOTAL COMMON STOCKS (Identified Cost $42,913,438) .............. 52,998,134
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- --------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (a) (1.7%)
U.S. GOVERNMENT AGENCY
$900 Federal Home Loan Mortgage
Corp. 5.75% due 08/01/97
(Amortized Cost $900,000).......... 900,000
-----------
TOTAL INVESTMENTS
(Identified Cost $43,813,438)(b) . 99.4% 53,898,134
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES ................... 0.6 316,360
-------- ------------
NET ASSETS........................ 100.0% $54,214,494
======== ============
</TABLE>
- ------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown
has been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$10,364,753 and the aggregate gross unrealized depreciation is
$280,057, resulting in net unrealized appreciation of $10,084,696.
SEE NOTES TO FINANCIAL STATEMENTS
59
<PAGE>
DEAN WITTER RETIREMENT SERIES - CAPITAL GROWTH
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (98.0%)
Auto Trucks & Parts (2.3%)
5,000 Miller Industries, Inc.* ........................................ $ 84,375
------------
Banking (4.8%)
1,450 State Street Corp. .............................................. 81,291
1,350 Washington Mutual, Inc. ......................................... 93,150
------------
174,441
------------
Commercial Services (1.4%)
1,900 Affiliated Computer Services, Inc. (Class A)* ................... 51,537
------------
Communications -
Equipment & Software (3.8%)
1,100 3Com Corp.* ..................................................... 60,087
1,350 Tellabs, Inc.* .................................................. 80,747
------------
140,834
------------
Computer Services (1.9%)
1,800 Sterling Commerce, Inc.* ........................................ 67,837
------------
Computer Software (8.9%)
1,100 Computer Associates International, Inc. ......................... 74,869
2,200 Danka Business Systems PLC (ADR)(United Kingdom) ................ 107,525
800 Electronics for Imaging, Inc.* .................................. 44,000
450 Microsoft Corp.* ................................................ 63,591
700 Oracle Corp.* ................................................... 38,019
------------
328,004
------------
Computer - Systems (4.7%)
2,000 EMC Corp.* ...................................................... 101,000
900 SCI Systems, Inc.* .............................................. 71,494
------------
172,494
------------
Consumer Business Services (2.6%)
2,200 AccuStaff, Inc.* ................................................ 59,950
1,000 Service Corp. International ..................................... 34,000
------------
93,950
------------
Drugs (1.4%)
1,100 Elan Corp. PLC (ADR)(Ireland)* .................................. 52,250
------------
Electronics (4.2%)
750 Hadco Corp.* .................................................... 49,406
1,800 Jabil Circuit, Inc.* ............................................ 87,637
250 Sanmina Corp.* .................................................. 18,344
------------
155,387
------------
Electronics - Semiconductors/
Components (1.2%)
400 Intel Corp. ..................................................... 36,700
150 Photronics, Inc.* ............................................... 8,137
------------
44,837
------------
Enviromental Control (1.5%)
1,600 Newpark Resources, Inc.* ........................................ $ 55,300
------------
Financial - Miscellaneous (11.4%)
1,600 Green Tree Financial Corp. ...................................... 75,400
700 Household International, Inc. ................................... 90,650
2,200 MBNA Corp. ...................................................... 99,000
1,300 MGIC Investment Corp. ........................................... 68,331
1,400 SunAmerica, Inc. ................................................ 84,700
------------
418,081
------------
Healthcare - Diversified (2.2%)
2,000 Universal Health Services, Inc. (Class B)* ...................... 81,250
------------
Hospital Management (1.5%)
1,200 Express Scripts, Inc. (Class A)* ................................ 53,400
------------
Household Furnishings & Appliances (3.1%)
1,200 American Standard Companies, Inc.* .............................. 59,625
1,000 Ethan Allen Interiors, Inc. ..................................... 53,000
------------
112,625
------------
Life Insurance (1.4%)
1,300 Providian Financial Corp.* ...................................... 50,944
------------
Manufacturing - Diversified (2.7%)
1,200 Tyco International Ltd. ......................................... 97,200
------------
Media (2.0%)
1,200 Clear Channel Communications, Inc.* ............................. 74,700
------------
Oil & Gas Products (0.5%)
300 Camco International, Inc. ....................................... 19,387
------------
Oil Drilling & Services (9.3%)
1,450 ENSCO International, Inc.* ...................................... 95,881
2,900 Pride International, Inc.* ...................................... 76,669
1,500 Tidewater, Inc. ................................................. 75,750
2,400 Varco International, Inc.* ...................................... 92,850
------------
341,150
------------
Oil Equipment & Services (4.2%)
2,400 Falcon Drilling Company, Inc.* .................................. 69,300
1,200 Smith International, Inc.* ...................................... 86,025
------------
155,325
Pharmaceuticals (2.8%)
2,300 Medicis Pharmaceutical Corp. (Class A)* ......................... 103,500
------------
Retail - Department Stores (3.7%)
1,900 Dollar General Corp. ............................................ 83,600
950 Proffitt's, Inc.* ............................................... 50,350
------------
133,950
------------
SEE NOTES TO FINANCIAL STATEMENTS
60
<PAGE>
DEAN WITTER RETIREMENT SERIES - CAPITAL GROWTH
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------
Retail - Drugs Stores (1.7%)
1,100 Walgreen Co. .................................................... $ 62,150
------------
Retail - Food Chains (4.1%)
2,400 Kroger Co.* ..................................................... 70,950
1,500 Safeway, Inc.* .................................................. 80,438
------------
151,388
------------
Retail - Specialty (6.0%)
1,562 Consolidated Stores Corp.* ...................................... 62,871
2,700 General Nutrition Companies, Inc.* .............................. 76,950
3,200 Staples, Inc.* .................................................. 80,400
------------
220,221
------------
Utilities - Electric (1.9%)
900 AES Corp.* ...................................................... 71,100
------------
Utilities - Telephone (0.8%)
850 Airtouch Communications, Inc.* .................................. 27,997
------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $2,725,382)(a) . 98.0% 3,595,614
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES................... 2.0 74,032
----- ----------
NET ASSETS....................... 100.0% $3,669,646
===== ==========
</TABLE>
- ------------
ADR American Depository Receipt.
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$870,624 and the aggregate gross unrealized depreciation is $392,
resulting in net unrealized appreciation of $870,232.
SEE NOTES TO FINANCIAL STATEMENTS
61
<PAGE>
DEAN WITTER RETIREMENT SERIES - DIVIDEND GROWTH
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (100.0%)
Aerospace (2.7%)
55,000 Raytheon Co. ................................................... $3,073,125
--------------
Aluminum (2.7%)
35,500 Aluminum Co. of America ........................................ 3,141,750
--------------
Automotive (5.3%)
84,000 Chrysler Corp. ................................................. 3,118,500
74,000 Ford Motor Co. ................................................. 3,024,750
--------------
6,143,250
--------------
Banks (2.7%)
43,000 NationsBank Corp. .............................................. 3,061,062
--------------
Banks - Money Center (2.7%)
41,000 BankAmerica Corp. .............................................. 3,095,500
--------------
Beverages - Soft Drinks (2.7%)
81,000 PepsiCo Inc. ................................................... 3,103,312
--------------
Chemicals (5.1%)
44,000 Du Pont (E.I.) de Nemours & Co., Inc. .......................... 2,945,250
49,500 Eastman Chemical Co. ........................................... 2,994,750
--------------
5,940,000
--------------
Computers - Systems (2.7%)
29,000 International Business Machines Corp. .......................... 3,066,750
--------------
Conglomerates (5.1%)
31,500 Minnesota Mining & Manufacturing Co. ........................... 2,984,625
63,000 Tenneco, Inc. .................................................. 2,937,375
--------------
5,922,000
--------------
Drugs (2.6%)
38,000 Bristol-Myers Squibb Co. ....................................... 2,980,625
--------------
Drugs & Healthcare (2.7%) ......................................
47,000 Abbott Laboratories ............................................ 3,075,562
--------------
Electric - Major (2.6%)
42,300 General Electric Co. ........................................... 2,968,931
--------------
Energy (2.6%)
47,000 Kerr-McGee Corp. ............................................... 2,943,375
--------------
Foods (5.2%)
59,800 Quaker Oats Company (The) ...................................... 3,061,012
13,300 Unilever NV (ADR)(Netherlands) ................................. 2,899,400
--------------
5,960,412
--------------
Machinery - Agricultural (2.6%)
53,600 Deere & Co. .................................................... 3,048,500
--------------
Manufacturing - Diversified (2.5%)
39,000 Honeywell, Inc. ................................................ $2,912,813
--------------
Metals - Miscellaneous (2.5%)
34,000 Phelps Dodge Corp. ............................................. 2,892,125
--------------
Natural Gas (2.6%)
78,000 Enron Corp. .................................................... 2,959,125
--------------
Office Equipment (2.7%)
41,000 Pitney Bowes, Inc. ............................................. 3,080,125
--------------
Oil - Domestic (5.3%)
32,000 Amoco Corp. .................................................... 3,008,000
59,000 Ashland, Inc. .................................................. 3,134,375
--------------
6,142,375
--------------
Oil Integrated - International (2.7%)
48,200 Exxon Corp. .................................................... 3,096,850
--------------
Paper & Forest Products (2.7%)
51,000 Weyerhaeuser Co. ............................................... 3,174,750
--------------
Photography (2.6%)
45,500 Eastman Kodak Co. .............................................. 3,048,500
--------------
Railroads (2.8%)
51,500 CSX Corp. ...................................................... 3,180,125
--------------
Retail - Department Stores (2.6%)
54,000 May Department Stores Co. ...................................... 3,017,250
--------------
Retail - Food Chains (2.6%)
120,600 American Stores Co. ............................................ 3,045,150
--------------
Steel (2.5%)
83,000 Timken Co. ..................................................... 2,920,563
--------------
Telecommunications (5.3%)
41,000 Bell Atlantic Corp. ............................................ 2,975,063
63,000 Sprint Corp. ................................................... 3,118,500
--------------
6,093,563
--------------
Tobacco (2.6%)
67,000 Philip Morris Companies, Inc. .................................. 3,023,375
--------------
Utilities - Electric (8.0%)
142,000 Houston Industries, Inc. ....................................... 2,973,125
82,800 New England Electric System .................................... 3,089,475
139,000 Unicom Corp. ................................................... 3,153,563
--------------
9,216,163
--------------
TOTAL COMMON STOCKS
(Identified Cost $86,532,718) .................................. 115,327,006
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
62
<PAGE>
DEAN WITTER RETIREMENT SERIES - DIVIDEND GROWTH
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (0.7%)
REPURCHASE AGREEMENT
The Bank of New York 5.75% due 08/01/97 (dated 07/31/97;
$757 proceeds $757,142)(a) (Identified Cost $757,021) ............. $ 757,021
-------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $87,289,739)(b) . 100.7% 116,084,027
LIABILITIES IN EXCESS OF OTHER
ASSETS ............................ (0.7) (772,518)
-------- -------------
NET ASSETS ........................ 100.0% $115,311,509
======== =============
</TABLE>
- ------------
ADR American Depository Receipt.
(a) Collateralized by $244,167 Federal National Mortgage Association
9.55% due 11/10/97 valued at $252,039, $400,000 Federal National
Mortgage Association 7.37% due 04/14/04 valued at $414,359 and
$99,269 Federal National Mortgage Association 7.50% due 04/16/07
valued at $105,764.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$29,069,461 and the aggregate gross unrealized depreciation is
$275,173, resulting in net unrealized appreciation of $28,794,288.
SEE NOTES TO FINANCIAL STATEMENTS
63
<PAGE>
DEAN WITTER RETIREMENT SERIES - UTILITIES
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (100.0%)
Natural Gas (19.1%)
5,000 American Water Works Company, Inc. ............................. $ 108,437
3,500 Brooklyn Union Gas Co. .......................................... 105,219
4,500 Calpine Corp.* .................................................. 88,875
3,500 Enron Corp. ..................................................... 132,781
5,000 MCN Corp. ...................................................... 158,437
2,000 Mobil Corp. ..................................................... 153,000
3,000 Pacific Enterprises ............................................. 100,312
4,000 Williams Companies, Inc. ........................................ 183,000
-----------
1,030,061
-----------
Telecommunications (29.1%)
3,000 Alltel Corp. .................................................... 98,625
3,000 AT&T Corp. ..................................................... 110,438
3,000 BellSouth Corp. ................................................ 142,125
3,500 Cable & Wireless PLC (ADR)(United Kingdom) ...................... 105,219
2,500 Compania de Telefonos de Chile S.A. (ADR)(Chile) ................ 82,344
7,000 Grupo Iusacell S.A. de C.V. (Series L)(ADR)(Mexico)* ............ 131,688
3,000 GTE Corp. ....................................................... 139,500
2,000 Nokia Corp. (ADR)(Finland)* ..................................... 171,250
3,000 Sprint Corp. .................................................... 148,500
3,000 Teleport Communications Group Inc. (Class A)* ................... 118,125
2,500 Vodafone Group PLC (ADR)(United Kingdom) ........................ 126,250
5,500 WorldCom, Inc.* ................................................. 192,156
-----------
1,566,220
-----------
Utilities - Electric (51.8%)
2,000 AES Corp.* ...................................................... 158,000
3,000 American Electric Power Co. ..................................... 134,250
4,000 CILCORP, Inc. .................................................. 167,750
4,000 CINergy Corp. .................................................. 134,500
4,000 CMS Energy Corp. ............................................... 148,000
5,000 DPL, Inc. ...................................................... 123,125
4,050 DQE, Inc. ...................................................... 127,828
3,000 Duke Energy Corp. ............................................... 152,063
5,000 Edison International ........................................... 126,250
4,000 Florida Progress Corp. ......................................... 128,750
4,000 General Public Utilities Corp. ................................. 138,750
6,000 MDU Resources Group, Inc. ...................................... 142,500
3,000 NIPSCO Industries, Inc. ......................................... 126,375
5,500 PacifiCorp ...................................................... 122,719
4,500 Pinnacle West Capital Corp. .................................... 142,031
4,000 Public Service Company of Colorado .............................. $ 166,500
4,500 Sierra Pacific Resources ........................................ 143,719
6,000 Teco Energy, Inc. .............................................. 152,250
4,000 Utilicorp United, Inc. .......................................... 119,250
4,000 Western Resources, Inc. ......................................... 138,500
-----------
2,793,110
-----------
TOTAL COMMON STOCKS
(Identified Cost $4,358,265) .................................... 5,389,391
-----------
PRINCIPAL
AMOUNT IN
THOUSANDS
- -----------
SHORT-TERM INVESTMENTS (5.2%)
U.S. GOVERNMENT AGENCY (a)(2.8%)
Federal National Mortgage Assoc. 5.48% due 08/04/97
$150 (Amortized Cost $149,931) ....................................... 149,931
-----------
REPURCHASE AGREEMENT (2.4%)
The Bank of New York
5.75% due 08/01/97 (dated 07/31/97; proceeds $132,571)(b)
133 (Identified Cost $132,550) ...................................... 132,550
-----------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $282,481) ...................................... 282,481
-----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $4,640,746)
(C) ............. ............. 105.2% 5,671,872
LIABILITIES IN EXCESS OF OTHER
ASSETS........................ (5.2) (280,644)
----- -----------
NET ASSETS..................... 100.0% $ 5,391,228
===== ===========
</TABLE>
- --------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown
has been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $30,477 U.S. Treasury Note 6.25% due 05/31/99
valued at $31,043 and $99,095 U.S. Treasury Note 7.125% due 09/30/99
valued at $104,158.
(c) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$1,034,626 and the aggregate gross unrealized depreciation is $3,500,
resulting in net unrealized appreciation of $1,031,126.
SEE NOTES TO FINANCIAL STATEMENTS
64
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (97.4%)
Aerospace & Defense (1.0%)
750 Boeing Co. ..................................................... $ 44,109
550 General Dynamics Corp. ......................................... 48,675
450 Lockheed Martin Corp. .......................................... 47,925
550 McDonnell Douglas Corp. ........................................ 42,075
450 Northrop Grumman Corp. ......................................... 51,806
-------------
234,590
-------------
Agriculture Related (0.2%)
600 Pioneer Hi-Bred International, Inc. ............................. 44,400
-------------
Air Freight (0.2%)
800 Federal Express Corp.* .......................................... 51,650
-------------
Airlines (0.8%)
450 AMR Corp.* ...................................................... 48,403
450 Delta Air Lines, Inc. .......................................... 39,994
1,550 Southwest Airlines Co. ......................................... 45,241
1,300 US Airways Group, Inc.* ......................................... 49,806
-------------
183,444
-------------
Aluminum (0.6%)
1,100 Alcan Aluminum Ltd. (Canada) .................................... 43,106
600 Aluminum Co. of America ......................................... 53,100
550 Reynolds Metals Co. ............................................ 42,900
-------------
139,106
-------------
Auto Parts - After Market (1.5%)
1,850 Cooper Tire & Rubber Co. ....................................... 46,134
1,150 Dana Corp. ..................................................... 52,253
1,250 Echlin, Inc. ................................................... 46,328
1,275 Genuine Parts Co. .............................................. 41,597
750 Goodyear Tire & Rubber Co. ..................................... 48,422
1,500 ITT Industries, Inc. ........................................... 42,469
1,000 Snap-On, Inc. .................................................. 41,250
800 TRW, Inc. ...................................................... 46,800
-------------
365,253
-------------
Auto Trucks & Parts (0.6%)
650 Cummins Engine Co., Inc. ....................................... 51,025
2,500 Navistar International Corp.* ................................... 51,562
1,050 PACCAR, Inc. ................................................... 51,712
-------------
154,299
-------------
Automobiles (0.6%)
1,100 Chrysler Corp. ................................................. 40,837
1,100 Ford Motor Co. ................................................. 44,962
800 General Motors Corp. ........................................... 49,500
-------------
135,299
-------------
Banks - Money Center (1.2%)
700 BankAmerica Corp. .............................................. $ 52,850
450 Bankers Trust New York Corp. ................................... 45,534
400 Chase Manhattan Corp. .......................................... 45,425
350 Citicorp ........................................................ 47,512
650 First Chicago NBD Corp. ........................................ 49,319
400 Morgan (J.P.) & Co., Inc. ...................................... 46,350
-------------
286,990
-------------
Banks - Regional (4.4%)
950 Banc One Corp. ................................................. 53,319
1,100 Bank of New York Co., Inc. ..................................... 53,419
550 BankBoston Corp. ............................................... 46,716
900 Barnett Banks, Inc. ............................................ 51,244
600 Comerica, Inc. ................................................. 45,375
700 CoreStates Financial Corp. ..................................... 43,181
825 Fifth Third Bancorp ............................................. 52,078
550 First Bank System, Inc. ........................................ 48,950
450 First Union Corp. .............................................. 45,647
700 Fleet Financial Group, Inc. .................................... 47,512
700 KeyCorp ......................................................... 43,531
1,000 Mellon Bank Corp. .............................................. 50,437
750 National City Corp. ............................................ 44,625
700 NationsBank Corp. .............................................. 49,831
750 Norwest Corp. .................................................. 47,297
900 PNC Bank Corp. ................................................. 41,175
450 Republic New York Corp. ........................................ 51,975
700 SunTrust Banks, Inc. ........................................... 44,931
750 U.S. Bancorp .................................................... 49,969
700 Wachovia Corp. ................................................. 45,150
800 Washington Mutual, Inc. ........................................ 55,200
150 Wells Fargo & Co. .............................................. 41,241
-------------
1,052,803
-------------
Beverages - Alcoholic (0.7%)
1,100 Anheuser-Busch Companies, Inc. ................................. 47,231
800 Brown-Forman Corp. (Class B) .................................... 39,000
1,650 Coors (Adolph) Co. ............................................. 51,872
1,100 Seagram Co. Ltd. (Canada) ....................................... 42,144
-------------
180,247
-------------
Beverages - Soft Drinks (0.5%)
650 Coca Cola Co. .................................................. 45,012
1,150 PepsiCo, Inc. .................................................. 44,059
1,700 Whitman Corp. .................................................. 42,925
-------------
131,996
-------------
Biotechnology (0.2%)
700 Amgen, Inc.* .................................................... 41,125
-------------
SEE NOTES TO FINANCIAL STATEMENTS
65
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
Broadcast Media (0.6%)
2,200 Comcast Corp. (Class A Special) ................................. $ 49,637
3,100 Tele-Communications, Inc. (Class A)* ............................ 52,894
2,200 U.S. West Media Group* .......................................... 48,537
-------------
151,068
-------------
Brokerage (0.2%)
1,000 Schwab (Charles) Corp. ......................................... 46,812
-------------
Building Materials (0.7%)
600 Armstrong World Industries, Inc. ............................... 44,287
1,000 Masco Corp. .................................................... 46,875
1,000 Owens-Corning ................................................... 42,062
1,300 Sherwin-Williams Co. ........................................... 41,681
-------------
174,905
-------------
Business Services (0.2%)
1,200 Cognizant Corp. ................................................ 51,150
-------------
Chemicals (1.5%)
550 Air Products & Chemicals, Inc. ................................. 48,503
450 Dow Chemical Co. ............................................... 42,750
700 Du Pont (E.I.) De Nemours & Co., Inc. .......................... 46,856
750 Eastman Chemical Co. ........................................... 45,375
900 Monsanto Co. ................................................... 44,831
800 Praxair, Inc. .................................................. 44,100
450 Rohm & Haas Co. ................................................ 44,100
750 Union Carbide Corp. ............................................ 41,531
-------------
358,046
-------------
Chemicals - Diversified (0.9%)
1,100 Avery Dennison Corp. ........................................... 48,537
1,800 Engelhard Corp. ................................................ 38,700
550 FMC Corp.* ...................................................... 47,162
950 Goodrich (B.F.) Co. ............................................ 42,928
700 PPG Industries, Inc. ........................................... 44,800
-------------
222,127
-------------
Chemicals - Specialty (1.5%)
1,000 Ecolab, Inc. ................................................... 46,687
750 Grace (W. R.) & Co. ............................................ 46,125
850 Great Lakes Chemical Corp. ..................................... 42,553
850 Hercules, Inc. ................................................. 45,156
800 International Flavors & Fragrances Inc. ........................ 42,450
1,300 Morton International, Inc. ..................................... 43,469
1,050 Nalco Chemical Co. ............................................. 42,853
1,200 Sigma-Aldrich Corp. ............................................ 41,250
-------------
350,543
-------------
Communications -
Equipment/Manufacturers (1.2%)
1,500 Andrew Corp.* ................................................... $ 39,094
1,650 DSC Communications Corp.* ....................................... 48,572
2,200 NextLevel Systems, Inc.* ........................................ 43,862
500 Northern Telecom Ltd. (Canada) .................................. 52,281
2,300 Scientific-Atlanta, Inc. ....................................... 48,300
800 Tellabs, Inc.* .................................................. 47,850
-------------
279,959
-------------
Communications Equipment (0.6%)
500 Harris Corp. ................................................... 43,437
600 Lucent Technologies Inc. ....................................... 50,962
650 Motorola, Inc. ................................................. 52,203
-------------
146,602
-------------
Computer Software & Services (3.0%)
900 3Com Corp.* ..................................................... 49,162
1,200 Adobe Systems, Inc. ............................................ 44,850
1,200 Autodesk, Inc. ................................................. 50,850
900 Automatic Data Processing, Inc. ................................ 44,550
1,650 Bay Networks, Inc.* ............................................. 50,325
1,400 Cabletron Systems, Inc.* ........................................ 47,425
1,000 Ceridian Corp.* ................................................. 43,750
650 Cisco Systems, Inc.* ............................................ 51,634
750 Computer Associates International, Inc. ........................ 51,047
600 Computer Sciences Corp.* ........................................ 48,862
350 Microsoft Corp.* ................................................ 49,459
10 Netscape Communications Corp.* .................................. 380
5,200 Novell, Inc.* ................................................... 39,325
950 Oracle Corp.* ................................................... 51,597
900 Parametric Technology Corp.* .................................... 44,100
5,800 Unisys Corp.* ................................................... 55,825
-------------
723,141
-------------
Computers - Peripheral Equipment (0.4%)
1,050 EMC Corp.* ...................................................... 53,025
1,000 Seagate Technology, Inc.* ....................................... 41,062
-------------
94,087
-------------
Computers - Systems (2.5%)
4,400 Amdahl Corp.* ................................................... 51,975
2,500 Apple Computer, Inc.* ........................................... 43,594
950 COMPAQ Computer Corp.* .......................................... 54,269
1,750 Data General Corp.* ............................................. 52,828
600 Dell Computer Corp.* ............................................ 51,300
1,100 Digital Equipment Corp.* ........................................ 45,306
700 Hewlett-Packard Co. ............................................ 49,044
SEE NOTES TO FINANCIAL STATEMENTS
66
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
500 International Business Machines Corp. .......................... $ 52,875
800 Shared Medical Systems Corp. ................................... 43,100
2,150 Silicon Graphics, Inc.* ......................................... 53,750
1,150 Sun Microsystems, Inc.* ......................................... 52,541
1,700 Tandem Computers Inc.* .......................................... 49,937
-------------
600,519
-------------
Containers - Metal & Glass (0.4%)
1,400 Ball Corp. ..................................................... 41,650
900 Crown Cork & Seal Co., Inc. .................................... 45,506
-------------
87,156
-------------
Containers - Paper (0.7%)
900 Bemis Company, Inc. ............................................ 41,344
3,200 Stone Container Corp. .......................................... 53,200
600 Temple-Inland, Inc. ............................................ 40,387
700 Union Camp Corp. ............................................... 40,994
-------------
175,925
-------------
Cosmetics (0.6%)
1,600 Alberto-Culver Co. (Class B) .................................... 44,900
600 Avon Products, Inc. ............................................ 43,537
450 Gillette Co. ................................................... 44,550
-------------
132,987
-------------
Data Processing (0.4%)
1,200 Equifax, Inc. .................................................. 40,725
1,000 First Data Corp. ............................................... 43,625
-------------
84,350
-------------
Distributors - Consumer Products (0.7%)
700 Cardinal Health, Inc. .......................................... 43,575
2,400 Fleming Companies., Inc. ....................................... 38,250
1,300 Supervalu, Inc. ................................................ 52,650
1,150 Sysco Corp. .................................................... 42,909
-------------
177,384
-------------
Electrical Equipment (1.8%)
1,000 AMP, Inc. ...................................................... 52,250
700 Emerson Electric Co. ........................................... 41,300
700 General Electric Co. ........................................... 49,131
950 General Signal Corp. ........................................... 46,728
550 Honeywell, Inc. ................................................ 41,078
550 Raychem Corp. .................................................. 53,350
700 Rockwell International Corp. ................................... 45,937
800 Thomas & Betts Corp. ........................................... 45,700
1,950 Westinghouse Electric Corp. .................................... 46,922
-------------
422,396
-------------
Electronic Components (0.2%)
500 Grainger (W.W.), Inc. .......................................... $ 48,000
-------------
Electronics - Defense (0.2%)
850 Raytheon Co. ................................................... 47,494
-------------
Electronics - Instrumentation (0.6%)
2,200 EG & G, Inc. ................................................... 45,100
550 Perkin-Elmer Corp. ............................................. 44,894
750 Tektronix, Inc. ................................................ 46,312
-------------
136,306
-------------
Electronics - Semiconductors (1.2%)
1,300 Advanced Micro Devices, Inc.* ................................... 45,581
500 Intel Corp. .................................................... 45,875
1,500 LSI Logic Corp.* ................................................ 47,344
1,150 Micron Technology, Inc. ........................................ 55,991
1,500 National Semiconductor Corp.* ................................... 47,250
450 Texas Instruments, Inc. ........................................ 51,750
-------------
293,791
-------------
Engineering & Construction (0.6%)
700 Fluor Corp. .................................................... 43,050
950 Foster Wheeler Corp. ........................................... 42,156
1,700 McDermott International, Inc. .................................. 51,956
-------------
137,162
-------------
Entertainment (0.7%)
1,100 King World Productions, Inc.* ................................... 44,412
850 Time Warner, Inc. .............................................. 46,378
1,400 Viacom, Inc. (Class B)* ......................................... 43,225
500 Walt Disney Co. ................................................ 40,406
-------------
174,421
-------------
Entertainment, Gaming & Lodging (0.2%)
2,400 Harrah's Entertainment, Inc.* ................................... 49,200
-------------
Finance - Consumer (1.0%)
600 Beneficial Corp. ............................................... 43,500
1,400 Countrywide Credit Industries, Inc. ............................ 49,350
1,100 Green Tree Financial Corp. ..................................... 51,837
400 Household International, Inc. .................................. 51,800
1,150 MBNA Corp. ..................................................... 51,750
-------------
248,237
-------------
Finance - Diversified (1.8%)
600 American Express Co. ........................................... 50,250
950 American General Corp. ......................................... 50,587
900 Fannie Mae ...................................................... 42,581
1,200 Freddie Mac ..................................................... 43,275
400 MBIA Inc. ...................................................... 47,200
SEE NOTES TO FINANCIAL STATEMENTS
67
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
900 MGIC Investment Corp. .......................................... $ 47,306
1,050 Morgan Stanley, Dean Witter, Discover & Co. (Note 3) ............ 54,928
700 SunAmerica, Inc. ............................................... 42,350
500 Transamerica Corp. ............................................. 50,437
-------------
428,914
-------------
Foods (2.4%)
2,100 Archer-Daniels-Midland Co. ..................................... 47,250
800 Campbell Soup Co. .............................................. 41,500
700 ConAgra, Inc. .................................................. 49,219
500 CPC International, Inc. ........................................ 47,969
600 General Mills, Inc. ............................................ 41,475
900 Heinz (H.J.) Co. ............................................... 41,569
750 Hershey Foods Corp. ............................................ 41,437
500 Kellogg Co. .................................................... 45,937
900 Quaker Oats Company (The) ....................................... 46,069
500 Ralston-Ralston Purina Group .................................... 45,125
900 Sara Lee Corp. ................................................. 39,431
200 Unilever NV (ADR)(Netherlands) .................................. 43,600
600 Wrigley (Wm.) Jr. Co. (Class A) ................................. 46,162
-------------
576,743
-------------
Hardware & Tools (0.4%)
1,200 Black & Decker Corp. ........................................... 50,550
1,100 Stanley Works ................................................... 49,844
-------------
100,394
-------------
Healthcare - Diversified (1.6%)
650 Abbott Laboratories ............................................. 42,534
1,400 Allergan, Inc. ................................................. 44,712
600 American Home Products Corp. ................................... 49,462
600 Bristol-Myers Squibb Co. ....................................... 47,062
1,800 Healthsouth Corp.* .............................................. 47,700
700 Johnson & Johnson ............................................... 43,619
1,300 Mallinckrodt Group, Inc. ....................................... 45,500
380 Warner-Lambert Co. ............................................. 53,081
-------------
373,670
-------------
Healthcare - Drugs (1.0%)
450 Lilly (Eli) & Co. .............................................. 50,850
450 Merck & Co., Inc. .............................................. 46,772
800 Pfizer, Inc. ................................................... 47,700
1,200 Pharmacia & Upjohn, Inc. ....................................... 45,300
1,000 Schering-Plough Corp. .......................................... 54,562
-------------
245,184
-------------
Healthcare - Miscellaneous (0.4%)
2,900 Beverly Enterprises, Inc.* ...................................... $ 44,587
1,500 Manor Care, Inc. ............................................... 49,500
-------------
94,087
-------------
Healthcare HMOs (0.4%)
1,950 Humana, Inc.* ................................................... 47,531
850 United Healthcare Corp. ........................................ 48,450
-------------
95,981
-------------
Healthcare Services (0.2%)
1,450 Alza Corp.* ..................................................... 46,853
-------------
Home Building (0.8%)
950 Centex Corp. ................................................... 52,962
1,450 Fleetwood Enterprises, Inc. .................................... 47,034
2,450 Kaufman & Broad Home Corp. ..................................... 52,369
1,200 Pulte Corp. .................................................... 48,975
-------------
201,340
-------------
Hospital Management (0.4%)
1,300 Columbia/HCA Healthcare Corp. .................................. 41,925
1,600 Tenet Healthcare Corp.* ......................................... 47,900
-------------
89,825
-------------
Hotels/Motels (0.8%)
700 HFS, Inc.* ...................................................... 40,775
1,400 Hilton Hotels Corp. ............................................ 44,012
750 ITT Corp.* ...................................................... 47,953
750 Marriot International, Inc. .................................... 51,562
-------------
184,302
-------------
Household Furnishings & Appliances (0.4%)
1,800 Maytag Corp. ................................................... 52,537
900 Whirlpool Corp. ................................................ 45,000
-------------
97,537
-------------
Household Products (0.8%)
340 Clorox Co. ..................................................... 47,472
700 Colgate-Palmolive Co. .......................................... 53,025
900 Kimberly-Clark Corp. ........................................... 45,619
300 Procter & Gamble Co. ........................................... 45,637
-------------
191,753
-------------
Housewares (0.6%)
1,200 Newell Co. ..................................................... 50,325
1,600 Rubbermaid, Inc. ............................................... 41,700
1,300 Tupperware Corp. ............................................... 45,175
-------------
137,200
-------------
SEE NOTES TO FINANCIAL STATEMENTS
68
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
Insurance Brokers (0.4%)
825 Aon Corp. ...................................................... $ 46,200
700 Marsh & McLennan Cos., Inc. .................................... 54,206
-------------
100,406
-------------
Investment Banking/Brokerage (0.4%)
750 Merrill Lynch & Co., Inc. ...................................... 52,828
750 Salomon, Inc. .................................................. 47,578
-------------
100,406
-------------
Leisure Time (0.2%)
1,350 Brunswick Corp. ................................................ 43,537
-------------
Life Insurance (1.2%)
450 Aetna Inc. ..................................................... 51,272
1,000 Conseco, Inc. .................................................. 40,750
600 Jefferson-Pilot Corp. .......................................... 42,637
1,100 Providian Financial Corp.* ...................................... 43,106
650 Torchmark Corp. ................................................ 51,756
1,100 UNUM Corp. ..................................................... 48,950
-------------
278,471
-------------
Machine Tools (0.2%)
2,100 Giddings & Lewis, Inc. ......................................... 43,706
-------------
Machinery - Diversified (2.3%)
800 Briggs & Stratton Corp. ........................................ 40,550
650 Case Corp. ..................................................... 40,584
900 Caterpillar, Inc. .............................................. 50,400
1,700 Cincinnati Milacron, Inc. ...................................... 47,600
800 Cooper Industries, Inc. ........................................ 44,450
800 Deere & Co. .................................................... 45,500
700 Dover Corp. .................................................... 49,962
1,100 Harnischfeger Industries, Inc. ................................. 47,437
750 Ingersoll-Rand Co. ............................................. 51,047
650 NACCO Industries, Inc. (Class A) ................................ 45,094
1,200 Thermo Electron Corp.* .......................................... 41,025
1,400 Timken Co. ..................................................... 49,262
-------------
552,911
-------------
Manufacturing - Diversified (3.2%)
950 Aeroquip-Vickers, Inc. ......................................... 52,072
500 AlliedSignal, Inc. ............................................. 46,125
850 Corning, Inc. .................................................. 52,541
1,150 Crane Co. ...................................................... 52,253
550 Eaton Corp. .................................................... 49,672
900 Illinois Tool Works, Inc. ...................................... 46,688
900 Johnson Controls, Inc. ......................................... 40,331
900 Millipore Corp. ................................................ 39,769
450 Minnesota Mining & Manufacturing Co. ........................... 42,638
900 National Service Industries, Inc. .............................. $ 44,381
1,700 Pall Corp. ..................................................... 42,713
800 Parker-Hannifin Corp. .......................................... 51,500
1,000 Tenneco, Inc. .................................................. 46,625
700 Textron Inc. ................................................... 49,044
650 Tyco International Ltd. ......................................... 52,650
500 United Technologies Corp. ...................................... 42,281
-------------
751,283
-------------
Medical Products & Supplies (2.0%)
1,300 Bard (C.R.), Inc. .............................................. 48,913
1,000 Bausch & Lomb, Inc. ............................................ 42,563
800 Baxter International, Inc. ..................................... 46,250
800 Becton, Dickinson & Co. ........................................ 42,900
2,500 Biomet, Inc. ................................................... 49,844
700 Boston Scientific Corp.* ........................................ 50,225
600 Guidant Corp. .................................................. 54,750
500 Medtronic, Inc. ................................................ 43,625
1,200 St. Jude Medical, Inc.* ......................................... 48,975
1,200 United States Surgical Corp. ................................... 44,550
-------------
472,595
-------------
Metals & Mining (1.5%)
1,350 ASARCO, Inc. ................................................... 45,900
2,000 Barrick Gold Corp. (Canada) ..................................... 45,625
7,300 Battle Mountain Gold Co. ....................................... 40,606
1,850 Cyprus Amax Minerals Co. ....................................... 46,944
7,800 Echo Bay Mines Ltd. (Canada) .................................... 39,000
2,900 Homestake Mining Co. ........................................... 40,056
1,300 Newmont Mining Corp. ........................................... 53,625
2,600 Placer Dome Inc. (Canada) ....................................... 44,200
-------------
355,956
-------------
Metals - Miscellaneous (0.5%)
1,400 Freeport-McMoran Copper & Gold, Inc. (Class B) .................. 40,950
1,400 Inco Ltd. (Canada) .............................................. 43,313
500 Phelps Dodge Corp. ............................................. 42,531
-------------
126,794
-------------
Miscellaneous (0.4%)
1,350 American Greetings Corp. (Class A) .............................. 45,056
1,800 Jostens, Inc. .................................................. 46,468
-------------
91,524
-------------
Multi-Line Insurance (1.2%)
450 American International Group, Inc. .............................. 47,925
250 CIGNA Corp. .................................................... 49,875
550 Hartford Financial Services Group, Inc. ......................... 47,919
SEE NOTES TO FINANCIAL STATEMENTS
69
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
650 Lincoln National Corp. ......................................... $ 46,231
400 Loews Corp. .................................................... 43,250
700 Travelers Group, Inc. .......................................... 50,356
-------------
285,556
-------------
Natural Gas (0.3%)
600 Anardarko Petroleum Corp. ...................................... 41,925
1,100 Apache Corp. ................................................... 38,775
-------------
80,700
-------------
Office Equipment & Supplies (0.6%)
1,600 Ikon Office Solutions, Inc. .................................... 46,700
2,100 Moore Corp. Ltd. (Canada) ....................................... 45,544
600 Pitney Bowes, Inc. ............................................. 45,075
-------------
137,319
-------------
Oil & Gas Drilling (1.5%)
950 Baker Hughes, Inc. ............................................. 41,859
1,250 Dresser Industries, Inc. ....................................... 52,188
1,100 Halliburton Co. ................................................ 50,600
700 Helmerich & Payne, Inc. ........................................ 47,119
1,600 Rowan Cos., Inc.* ............................................... 52,600
700 Schlumberger, Ltd. .............................................. 53,463
600 Western Atlas, Inc.* ............................................ 47,738
-------------
345,567
-------------
Oil & Gas Exploration (0.9%)
900 Burlington Resources, Inc. ..................................... 42,525
650 Kerr-McGee Corp. ............................................... 40,706
680 Louisiana Land & Exploration Co. ................................ 48,025
1,700 Oryx Energy Co.* ................................................ 41,969
1,600 Union Pacific Resources Group, Inc. ............................. 39,500
-------------
212,725
-------------
Oil - Domestic Integrated (1.5%)
750 Amerada Hess Corp. ............................................. 44,109
900 Ashland, Inc. .................................................. 47,826
1,700 Occidental Petroleum Corp. ..................................... 42,606
650 Pennzoil Co. ................................................... 50,781
1,000 Phillips Petroleum Co. ......................................... 46,063
1,300 Sun Co., Inc. .................................................. 46,556
1,050 Unocal Corp. ................................................... 42,000
1,450 USX-Marathon Group .............................................. 46,672
-------------
366,613
-------------
Oil - International Integrated (1.3%)
450 Amoco Corp. .................................................... 42,300
600 Atlantic Richfield Co. ......................................... 44,888
550 Chevron Corp. .................................................. 43,519
700 Exxon Corp. .................................................... 44,975
600 Mobil Corp. .................................................... 45,900
800 Royal Dutch Petroleum Co. (Netherlands) ......................... $ 44,750
350 Texaco, Inc. ................................................... 40,622
-------------
306,954
-------------
Paper & Forest Products (2.1%)
1,200 Boise Cascade Corp. ............................................ 44,475
800 Champion International Corp. ................................... 49,600
500 Georgia-Pacific Corp. .......................................... 47,219
900 International Paper Co. ........................................ 50,400
1,100 James River Corp. of Virginia ................................... 45,306
1,800 Louisiana-Pacific Corp. ........................................ 41,288
600 Mead Corp. ..................................................... 43,200
900 Potlatch Corp. ................................................. 43,031
1,200 Westvaco Corp. ................................................. 40,125
800 Weyerhaeuser Co. ............................................... 49,800
550 Willamette Industries, Inc. .................................... 41,903
-------------
496,347
-------------
Photography/Imaging (0.6%)
700 Eastman Kodak Co. .............................................. 46,900
850 Polaroid Corp. ................................................. 50,575
650 Xerox Corp. .................................................... 53,463
-------------
150,938
-------------
Pollution Control (0.2%)
1,300 Waste Management Inc. .......................................... 41,600
-------------
Property - Casualty Insurance (1.2%)
600 Allstate Corp. ................................................. 47,400
700 Chubb Corp. .................................................... 49,350
250 General Re Corp. ............................................... 52,219
900 Safeco Corp. ................................................... 43,088
600 St. Paul Companies, Inc. ....................................... 47,063
1,800 USF&G Corp. .................................................... 44,213
-------------
283,333
-------------
Publishing (0.9%)
950 Dow Jones & Co., Inc. .......................................... 41,028
1,500 Dun & Bradstreet Corp. ......................................... 40,500
700 McGraw-Hill, Inc. .............................................. 47,469
1,600 Meredith Corp. ................................................. 44,300
750 Times Mirror Co. (Class A) ...................................... 40,969
-------------
214,266
-------------
Publishing -Newspaper (0.8%)
450 Gannett Co., Inc. .............................................. 44,691
900 Knight-Ridder Newspapers, Inc. ................................. 44,719
950 New York Times Co. (Class A) .................................... 47,738
950 Tribune Co. .................................................... 50,291
-------------
187,439
-------------
SEE NOTES TO FINANCIAL STATEMENTS
70
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
Railroads (0.8%)
450 Burlington Northern Santa Fe Corp. ............................. $ 43,453
750 CSX Corp. ...................................................... 46,313
450 Norfolk Southern Corp. ......................................... 49,838
550 Union Pacific Corp. ............................................ 39,428
-------------
179,032
-------------
Restaurants (0.6%)
5,000 Darden Restaurants, Inc. ....................................... 47,813
750 McDonald's Corp. ............................................... 40,313
1,750 Wendy's International, Inc. .................................... 42,766
-------------
130,892
-------------
Retail - Department Stores (1.4%)
1,200 Dillard Department Stores, Inc. (Class A) ....................... 45,375
1,200 Federated Department Stores, Inc.* .............................. 52,575
850 Harcourt General, Inc. ......................................... 40,163
850 May Department Stores Co. ...................................... 47,494
750 Mercantile Stores Co., Inc. .................................... 50,391
900 Nordstrom, Inc. ................................................ 50,963
800 Penney (J.C.) Co., Inc. ........................................ 46,800
-------------
333,761
-------------
Retail - Drug Stores (0.8%)
850 CVS Corp. ...................................................... 48,344
1,500 Longs Drug Stores Corp. ........................................ 40,406
900 Rite Aid Corp. ................................................. 46,744
900 Walgreen Co. ................................................... 50,850
-------------
186,344
-------------
Retail - Food Chains (1.1%)
1,150 Albertson's, Inc. .............................................. 42,622
1,600 American Stores Co. ............................................ 40,400
1,400 Giant Food, Inc. (Class A) ...................................... 46,988
1,600 Great Atlantic & Pacific Tea Co., Inc. ......................... 43,900
1,400 Kroger Co.* ..................................................... 41,388
1,250 Winn-Dixie Stores, Inc. ........................................ 45,781
-------------
261,079
-------------
Retail - General Merchandise (1.1%)
1,400 Costco Companies Inc.* .......................................... 53,025
800 Dayton-Hudson Corp. ............................................ 51,700
4,000 Kmart Corp.* .................................................... 47,500
800 Sears, Roebuck & Co. ........................................... 50,650
1,400 Wal-Mart Stores, Inc. .......................................... 52,588
-------------
255,463
-------------
Retail - Specialty (1.6%)
1,600 AutoZone, Inc.* ................................................. $ 45,800
1,200 Circuit City Stores, Inc. ...................................... 43,500
1,050 Home Depot, Inc. ............................................... 52,369
1,100 Lowe's Companies, Inc. ......................................... 41,388
1,300 Pep Boys-Manny, Moe & Jack ...................................... 43,225
800 Tandy Corp. .................................................... 47,550
1,450 Toys 'R' Us, Inc.* .............................................. 49,391
1,800 Woolworth Corp.* ................................................ 50,963
-------------
374,186
-------------
Retail - Specialty Apparel (0.8%)
6,700 Charming Shoppes, Inc.* ......................................... 39,363
1,200 Gap, Inc. ...................................................... 53,325
2,200 Limited (The), Inc. ............................................ 49,088
1,700 TJX Companies, Inc. ............................................ 50,788
-------------
192,564
-------------
Savings & Loan Companies (0.4%)
1,000 Ahmanson (H.F.) & Co. .......................................... 53,188
600 Golden West Financial Corp. .................................... 50,475
-------------
103,663
-------------
Semiconductor Equipment (0.2%)
550 Applied Materials, Inc.* ........................................ 50,497
-------------
Shoes (0.6%)
700 Nike, Inc. (Class B) ............................................ 43,619
900 Reebok International Ltd. ....................................... 46,463
3,200 Stride Rite Corp. .............................................. 43,400
-------------
133,482
-------------
Specialized Services (1.0%)
1,350 Block (H.&R.), Inc. ............................................ 51,722
1,900 CUC International, Inc.* ........................................ 46,788
1,050 Interpublic Group of Companies, Inc. ........................... 46,988
2,550 Safety-Kleen Corp. ............................................. 44,784
1,200 Service Corp. International ..................................... 40,800
-------------
231,082
-------------
Specialty Printing (0.6%)
1,200 Deluxe Corp. ................................................... 39,975
1,200 Donnelley (R.R.) & Sons Co. .................................... 48,225
2,300 Harland (John H.) Co. .......................................... 45,138
-------------
133,338
-------------
Steel & Iron (1.3%)
1,600 Allegheny Teledyne Inc. ........................................ 49,800
7,400 Armco, Inc.* .................................................... 40,238
4,000 Bethlehem Steel Corp.* .......................................... 45,000
SEE NOTES TO FINANCIAL STATEMENTS
71
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
1,800 Inland Steel Industries, Inc. .................................. $ 41,288
750 Nucor Corp. .................................................... 46,547
1,150 USX-U.S. Steel Group, Inc. ..................................... 42,047
2,400 Worthington Industries, Inc. ................................... 47,400
-------------
312,320
-------------
Telecommunications -
Long Distance (1.0%)
1,300 AT&T Corp. ..................................................... 47,856
2,300 Frontier Corp. ................................................. 47,438
1,200 MCI Communications Corp. ....................................... 42,225
850 Sprint Corp. ................................................... 42,075
1,500 WorldCom, Inc.* ................................................. 52,406
-------------
232,000
-------------
Telecommunications -Wireless (0.2%)
1,500 Airtouch Communications, Inc.* .................................. 49,406
-------------
Textiles (0.9%)
1,700 Fruit of the Loom, Inc. (Class A)* .............................. 46,538
850 Liz Claiborne, Inc. ............................................ 40,694
1,400 Russell Corp. .................................................. 40,863
900 Springs Industries, Inc. (Class A) .............................. 43,538
550 VF Corp. ....................................................... 49,363
-------------
220,996
-------------
Tobacco (0.6%)
1,150 Fortune Brands, Inc. ........................................... 40,753
1,050 Philip Morris Companies, Inc. .................................. 47,381
1,500 UST, Inc. ...................................................... 43,594
-------------
131,728
-------------
Toys (0.4%)
1,600 Hasbro Inc. .................................................... 49,100
1,350 Mattel, Inc. ................................................... 46,913
-------------
96,013
-------------
Truckers (0.4%)
1,300 Caliber System, Inc. ........................................... 50,619
1,250 Ryder System, Inc. ............................................. 44,766
-------------
95,385
-------------
Utilities - Electric (4.9%)
900 American Electric Power Co., Inc. ............................... 40,275
1,700 Baltimore Gas & Electric Co. ................................... 47,281
1,300 Carolina Power & Light Co. ..................................... 46,313
2,300 Central & South West Corp. ..................................... 46,144
1,200 CINergy Corp. .................................................. 40,350
1,400 Consolidated Edison Co. of New York, Inc. ...................... $ 44,275
1,450 Detroit Edison Co. ............................................. 43,409
1,300 Dominion Resources, Inc. ....................................... 47,775
1,050 Duke Energy Corp. .............................................. 53,222
1,700 Edison International ............................................ 42,925
1,450 Entergy Corp. .................................................. 39,603
1,000 FPL Group, Inc. ................................................ 47,875
1,200 General Public Utilities Corp. ................................. 41,625
2,200 Houston Industries, Inc. ....................................... 46,063
4,300 Niagara Mohawk Power Corp.* ..................................... 40,044
800 Northern States Power Co. ...................................... 41,100
1,950 Ohio Edison Co. ................................................ 43,388
2,050 PacifiCorp ...................................................... 45,741
2,100 PECO Energy Co. ................................................ 49,350
1,700 PG & E Corp. ................................................... 42,181
2,300 PP&L Resources, Inc. ........................................... 47,006
1,900 Public Service Enterprise Group, Inc. .......................... 47,025
1,900 Southern Co. ................................................... 41,681
1,200 Texas Utilities Co. ............................................ 42,525
2,100 Unicom Corp. ................................................... 47,644
1,200 Union Electric Co. ............................................. 46,200
-------------
1,161,020
-------------
Utilities - Natural Gas (2.4%)
800 Coastal Corp. .................................................. 43,500
600 Columbia Gas System, Inc. ...................................... 41,250
700 Consolidated Natural Gas Co. ................................... 40,513
1,300 Eastern Enterprises ............................................. 46,556
1,200 Enron Corp. .................................................... 45,525
1,900 ENSERCH Corp. .................................................. 42,275
1,200 NICOR, Inc. .................................................... 43,950
2,800 NorAm Energy Corp. ............................................. 44,800
1,250 ONEOK Inc. ..................................................... 43,750
1,200 Pacific Enterprises ............................................. 40,125
1,100 Peoples Energy Corp. ........................................... 42,213
900 Sonat, Inc. .................................................... 44,888
900 Williams Cos., Inc. ............................................ 41,175
-------------
560,520
-------------
Utilities - Telephone (1.4%)
1,250 Alltel Corp. ................................................... 41,094
650 Ameritech Corp. ................................................ 43,834
550 Bell Atlantic Corp. ............................................ 39,909
850 BellSouth Corp. ................................................ 40,269
1,000 GTE Corp. ...................................................... 46,500
SEE NOTES TO FINANCIAL STATEMENTS
72
<PAGE>
DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
700 NYNEX Corp. .................................................... $ 38,806
750 SBC Communications, Inc. ....................................... 44,391
1,100 U.S. West Communications Group, Inc. ............................ 40,219
-------------
335,022
-------------
Waste Management (0.4%)
1,200 Browning-Ferris Industries, Inc. ............................... 44,400
2,900 Laidlaw Inc. (Class B)(Canada) .................................. 46,219
-------------
90,619
-------------
TOTAL COMMON STOCKS (Identified Cost $14,805,322) ............... 23,156,111
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENT (a)(2.9%)
U.S. GOVERNMENT AGENCY
$700 Federal Home Loan Mortgage Corp.
5.75% due 08/01/97
(Amortized Cost $700,000) .................................... $ 700,000
------------
TOTAL INVESTMENTS
(Identified cost $15,505,322)(b) . 100.3% 23,856,111
LIABILITIES IN EXCESS OF
CASH AND OTHER ASSETS............. (0.3) (76,376)
----- ------------
NET ASSETS........................ 100.0% $23,779,735
===== ============
</TABLE>
- ------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown
has been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$8,490,682 and the aggregate gross unrealized depreciation is
$139,893, resulting in net unrealized appreciation of $8,350,789.
SEE NOTES TO FINANCIAL STATEMENTS
73
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (93.8%)
ARGENTINA (0.7%)
Banks
1,700 Banco de Galicia y Buenos Aires S.A. de C.V. (Class B)(ADR) ....$ 53,337
-----------
Brewery
2,000 Quilmes Industrial S.A. (ADR) .................................. 23,000
-----------
Telecommunications
1,000 Telecom Argentina Stet - France Telecom S.A. (Class B)(ADR) .... 57,813
-----------
TOTAL ARGENTINA ................................................ 134,150
-----------
AUSTRALIA (1.0%)
Business Services
4,800 Mayne Nickless Ltd. ............................................ 27,735
-----------
Energy
2,500 Woodside Petroleum Ltd. ........................................ 21,268
-----------
Financial Services
24,000 Tyndall Australia Ltd. ......................................... 41,083
-----------
Foods & Beverages
30,000 Goodman Fielder Ltd. ........................................... 46,263
-----------
Metals & Mining
20,155 M.I.M. Holdings Ltd. ........................................... 28,022
14,000 Pasminco Ltd. .................................................. 27,000
-----------
55,022
-----------
TOTAL AUSTRALIA ................................................ 191,371
-----------
BELGIUM (0.2%)
Retail
1,000 G.I.B. Holdings Ltd. ........................................... 48,471
-----------
BRAZIL (2.3%)
Banks
600 Uniao de Bancos Brasileiros S.A. (GDR)* ........................ 24,150
-----------
Brewery
4,500 Companhia Cervejaria Brahma -(ADR) ............................. 68,906
-----------
Steel & Iron
2,000 Usinas Siderurgicas de Minas Gerais S.A. (ADR) -144A** ......... 23,700
3,000 Usinas Siderurgicas de Minas Gerais S.A. (S Shares)(ADR) ....... 35,550
-----------
59,250
-----------
Telecommunications
600 Telecommunicacoes Brasileiras S.A. (ADR) .......................$ 89,025
-----------
Utilities - Electric
2,000 Companhia Energetica de Minas Gerais S.A. (ADR) ................ 112,500
5,000 Companhia Paranaense de Energia -Copel (Preference Shares) ..... 96,250
-----------
208,750
-----------
TOTAL BRAZIL ................................................... 450,081
-----------
CANADA (0.7%)
Energy
5,000 Ranger Oil Ltd. ................................................ 48,970
-----------
Retail - Department Stores
4,000 Hudson's Bay Co. ............................................... 89,669
-----------
TOTAL CANADA ................................................... 138,639
-----------
CHILE (0.7%)
Pharmaceuticals
1,300 Laboratorio Chile S.A. (ADR) ................................... 38,431
-----------
Retail
3,000 Supermercados Unimarc S.A. (ADR)* .............................. 51,938
-----------
Telecommunications
1,487 Compania de Telecommunicaciones de Chile S.A. (ADR) ............ 48,978
-----------
TOTAL CHILE .................................................... 139,347
-----------
CHINA (0.2%)
Transportation
1,000 China Southern Airlines Co. (ADR) .............................. 31,000
-----------
DENMARK (0.9%)
Pharmaceuticals
1,000 Novo-Nordisk AS (Series B) ..................................... 105,361
-----------
Transportation
700 Kobenhavns Lufthavne AS ........................................ 73,453
-----------
TOTAL DENMARK .................................................. 178,814
-----------
FINLAND (0.7%)
Manufacturing
800 KCI Konecranes International ................................... 32,104
-----------
SEE NOTES TO FINANCIAL STATEMENTS
74
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------
Paper Products
3,200 UPM-Kymmene OY Corp. ...........................................$ 77,810
-----------
Pharmaceuticals
1,000 Orion-yhtymae OY (B Shares) .................................... 36,300
-----------
TOTAL FINLAND .................................................. 146,214
-----------
FRANCE (3.6%)
Automotive
1,200 Michelin (B Shares) ............................................ 74,682
-----------
Computer Services
400 Axime (Ex Segin) ............................................... 44,599
-----------
Energy
700 Elf Aquitaine S.A. ............................................. 79,855
-----------
Financial Services
350 Credit Local de France ......................................... 34,675
-----------
Household Products
740 Societe BIC S.A. ............................................... 61,015
-----------
Insurance
2,000 AXA-UAP ........................................................ 130,730
1,400 Scor ........................................................... 61,218
-----------
191,948
-----------
Leisure
600 Accor S.A. ..................................................... 90,230
-----------
Retail
80 Carrefour Supermarche .......................................... 54,022
-----------
Steel & Iron
4,500 Usinor Sacilor ................................................. 89,673
-----------
TOTAL FRANCE ................................................... 720,699
-----------
GERMANY (3.8%)
Apparel
400 Adidas AG ...................................................... 46,995
-----------
Automotive
90 Bayerische Motoren Werke (BMW) AG .............................. 73,332
300 MAN AG ......................................................... 90,481
250 Volkswagen AG .................................................. 191,188
-----------
355,001
-----------
Chemicals
1,200 Bayer AG ....................................................... 50,519
600 SGL Carbon AG .................................................. 79,793
-----------
130,312
-----------
Machinery - Diversified
100 Mannesmann AG ..................................................$ 46,696
-----------
Pharmaceuticals
1,000 Gehe AG ........................................................ 62,605
-----------
Telecommunications
900 Siemens AG ..................................................... 62,709
-----------
Utilities - Electric
700 VEBA AG ........................................................ 40,702
-----------
TOTAL GERMANY .................................................. 745,020
-----------
HONG KONG (4.9%)
Banking
12,000 Guoco Group Ltd. ............................................... 67,743
3,140 HSBC Holdings PLC .............................................. 109,521
-----------
177,264
-----------
Conglomerates
24,000 China Resources Enterprise Ltd. ................................ 119,984
12,000 Citic Pacific Ltd. ............................................. 76,114
-----------
196,098
-----------
Finance & Brokerage
36,000 Peregrine Investments Holdings Ltd. ............................ 79,525
-----------
Real Estate
10,000 Cheung Kong (Holdings) Ltd. .................................... 111,097
24,000 New World Development Co., Ltd. ................................. 172,846
6,000 Sun Hung Kai Properties Ltd. ................................... 75,378
-----------
359,321
-----------
Utilities
36,600 Hong Kong & China Gas Co. Ltd. .................................. 79,431
-----------
Utilities - Electric
13,000 China Light & Power Co. Ltd. ................................... 74,564
-----------
TOTAL HONG KONG ................................................ 966,203
-----------
IRELAND (0.3%)
Transportation
2,000 Ryanair Holdings PLC (ADR)* .................................... 56,250
-----------
ITALY (1.4%)
Energy
1,500 Ente Nazionale Idrocarburi SpA (ADR) ........................... 88,219
-----------
Household Furnishings & Appliances
3,000 Industrie Natuzzi SpA (ADR) .................................... 82,688
-----------
SEE NOTES TO FINANCIAL STATEMENTS
75
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------
Telecommunications
16,000 Telecom Italia SpA .............................................$ 101,703
------------
TOTAL ITALY .................................................... 272,610
------------
JAPAN (19.5%)
Automotive
4,000 Honda Motor Co. ................................................ 133,626
6,000 Suzuki Motor Co. Ltd. .......................................... 72,887
------------
206,513
------------
Banking
14,000 Asahi Bank, Ltd. ............................................... 104,876
3,000 Bank of Tokyo-Mitsubishi, Ltd. ................................. 55,677
9,000 Sakura Bank Ltd. ............................................... 55,045
------------
215,598
------------
Building & Construction
12,000 Sekisui House Ltd. ............................................. 114,392
------------
Business Services
2,000 Secom Co. ...................................................... 146,280
------------
Chemicals
8,000 Kaneka Corp. ................................................... 49,064
6,000 Nippon Shokubai K.K. Co. ....................................... 41,859
4,000 Shin-Etsu Chemical Co., Ltd. ................................... 114,054
------------
204,977
------------
Computers
6,000 Fujitsu, Ltd. .................................................. 88,072
------------
Consumer Products
4,000 Kao Corp. ...................................................... 60,064
------------
Electronics
6,000 Canon, Inc. .................................................... 191,328
9,000 Hitachi, Ltd. .................................................. 101,738
9,000 Hitachi Cable .................................................. 81,238
6,000 Matsushita Electric Industrial Co., Ltd. ....................... 125,021
8,000 Sharp Corp. .................................................... 102,581
2,000 Sony Corp. ..................................................... 199,089
2,000 TDK Corp. ...................................................... 172,094
------------
973,089
------------
Electronics - Semiconductors/Components
1,000 Rohm Co., Ltd. ................................................. 130,758
------------
Financial Services
6,000 Nomura Securities Co. Ltd. ..................................... 85,035
2,000 Orix Corp. ..................................................... 161,296
------------
246,331
------------
International Trade
10,000 Mitsui & Co. ...................................................$ 95,326
------------
Machine Tools
7,000 Asahi Diamond Industries Co. Ltd. .............................. 57,576
------------
Machinery
10,000 Minebea Co., Ltd. .............................................. 118,947
13,000 Mitsubishi Heavy Industries, Ltd. ............................... 91,572
------------
210,519
------------
Pharmaceuticals
5,000 Eisai Co. Ltd. ................................................. 103,762
6,000 Fujisawa Pharmaceutical ........................................ 61,245
2,000 Sankyo Co. Ltd. ................................................ 71,368
2,000 Terumo Corp. ................................................... 40,324
------------
276,699
------------
Real Estate
5,000 Mitsui Fudosan Co., Ltd. ....................................... 64,113
------------
Restaurants
5 Yoshinoya D & C Company Ltd. ................................... 61,583
------------
Retail
2,000 Aoyama Trading Co., Ltd. ....................................... 59,895
4,000 Izumiya Co. Ltd. ............................................... 50,953
2,000 Jusco Co. ...................................................... 55,677
------------
166,525
------------
Steel & Iron
40,000 NKK Corp. ...................................................... 72,887
------------
Telecommunications
10 DDI Corp. ...................................................... 68,669
14 Nippon Telegraph & Telephone Corp. ............................. 141,724
------------
210,393
------------
Textiles
15,000 Teijin Ltd. .................................................... 64,535
------------
Transportation
15 East Japan Railway Co. ......................................... 64,409
6,000 Yamato Transport Co. Ltd. ...................................... 75,924
------------
140,333
------------
Wholesale Distributor
1,000 Softbank Corp. ................................................. 51,881
------------
TOTAL JAPAN .................................................... 3,858,444
------------
SEE NOTES TO FINANCIAL STATEMENTS
76
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------
MALAYSIA (2.2%)
Banking
8,000 Malayan Banking Berhad .........................................$ 75,959
22,666 Public Bank Berhad ............................................. 32,540
550 RHB Sakura Merchant Bankers Berhad ............................. 856
-----------
109,355
-----------
Building & Construction
9,000 United Engineers Malaysia Berhad ............................... 62,894
-----------
Conglomerates
10,000 Road Builder (M) Holdings Berhad ............................... 41,777
-----------
Entertainment
37,000 Magnum Corporation Berhad ...................................... 47,497
-----------
Financial Services
12,000 Arab Malaysian Finance Berhad 7.5% due 5/25/02 (Loan Stock) .... 4,147
-----------
Machinery
10,000 UMW Holdings Berhad ............................................ 39,499
-----------
Natural Gas
15,000 Petronas Gas Berhad ............................................ 52,697
-----------
Utilities - Electric
20,000 Tenaga Nasional Berhad ......................................... 80,517
-----------
TOTAL MALAYSIA ................................................. 438,383
-----------
MEXICO (3.4%)
Banking
29,391 Grupo Financiero Banamex Accival S.A. de C.V. (B Shares)* ...... 90,414
-----------
Beverages
2,700 Pepsi-Gemex S.A. de C.V. (GDR) ................................. 39,150
-----------
Brewery
Grupo Modelo S.A. de C.V.
6,000 (Series C) ..................................................... 55,794
-----------
Building Materials
15,087 Cemex, S.A. de C.V. (B Shares) ................................. 86,840
-----------
Conglomerates
1,707 DESC S.A. de C.V. (Series C)(ADR) .............................. 62,732
7,000 Grupo Carso S.A. de C.V. (Series A1) ........................... 56,856
-----------
119,588
-----------
Food Processing
2,500 Grupo Industrial Maseca S.A. de C.V. (ADR) .....................$ 46,250
-----------
Paper & Forest Products
14,000 Kimberly-Clark de Mexico, S.A. de C.V. (A Shares) .............. 68,048
-----------
Retail
2,200 Grupo Elektra, S.A. de C.V. (GDR) ............................... 65,450
-----------
Telecommunications
2,000 Telefonos de Mexico S.A. de C.V. (Series L)(ADR) ............... 111,000
-----------
TOTAL MEXICO ................................................... 682,534
-----------
NETHERLANDS (4.3%)
Building Materials
800 Hunter Douglas NV .............................................. 37,205
-----------
Business & Public Services
700 Randstad Holdings NV ........................................... 74,946
-----------
Chemicals
500 Akzo Nobel NV .................................................. 77,462
-----------
Electronics
2,000 Philips Electronics NV ......................................... 162,264
-----------
Food Processing
200 Nutricia Verenigde Bedrijven NV ................................ 33,998
-----------
Furniture
1,400 Ahrend Groep NV ................................................ 47,327
-----------
Insurance
500 Aegon NV ....................................................... 37,958
875 ING Groep NV ................................................... 42,594
-----------
80,552
-----------
Publishing
2,900 Elsevier NV .................................................... 51,118
-----------
Retail
950 Gucci Group NV ................................................. 59,969
2,700 Koninklijke Ahold NV ........................................... 78,104
-----------
138,073
-----------
Steel
1,100 Koninklijke Hoogovens NV ....................................... 66,668
-----------
Transportation
2,000 KLM Royal Dutch Air Lines NV ................................... 71,377
-----------
TOTAL NETHERLANDS .............................................. 840,990
-----------
SEE NOTES TO FINANCIAL STATEMENTS
77
<PAGE>
DEAN WITTER RETIREMENT SERIES -GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------
PERU (0.2%)
Banking
7,000 Banco Wiese (ADR) ..............................................$ 43,750
-----------
PHILIPPINES (0.1%)
Telecommunications
600 Philippine Long Distance Telephone Co. (ADR) ................... 20,137
-----------
PORTUGAL (0.4%)
Telecommunications
1,100 Portugal Telecom S.A. (ADR) .................................... 44,275
500 Telecel-Comunicacaoes Pessoais, S.A.* .......................... 39,155
-----------
TOTAL PORTUGAL ................................................. 83,430
-----------
SINGAPORE (1.6%)
Banking
4,500 Development Bank of Singapore, Ltd. ............................ 58,422
-----------
Beverages
7,000 Fraser & Neave Ltd. ............................................ 47,580
-----------
Hospital Management
6,000 Parkway Holdings Ltd. .......................................... 27,529
-----------
Publishing
4,000 Singapore Press Holdings Ltd. .................................. 75,856
-----------
Transportation
3,700 Singapore International Airlines ............................... 34,706
-----------
Utilities - Telecommunications
37,000 Singapore Telecommunications, Ltd. ............................. 70,167
-----------
TOTAL SINGAPORE ................................................ 314,260
-----------
SOUTH AFRICA (0.1%)
Brewers
700 South African Breweries Ltd. (ADR) ............................. 22,488
-----------
SOUTH KOREA (0.3%)
Electronics
1,700 Samsung Electronics Co. (GDR)(Non-voting) -144A** .............. 51,510
-----------
SPAIN (1.7%)
Banks
3,300 Banco Bilbao Vizcaya ........................................... 86,127
200 Banco Popular Espanol S.A. ..................................... 44,307
-----------
130,434
-----------
Natural Gas
800 Gas Natural SDG S.A. ...........................................$ 39,132
-----------
Retail
3,100 Centros Comerciales Pryca, S.A. ................................ 59,857
-----------
Telecommunications
500 Telefonica de Espana S.A. (ADR) ................................ 39,375
-----------
Utilities - Electric
2,800 Empresa Nacional de Electricidad S.A. .......................... 57,669
-----------
TOTAL SPAIN .................................................... 326,467
-----------
SWEDEN (1.4%)
Automotive
2,200 Scania AB (A Shares) ........................................... 63,038
-----------
Machinery
2,300 Kalmar Industries AB ........................................... 38,563
-----------
Manufacturing
1,200 Assa Abloy AB (Series B) ....................................... 26,276
-----------
Paper Products
3,400 Stora Kopparbergs Aktiebolag (A Shares) ........................ 55,731
-----------
Telecommunications
2,250 Ericsson (L.M.) Telephone Co. AB (Series "B" Free) ............. 101,211
-----------
TOTAL SWEDEN ................................................... 284,819
-----------
SWITZERLAND (1.7%)
Engineering
40 ABB AG-Bearer .................................................. 56,890
-----------
Food Processing
70 Nestle S.A. .................................................... 88,901
-----------
Pharmaceuticals
32 Novartis AG .................................................... 51,399
30 Novartis AG - Bearer ........................................... 48,147
10 Roche Holdings AG .............................................. 96,790
-----------
196,336
-----------
TOTAL SWITZERLAND .............................................. 342,127
-----------
UNITED KINGDOM (10.4%)
Aerospace
11,453 Rolls-Royce PLC ................................................ 43,939
-----------
Aerospace & Defense
3,978 British Aerospace PLC .......................................... 86,970
2,900 Smiths Industries PLC .......................................... 38,274
-----------
125,244
-----------
SEE NOTES TO FINANCIAL STATEMENTS
78
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------
Auto Parts - Original Equipment
26,200 LucasVarity PLC ................................................$ 80,755
-----------
Banking
3,600 Abbey National PLC ............................................. 49,460
1,323 Barclays Bank, PLC ............................................. 27,872
7,103 National Westminster Bank PLC .................................. 100,849
-----------
178,181
-----------
Beverages
5,800 Bass PLC ....................................................... 79,306
-----------
Broadcast Media
3,600 Flextech PLC* .................................................. 38,807
-----------
Building & Construction
5,893 Blue Circle Industries PLC ..................................... 39,999
-----------
Business Services
3,400 Compass Group PLC .............................................. 34,171
3,000 Reuters Holdings PLC ........................................... 32,315
-----------
66,486
-----------
Computer Software & Services
3,500 SEMA Group PLC ................................................. 80,622
-----------
Conglomerates
8,300 BTR PLC ........................................................ 25,787
9,302 Tomkins PLC .................................................... 46,972
-----------
72,759
-----------
Consumer Products
3,000 Unilever PLC ................................................... 86,910
-----------
Energy
27,300 Shell Transport & Trading Co. PLC .............................. 201,860
-----------
Food Processing
10,000 Devro PLC ...................................................... 64,104
-----------
Household Products
7,000 Reckitt & Colman PLC ........................................... 108,912
-----------
Insurance
4,200 Britannic Assurance PLC ........................................ 53,813
5,700 Commercial Union PLC ........................................... 64,061
10,441 Royal & Sun Alliance Insurance Group PLC ....................... 85,761
-----------
203,635
-----------
Leisure
2,671 Granada Group PLC .............................................. 36,785
-----------
Pharmaceuticals
6,220 Glaxo Wellcome PLC ............................................. 131,652
-----------
Property - Casualty Insurance
65 General Accident PLC ...........................................$ 980
-----------
Retail
9,500 Sainsbury (J.) PLC ............................................. 66,195
-----------
Telecommunications
10,000 British Telecommunications PLC ................................. 70,007
9,602 Securicor PLC .................................................. 43,607
11,900 Vodafone Group PLC ............................................. 60,091
-----------
173,705
-----------
Transportation
7,811 British Airways PLC ............................................ 84,896
-----------
Utilities
3,220 Thames Water PLC ............................................... 42,392
-----------
Utilities -Electric
6,500 National Power PLC ............................................. 57,546
-----------
TOTAL UNITED KINGDOM ........................................... 2,065,670
-----------
UNITED STATES (25.1%)
Aerospace & Defense
1,040 Lockheed Martin Corp. .......................................... 110,760
6,130 Loral Space & Communications* .................................. 95,781
-----------
206,541
-----------
Aluminum
1,240 Aluminum Co. of America ........................................ 109,740
-----------
Automotive
2,940 Chrysler Corp. ................................................. 109,147
2,870 Ford Motor Co. ................................................. 117,311
-----------
226,458
-----------
Banks
1,970 First Tennessee National Corp. ................................. 102,440
-----------
Beverages - Soft Drinks
2,780 PepsiCo, Inc. .................................................. 106,509
-----------
Biotechnology
4,120 Biochem Pharma, Inc.* .......................................... 118,450
-----------
Chemicals
1,060 Dow Chemical Co. ............................................... 100,700
2,250 Monsanto Co. ................................................... 112,078
1,880 Praxair, Inc. .................................................. 103,635
-----------
316,413
-----------
Communications - Equipment & Software
1,850 Cisco Systems, Inc.* ........................................... 146,959
-----------
SEE NOTES TO FINANCIAL STATEMENTS
79
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------
Computer Software
2,400 Oracle Systems Corp.* ..........................................$ 130,350
-----------
Computers
3,360 Gateway 2000, Inc.* ............................................ 128,310
-----------
Computers - Peripheral Equipment
1,900 Seagate Technology, Inc.* ...................................... 78,019
-----------
Computers - Systems
1,760 Hewlett-Packard Co. ............................................ 123,310
3,230 Sun Microsystems, Inc.* ........................................ 147,571
-----------
270,881
-----------
Electrical Equipment
1,260 Honeywell, Inc. ................................................ 94,106
-----------
Electronics - Defense
1,590 General Motors Corp. (Class H) ................................. 96,096
-----------
Electronics - Semiconductors/Components
1,300 Intel Corp. .................................................... 119,275
-----------
Entertainment
1,240 Walt Disney Productions ........................................ 100,207
-----------
Financial - Miscellaneous
2,400 Ahmanson (H.F.) & Co. .......................................... 127,650
1,460 American Express Co. ........................................... 122,275
2,350 Fannie Mae ..................................................... 111,184
1,400 Golden West Financial Corp. .................................... 117,775
1,770 Travelers Group, Inc. .......................................... 127,329
-----------
606,213
-----------
Foods
1,450 General Mills, Inc. ............................................ 100,231
-----------
Household Furnishings & Appliances
4,340 Maytag Corp. ................................................... 126,674
2,800 Sunbeam Corp. .................................................. 109,550
-----------
236,224
-----------
Household Products
1,700 Colgate-Palmolive Co. .......................................... 128,775
-----------
Medical Products & Supplies
2,040 Baxter International, Inc. ..................................... 117,938
-----------
Medical Services
2,000 HBO & Co. ...................................................... 154,500
-----------
Oil Integrated -International
1,500 Atlantic Richfield Co. .........................................$ 112,219
1,480 Chevron Corp. .................................................. 117,105
1,900 Exxon Corp. .................................................... 122,075
1,520 Mobil Corp. .................................................... 116,280
-----------
467,679
-----------
Pharmaceuticals
1,580 Abbott Laboratories ............................................ 103,391
1,480 American Home Products Corp. ................................... 122,008
-----------
225,399
-----------
Retail - Department Stores
1,800 Sears, Roebuck & Co. ........................................... 113,963
-----------
Retail - Specialty
3,670 Bed Bath & Beyond, Inc.* ....................................... 121,110
-----------
Retail - Specialty Apparel
2,680 Gap, Inc. ...................................................... 119,093
-----------
Semiconductor Equipment
3,140 Teradyne, Inc.* ................................................ 146,795
-----------
Shoes
1,440 Nike, Inc. (Class B) ........................................... 89,730
-----------
TOTAL UNITED STATES ............................................ 4,978,404
-----------
TOTAL COMMON STOCKS
(Identified Cost $15,100,950) .................................. 18,572,282
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- -----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (a)(7.1%)
U.S. GOVERNMENT AGENCIES
Federal Farm Credit Bank
$1,000 5.45% due 08/04/97 ............................................ 999,546
400 Federal Home Loan Mortgage Corp.
5.75% due 08/01/97 ............................................. 400,000
----------
TOTAL SHORT-TERM INVESTMENTS
(Amortized Cost $1,399,546) .................................... 1,399,546
----------
TOTAL INVESTMENTS
(Identified Cost $16,500,496)(b) ................................. 100.9% 19,971,828
LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS ................................................. (0.9) (174,632)
-------- ------------
NET ASSETS ........................................................ 100.0% $19,797,196
======== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
80
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
- ------------
ADR American Depository Receipt.
GDR Global Depository Receipt.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(a) Securities were purchased on a discount basis. The interest rates
shown have been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$3,806,319 and the aggregate gross unrealized depreciation is
$334,987, resulting in net unrealized appreciation of $3,471,332.
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JULY 31, 1997:
<TABLE>
<CAPTION>
IN UNREALIZED
CONTRACTS TO EXCHANGE DELIVERY APPRECIATION/
RECEIVE FOR DATE (DEPRECIATION)
- ------------------ ------------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
$ 64,633 ESP 10,034,338 08/01/97 $ 50
$ 1,472 MXN 11,571 08/01/97 (8)
DEM 69,082 $ 37,698 08/04/97 (123)
NLG 142,403 $ 69,027 08/04/97 (257)
yen 6,273,323 $ 52,939 08/05/97 (18)
MYR 199,255 $ 75,936 08/05/97 (259)
PTE 7,438,359 $ 40,153 08/05/97 (119)
$ 93,976 ESP 14,622,742 08/07/97 (139)
SGD 72,082 $ 49,042 08/07/97 (47)
$ 22,998 AUD 30,870 08/08/97 (77)
FRF 563,860 $ 91,528 08/29/97 (546)
-------
Net unrealized depreciation...................... $(1,543)
=======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
81
<PAGE>
DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY PORTFOLIO
SUMMARY OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- -----------------------------------------------------------
<S> <C> <C>
Aerospace ...................... $ 43,939 0.2%
Aerospace & Defense ............ 331,785 1.7
Aluminum ....................... 109,740 0.6
Apparel ........................ 46,995 0.2
Auto Parts-Original Equipment .. 80,755 0.4
Automotive ..................... 925,692 4.7
Banking ........................ 872,984 4.4
Banks .......................... 310,361 1.6
Beverages ...................... 166,036 0.8
Beverages-Soft Drinks .......... 106,509 0.5
Biotechnology .................. 118,450 0.6
Brewers ........................ 22,488 0.1
Brewery ........................ 147,700 0.8
Broadcast Media ................ 38,807 0.2
Building & Construction ........ 217,285 1.1
Building Materials ............. 124,045 0.6
Business & Public Services .... 74,946 0.4
Business Services .............. 240,501 1.2
Chemicals ...................... 729,164 3.7
Communications-Equipment &
Software ...................... 146,959 0.7
Computer Services .............. 44,599 0.2
Computer Software .............. 130,350 0.7
Computer Software & Services ... 80,622 0.4
Computers ...................... 216,382 1.1
Computers-Peripheral Equipment . 78,019 0.4
Computers-Systems .............. 270,881 1.4
Conglomerates .................. 430,222 2.2
Consumer Products .............. 146,974 0.7
Electrical Equipment ........... 94,106 0.5
Electronics .................... 1,186,863 6.0
Electronics-Defense ............ 96,096 0.5
Electronics-Semiconductors/
Components .................... 250,033 1.3
Energy ......................... 440,172 2.2
Engineering .................... 56,890 0.3
Entertainment .................. 147,704 0.8
Finance & Brokerage ............ 79,525 0.4
Financial-Miscellaneous ....... 606,213 3.1
Financial Services ............. 326,236 1.6
Food Processing ................ 233,253 1.2
Foods .......................... 100,231 0.5
Foods & Beverages .............. 46,263 0.2
Furniture ...................... 47,327 0.2
Hospital Management ............ 27,529 0.1
Household Furnishings &
Appliances .................... 318,912 1.6
Household Products ............. $ 298,702 1.5%
Insurance ...................... 476,135 2.4
International Trade ............ 95,326 0.5
Leisure ........................ 127,015 0.6
Machine Tools .................. 57,576 0.3
Machinery ...................... 288,581 1.5
Machinery-Diversified .......... 46,696 0.2
Manufacturing .................. 58,380 0.3
Medical Products & Supplies ... 117,938 0.6
Medical Services ............... 154,500 0.8
Metals & Mining ................ 55,022 0.3
Natural Gas .................... 91,829 0.5
Oil Integrated-International ... 467,679 2.4
Paper & Forest Products ........ 68,048 0.3
Paper Products ................. 133,541 0.7
Pharmaceuticals ................ 1,072,783 5.4
Property-Casualty Insurance .... 980 0.0
Publishing ..................... 126,974 0.6
Real Estate .................... 423,434 2.1
Restaurants .................... 61,583 0.3
Retail ......................... 650,531 3.3
Retail-Department Stores ...... 203,632 1.0
Retail-Specialty ............... 121,110 0.6
Retail-Specialty Apparel ...... 119,093 0.6
Semiconductor Equipment ........ 146,795 0.7
Shoes .......................... 89,730 0.5
Steel .......................... 66,668 0.3
Steel & Iron ................... 221,810 1.1
Telecommunications ............. 1,099,479 5.6
Textiles ....................... 64,535 0.3
Transportation ................. 492,015 2.5
U.S. Government Agencies ...... 1,399,546 7.1
Utilities ...................... 121,823 0.6
Utilities-Electric ............. 519,748 2.6
Utilities-Telecommunications ... 70,167 0.4
Wholesale Distributor .......... 51,881 0.3
------------- ------------
$19,971,828 100.9%
============= ============
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
- ---------------------------------------------------
<S> <C> <C>
Common Stocks .......... $18,572,282 93.8%
Short-Term Investments 1,399,546 7.1
----------- -----
$19,971,828 100.9%
=========== =====
</TABLE>
82
<PAGE>
DEAN WITTER RETIREMENT SERIES - STRATEGIST
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS (58.4%)
Aerospace & Defense (1.1%)
3,905 Honeywell, Inc. ................................................ $ 291,655
-------------
Aluminum (0.5%)
1,600 Aluminum Co. of America ......................................... 141,600
-------------
Automotive (1.7%)
8,000 Chrysler Corp. .................................................. 297,000
3,500 Ford Motor Co. ................................................. 143,062
-------------
440,062
-------------
Banks - Money Center (2.3%)
4,500 Citicorp ........................................................ 610,875
-------------
Banks - Regional (2.0%)
1,940 Wells Fargo & Co. ............................................... 533,379
-------------
Beverages - Soft Drinks (0.5%)
3,400 PepsiCo Inc. ................................................... 130,262
-------------
Cable/Cellular (0.8%)
9,400 U.S. West Media Group* .......................................... 207,387
-------------
Chemicals (2.6%)
1,250 Dow Chemical Co. ................................................ 118,750
11,450 Monsanto Co. ................................................... 570,353
-------------
689,103
-------------
Communications - Equipment & Software (0.6%)
1,840 Cisco Systems, Inc.* ........................................... 146,165
-------------
Computer Software (1.6%)
1,800 Microsoft Corp.* ................................................ 254,362
3,150 Oracle Corp.* ................................................... 171,084
-------------
425,446
-------------
Computers (4.5%)
10,400 Dell Computer Corp.* ........................................... 889,200
7,800 Gateway 2000, Inc.* ............................................ 297,862
-------------
1,187,062
-------------
Computers - Peripheral Equipment (1.8%)
11,250 Seagate Technology, Inc.* ....................................... 461,953
-------------
Computers - Systems (3.7%)
3,450 Diebold, Inc. .................................................. 173,362
9,500 Hewlett-Packard Co. ............................................ 665,594
3,300 Sun Microsystems, Inc.* ......................................... 150,769
-------------
989,725
-------------
Consumer Products (1.8%)
14,000 Tupperware Corp. ............................................... 486,500
-------------
Electrical Equipment (2.4%)
4,820 Emerson Electric Co. ............................................ $ 284,380
5,160 General Electric Co. ........................................... 362,167
-------------
646,547
-------------
Electronics -
Semiconductors/Components (2.1%)
6,000 Intel Corp. ..................................................... 550,500
-------------
Entertainment/Gaming (0.7%)
7,000 Circus Circus Enterprises, Inc.* ................................ 175,437
-------------
Financial Services (2.0%)
5,000 American Express Co. ............................................ 418,750
2,600 Fannie Mae ...................................................... 123,013
-------------
541,763
-------------
Foods (2.6%)
2,860 Campbell Soup Co. .............................................. 148,363
7,900 General Mills, Inc. ............................................ 546,088
-------------
694,451
-------------
Forest Products (2.4%)
10,100 Champion International Corp. .................................... 626,200
-------------
Healthcare - HMOs (1.0%)
11,200 Humana, Inc.* .................................................. 273,000
-------------
Household Appliances (1.2%)
11,000 Maytag Corp. ................................................... 321,063
-------------
Insurance (0.1%)
Aetna Inc. (Class C)
172 (Conv. Pref.) $4.75 ............................................ 17,329
-------------
Oil - International Integrated (5.8%)
6,400 Atlantic Richfield Co. ......................................... 478,800
2,070 Chevron Corp. .................................................. 163,789
2,800 Exxon Corp. .................................................... 179,900
7,200 Mobil Corp. ..................................................... 550,800
1,500 Texaco, Inc. .................................................... 174,094
-------------
1,547,383
-------------
Pharmaceuticals (4.5%)
1,800 Abbott Laboratories ............................................. 117,788
6,700 American Home Products Corp. .................................... 552,331
8,450 Johnson & Johnson ............................................... 526,541
-------------
1,196,660
-------------
Retail -Specialty (3.2%)
10,000 Bed Bath & Beyond, Inc.* ....................................... 330,000
2,400 Costco Companies Inc.* .......................................... 90,900
SEE NOTES TO FINANCIAL STATEMENTS
83
<PAGE>
DEAN WITTER RETIREMENT SERIES - STRATEGIST
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
3,450 Home Depot, Inc. ............................................... $ 172,069
14,250 Pier 1 Imports, Inc. ............................................ 251,156
-------------
844,125
-------------
Retail - Specialty Apparel (2.5%)
14,600 Gap, Inc. ....................................................... 648,788
-------------
Savings & Loans (0.5%)
1,500 Golden West Financial Corp. ..................................... 126,187
-------------
Shoes (0.7%)
3,000 Nike, Inc. (Class B) ............................................ 186,938
-------------
Steel (1.2%)
4,300 Inland Steel Industries, Inc. .................................. 98,631
3,450 Nucor Corp. ..................................................... 214,116
-------------
312,747
-------------
TOTAL COMMON AND
PREFERRED STOCKS
(Identified Cost $10,314,161) .................................. 15,450,292
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- -----------
<S> <C> <C>
CORPORATE BONDS (3.7%)
Automotive - Finance (0.1%)
$ 15 Ford Capital BV (Netherlands)
9.375% due 05/15/01 ........................................... 16,545
------------
Banks (0.9%)
100 Bank One Corp
9.875% due 03/01/09 ........................................... 124,417
100 Central Fidelity Capital I Series -144A**
6.75% due 04/15/27 ............................................ 102,601
------------
227,018
------------
Financial (0.4%)
100 Money Store Inc. (The)
8.375% due 04/15/04 ........................................... 105,497
------------
Financial Services (0.4%)
100 Centura Capital Trust I Series 144A**
8.845% due 06/01/27 ........................................... 108,125
------------
Insurance (0.4%)
100 Vesta Capital Trust I -144A**
8.525% due 01/15/27 ........................................... 108,250
------------
Metals & Mining (0.4%)
100 Placer Dome, Inc. (Canada)
8.50% due 12/31/45 ............................................ 102,750
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Oil & Gas Products (0.4%)
$ 100 Mitchell Energy & Development Corp.
6.75% due 02/15/04 ............................................ $ 99,420
-------------
Oil - Domestic (0.2%)
50 Occidental Petroleum Corp.
11.125% due 08/01/10 .......................................... 67,914
-------------
Steel (0.0%)
10 Pohang Iron & Steel Co., Ltd. (South Korea)
7.50% due 08/01/02 ............................................ 10,336
-------------
Telecommunications (0.4%)
100 Total Access Communication -144A** (Thailand)
8.375% due 11/04/06 ........................................... 99,250
-------------
Utilities - Electric (0.1%)
20 Long Island Lighting Co.
6.25% due 07/15/01 ............................................ 19,789
-------------
TOTAL CORPORATE BONDS
(Identified Cost $919,525) ..................................... 964,894
-------------
U.S. GOVERNMENT OBLIGATIONS (16.0%)
400 U.S. Treasury Bond
6.50% due 11/15/26 ............................................ 408,984
315 U.S. Treasury Bond
6.875% due 08/15/25 ........................................... 336,414
150 U.S. Treasury Bond
7.625% due 02/15/25 ........................................... 174,529
550 U.S. Treasury Note
5.125% due 11/30/98 ........................................... 546,364
950 U.S. Treasury Note
5.25% due 12/31/97 ............................................ 949,269
350 U.S. Treasury Note
5.625% due 11/30/00 ........................................... 348,071
450 U.S. Treasury Note
5.75% due 08/15/03 ............................................ 445,927
100 U.S. Treasury Note
5.875% due 11/30/01 ........................................... 99,956
50 U.S. Treasury Note
6.375% due 01/15/99 ........................................... 50,506
350 U.S. Treasury Note
6.50% due 05/15/05 ............................................ 360,315
360 U.S. Treasury Note
6.875% due 08/31/99 ............................................ 367,978
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
84
<PAGE>
DEAN WITTER RETIREMENT SERIES - STRATEGIST
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 140 U.S. Treasury Note
7.25% due 05/15/04 ........................................................ $ 149,911
-------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Identified Cost $4,145,542) ............................................... 4,238,224
-------------
SHORT-TERM INVESTMENTS (22.0%)
U.S. GOVERNMENT AGENCIES (a)(21.2%)
5,000 Federal Farm Credit Bank
5.42% due 08/05/97 ........................................................ 4,996,989
600 Federal Home Loan Mortgage Corp.
5.75% due 08/01/97 ........................................................ 600,000
-------------
TOTAL U.S. GOVERNMENT AGENCIES
(Amortized Cost $5,596,989) ................................................ 5,596,989
-------------
REPURCHASE AGREEMENT (0.8%)
223 The Bank of New York 5.75% due 08/01/97 (dated 07/31/97; proceeds
$222,587)(b) (Identified Cost $222,551) ................................... 222,551
-------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $5,819,540) ................................................ 5,819,540
-------------
TOTAL INVESTMENTS
(Identified Cost $21,198,768)(c) .......................................... 100.1% 26,472,950
LIABILITIES IN EXCESS OF
OTHER ASSETS ............................................................... (0.1) (13,530)
-------- -------------
NET ASSETS ................................................................. 100.0% $26,459,420
======== =============
</TABLE>
- ------------
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(a) Securities were purchased on a discount basis. The interest rates
shown have been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $120,000 U.S. Treasury Note 7.875% due 04/15/98
valued at $124,656, $93,651 U.S. Treasury Note 7.00% due 04/15/99
valued at $97,514 and $4,723 U.S. Treasury Note 5.625% due 08/31/97
valued at $4,832.
(c) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$5,356,659 and the aggregate gross unrealized depreciation is
$82,477, resulting in net unrealized appreciation of $5,274,182.
SEE NOTES TO FINANCIAL STATEMENTS
85
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
July 31, 1997
<TABLE>
<CAPTION>
INTERMEDIATE
U.S. GOVERNMENT U.S. GOVERNMENT INCOME
LIQUID ASSET MONEY MARKET SECURITIES SECURITIES
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value*............... $20,113,397 $4,036,736 $10,350,075 $2,347,060
Cash .............................................. 8,427 2,213 78,974 86,163
Receivable for:
Investments sold.................................. -- -- -- --
Shares of beneficial interest sold................ 1,135,082 10,301 22,677 3,462
Dividends......................................... -- -- -- --
Interest.......................................... -- -- 76,764 33,314
Foreign withholding taxes reclaimed............... -- -- -- --
Prepaid expenses and other assets.................. 26,147 5,790 6,691 12,589
Deferred organizational expenses................... 1,127 1,284 1,191 1,189
Receivable from affiliate.......................... -- 8,537 -- 6,791
----------- ---------- ----------- ----------
TOTAL ASSETS...................................... 21,284,180 4,064,861 10,536,372 2,490,568
----------- ---------- ----------- ----------
LIABILITIES:
Payable for:
Investments purchased............................. -- -- -- --
Shares of beneficial interest repurchased ........ 38,541 -- 11,416 8,580
Dividends to shareholders......................... -- -- 4,011 746
Investment management fee......................... 4,022 -- 110 --
Accrued expenses and other payables................ 23,148 17,969 19,019 19,964
Organizational expenses payable.................... 5,441 5,596 5,509 5,506
----------- ---------- ----------- ----------
TOTAL LIABILITIES................................. 71,152 23,565 40,065 34,796
----------- ---------- ----------- ----------
NET ASSETS:
Paid-in-capital.................................... 21,213,018 4,041,296 10,359,177 2,514,907
Accumulated undistributed net investment income .. 10 -- -- 46
Accumulated undistributed net realized gain
(loss)............................................ -- -- (491) (91,207)
Net unrealized appreciation........................ -- -- 137,621 32,026
----------- ---------- ----------- ----------
NET ASSETS ...................................... $21,213,028 $4,041,296 $10,496,307 $2,455,772
=========== ========== =========== ==========
*IDENTIFIED COST.................................. $20,113,397 $4,036,736 $10,212,454 $2,315,034
=========== ========== =========== ==========
SHARES OF BENEFICIAL INTEREST OUTSTANDING ...... 21,213,018 4,042,542 1,059,510 253,850
=========== ========== =========== ==========
NET ASSET VALUE PER SHARE
(unlimited authorized shares of $.01 par value) .. $1.00 $1.00 $9.91 $9.67
=========== ========== =========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
86
<PAGE>
<TABLE>
<CAPTION>
AMERICAN CAPITAL DIVIDEND VALUE-ADDED GLOBAL
VALUE GROWTH GROWTH UTILITIES MARKET EQUITY STRATEGIST
- ------------- ------------ -------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$53,898,134 $3,595,614 $116,084,027 $5,671,872 $23,856,111 $19,971,828 $26,472,950
50,162 17,654 -- -- 71,591 97,563 --
1,160,411 114,777 338,972 59,863 724,700 274,717 --
117,578 17,493 153,745 13,810 32,661 36,421 50,264
27,266 905 165,765 20,937 22,727 10,450 18,010
-- -- 121 21 -- -- 81,793
101 -- -- 1,065 -- 8,996 144
13,270 4,338 11,076 5,646 8,501 9,554 7,169
1,376 1,379 1,186 1,191 1,379 1,191 1,189
-- 5,185 -- 2,057 -- 25,572 --
- ------------- ------------ -------------- ------------ ------------- ------------- -------------
55,268,298 3,757,345 116,754,892 5,776,462 24,717,670 20,436,292 26,631,519
- ------------- ------------ -------------- ------------ ------------- ------------- -------------
918,594 58,353 1,221,168 316,275 861,090 574,355 --
77,147 3,874 108,736 43,837 45,267 28,565 125,989
-- -- -- -- -- -- --
20,595 -- 71,294 -- 5,006 -- 16,034
31,781 19,786 36,684 19,613 20,886 30,667 24,575
5,687 5,686 5,501 5,509 5,686 5,509 5,501
- ------------- ------------ -------------- ------------ ------------- ------------- -------------
1,053,804 87,699 1,443,383 385,234 937,935 639,096 172,099
- ------------- ------------ -------------- ------------ ------------- ------------- -------------
37,394,619 2,542,364 78,149,265 3,829,119 14,983,162 15,411,210 20,620,027
46,600 -- 365,924 54,200 100,361 131,548 381,735
6,688,579 257,050 8,002,032 476,783 345,423 784,106 183,476
10,084,696 870,232 28,794,288 1,031,126 8,350,789 3,470,332 5,274,182
- ------------- ------------ -------------- ------------ ------------- ------------- -------------
$54,214,494 $3,669,646 $115,311,509 $5,391,228 $23,779,735 $19,797,196 $26,459,420
============= ============ ============== ============ ============= ============= =============
$43,813,438 $2,725,382 $ 87,289,739 $4,640,746 $15,505,322 $16,500,496 $21,198,768
============= ============ ============== ============ ============= ============= =============
3,197,235 207,826 5,855,243 391,125 1,262,502 1,367,161 1,744,091
============= ============ ============== ============ ============= ============= =============
$16.96 $17.66 $19.69 $13.78 $18.84 $14.48 $15.17
============= ============ ============== ============ ============= ============= =============
</TABLE>
87
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS, continued
STATEMENTS OF OPERATIONS
For the year ended July 31, 1997
<TABLE>
<CAPTION>
INTERMEDIATE
U.S. GOVERNMENT U.S. GOVERNMENT INCOME
LIQUID ASSET MONEY MARKET SECURITIES SECURITIES
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET INVESTMENT INCOME:
INCOME
Interest........................................... $1,450,222 $393,765 $706,725 $245,036
Dividends.......................................... -- -- -- --
-------------- --------------- --------------- --------------
TOTAL INCOME..................................... 1,450,222 393,765 706,725 245,036
-------------- --------------- --------------- --------------
EXPENSES
Investment management fees......................... 132,515 36,695 67,676 24,502
Transfer agent fees and expenses................... 52,551 6,122 42,577 7,692
Shareholder reports and notices.................... 29,598 4,314 4,749 2,416
Professional fees.................................. 15,232 15,334 14,872 16,995
Registration fees.................................. 25,200 14,233 22,217 13,083
Custodian fees..................................... 10,663 6,196 3,435 4,847
Trustees' fees and expenses........................ 3,655 321 753 250
Organizational expenses............................ 2,722 2,721 2,727 2,727
Other.............................................. 3,904 1,879 1,870 3,021
-------------- --------------- --------------- --------------
TOTAL EXPENSES................................... 276,040 87,815 160,876 75,533
Less: amounts waived/reimbursed ................... (11,009) (14,427) (56,757) (37,837)
-------------- --------------- --------------- --------------
NET EXPENSES..................................... 265,031 73,388 104,119 37,696
-------------- --------------- --------------- --------------
NET INVESTMENT INCOME (LOSS)..................... 1,185,191 320,377 602,606 207,340
-------------- --------------- --------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss)........................... -- -- 5,297 (62,395)
Net change in unrealized
appreciation/depreciation......................... -- -- 365,249 151,066
-------------- --------------- --------------- --------------
NET GAIN......................................... -- -- 370,546 88,671
-------------- --------------- --------------- --------------
NET INCREASE....................................... $1,185,191 $320,377 $973,152 $296,011
============== =============== =============== ==============
</TABLE>
- --------------
* Net of $1,132, $10, $7,380, $972, $1,050, $18,695 and $63 foreign
withholding tax, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
88
<PAGE>
<TABLE>
<CAPTION>
AMERICAN CAPITAL DIVIDEND VALUE-ADDED GLOBAL
VALUE GROWTH GROWTH UTILITIES MARKET EQUITY STRATEGIST
- ------------- ------------ ------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$ 147,964 $ 8,415 $ 69,357 $ 41,817 $ 34,670 $ 67,144 $ 673,048
357,714* 12,328* 2,522,140* 208,343* 368,546* 214,870* 153,990*
- ------------- ------------ ------------- ------------ ------------- ------------ ------------
505,678 20,743 2,591,497 250,160 403,216 282,014 827,038
- ------------- ------------ ------------- ------------ ------------- ------------ ------------
390,217 22,697 672,098 51,738 97,479 153,656 180,204
77,489 3,914 86,989 18,120 18,607 37,093 51,763
20,768 1,692 38,212 3,853 8,952 5,415 10,295
12,798 11,302 13,936 15,840 15,314 15,207 10,489
18,634 28,006 32,684 19,450 20,656 27,047 20,879
28,005 12,249 12,104 7,964 24,785 28,694 13,942
3,312 47 6,141 285 1,131 819 1,050
2,720 2,717 2,724 2,727 2,717 2,727 2,721
3,530 1,744 3,851 2,533 10,004 13,075 5,095
- ------------- ------------ ------------- ------------ ------------- ------------ ------------
557,473 84,368 868,739 122,510 199,645 283,733 296,438
(98,395) (57,660) -- (53,527) (4,686) (130,077) (84,434)
- ------------- ------------ ------------- ------------ ------------- ------------ ------------
459,078 26,708 868,739 68,983 194,959 153,656 212,004
- ------------- ------------ ------------- ------------ ------------- ------------ ------------
46,600 (5,965) 1,722,758 181,177 208,257 128,358 615,034
- ------------- ------------ ------------- ------------ ------------- ------------ ------------
7,151,437 294,325 8,642,932 608,162 896,043 811,865 247,627
9,007,653 762,068 21,493,364 426,820 6,185,067 2,898,751 4,379,845
- ------------- ------------ ------------- ------------ ------------- ------------ ------------
16,159,090 1,056,393 30,136,296 1,034,982 7,081,110 3,710,616 4,627,472
- ------------- ------------ ------------- ------------ ------------- ------------ ------------
$16,205,690 $1,050,428 $31,859,054 $1,216,159 $7,289,367 $3,838,974 $5,242,506
============= ============ ============= ============ ============= ============ ============
</TABLE>
89
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS, continued
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended July 31,
<TABLE>
<CAPTION>
U.S. GOVERNMENT
LIQUID ASSET MONEY MARKET
------------------------------- --------------------------------------
1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss).......................... $ 1,185,191 $ 3,416,056 $ 320,377 $ 727,122
Net realized gain (loss).............................. -- -- -- --
Net change in unrealized appreciation/depreciation ... -- -- -- --
------------ ------------- ------------ ------------
NET INCREASE ....................................... 1,185,191 3,416,056 320,377 727,122
------------ ------------- ------------ ------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income................................. (1,185,223) (3,416,043) (321,625) (727,125)
Net realized gain..................................... -- -- -- --
------------ ------------- ------------ ------------
TOTAL............................................... (1,185,223) (3,416,043) (321,625) (727,125)
------------ ------------- ------------ ------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Net proceeds from sales............................... 29,266,419 177,956,895 8,809,340 27,880,399
Reinvestment of dividends and distributions .......... 1,185,223 3,416,043 321,624 727,125
Cost of shares repurchased............................ (51,991,220) (174,251,486) (11,716,197) (32,674,558)
------------ ------------- ------------ ------------
NET INCREASE (DECREASE)............................. (21,539,578) 7,121,452 (2,585,233) (4,067,034)
------------ ------------- ------------ ------------
TOTAL INCREASE (DECREASE)........................... (21,539,610) 7,121,465 (2,586,481) (4,067,037)
NET ASSETS:
Beginning of period................................... 42,752,638 35,631,173 6,627,777 10,694,814
------------ ------------- ------------ ------------
END OF PERIOD....................................... $ 21,213,028 $ 42,752,638 $ 4,041,296 $ 6,627,777
============ ============= ============ ============
UNDISTRIBUTED NET INVESTMENT INCOME................... $ 10 $ 42 -- $ 2
============ ============= ============ ============
SHARES ISSUED AND REPURCHASED:
Sold.................................................. 29,266,419 177,956,895 8,809,340 27,880,399
Issued in reinvestment of dividends and
distributions........................................ 1,185,223 3,416,043 321,624 727,125
Repurchased........................................... (51,991,220) (174,251,486) (11,716,197) (32,674,558)
------------ ------------- ------------ ------------
NET INCREASE (DECREASE)............................... (21,539,578) 7,121,452 (2,585,233) (4,067,034)
============ ============= ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
90
<PAGE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT INTERMEDIATE
SECURITIES INCOME SECURITIES AMERICAN VALUE CAPITAL GROWTH
- ---------------------------- ---------------------------- ----------------------------- -------------------------------------
1997 1996 1997 1996 1997 1996 1997 1996
- ------------- ------------- ------------- ------------- -------------- ------------- ------------ -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 602,606 $ 434,937 $ 207,340 $ 218,492 $ 46,600 $ 244,604 $ (5,965) $ 6,999
5,297 18,226 (62,395) (27,045) 7,151,437 4,355,860 294,325 31,476
365,249 (149,772) 151,066 (116,038) 9,007,653 (2,487,467) 762,068 45,817
- ------------- ------------- ------------- ------------- -------------- ------------- ------------ -----------------------
973,152 303,391 296,011 75,409 16,205,690 2,112,997 1,050,428 84,292
- ------------- ------------- ------------- ------------- -------------- ------------- ------------ -----------------------
(602,630) (434,913) (207,294) (218,918) (93,984) (299,827) (2,106) (8,566)
(22,190) -- -- (4,854) (3,137,376) (2,309,181) (56,080) (4,860)
- ------------- ------------- ------------- ------------- -------------- ------------- ------------ -----------------------
(624,820) (434,913) (207,294) (223,772) (3,231,360) (2,609,008) (58,186) (13,426)
- ------------- ------------- ------------- ------------- -------------- ------------- ------------ -----------------------
5,963,450 9,509,649 3,241,075 4,840,703 20,568,978 21,806,112 1,297,311 1,518,128
567,526 433,619 165,904 217,069 3,227,638 2,602,757 58,150 13,426
(5,033,814) (5,369,758) (5,211,640) (1,731,472) (22,877,816) (6,172,981) (665,910) (292,073)
- ------------- ------------- ------------- ------------- -------------- ------------- ------------ -----------------------
1,497,162 4,573,510 (1,804,661) 3,326,300 918,800 18,235,888 689,551 1,239,481
- ------------- ------------- ------------- ------------- -------------- ------------- ------------ -----------------------
1,845,494 4,441,988 (1,715,944) 3,177,937 13,893,130 17,739,877 1,681,793 1,310,347
8,650,813 4,208,825 4,171,716 993,779 40,321,364 22,581,487 1,987,853 677,506
- ------------- ------------- ------------- ------------- -------------- ------------- ------------ -----------------------
$10,496,307 $ 8,650,813 $ 2,455,772 $ 4,171,716 $ 54,214,494 $40,321,364 $3,669,646 $1,987,853
============= ============= ============= ============= ============== ============= ============ =======================
$ $ $
-- $ 24 $ 46 -- $ 46,600 $ 93,984 -- $ 2,106
============= ============= ============= ============= ============== ============= ============ =======================
616,600 971,490 340,574 499,259 1,422,680 1,603,955 91,240 119,028
58,481 44,420 17,479 22,618 237,676 203,340 4,317 1,087
(517,322) (547,637) (547,645) (181,670) (1,545,904) (447,666) (45,416) (23,095)
- ------------- ------------- ------------- ------------- -------------- ------------- ------------ -----------------------
157,759 468,273 (189,592) 340,207 114,452 1,359,629 50,141 97,020
============= ============= ============= ============= ============== ============= ============ =======================
</TABLE>
91
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL STATEMENTS, continued
STATEMENTS OF CHANGES IN NET ASSSETS, continued
For the year ended July 31,
<TABLE>
<CAPTION>
DIVIDEND GROWTH UTILITIES
----------------------------- -----------------------------
1997 1996 1997 1996
- ----------------------------------------------------- -------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................. $ 1,722,758 $ 1,244,989 $ 181,177 $ 205,110
Net realized gain (loss).............................. 8,642,932 2,317,010 608,162 (13,965)
Net change in unrealized appreciation/depreciation ... 21,493,364 2,701,826 426,820 257,350
------------ ----------- ----------- -----------
NET INCREASE ....................................... 31,859,054 6,263,825 1,216,159 448,495
------------ ----------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income................................. (1,707,024) (1,199,564) (160,780) (230,987)
Net realized gain..................................... (2,463,125) (590,466) -- --
------------ ----------- ----------- -----------
TOTAL............................................... (4,170,149) (1,790,030) (160,780) (230,987)
------------ ----------- ----------- -----------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Net proceeds from sales............................... 37,149,898 36,503,267 2,818,978 3,456,194
Reinvestment of dividends and distributions .......... 4,150,502 1,779,713 158,903 227,657
Cost of shares repurchased............................ (23,440,408) (8,398,184) (6,235,329) (1,687,882)
------------ ----------- ----------- -----------
NET INCREASE (DECREASE)............................. 17,859,992 29,884,796 (3,257,448) 1,995,969
------------ ----------- ----------- -----------
TOTAL INCREASE (DECREASE)........................... 45,548,897 34,358,591 (2,202,069) 2,213,477
NET ASSETS:
Beginning of period................................... 69,762,612 35,404,021 7,593,297 5,379,820
------------ ----------- ----------- -----------
END OF PERIOD....................................... $115,311,509 $69,762,612 $ 5,391,228 $ 7,593,297
============ =========== =========== ===========
UNDISTRIBUTED NET INVESTMENT INCOME................... $ 365,924 $ 350,190 $ 54,200 $ 33,362
============ =========== =========== ===========
SHARES ISSUED AND REPURCHASED:
Sold.................................................. 2,205,684 2,524,798 222,951 288,411
Issued in reinvestment of dividends and
distributions........................................ 255,693 126,953 12,596 18,947
Repurchased........................................... (1,379,982) (583,926) (488,313) (141,590)
------------ ----------- ----------- -----------
NET INCREASE (DECREASE)............................... 1,081,395 2,067,825 (252,766) 165,768
============ =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
92
<PAGE>
<TABLE>
<CAPTION>
VALUE-ADDED MARKET GLOBAL EQUITY STRATEGIST
- ----------------------------- ---------------------------- ----------------------------------------
1997 1996 1997 1996 1997 1996
- -------------- ------------- ------------- ------------- ------------- -------------------------
<S> <C> <C> <C> <C> <C>
$ 208,257 $ 331,372 $ 128,358 $ 84,531 $ 615,034 $ 287,670
896,043 186,832 811,865 434,795 247,627 730,868
6,185,067 1,044,025 2,898,751 47,491 4,379,845 291,438
- -------------- ------------- ------------- ------------- ------------- -------------------------
7,289,367 1,562,229 3,838,974 566,817 5,242,506 1,309,976
- -------------- ------------- ------------- ------------- ------------- -------------------------
(279,999) (257,479) (70,000) (126,784) (408,002) (244,742)
(698,399) (78,439) (367,529) -- (699,994) (159,285)
- -------------- ------------- ------------- ------------- ------------- -------------------------
(978,398) (335,918) (437,529) (126,784) (1,107,996) (404,027)
- -------------- ------------- ------------- ------------- ------------- -------------------------
6,558,038 6,512,239 7,696,263 6,329,119 7,519,070 12,101,707
948,925 329,833 435,668 121,869 1,107,086 403,090
(10,417,432) (1,769,137) (3,421,423) (2,492,083) (3,796,952) (2,673,732)
- -------------- ------------- ------------- ------------- ------------- -------------------------
(2,910,469) 5,072,935 4,710,508 3,958,905 4,829,204 9,831,065
- -------------- ------------- ------------- ------------- ------------- -------------------------
3,400,500 6,299,246 8,111,953 4,398,938 8,963,714 10,737,014
20,379,235 14,079,989 11,685,243 7,286,305 17,495,706 6,758,692
- -------------- ------------- ------------- ------------- ------------- -------------------------
$ 23,779,735 $20,379,235 $19,797,196 $11,685,243 $26,459,420 $17,495,706
============== ============= ============= ============= ============= =========================
$ 100,361 $ 172,103 $ 131,548 $ 49,495 $ 381,735 $ 174,703
============== ============= ============= ============= ============= =========================
416,960 468,279 606,253 542,027 549,814 972,731
62,594 24,706 35,887 10,862 83,616 34,364
(680,374) (129,743) (265,700) (214,741) (277,595) (218,134)
- -------------- ------------- ------------- ------------- ------------- -------------------------
(200,820) 363,242 376,440 338,148 355,835 788,961
============== ============= ============= ============= ============= =========================
</TABLE>
93
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 31, 1997
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Retirement Series (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment
company, consisting of eleven separate Series ("Series"). All of the Series,
with the exception of Strategist, are diversified.
The Fund was organized on May 14, 1992 as a Massachusetts business trust and
each of the Series commenced operations as follows:
<TABLE>
<CAPTION>
COMMENCEMENT COMMENCEMENT
OF OPERATIONS OF OPERATIONS
------------- -------------
<S> <C> <C> <C>
Liquid Asset ....................... December 30, 1992 Dividend Growth ........ January 7, 1993
U.S. Government Money Market ...... January 20, 1993 Utilities .............. January 8, 1993
U.S. Government Securities ......... January 8, 1993 Value-Added Market .... February 1, 1993
Intermediate Income Securities .... January 12, 1993 Global Equity .......... January 8, 1993
American Value ..................... February 1, 1993 Strategist ............. January 7, 1993
Capital Growth ..................... February 2, 1993
</TABLE>
The investment objectives of each Series are as follows:
SERIES INVESTMENT OBJECTIVE
- -------------------------------------------------------------------------------
Liquid Asset Seeks high current income, preservation of capital and
liquidity by investing in short-term money market
instruments.
- -------------------------------------------------------------------------------
U.S. Government Seeks high current income, preservation of capital and
Money Market liquidity by investing primarily in money market
instruments which are issued and/or guaranteed by the
U.S. Government, its agencies or instrumentalities.
- -------------------------------------------------------------------------------
U.S. Government Seeks high current income consistent with safety of
Securities principal by investing in a diversified portfolio of
obligations issued and/or guaranteed by the U.S.
Government or its instrumentalities.
- -------------------------------------------------------------------------------
Intermediate Income Seeks high current income consistent with safety of
Securities principal by investing primarily in intermediate term,
investment grade fixed-income securities.
- -------------------------------------------------------------------------------
American Value Seeks long-term growth consistent with an effort to
reduce volatility by investing principally in common
stock of companies in industries which, at the time of
investment, are believed to be undervalued in the
marketplace.
- -------------------------------------------------------------------------------
Capital Growth Seeks long-term capital growth by investing primarily
in common stocks.
- -------------------------------------------------------------------------------
Dividend Growth Seeks to provide reasonable current income and
long-term growth of income and capital by investing
primarily in common stock of companies with a record of
paying dividends and the potential for increasing
dividends.
- -------------------------------------------------------------------------------
94
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 31, 1997, continued
SERIES INVESTMENT OBJECTIVE
- -------------------------------------------------------------------------------
Utilities Seeks to provide current income and long-term growth of
income and capital by investing in equity and
fixed-income securities of companies in the public
utilities industry.
- -------------------------------------------------------------------------------
Value-Added Seeks to achieve a high level of total return on its
Market assets through a combination of capital appreciation
and current income. It seeks to achieve this objective
by investing, on an equally weighted basis, in a
diversified portfolio of common stocks of the companies
which are represented in the Standard & Poor's 500
Composite Stock Price Index.
- -------------------------------------------------------------------------------
Global Equity Seeks to provide a high level of total return on its
assets, primarily through long-term capital growth and,
to a lesser extent, from income. It seeks to achieve
this objective through investments in all types of
common stocks and equivalents, preferred stocks and
bonds and other debt obligations of domestic and
foreign companies, governments and international
organizations.
- -------------------------------------------------------------------------------
Strategist Seeks a high total investment return through a fully
managed investment policy utilizing equity, investment
grade fixed income and money market securities.
- -------------------------------------------------------------------------------
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Liquid Asset and U.S. Government Money Market:
Securities are valued at amortized cost which approximates market value. All
remaining Series: (1) an equity security listed or traded on the New York,
American or other domestic or foreign stock exchange is valued at its latest
sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price
(in cases where securities are traded on more than one exchange, the
securities are valued on the exchange designated as the primary market
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 Dean Witter InterCapital Inc. (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
95
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 31, 1997, continued
established by and under the general supervision of the Trustees (valuation
of securities for which market quotations are not readily available may also
be based upon current market prices of securities which are comparable in
coupon, rating and maturity, or an appropriate matrix utilizing similar
factors); (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 its staff,
including review of broker-dealer market price quotations, if available, in
determining what it believes is the fair valuation of the securities valued
by such pricing service; and (5) short-term debt securities having a maturity
date of more than sixty days at time of purchase are valued on a
mark-to-market basis until sixty days prior to maturity and thereafter at
amortized cost based on their value on the 61st day. Short-term debt
securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. Dividend income and distributions are recorded on the ex-dividend
date except for certain dividends on foreign securities which are recorded as
soon as the Fund is informed after the ex-dividend date. Interest income is
accrued daily. Liquid Asset and U.S. Government Money Market amortize
premiums and accrete discounts on securities owned; gains and losses realized
upon the sale of such securities are based on their amortized cost. Discounts
for all other Series are accreted over the life of the respective securities.
C. FOREIGN CURRENCY TRANSLATION -- The books and records of each Series
investing in foreign currency denominated transactions are translated into
U.S. dollars as follows: (1) the foreign currency market value of investment
securities, other assets and liabilities and forward foreign currency
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 Series do not isolate that portion of the results of operations
arising as a result of changes in the foreign exchange rates from the changes
in the market prices of the securities.
D. FORWARD FOREIGN CURRENCY CONTRACTS -- Some of the Series may enter into
forward foreign currency contracts which are valued daily at the appropriate
exchange rates. The resultant unrealized exchange
96
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 31, 1997, continued
gains and losses are included in the Statement of Operations as unrealized
foreign currency gain or loss. The Series record realized gains or losses on
delivery of the currency or at the time the forward contract is extinguished
(compensated) by entering into a closing transaction prior to delivery.
E. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply
individually for each Series with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of
its taxable income to its shareholders. Accordingly, no federal income tax
provision is required.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
G. EXPENSES -- Direct expenses are charged to the respective Series and
general Fund expenses are allocated on the basis of relative net assets or
equally among the Series.
H. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of $150,000 ($13,636 allocated to each of
the Series) and will be reimbursed, exclusive of amounts waived. Such
expenses have been deferred and are being amortized by the Fund on the
straight line method over a period not to exceed five years from the
commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement (the "Agreement"), the Fund
pays the Investment Manager a management fee, accrued daily and payable
monthly, by applying the following annual rates to each Series' net assets
determined at the close of each business day: Liquid Asset, U.S. Government
Money Market and Value-Added Market -0.50%; U.S. Government Securities and
Intermediate Income Securities -0.65%; Dividend Growth and Utilities -0.75%;
American Value, Capital Growth and Strategist -0.85%; and Global Equity -1.0%.
97
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 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.
For the period January 1, 1996 through December 31, 1997, the Investment
Manager is waiving the management fee and reimbursing expenses to the extent
they exceed 1.00% of daily net assets of each Series. At July 31, 1997,
included in the Statement of Assets and Liabilities are receivables from an
affiliate which represent expense reimbursements due to the Fund.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
Purchases and sales/maturities/prepayments of portfolio securities, excluding
short-term investments (except for Liquid Asset and U.S. Government Money
Market), for the year ended July 31, 1997 were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES OTHER
------------------------------ ------------------------------
SALES/
MATURITIES/ SALES/
PURCHASES PREPAYMENTS PURCHASES MATURITIES
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Liquid Asset ................... $395,220,670 $391,812,764 $353,719,078 $382,160,567
U.S. Government Money Market .. 661,528,098 664,513,285 -- --
U.S. Government Securities .... 11,000,110 9,181,622 -- --
Intermediate Income Securities 2,742,469 4,820,820 2,019,750 1,836,116
American Value ................. 1,055,258 1,298,196 114,604,516 110,531,028
Capital Growth ................. 15,742 77,006 4,322,821 3,559,093
Dividend Growth ................ -- -- 44,208,359 27,461,961
Utilities ...................... -- -- 5,530,405 7,587,775
Value-Added Market ............. -- 25,784 4,396,277 8,131,744
Global Equity .................. -- 46,580 15,006,072 11,195,792
Strategist ..................... 3,410,867 5,765,994 12,067,832 9,926,607
</TABLE>
Included in the aforementioned purchases and sales/maturities of portfolio
securities of Value-Added Market are common stock purchases and sales of
Morgan Stanley, Dean Witter, Discover & Co., an affiliate of the Investment
Manager, of $12,464 and $75,839, respectively, including realized gains of
$28,629.
98
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 31, 1997, continued
Included at July 31, 1997 in the payable for investments purchased and
receivable for investments sold were unsettled trades with Dean Witter
Reynolds Inc. ("DWR"), an affiliate of the Investment Manager, as follows:
<TABLE>
<CAPTION>
CAPITAL DIVIDEND GLOBAL
GROWTH GROWTH UTILITIES EQUITY
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Payable for investments purchased $ 4,319 $887,346 $200,025 $ --
========= ========== =========== =========
Receivable for investments sold .. $38,982 $149,533 $ 42,821 $91,462
========= ========== =========== =========
</TABLE>
For the year ended July 31, 1997, the following Series incurred brokerage
commissions with DWR, for portfolio transactions executed on behalf of such
Series, as follows:
<TABLE>
<CAPTION>
AMERICAN CAPITAL DIVIDEND GLOBAL
VALUE GROWTH GROWTH UTILITIES EQUITY STRATEGIST
- ---------- --------- ---------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C>
$25,735 $1,487 $43,558 $13,830 $9,201 $6,861
========== ========= ========== =========== ======== ============
</TABLE>
For the period May 31, 1997 through July 31, 1997, Capital Growth, Global
Equity and American Value incurred brokerage commissions of $270, $168 and
$1,365, respectively, with Morgan Stanley & Co., Inc., an affiliate of the
Investment Manager since May 31, 1997, for portfolio transactions executed on
behalf of the Series.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Fund's transfer agent. At July 31, 1997 the following Series had approximate
transfer agent fees and expenses payable as follows:
<TABLE>
<CAPTION>
INTERMEDIATE
U.S. GOVERNMENT U.S. GOVERNMENT INCOME AMERICAN CAPITAL
LIQUID ASSET MONEY MARKET SECURITIES SECURITIES VALUE GROWTH
- -------------- --------------- --------------- -------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
$120 $100 $1,250 $150 $800 $90
============== =============== =============== ============== ============ =========
DIVIDEND VALUE-ADDED GLOBAL
GROWTH UTILITIES MARKET EQUITY STRATEGIST
- -------------- --------------- --------------- -------------- ------------
$280 $80 $140 $210 $500
============== =============== =============== ============== ============
</TABLE>
99
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 31, 1997, continued
4. FEDERAL INCOME TAX STATUS
At July 31, 1997, Intermediate Income Securities had a net capital loss
carryover of approximately $30,200 of which $5,700 will be available through
July 31, 2004 and $24,500 will be available through July 31, 2005 to offset
future capital gains to the extent provided by regulations. During the year
ended July 31, 1997, Utilities utilized its net capital loss carryover of
approximately $102,000.
Net capital and net currency losses incurred after October 31 ("post-October
losses") within the taxable year are deemed to arise on the first business
day of the Series' next taxable year. The following Series incurred and will
elect to defer post-October losses during fiscal 1997:
<TABLE>
<CAPTION>
INTERMEDIATE
U.S. GOVERNMENT INCOME GLOBAL
SECURITIES SECURITIES EQUITY
- --------------- -------------- --------
<S> <C> <C>
$500 $57,800 $900
=============== ============== ========
</TABLE>
At July 31, 1997, the primary reason(s) for temporary book/tax differences
were as follows:
<TABLE>
<CAPTION>
TEMPORARY DIFFERENCES
-------------------------------
POST- CAPITAL LOSS
OCTOBER DEFERRALS FROM
LOSSES WASH SALES
----------- ------------------
<S> <C> <C>
U.S. Government Securities ......... o
Intermediate Income Securities .... o o
American Value ..................... o
Capital Growth ..................... o
Dividend Growth .................... o
Utilities ..........................
Value-Added Market.................. o
Global Equity....................... o o
Strategist ......................... o
</TABLE>
Additionally, Global Equity had temporary differences attributable to income
from the mark-to-market of passive foreign investment companies ("PFICs") and
permanent differences attributable to tax adjustments on PFICs sold by the
Series and Capital Growth had permanent differences attributable to a net
operating loss.
100
<PAGE>
DEAN WITTER RETIREMENT SERIES
NOTES TO FINANCIAL STATEMENTS July 31, 1997, continued
To reflect reclassifications arising from permanent book/tax differences for
the year ended July 31, 1997, the following accounts were (charged) credited:
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED UNDISTRIBUTED
NET INVESTMENT NET REALIZED
INCOME GAIN (LOSS)
-------------- ---------------
<S> <C> <C>
Capital Growth $ 5,965 $ (5,965)
Global Equity . $23,695 $(23,695)
</TABLE>
5. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
Some of the Portfolios may enter into forward foreign currency contracts
("forward contracts") to facilitate settlement of foreign currency
denominated portfolio transactions or to manage foreign currency exposure
associated with foreign currency denominated securities.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Portfolios bear the
risk of an unfavorable change in foreign exchange rates underlying the
forward contracts. Risks may also arise upon entering into these contracts
from the potential inability of the counterparties to meet the terms of their
contracts.
At July 31, 1997, Global Equity had outstanding forward contracts to
facilitate settlement of foreign currency denominated portfolio transactions.
101
<PAGE>
DEAN WITTER RETIREMENT SERIES
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
NET ASSET NET TOTAL
YEAR VALUE NET REALIZED TOTAL FROM DIVIDENDS DISTRIBUTIONS DIVIDENDS
ENDED BEGINNING INVESTMENT AND UNREALIZED INVESTMENT TO TO AND
JULY 31 OF PERIOD INCOME GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS
- ---------- ----------- ------------ -------------- ------------ -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
LIQUID ASSET
1993 (1) $ 1.00 $0.02 -- $ 0.02 $(0.02) -- $(0.02)
1994 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1995 1.00 0.06 -- 0.06 (0.06) -- (0.06)
1996 1.00 0.05 -- 0.05 (0.05) -- (0.05)
1997 1.00 0.05 -- 0.05 (0.05) -- (0.05)
U.S. GOVERNMENT MONEY MARKET
1993 (2) 1.00 --++ -- -- -- -- --
1994 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1995 1.00 0.06 -- 0.06 (0.06) -- (0.06)
1996 1.00 0.05 -- 0.05 (0.05) -- (0.05)
1997 1.00 0.04 -- 0.04 (0.04) -- (0.04)
U.S. GOVERNMENT SECURITIES
1993 (3) 10.00 0.19 $ 0.07 0.26 (0.20) -- (0.20)
1994 10.06 0.44 (0.50) (0.06) (0.44) -- (0.44)
1995 9.56 0.56 0.15 0.71 (0.56) -- (0.56)
1996 9.71 0.55 (0.12) 0.43 (0.55) -- (0.55)
1997 9.59 0.56 0.34 0.90 (0.56) $(0.02) (0.58)
INTERMEDIATE INCOME SECURITIES
1993 (4) 10.00 0.19 (0.02) 0.17 (0.19) -- (0.19)
1994 9.98 0.60 (0.57) 0.03 (0.60) -- (0.60)
1995 9.41 0.61 0.22 0.83 (0.61) -- (0.61)
1996 9.63 0.59 (0.21) 0.38 (0.59) (0.01) (0.60)
1997 9.41 0.53 0.26 0.79 (0.53) -- (0.53)
AMERICAN VALUE
1993 (5) 10.00 0.06 (0.01) 0.05 -- -- --
1994 10.05 0.03 (0.09) (0.06) (0.02) (0.04) (0.06)
1995 9.93 0.14 3.15 3.29 (0.12) -- (0.12)
1996 13.10 0.09 1.17 1.26 (0.15) (1.13) (1.28)
1997 13.08 0.02 5.12 5.14 (0.04) (1.22) (1.26)
</TABLE>
- ------------
* After application of the Fund's expense limitation.
+ Calculated based on the net asset value as of the last business day
of the period.
++ Includes dividends from net investment income of $0.004 per share.
(a) Not annualized.
(b) Annualized.
Commencement of operations:
(1) December 30, 1992. (4) January 12, 1993.
(2) January 20, 1993. (5) February 1, 1993.
(3) January 8, 1993.
SEE NOTES TO FINANCIAL STATEMENTS
102
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET RATIOS TO AVERAGE NET
ASSETS ASSETS
(BEFORE EXPENSES WERE (AFTER EXPENSES WERE
ASSUMED) ASSUMED)
-------------------------- --------------------------
NET ASSET NET ASSETS
VALUE TOTAL END OF NET NET PORTFOLIO AVERAGE
END OF INVESTMENT PERIOD INVESTMENT INVESTMENT TURNOVER COMMISSION
PERIOD RETURN+ (000'S) EXPENSES INCOME (LOSS) EXPENSES INCOME (LOSS) RATE RATE PAID
- ----------- ------------ ------------ ----------- ------------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1.00 1.77%(a) $ 1,081 1.30%(b) 0.53%(b) 0.14%(b) 3.02%(b) N/A N/A
1.00 3.48 1,524 2.50 * 0.99 -- 3.49 N/A N/A
1.00 5.90 35,631 1.16 4.96 -- 6.12 N/A N/A
1.00 5.44 42,753 0.65 5.05 0.33 5.37 N/A N/A
1.00 4.57 21,213 1.04 4.43 1.00 4.47 N/A N/A
1.00 0.42 (a) 125 2.50* (b) (0.95)(b) 2.13 (b) 0.83 (b) N/A N/A
1.00 3.52 555 2.50* 0.82 -- 3.32 N/A N/A
1.00 5.86 10,695 2.50* 3.62 -- 6.12 N/A N/A
1.00 5.23 6,628 0.82 4.75 0.37 5.21 N/A N/A
1.00 4.51 4,041 1.20 4.17 1.00 4.37 N/A N/A
10.06 2.60 (a) 1,756 1.81 (b) 0.33 (b) 0.18 (b) 3.66 (b) -- N/A
9.56 (0.69) 2,954 2.50* 1.96 -- 4.46 29% N/A
9.71 7.72 4,209 2.36 3.49 -- 5.85 14 N/A
9.59 4.49 8,651 1.48 4.70 0.63 5.55 47 N/A
9.91 9.70 10,496 1.55 5.24 1.00 5.79 89 N/A
9.98 1.67 (a) 182 2.50* (b) 1.00 (b) 1.62 (b) 3.50 (b) -- N/A
9.41 0.26 460 2.50* 3.64 -- 6.14 40 N/A
9.63 9.22 994 2.50* 4.08 -- 6.58 37 N/A
9.41 3.95 4,172 1.58 5.01 0.72 5.87 142 N/A
9.67 8.63 2,456 2.00 4.50 1.00 5.50 132 N/A
10.05 0.50 (a) 308 2.50*(b) (0.66)(b) 0.74 (b) 1.10 (b) 121 (a) --
9.93 (0.59) 6,841 2.50* (0.81) -- 1.69 136 --
13.10 33.48 22,581 1.42 0.39 -- 1.81 234 --
13.08 9.83 40,321 1.18 0.23 0.65 0.76 301 $0.0543
16.96 41.62 54,214 1.21 (0.11) 1.00 0.10 261 0.0552
</TABLE>
103
<PAGE>
DEAN WITTER RETIREMENT SERIES n
FINANCIAL HIGHLIGHTS, continued
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
NET ASSET NET TOTAL
YEAR VALUE NET REALIZED TOTAL FROM DISTRIBUTIONS DIVIDENDS
ENDED BEGINNING INVESTMENT AND UNREALIZED INVESTMENT DIVIDENDS TO TO AND
JULY 31 OF PERIOD INCOME (LOSS) GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS
- ---------- ----------- ------------- -------------- ------------ -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITAL GROWTH
1993 (4) $10.00 $(0.02) $(1.10) $(1.12) -- -- --
1994 8.88 0.13 0.45 0.58 $(0.04) -- $(0.04)
1995 9.42 0.10 1.77 1.87 (0.12) -- (0.12)
1996 11.17 0.07 1.55 1.62 (0.11) $(0.07) (0.18)
1997 12.61 (0.03) 5.41 5.38 (0.01) (0.32) (0.33)
DIVIDEND GROWTH
1993 (1) 10.00 0.13 0.58 0.71 (0.10) -- (0.10)
1994 10.61 0.28 0.37 0.65 (0.23) (0.01) (0.24)
1995 11.02 0.34 2.13 2.47 (0.31) (0.10) (0.41)
1996 13.08 0.32 1.76 2.08 (0.36) (0.19) (0.55)
1997 14.61 0.33 5.60 5.93 (0.33) (0.52) (0.85)
UTILITIES
1993 (2) 10.00 0.19 1.30 1.49 (0.14) -- (0.14)
1994 11.35 0.37 (0.95) (0.58) (0.34) (0.01) (0.35)
1995 10.42 0.42 0.80 1.22 (0.37) (0.02) (0.39)
1996 11.25 0.38 0.61 0.99 (0.45) -- (0.45)
1997 11.79 0.41 1.90 2.31 (0.32) -- (0.32)
VALUE-ADDED MARKET
1993 (3) 10.00 0.05 0.02 0.07 (0.04) -- (0.04)
1994 10.03 0.24 0.65 0.89 (0.11) -- (0.11)
1995 10.81 0.21 2.16 2.37 (0.26) (0.12) (0.38)
1996 12.80 0.25 1.17 1.42 (0.22) (0.07) (0.29)
1997 13.93 0.21 5.58 5.79 (0.25) (0.63) (0.88)
GLOBAL EQUITY
1993 (2) 10.00 0.07 (0.03) 0.04 -- -- --
1994 10.04 0.08 0.58 0.66 (0.05) -- (0.05)
1995 10.65 0.14 0.49 0.63 (0.11) -- (0.11)
1996 11.17 0.09 0.71 0.80 (0.18) -- (0.18)
1997 11.79 0.09 2.98 3.07 (0.06) (0.32) (0.38)
STRATEGIST
1993 (1) 10.00 0.06 (0.23) (0.17) -- -- --
1994 9.83 0.23 (0.20) 0.03 (0.13) -- (0.13)
1995 9.73 0.24 1.49 1.73 (0.18) -- (0.18)
1996 11.28 0.25 1.63 1.88 (0.34) (0.22) (0.56)
1997 12.60 0.37 2.96 3.33 (0.28) (0.48) (0.76)
</TABLE>
- ------------
* After application of the Fund's expense limitation.
+ Calculated based on the net asset value as of the last business day
of the period.
(a) Not annualized.
(b) Annualized.
Commencement of operations:
(1) January 7, 1993.
(2) January 8, 1993.
(3) February 1, 1993.
(4) February 2, 1993.
SEE NOTES TO FINANCIAL STATEMENTS
104
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET RATIOS TO AVERAGE NET
ASSETS ASSETS
(BEFORE EXPENSES WERE (AFTER EXPENSES WERE
ASSUMED) ASSUMED)
-------------------------- -------------------------
NET ASSET NET ASSETS
VALUE TOTAL END OF NET NET PORTFOLIO AVERAGE
END OF INVESTMENT PERIOD INVESTMENT INVESTMENT TURNOVER COMMISSION
PERIOD RETURN+ (000'S) EXPENSES INCOME (LOSS) EXPENSES INCOME (LOSS) RATE RATE PAID
- ----------- ------------- ------------ ----------- ------------- ---------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8.88 (11.20)%(a) $ 135 2.50%*(b) (1.01)%(b) 1.97%(b) (0.47)%(b) 2%(a) --
9.42 6.57 215 2.50* (0.98) -- 1.52 11 --
11.17 20.08 678 2.50 * (1.07) -- 1.43 20 --
12.61 14.58 1,988 2.50 * (1.24) 0.76 0.50 68 $0.0536
17.66 43.46 3,670 3.16 (2.38) 1.00 (0.22) 147 0.0575
10.61 7.11 (a) 2,417 2.50* (b) 0.61 (b) 0.16 (b) 2.89 (b) 7 (a) --
11.02 6.13 12,821 1.51 1.78 -- 3.29 13 --
13.08 23.07 35,404 1.14 2.34 -- 3.48 29 --
14.61 16.09 69,763 1.00 2.07 0.63 2.44 18 0.0526
19.69 41.92 115,312 0.97 1.92 0.97 1.92 31 0.0537
11.35 14.98 (a) 1,334 2.50* (b) 1.59 (b) 0.30 (b) 3.79 (b) 8 (a) --
10.42 (5.23) 3,860 2.50* 1.62 -- 4.14 5 --
11.25 12.16 5,380 1.91 2.41 -- 4.32 24 --
11.79 8.76 7,593 1.52 2.31 0.62 3.20 17 0.0508
13.78 19.87 5,391 1.78 1.85 1.00 2.63 89 0.0508
10.03 0.71 (a) 640 2.50* (b) (0.16) (b) 0.92 (b) 1.42 (b) 1 (a) --
10.81 8.89 5,133 1.82 0.70 -- 2.53 8 --
12.80 22.65 14,080 1.22 1.33 -- 2.55 7 --
13.93 11.19 20,379 0.78 1.58 0.47 1.89 8 0.0300
18.84 43.12 23,780 1.02 1.04 1.00 1.07 23 0.0300
10.04 0.40 (a) 322 2.50* (b) (0.90) (b) 1.00 (b) 1.77 (b) -- --
10.65 6.54 2,020 2.50* 0.09 -- 2.41 8 --
11.17 6.08 7,286 2.25 0.48 -- 2.73 55 --
11.79 7.26 11,685 1.73 (0.15) 0.66 0.92 95 0.0500
14.48 26.66 19,797 1.85 (0.01) 1.00 0.84 80 0.0348
9.83 (1.70) (a) 551 2.50* (b) (0.19) (b) 0.64 (b) 1.67 (b) 26 (a) --
9.73 0.12 1,276 2.50* 0.70 -- 3.20 57 --
11.28 18.21 6,759 2.14 1.97 -- 4.11 115 --
12.60 16.97 17,496 1.61 1.92 0.66 2.86 113 0.0525
15.17 27.35 26,459 1.40 2.50 1.00 2.90 90 0.0535
</TABLE>
105
<PAGE>
DEAN WITTER RETIREMENT SERIES
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER RETIREMENT SERIES
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Liquid Asset
Series, the U.S. Government Money Market Series, the U.S. Government
Securities Series, the Intermediate Income Securities Series, the American
Value Series, the Capital Growth Series, the Dividend Growth Series, the
Utilities Series, the Value-Added Market Series, the Global Equity Series,
and the Strategist Series (constituting Dean Witter Retirement Series,
hereafter referred to as the "Fund") at July 31, 1997, the results of each of
their operations for the year then ended, the changes in each of their net
assets for each of the two years in the period then ended and the financial
highlights for each of the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at July 31, 1997 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
September 12, 1997
1997 FEDERAL INCOME TAX NOTICE (unaudited)
During the year ended July 31, 1997, the Fund paid to shareholders
long-term capital gains per share as follows:
<TABLE>
<CAPTION>
AMERICAN CAPITAL DIVIDEND VALUE-ADDED GLOBAL
VALUE GROWTH GROWTH MARKET EQUITY STRATEGIST
- ---------- --------- ---------- ------------- -------- ------------
<S> <C> <C> <C> <C> <C>
$0.31 $0.32 $0.47 $0.45 $0.05 $0.31
</TABLE>
Additionally, the following percentages of the income paid qualified
for the dividends received deduction available to corporations:
<TABLE>
<CAPTION>
AMERICAN CAPITAL DIVIDEND VALUE-ADDED GLOBAL
VALUE GROWTH GROWTH UTILITIES MARKET EQUITY STRATEGIST
- ---------- --------- ---------- ----------- ------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
5.58% 100% 99.92% 98.72% 74.37% 7.89% 19.47%
</TABLE>
106
<PAGE>
APPENDIX
- -----------------------------------------------------------------------------
Description of the highest commercial paper, bond and other short-and
long-term rating categories assigned by Standard & Poor's Corporation
("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch Investors
Service, Inc. ("Fitch"), Duff and Phelps, Inc. ("Duff"), IBCA Limited and
IBCA Inc. ("IBCA") and Thomson BankWatch, Inc. ("Thomson"):
COMMERCIAL PAPER AND SHORT-TERM RATINGS
The designation A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined
to possess overwhelming safety characteristics are denoted with a plus sign
(+) designation. Capacity for timely payment on issues with an A-2
designation is strong. However, the relative degree of safety is not as high
as for issues designated A-1.
The rating Prime-1 (P-1) is the highest commercial paper rating assigned
by Moody's. Issuers of P-1 paper must have a superior capacity for repayment
of short-term promissory obligations and ordinarily will be evidenced by
leading market positions in well established industries, high rates of return
of funds employed, conservative capitalization structures with moderate
reliance on debt and ample asset protection, broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and
well established access to a range of financial markets and assured sources
of alternate liquidity. Issues rated Prime-2 (P-2) have a strong capacity for
repayment of short-term promissory obligations. This ordinarily will be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is
maintained.
The rating Fitch-1 (Highest Grade) is the highest commercial paper rating
assigned by Fitch. Paper rated Fitch-1 is regarded as having the strongest
degree of assurance for timely payment. The rating Fitch-2 (Very Good Grade)
is the second highest commercial paper rating assigned by Fitch which
reflects an assurance of timely payment only slightly less in degree than the
strongest issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely
payment with excellent liquidity factors which are supported by good
fundamental protection factors. Risk factors are minor. Duff applies the
modifiers (+) and (-) to the rating Duff-1 in recognition of significant
quality differences within the highest tier. Paper rated Duff-2 is regarded
as having good certainty of timely payment, good access to capital markets
and sound liquidity factors and company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a
very strong capacity for timely repayment. Those obligations rated A1+ are
supported by the highest capacity for timely repayment. The designation A2 by
IBCA indicates that the obligation is supported by a strong capacity for
timely repayment, although such capacity may be susceptible to adverse
changes in business, economic, or financial conditions.
The rating TBW-1 is the highest short-term rating assigned by Thomson and
indicates a very high degree of likelihood that principal and interest will
be paid on a timely basis. The rating TBW-2 by Thomson is its second highest
rating; while the degree of safety regarding timely repayment of principal
and interest is strong, the relative degree of safety is not as high as for
issues rated TBW-1.
BOND AND LONG-TERM RATINGS
Bonds rated AAA are considered by S&P to be the highest grade obligations
and possess an extremely strong capacity to pay interest and repay principal.
Bonds rated AA by S&P are judged by S&P to have a very strong capacity to pay
interest and repay principal, and differ only in small degrees from issues
rated AAA.
107
<PAGE>
Bonds which are rated Aaa by Moody's are judged to be of the best quality.
Bonds rated Aa by Moody's are judged by Moody's to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high-grade bonds. Aa bonds are rated lower than Aaa bonds because margins
of protection may not be as large or fluctuations of protective elements may
be of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa rated bonds. Moody's
applies numerical modifiers 1, 2 and 3 in the Aa rating category. The
modifier 1 indicates a ranking for the security in the higher end of this
rating category, the modifier 2 indicates a mid-range ranking, and the
modifier 3 indicates a ranking in the lower end of the rating category.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade,
broadly marketable, suitable for investment by trustees and fiduciary
institutions and liable to but slight market fluctuation other than through
changes in the money rate. The prime feature of an AAA bond is a showing of
earnings several times or many times interest requirements, with such
stability of applicable earnings that safety is beyond reasonable question
whatever changes occur in conditions. Bonds rated AA by Fitch are judged by
Fitch to be of safety virtually beyond question and are readily salable,
whose merits are not unlike those of the AAA class, but whose margin of
safety is less strikingly broad. The issue may be the obligation of a small
company, strongly secured but influenced as to rating by the lesser financial
power of the enterprise and more local type of market.
Bonds rated AAA by Duff are considered to be of the highest credit quality
with negligible risk factors that are only slightly more than for risk-free
U.S. Treasury debt. Bonds rated AA are judged by Duff to be of high credit
quality with strong protection factors; risk is modest but may vary slightly
from time to time because of economic conditions. Duff applies modifiers of
(+) and (-) to the AA category.
Obligations rated AAA by IBCA have the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk significantly. Obligations rated AA have
a very low expectation of investment risk. Capacity for timely repayment of
principal and interest is substantial. Adverse changes in business, economic
or financial conditions may increase investment risk albeit not very
significantly.
IBCA also assigns a rating to certain international and U.S. banks. An
IBCA bank rating represents IBCA's current assessment of the strength of the
bank and whether such bank would receive support should it experience
difficulties. In its assessment of a bank, IBCA uses a dual rating system
comprised of Legal Ratings and Individual Ratings. In addition, IBCA assigns
banks Long-and Short-Term Ratings as used in the corporate ratings discussed
above. Legal Ratings, which range in gradation from 1 through 5, address the
question of whether the bank would receive support by central banks or
shareholders if it experienced difficulties, and such ratings are considered
by IBCA to be a prime factor in its assessment of credit risk. Individual
Ratings, which range in gradations from A through E, represent IBCA's
assessment of a bank's economic merits and address the question of how the
bank would be viewed if it were entirely independent and could not rely on
support from state authorities or its owners.
Companies rated A are considered by Thomson to possess an exceptionally
strong balance sheet and earnings record, translating into an excellent
reputation and unquestioned access to their natural money markets; if
weakness or vulnerability exists in any aspect of a company's business, it is
entirely mitigated by the strengths of the organization. Companies rated
A/B-by Thomson are judged by Thomson to be financially very solid with a
favorable track record and no readily apparent weakness; their overall risk
profiles, while low, are not quite as favorable as for companies in the
highest rating category.
108
<PAGE>
DEAN WITTER LIQUID ASSET FUND INC.
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
The response to this item is incorporated herein by reference to Item 27
of Post-Effective Amendment No. 34 to Registrant's Registration Statement on
Form N-1A, dated October 24, 1997, which was filed electronically pursuant to
Regulation S-T on October 23, 1997 ("Post-Effective Amendment No. 34") as an
amendment to Registrant's Registration Statement on Form N-1A (File Nos.
811-2575 and 2-53856) filed on October 23, 1997 (the "Registration
Statement")
ITEM 16. EXHIBITS
(1) Amended Articles of Incorporation dated May 13, 1975 ("Articles of
Incorporation") (incorporated herein by reference to Exhibit 1 of
Registrant's initial Registration Statement)
(2) Amended and Restated Bylaws of Registrant dated as of January 25,
1995 (incorporated herein by reference to Exhibit 2 of
Post-Effective Amendment No. 32 to Registrant's Registration
Statement ("Post-Effective Amendment No. 32"))
(3) Not Applicable
(4) Copy of Agreement and Plan of Reorganization (filed herewith as
Exhibit A to the Proxy Statement and Prospectus)
(5) Not Applicable
(6) Investment Management Agreement (incorporated herein by reference to
Exhibit 5 to Post-Effective Amendment No. 34)
(7) (a) Distribution Agreement between Registrant and Dean Witter
Distributors Inc. (incorporated herein by reference to Exhibit 6
to Post-Effective Amendment No. 34)
(b) Form of Selected Dealer's Agreement (incorporated herein by
reference to Exhibit 6 to Post-Effective Amendment No. 30 to
Registrant's Registration Statement ("Post-Effective Amendment No.
30"))
(8) Not Applicable
(9) (a) Custody Agreement dated September 30, 1991 (incorporated herein by
reference to Exhibit 8 to Post-Effective Amendment No. 32)
(b) Amendment to the Custodian Agreement dated April 17, 1996
(incorporated herein by reference to Exhibit 8 to Post-Effective
Amendment No. 33)
(c) Amended and Restated Transfer Agency and Services Agreement
(10) Amended and Restated Plan of Distribution pursuant to Rule 12b-1,
dated July 23, 1997 (incorporated herein by reference to Exhibit 15
to Post-Effective Amendment No. 34)
(11) (a) Opinion and consent of Gordon Altman Butowsky Weitzen Shalov &
Wein
(b) Opinion and consent of Piper & Marbury
(12) Opinion and consent of Gordon Altman Butowsky Weitzen Shalov & Wein
regarding tax matters
(13) Form of Services Agreement between Dean Witter InterCapital Inc. and
Dean Witter Services Company Inc. (incorporated herein by reference
to Exhibit 9 to Post-Effective Amendment No. 32)
(14) Consent of Independent Accountants
(15) Not Applicable
C-1
<PAGE>
(16) Powers of Attorney
(17) (a) Registrant's Rule 24f-2 Notice pursuant to Rule 24f-2 under the
Investment Company Act of 1940, for its fiscal year ended August
31, 1997 (incorporated herein by reference to Form 24f-2 filed
with the Securities and Exchange Commission on October 27, 1997)
(b) Form of Proxy
ITEM 17. UNDERTAKINGS
1. The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of the prospectus which is a
part of this registration statement on Form N-14 by any person or party who
is deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act of 1933, the reoffering prospectus will contain the
information called for by the applicable registration form for reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
2. The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to this
registration statement on Form N-14 and will not be used until the amendment
is effective, and that, in determining any liability under the Securities Act
of 1933, each post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein, and the offering
of the securities at that time shall be deemed to be the initial bona fide
offering of them.
C-2
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this registration statement has
been signed on behalf of the registrant, in the City of New York and State of
New York, on the 30th day of April 1998.
DEAN WITTER LIQUID ASSET FUND INC.
By: /s/ Barry Fink
. ...............................
Barry Fink
Vice President and Secretary
As required by the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------- ---------------------------- ------------------
<S> <C> <C>
1. Principal Executive Officer
/s/ Charles A. Fiumefreddo Chief Executive Officer, April 30, 1998
............................. Director and Chairman
Charles A. Fiumefreddo
2. Principal Financial Officer
/s/ Thomas A. Caloia Treasurer
............................. April 30, 1998
Thomas F. Caloia
3. Majority of Directors
/s/ Michael Bozic Director April 30, 1998
...............................
Michael Bozic
/s/ Edwin J. Garn Director April 30, 1998
...............................
Edwin J. Garn
/s/ John R. Haire Director April 30, 1998
...............................
John R. Haire
/s/ Manuel H. Johnson Director April 30, 1998
...............................
Manuel H. Johnson
/s/ Michael E. Nugent Director April 30, 1998
...............................
Michael E. Nugent
/s/ John L. Schroeder Director April 30, 1998
...............................
John L. Schroeder
/s/ Philip J. Purcell Director April 30, 1998
...............................
Philip J. Purcell
/s/ Wayne E. Hedien Director April 30, 1998
</TABLE>
...............................
Wayne E. Hedien
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT NUMBER
- ----------- -------------------------------------------------------------------------- ----------
<S> <C> <C>
(9) (c) Amended and Restated Transfer Agency and Services Agreement
(11) (a) Opinion and consent of Gordon Altman Butowsky Weitzen Shalov & Wein
(b) Opinion and consent of Piper & Marbury
(12) Opinion and consent of Gordon Altman Butowsky Weitzen Shalov & Wein
regarding tax matters
(14) Consent of Independent Accountants
(16) Powers of Attorney
(17) (b) Form of Proxy
</TABLE>
<PAGE>
AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
WITH
DEAN WITTER TRUST FSB
<PAGE>
TABLE OF CONTENTS
Article 1 Terms of Appointment .................................. 1
Article 2 Fees and Expenses ..................................... 2
Article 3 Representations and Warranties of DWTFSB .............. 3
Article 4 Representations and Warranties of the Fund ............ 3
Article 5 Duty of Care and Indemnification ...................... 3
Article 6 Documents and Covenants of the Fund and DWTFSB ........ 4
Article 7 Duration and Termination of Agreement ................. 5
Article 8 Assignment ............................................ 5
Article 9 Affiliations .......................................... 6
Article 10 Amendment ............................................. 6
Article 11 Applicable Law ........................................ 6
Article 12 Miscellaneous ......................................... 6
Article 13 Merger of Agreement ................................... 7
Article 14 Personal Liability .................................... 7
<PAGE>
AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of the 23rd day of October, 1997 by
and between each of the Funds listed on the signature pages hereof, each of
such Funds acting severally on its own behalf and not jointly with any of
such other Funds (each such Fund hereinafter referred to as the "Fund"), each
such Fund having its principal office and place of business at Two World
Trade Center, New York, New York, 10048, and DEAN WITTER TRUST FSB
("DWTFSB"), a federally chartered savings bank, having its principal office
and place of business at Harborside Financial Center, Plaza Two, Jersey City,
New Jersey 07311.
WHEREAS, the Fund desires to appoint DWTFSB as its transfer agent,
dividend disbursing agent and shareholder servicing agent and DWTFSB desires
to accept such appointment;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of DWTFSB
1.1 Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints DWTFSB to act as, and DWTFSB agrees to act
as, the transfer agent for each series and class of shares of the Fund,
whether now or hereafter authorized or issued ("Shares"), dividend disbursing
agent and shareholder servicing agent in connection with any accumulation,
open-account or similar plans provided to the holders of such Shares
("Shareholders") and set out in the currently effective prospectus and
statement of additional information ("prospectus") of the Fund, including
without limitation any periodic investment plan or periodic withdrawal
program.
1.2 DWTFSB agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and DWTFSB, DWTFSB shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to the
custodian of the assets of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and issue certificates therefor or hold such Shares in book
form in the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation therefor to the
Custodian;
(iv) At the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over or cause
to be paid over in the appropriate manner such monies as instructed by
the redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and distributions
declared by the Fund;
(vii) Calculate any sales charges payable by a Shareholder on
purchases and/or redemptions of Shares of the Fund as such charges may
be reflected in the prospectus;
(viii) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(ix) Record the issuance of Shares of the Fund and maintain pursuant
to Rule 17Ad-10(e) under the Securities Exchange Act of 1934 ("1934
Act") a record of the total number of Shares of the Fund which are
authorized, based upon data provided to it by the Fund, and issued and
outstanding. DWTFSB shall also provide to the Fund on a regular basis
the total number of Shares that are authorized, issued and outstanding
and shall notify the Fund in case any proposed issue of Shares by the
Fund would result in an overissue. In case any issue of Shares
1
<PAGE>
would result in an overissue, DWTFSB shall refuse to issue such Shares
and shall not countersign and issue any certificates requested for
such Shares. When recording the issuance of Shares, DWTFSB shall have
no obligation to take cognizance of any Blue Sky laws relating to the
issue of sale of such Shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition to and not in lieu of the services set forth in the above
paragraph (a), DWTFSB shall:
(i) perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, shareholder servicing
agent in connection with dividend reinvestment, accumulation,
open-account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including
but not limited to, maintaining all Shareholder accounts, preparing
Shareholder meeting lists, mailing proxies, receiving and tabulating
proxies, mailing shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident
alien accounts, preparing and filing appropriate forms required with
respect to dividends and distributions by federal tax authorities for
all Shareholders, preparing and mailing confirmation forms and
statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity statements for
Shareholders and providing Shareholder account information;
(ii) open any and all bank accounts which may be necessary or
appropriate in order to provide the foregoing services; and
(iii) provide a system that will enable the Fund to monitor the total
number of Shares sold in each State or other jurisdiction.
(c) In addition, the Fund shall:
(i) identify to DWTFSB in writing those transactions and assets to be
treated as exempt from Blue Sky reporting for each State; and
(ii) verify the inclusion on the system prior to activation of each
State in which Fund shares may be sold and thereafter monitor the
daily purchases and sales for shareholders in each State. The
responsibility of DWTFSB for the Fund's status under the securities
laws of any State or other jurisdiction is limited to the inclusion on
the system of each State as to which the Fund has informed DWTFSB that
shares may be sold in compliance with state securities laws and the
reporting of purchases and sales in each such State to the Fund as
provided above and as agreed from time to time by the Fund and DWTFSB.
(d) DWTFSB shall provide such additional services and functions not
specifically described herein as may be mutually agreed between DWTFSB and
the Fund. Procedures applicable to such services may be established from
time to time by agreement between the Fund and DWTFSB.
Article 2 Fees and Expenses
2.1 For performance by DWTFSB pursuant to this Agreement, each Fund agrees
to pay DWTFSB an annual maintenance fee for each Shareholder account and
certain transactional fees, if applicable, as set out in the respective fee
schedule attached hereto as Schedule A. Such fees and out-of-pocket expenses
and advances identified under Section 2.2 below may be changed from time to
time subject to mutual written agreement between the Fund and DWTFSB.
2.2 In addition to the fees paid under Section 2.1 above, the Fund agrees
to reimburse DWTFSB for out of pocket expenses in connection with the
services rendered by DWTFSB hereunder. In addition, any other expenses
incurred by DWTFSB at the request or with the consent of the Fund will be
reimbursed by the Fund.
2.3 The Fund agrees to pay all fees and reimbursable expenses within a
reasonable period of time following the mailing of the respective billing
notice. Postage for mailing of dividends, proxies, Fund reports and other
mailings to all Shareholder accounts shall be advanced to DWTFSB by the Fund
upon request prior to the mailing date of such materials.
2
<PAGE>
Article 3 Representations and Warranties of DWTFSB
DWTFSB represents and warrants to the Fund that:
3.1 It is a federally chartered savings bank whose principal office is in
New Jersey.
3.2 It is and will remain registered with the U.S. Securities and Exchange
Commission ("SEC") as a Transfer Agent pursuant to the requirements of
Section 17A of the 1934 Act.
3.3 It is empowered under applicable laws and by its charter and By-Laws
to enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to DWTFSB that:
4.1 It is a corporation duly organized and existing and in good standing
under the laws of Delaware or Maryland or a trust duly organized and existing
and in good standing under the laws of Massachusetts, as the case may be.
4.2 It is empowered under applicable laws and by its Articles of
Incorporation or Declaration of Trust, as the case may be, and under its
By-Laws to enter into and perform this Agreement.
4.3 All corporate proceedings necessary to authorize it to enter into and
perform this Agreement have been taken.
4.4 It is an investment company registered with the SEC under the
Investment Company Act of 1940, as amended (the "1940 Act").
4.5 A registration statement under the Securities Act of 1933 (the "1933
Act") is currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with
respect to all Shares of the Fund being offered for sale.
Article 5 Duty of Care and Indemnification
5.1 DWTFSB shall not be responsible for, and the Fund shall indemnify and
hold DWTFSB harmless from and against, any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions of DWTFSB or its agents or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence
or willful misconduct or which arise out of breach of any representation
or warranty of the Fund hereunder.
(c) The reliance on or use by DWTFSB or its agents or subcontractors of
information, records and documents which (i) are received by DWTFSB or its
agents or subcontractors and furnished to it by or on behalf of the Fund,
and (ii) have been prepared and/or maintained by the Fund or any other
person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by DWTFSB or its agents or
subcontractors of, any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities or Blue Sky laws
of any State or other jurisdiction that notice of
3
<PAGE>
offering of such Shares in such State or other jurisdiction or in
violation of any stop order or other determination or ruling by any
federal agency or any State or other jurisdiction with respect to the
offer or sale of such Shares in such State or other jurisdiction.
5.2 DWTFSB shall indemnify and hold the Fund harmless from or against any
and all losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to any action or failure or omission
to act by DWTFSB as a result of the lack of good faith, negligence or willful
misconduct of DWTFSB, its officers, employees or agents.
5.3 At any time, DWTFSB may apply to any officer of the Fund for
instructions, and may consult with legal counsel to the Fund, with respect to
any matter arising in connection with the services to be performed by DWTFSB
under this Agreement, and DWTFSB and its agents or subcontractors shall not
be liable and shall be indemnified by the Fund for any action taken or
omitted by it in reliance upon such instructions or upon the opinion of such
counsel. DWTFSB, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document furnished by or on behalf of
the Fund, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data, records
or documents provided to DWTFSB or its agents or subcontractors by machine
readable input, telex, CRT data entry or other similar means authorized by
the Fund, and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the Fund. DWTFSB,
its agents and subcontractors shall also be protected and indemnified in
recognizing stock certificates which are reasonably believed to bear the
proper manual or facsimile signature of the officers of the Fund, and the
proper countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.
5.4 In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to
the other for any damages resulting from such failure to perform or otherwise
from such causes.
5.5 Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any act or
failure to act hereunder.
5.6 In order that the indemnification provisions contained in this Article
5 shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The
party who may be required to indemnify shall have the option to participate
with the party seeking indemnification in the defense of such claim. The
party seeking indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to indemnify
it except with the other party's prior written consent.
Article 6 Documents and Covenants of the Fund and DWTFSB
6.1 The Fund shall promptly furnish to DWTFSB the following, unless
previously furnished to Dean Witter Trust Company, the prior transfer agent
of the Fund:
(a) If a corporation:
(i) A certified copy of the resolution of the Board of Directors of
the Fund authorizing the appointment of DWTFSB and the execution and
delivery of this Agreement;
(ii) A certified copy of the Articles of Incorporation and By-Laws of
the Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Directors
designating persons authorized to give instructions on behalf of the
Fund and signature cards bearing the signature of any officer of the
Fund or any other person authorized to sign written instructions on
behalf of the Fund;
(iv) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Directors, with a certificate of the
Secretary of the Fund as to such approval;
4
<PAGE>
(b) If a business trust:
(i) A certified copy of the resolution of the Board of Trustees of
the Fund authorizing the appointment of DWTFSB and the execution and
delivery of this Agreement;
(ii) A certified copy of the Declaration of Trust and By-Laws of the
Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Trustees
designating persons authorized to give instructions on behalf of the
Fund and signature cards bearing the signature of any officer of the
Fund or any other person authorized to sign written instructions on
behalf of the Fund;
(iv) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Trustees, with a certificate of the Secretary
of the Fund as to such approval;
(c) The current registration statements and any amendments and
supplements thereto filed with the SEC pursuant to the requirements of the
1933 Act or the 1940 Act;
(d) All account application forms or other documents relating to
Shareholder accounts and/or relating to any plan, program or service
offered or to be offered by the Fund; and
(e) Such other certificates, documents or opinions as DWTFSB deems to be
appropriate or necessary for the proper performance of its duties.
6.2 DWTFSB hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of Share
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such
certificates, forms and devices.
6.3 DWTFSB shall prepare and keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable and as
required by applicable laws and regulations. To the extent required by
Section 31 of the 1940 Act, and the rules and regulations thereunder, DWTFSB
agrees that all such records prepared or maintained by DWTFSB relating to the
services performed by DWTFSB hereunder are the property of the Fund and will
be preserved, maintained and made available in accordance with such Section
31 of the 1940 Act, and the rules and regulations thereunder, and will be
surrendered promptly to the Fund on and in accordance with its request.
6.4 DWTFSB and the Fund agree that all books, records, information and
data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement
shall remain confidential and shall not be voluntarily disclosed to any other
person except as may be required by law or with the prior consent of DWTFSB
and the Fund.
6.5 In case of any request or demands for the inspection of the
Shareholder records of the Fund, DWTFSB will endeavor to notify the Fund and
to secure instructions from an authorized officer of the Fund as to such
inspection. DWTFSB reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be
held liable for the failure to exhibit the Shareholder records to such
person.
Article 7 Duration and Termination of Agreement
7.1 This Agreement shall remain in full force and effect until August 1,
2000 and from year-to-year thereafter unless terminated by either party as
provided in Section 7.2 hereof.
7.2 This Agreement may be terminated by the Fund on 60 days written
notice, and by DWTFSB on 90 days written notice, to the other party without
payment of any penalty.
7.3 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and other materials will be
borne by the Fund. Additionally, DWTFSB reserves the right to charge for any
other reasonable fees and expenses associated with such termination.
Article 8 Assignment
8.1 Except as provided in Section 8.3 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
5
<PAGE>
8.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
8.3 DWTFSB may, in its sole discretion and without further consent by the
Fund, subcontract, in whole or in part, for the performance of its
obligations and duties hereunder with any person or entity including but not
limited to companies which are affiliated with DWTFSB; provided, however,
that such person or entity has and maintains the qualifications, if any,
required to perform such obligations and duties, and that DWTFSB shall be as
fully responsible to the Fund for the acts and omissions of any agent or
subcontractor as it is for its own acts or omissions under this Agreement.
Article 9 Affiliations
9.1 DWTFSB may now or hereafter, without the consent of or notice to the
Fund, function as transfer agent and/or shareholder servicing agent for any
other investment company registered with the SEC under the 1940 Act and for
any other issuer, including without limitation any investment company whose
adviser, administrator, sponsor or principal underwriter is or may become
affiliated with Morgan Stanley, Dean Witter, Discover & Co. or any of its
direct or indirect subsidiaries or affiliates.
9.2 It is understood and agreed that the Directors or Trustees (as the
case may be), officers, employees, agents and shareholders of the Fund, and
the directors, officers, employees, agents and shareholders of the Fund's
investment adviser and/or distributor, are or may be interested in DWTFSB as
directors, officers, employees, agents and shareholders or otherwise, and
that the directors, officers, employees, agents and shareholders of DWTFSB
may be interested in the Fund as Directors or Trustees (as the case may be),
officers, employees, agents and shareholders or otherwise, or in the
investment adviser and/or distributor as directors, officers, employees,
agents, shareholders or otherwise.
Article 10 Amendment
10.1 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the
Board of Directors or the Board of Trustees (as the case may be) of the Fund.
Article 11 Applicable Law
11.1 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of New York.
Article 12 Miscellaneous
12.1 In the event that one or more additional investment companies managed
or administered by Dean Witter InterCapital Inc. or any of its affiliates
("Additional Funds") desires to retain DWTFSB to act as transfer agent,
dividend disbursing agent and/or shareholder servicing agent, and DWTFSB
desires to render such services, such services shall be provided pursuant to
a letter agreement, substantially in the form of Exhibit A hereto, between
DWTFSB and each Additional Fund.
12.2 In the event of an alleged loss or destruction of any Share
certificate, no new certificate shall be issued in lieu thereof, unless there
shall first be furnished to DWTFSB an affidavit of loss or non-receipt by the
holder of Shares with respect to which a certificate has been lost or
destroyed, supported by an appropriate bond satisfactory to DWTFSB and the
Fund issued by a surety company satisfactory to DWTFSB, except that DWTFSB
may accept an affidavit of loss and indemnity agreement executed by the
registered holder (or legal representative) without surety in such form as
DWTFSB deems appropriate indemnifying DWTFSB and the Fund for the issuance of
a replacement certificate, in cases where the alleged loss is in the amount
of $1,000 or less.
12.3 In the event that any check or other order for payment of money on
the account of any Shareholder or new investor is returned unpaid for any
reason, DWTFSB will (a) give prompt notification to the Fund's distributor
("Distributor") (or to the Fund if the Fund acts as its own distributor) of
such non-payment; and (b) take such other action, including imposition of a
reasonable processing or handling fee, as DWTFSB may, in its sole discretion,
deem appropriate or as the Fund and, if applicable, the Distributor may
instruct DWTFSB.
6
<PAGE>
12.4 Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or to DWTFSB shall be
sufficiently given if addressed to that party and received by it at its
office set forth below or at such other place as it may from time to time
designate in writing.
To the Fund:
[Name of Fund]
Two World Trade Center
New York, New York 10048
Attention: General Counsel
To DWTFSB:
Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
Attention: President
Article 13 Merger of Agreement
13.1 This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
Article 14 Personal Liability
14.1 In the case of a Fund organized as a Massachusetts business trust, a
copy of the Declaration of Trust of the Fund is on file with the Secretary of
The Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however,
that the Declaration of Trust of the Fund provides that the assets of a
particular Series of the Fund shall under no circumstances be charged with
liabilities attributable to any other Series of the Fund and that all persons
extending credit to, or contracting with or having any claim against, a
particular Series of the Fund shall look only to the assets of that
particular Series for payment of such credit, contract or claim.
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Agreement to be executed in their names and on their behalf by and
through their duly authorized officers, as of the day and year first above
written.
DEAN WITTER FUNDS
MONEY MARKET FUNDS
1. Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Dean Witter U.S. Government Money Market Trust
4. Active Assets Government Securities Trust
5. Dean Witter Tax-Free Daily Income Trust
6. Active Assets Tax-Free Trust
7. Dean Witter California Tax-Free Daily Income Trust
8. Dean Witter New York Municipal Money Market Trust
9. Active Assets California Tax-Free Trust
EQUITY FUNDS
10. Dean Witter American Value Fund
11. Dean Witter Mid-Cap Growth Fund
7
<PAGE>
12. Dean Witter Dividend Growth Securities Inc.
13. Dean Witter Capital Growth Securities
14. Dean Witter Global Dividend Growth Securities
15. Dean Witter Income Builder Fund
16. Dean Witter Natural Resource Development Securities Inc.
17. Dean Witter Precious Metals and Minerals Trust
18. Dean Witter Developing Growth Securities Trust
19. Dean Witter Health Sciences Trust
20. Dean Witter Capital Appreciation Fund
21. Dean Witter Information Fund
22. Dean Witter Value-Added Market Series
23. Dean Witter World Wide Investment Trust
24. Dean Witter European Growth Fund Inc.
25. Dean Witter Pacific Growth Fund Inc.
26. Dean Witter International SmallCap Fund
27. Dean Witter Japan Fund
28. Dean Witter Utilities Fund
29. Dean Witter Global Utilities Fund
30. Dean Witter Special Value Fund
31. Dean Witter Financial Services Trust
32. Dean Witter Market Leader Trust
33. Dean Witter Managers' Select Fund
34. Dean Witter Fund of Funds
35. Dean Witter S&P 500 Index Fund
BALANCED FUNDS
36. Dean Witter Balanced Growth Fund
37. Dean Witter Balanced Income Trust
ASSET ALLOCATION FUNDS
38. Dean Witter Strategist Fund
39. Dean Witter Global Asset Allocation Fund
FIXED INCOME FUNDS
40. Dean Witter High Yield Securities Inc.
41. Dean Witter High Income Securities
42. Dean Witter Convertible Securities Trust
43. Dean Witter Intermediate Income Securities
44. Dean Witter Short-Term Bond Fund
45. Dean Witter World Wide Income Trust
46. Dean Witter Global Short-Term Income Fund Inc.
47. Dean Witter Diversified Income Trust
48. Dean Witter U.S. Government Securities Trust
49. Dean Witter Federal Securities Trust
50. Dean Witter Short-Term U.S. Treasury Trust
51. Dean Witter Intermediate Term U.S. Treasury Trust
52. Dean Witter Tax-Exempt Securities Trust
53. Dean Witter National Municipal Trust
55. Dean Witter Limited Term Municipal Trust
55. Dean Witter California Tax-Free Income Fund
56. Dean Witter New York Tax-Free Income Fund
57. Dean Witter Hawaii Municipal Trust
58. Dean Witter Multi-State Municipal Series Trust
59. Dean Witter Select Municipal Reinvestment Fund
8
<PAGE>
SPECIAL PURPOSE FUNDS
60. Dean Witter Retirement Series
61. Dean Witter Variable Investment Series
62. Dean Witter Select Dimensions Investment Series
TCW/DW FUNDS
63. TCW/DW Core Equity Trust
64. TCW/DW North American Government Income Trust
65. TCW/DW Latin American Growth Fund
66. TCW/DW Income and Growth Fund
67. TCW/DW Small Cap Growth Fund
68. TCW/DW Balanced Fund
69. TCW/DW Total Return Trust
70. TCW/DW Global Telecom Trust
71. TCW/DW Strategic Income Trust
72. TCW/DW Mid-Cap Equity Trust
By:
--------------------------
Barry Fink
Vice President and
General Counsel
ATTEST:
- -----------------------------------
Assistant Secretary
DEAN WITTER TRUST FSB
By:
--------------------------
John Van Heuvelen
President
ATTEST:
- -----------------------------------
Executive Vice President
9
<PAGE>
EXHIBIT A
Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311
Gentlemen:
The undersigned, (insert name of investment company) a (Massachusetts
business trust/Maryland corporation) (the "Fund"), desires to employ and
appoint Dean Witter Trust FSB ("DWTFSB") to act as transfer agent for each
series and class of shares of the Fund, whether now or hereafter authorized
or issued ("Shares"), dividend disbursing agent and shareholder servicing
agent, registrar and agent in connection with any accumulation, open-account
or similar plan provided to the holders of Shares, including without
limitation any periodic investment plan or periodic withdrawal plan.
The Fund hereby agrees that, in consideration for the payment by the Fund
to DWTFSB of fees as set out in the fee schedule attached hereto as Schedule
A, DWTFSB shall provide such services to the Fund pursuant to the terms and
conditions set forth in the Transfer Agency and Service Agreement annexed
hereto, as if the Fund was a signatory thereto.
Please indicate DWTFSB's acceptance of employment and appointment by the
Fund in the capacities set forth above by so indicating in the space provided
below.
Very truly yours,
(name of fund)
By:
-------------------------------
Barry Fink
Vice President and General
Counsel
ACCEPTED AND AGREED TO:
DEAN WITTER TRUST FSB
By:
-------------------------------------------------------------------------
Its:
-----------------------------------------------------------------------
Date:
-----------------------------------------------------------------------
10
<PAGE>
SCHEDULE A
Fund: Dean Witter Liquid Asset Fund Inc.
Fees: (1) Annual maintenance fee of $15.00 per shareholder account,
payable monthly.
(2) A fee equal to 1/12 of the fee set forth in (1) above, for
providing Forms 1099 for accounts closed during the year, payable
following the end of the calendar year.
(3) Out-of-pocket expenses in accordance with Section 2.2 of the
Agreement.
(4) Fees for additional services not set forth in this Agreement
shall be as negotiated between the parties.
<PAGE>
GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN
April 30, 1998
Dean Witter Liquid Asset Fund Inc.
Two World Trade Center
New York, New York 10048
Ladies and Gentlemen:
This opinion is being furnished to Dean Witter Liquid Asset Fund Inc., a
Maryland corporation (the "Corporation"), in connection with the Registration
Statement on Form N-14 (the "Registration Statement") under the Securities
Act of 1933, as amended (the "1933 Act"), to be filed by the Corporation in
connection with the acquisition by the Corporation of substantially all the
assets of Liquid Asset Series ("Liquid Asset"), one of eleven portfolios of
Dean Witter Retirement Series ("Retirement Series"), in exchange for shares
of common stock, par value $.01, of the Corporation ("Shares") and the
assumption by the Corporation of certain stated liabilities of Liquid Asset
pursuant to an Agreement and Plan of Reorganization dated as of January 29,
1998, between the Corporation and Retirement Series, on behalf of Liquid
Asset (the "Reorganization Agreement"). We have examined such statutes,
regulations, corporate records and other documents and reviewed such
questions of law as we deemed necessary or appropriate for the purposes of
this opinion.
As to matters of Maryland law contained in this opinion, we have relied
upon the opinion of Piper & Marbury LLP, dated April 30, 1998.
Based upon the foregoing, we are of the opinion that the Shares when
issued, as described in the Reorganization Agreement, will be duly authorized
and, assuming receipt of the consideration to be paid therefor, upon delivery
as provided in the Reorganization Agreement, will be legally issued, fully
paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement. We
do not thereby admit that we are within the category of persons whose consent
is required under Section 7 of the 1933 Act or the rules and regulations of
the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Gordon Altman Butowsky
Weitzen Shalov & Wein
1
<PAGE>
<PAGE>
[LETTERHEAD OF PIPER & MARBURY LLP]
April 30, 1998
Dean Witter Liquid Asset Fund Inc.
Two World Trade Center
New York, New York 10048
Registration Statement on Form N-14
Gentlemen:
We have acted as special Maryland counsel to Dean Witter Liquid Asset Fund
Inc., a Maryland corporation (the "Corporation"), in connection with the
Corporation's Registration Statement on Form N-14 (the "Registration
Statement") to be filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"),
related to the transfer of substantially all of the assets of Liquid Asset
Series ("Liquid Asset"), one of eleven portfolios of Dean Witter Retirement
Series, a Massachusetts business trust ("Retirement Series"), to the
Corporation in exchange for the issuance of shares of common stock, par value
$.01 per share (the "Shares"), of the Corporation and the assumption by the
Corporation of certain stated liabilities of Liquid Asset pursuant to the
terms of an Agreement and Plan of Reorganization (the "Agreement") dated as
of April 30, 1998, between the Corporation and Retirement Series, on behalf
of Liquid Asset.
In this capacity, we have examined the Registration Statement, the
Agreement, the Charter and By-Laws of the Corporation, a short-form good
standing certificate (the "Certificate") from the State Department of
Assessments and Taxation of Maryland dated April 14, 1998, and such other
statutes, certificates, instruments, and documents relating to the
Corporation and matters of law as we have deemed necessary to the issuance of
this opinion. In such examination, we have assumed, without independent
investigation, the genuineness of all signatures, the legal capacity of all
individuals who have executed any of the aforesaid documents, the
authenticity of all documents submitted to us as originals, the conformity
with originals of all documents submitted to us as copies (and the
authenticity of the originals of such copies), and all public records
reviewed are accurate and complete. As to factual matters, we have relied on
the certificate and have not independently verified the matters stated
therein. We assume that prior to the issuance of any of the Shares, there
will exist, under the Charter of the Corporation, the requisite number of
authorized but unissued Shares and that all actions necessary to the creation
of any Shares, whether by Charter amendment or by classification or
reclassification of existing capital stock and the filing of Articles
Supplementary, will have been taken. We further assume that appropriate
certificates representing the Shares will be executed and delivered upon
issuance of any of the Shares and will comply with all applicable
requirements of Maryland law and the Agreement. We assume that the issuance,
amount and terms of the Shares will be authorized and determined by proper
action of the Board of Directors of the Corporation ("Board Action") in
accordance with the Corporation's Charter and By-Laws and with applicable
Maryland law and the Agreement. Finally, we assume that the Agreement will be
a valid and legally binding contract that conforms to the description thereof
set forth in the Registration Statement.
Based upon the foregoing and having regard for such legal considerations
as we deem relevant, we are of the opinion that, as of the date hereof:
1. The Corporation is a corporation validly existing and in good standing
under the laws of the State of Maryland.
2. Upon due authorization by Board Action of the issuance of the Shares
and upon issuance and delivery of certificates for the Shares against
payment therefor in accordance with the terms and provisions of such Board
Action, the Registration Statement (as declared effective under the Act),
and the Agreement, the Shares will have been duly and validly authorized
and will be validly issued, fully paid, and nonassessable.
1
<PAGE>
The opinion expressed herein is solely for (i) the use of the Corporation
in connection with the Registration Statement, and (ii) the use of Gordon
Altman Butowsky Weitzen Shalov & Wein in giving their legality opinion to be
filed as an exhibit to the Registration Statement. This opinion may not be
relied on by any other person or in any other connection without our prior
written approval. We have made no investigation as to, and we express no
opinion concerning, any law of any jurisdiction other than the State of
Maryland. This opinion is limited to the matters set forth herein, and no
other opinion should be inferred beyond the matters expressly stated.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Legal
Matters" in the Proxy Statement and Prospectus included in the Registration
Statement. In giving our consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the Act or
the rules and regulations of the Commission thereunder.
Very truly yours,
/s/ Piper & Marbury L.L.P.
2
<PAGE>
GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN
April 30, 1998
Dean Witter Liquid Asset Fund Inc.
Two World Trade Center
New York, New York 10048
Dean Witter Retirement Series
Liquid Asset Series
Two World Trade Center
New York, New York 10048
Gentlemen:
You have requested our opinion as to the Federal income tax consequences
of the transaction (the "Reorganization") described below pursuant to which
(i) substantially all assets of Liquid Asset Series ("Liquid Asset"), one of
eleven portfolios of Dean Witter Retirement Series, a Masachusetts business
trust("Retirement Series"), will be combined with those of Dean Witter Liquid
Asset Fund Inc., a Maryland corporation (the "Corporation"), in exchange for
shares of the Corporation ("Corporation Shares"), and the assumption by the
Corporation of certain liabilities of Liquid Asset (the "Liabilities"); (ii)
Liquid Asset will be liquidated; and (iii) the Corporation Shares will be
distributed to the holders ("Liquid Asset Shareholders") of shares in Liquid
Asset ("Liquid Asset Shares").
We have examined and are familiar with such documents, records and other
instruments as we have deemed appropriate for purposes of this opinion
letter, including the Registration Statement filed with the Securities and
Exchange Commission under the Securities Act of 1933 on Form N-14, relating
to the Corporation Shares (the "Registration Statement") which includes, as a
part thereof, the proxy statement of Retirement Series, on behalf of Liquid
Asset (the "Liquid Asset Proxy"), which will be used to solicit proxies of
Liquid Asset Shareholders in connection with the Special Meeting of Liquid
Asset Shareholders and the Agreement and Plan of Reorganization by and
between the Corporation and Retirement Series, on behalf of Liquid Asset (the
"Plan").
In rendering this opinion, we have assumed that the Reorganization will be
carried out pursuant to the terms of the Plan, that factual statements and
information contained in the Registration Statement, the Liquid Asset Proxy
and other documents, records and instruments supplied to us are correct and
that there will be no material change with respect to such facts or
information prior to the time of the Reorganization. In rendering our
opinion, we have also relied on the representations and facts discussed below
which have been provided to us by Dean Witter Intercapital Inc.
("InterCapital"), the Corporation and Retirement Series, and we have assumed
that such representations and facts will remain correct at the time of the
Reorganization.
FACTS
The Corporation is an open-end diversified management investment company
engaged in the continuous offering of its shares to the public. Since its
inception, the Corporation has conducted its affairs so as to qualify, and
has elected to be taxed, as a regulated investment company under Section 851
of the Internal Revenue Code of 1986, as amended (the "Code").
Retirement Series is an open-end diversified management investment company
engaged in the continuous offering of shares of Liquid Asset to the public.
Liquid Asset is one of eleven portfolios of Retirement Series, a series fund.
Since its inception, Liquid Asset has conducted its affairs so as to qualify,
and has elected to be taxed, as a regulated investment company under Section
851 of the code.
The Board of Directors of the Corporation and the Board of Trustees of
Retirement Series have each determined, for valid business reasons, that it
is advisable to combine the assets of the Corporation and Liquid Asset into
one fund.
1
<PAGE>
In view of the above, the Board of Trustees of Retirement Series adopted
the Plan, subject to, among other things, approval by Liquid Asset
Shareholders.
Pursuant to the Plan, Liquid Asset will transfer all of its assets to the
Corporation in exchange for the Corporation Shares (including fractional
Corporation Shares) and the assumption by the Corporation of the Liabilities.
Immediately thereafter, Liquid Asset will distribute the Corporation Shares
to Liquid Asset Shareholders in exchange for and in cancellation of their
Liquid Asset Shares and in complete liquidation of Liquid Asset.
Each of the following representations, among other representations, has
been made to us in connection with the Reorganization by InterCapital,
Retirement Series and by the Corporation.
(1) To the best of the knowledge of the management of InterCapital,
Retirement Series, the Corporation, and their affiliates, there is no plan or
intention on the part of Liquid Asset Shareholders, to redeem, sell, exchange
or otherwise dispose of a number of Corporation Shares that would reduce
Liquid Asset Shareholders' ownership of Corporation Shares to a number of
Corporation Shares having a value, as of the date of the Reorganization, of
less than fifty percent of the value of all of the formerly outstanding
Liquid Asset Shares as of such date;
(2) The Corporation has no plan or intention to reacquire any of the
Corporation Shares to be issued pursuant to the Reorganization except to the
extent necessary to comply with its legal obligation to redeem its own
shares;
(3) The Liabilities to be assumed by or transferred to the Corporation
were incurred by Liquid Asset in the ordinary course of business and are
associated with the assets being transferred to the Corporation;
(4) The amount of the Liabilities will not exceed the aggregate adjusted
basis of Liquid Asset for its assets transferred to the Corporation;
(5) The Corporation has no plan or intention to sell or otherwise dispose
of more than fifty percent of the assets of Liquid Asset acquired in the
Reorganization, except for dispositions made in the ordinary course of
business;
(6) There is no indebtedness between Liquid Asset and the Corporation that
was issued, acquired or will be settled at a discount;
(7) Liquid Asset has been a regulated investment company within the
meaning of Section 851 of the Code since the date of its organization through
the end of its last complete taxable year and will qualify as a regulated
investment company for its taxable year ending on the date of the
Reorganization;
(8) The Corporation has been a regulated investment company within the
meaning of Section 851 of the Code since the date of its organization through
the date hereof and will qualify as a regulated investment company for its
taxable year ending on August 31, 1997;
(9) Liquid Asset will have no accumulated earnings and profits as of the
close of its taxable year ending on the date of the Reorganization.
OPINION
Based on the Code, Treasury Regulations issued thereunder, Internal
Revenue Service Rulings and the relevant case law, as of the date hereof, and
on the facts, representations and assumptions set forth above, and the
documents, records and other instruments we have reviewed, it is our opinion
that the Federal income tax consequences of the Reorganization to the
Corporation, Liquid Asset and the Liquid Asset Shareholders will be as
follows:
(1) The transfer of substantially all of Liquid Asset's assets in exchange
for the Corporation Shares and the assumption by the Corporation of certain
stated Liabilities of Liquid Asset, followed by the distribution by Liquid
Asset of the Corporation Shares to the Liquid Asset Shareholders in exchange
for their Liquid Asset Shares, will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code, and Liquid Asset and the
Corporation will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code;
2
<PAGE>
(2) No gain or loss will be recognized by the Corporation upon the receipt
of the assets of Liquid Asset solely in exchange for the Corporation Shares
and the assumption of the Liabilities by the Corporation;
(3) No gain or loss will be recognized by Liquid Asset upon the transfer
of the assets of Liquid Asset to the Corporation, in exchange for the
Corporation Shares and the assumption of the Liabilities by the Corporation,
or upon the distribution of the Corporation Shares to Liquid Asset
Shareholders in exchange for their Liquid Asset Shares as provided in the
Plan;
(4) No gain or loss will be recognized by Liquid Asset Shareholders upon
the exchange of their Liquid Asset Shares for the Corporation Shares;
(5) The aggregate tax basis for the Corporation Shares received by each
Liquid Asset Shareholder pursuant to the Reorganization will be the same as
the aggregate tax basis of the Liquid Asset Shares held by each such Liquid
Asset Shareholder immediately prior to the Reorganization;
(6) The holding period of the Corporation Shares to be received by each
Liquid Asset Shareholder will include the period during which the Liquid
Asset Shares surrendered in exchange therefor were held (provided such Liquid
Asset Shares were held as capital assets on the date of the Reorganization);
(7) The tax basis of the assets of Liquid Asset acquired by the
Corporation will be the same as the tax basis of such assets to Liquid Asset
immediately prior to the Reorganization; and
(8) The holding period of the assets of Liquid Asset in the hands of the
Corporation will include the period during which those assets were held by
Liquid Asset.
We are not expressing an opinion as to any aspect of the Reorganization
other than those opinions expressly stated above.
As noted above, this opinion is based upon our analysis of the Code,
Treasury Regulations issued thereunder, Internal Revenue Service Rulings and
case law which we deem relevant as of the date hereof. No assurances can be
given that there will not be a change in the existing law or that the
Internal Revenue Service will not alter its present views, either
prospectively or retroactively, or adopt new views with regard to any of the
matters upon which we are rendering this opinion, nor can any assurances be
given that the Internal Revenue Service will not audit or question the
treatment accorded to the Reorganization on the Federal income tax returns of
the Corporation, Liquid Asset or the Liquid Asset Shareholders.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name and any reference to our
firm in the Registration Statement and the Liquid Asset Proxy constituting a
part thereof.
Very truly yours,
/s/ Gordon Altman Butowsky
Weitzen Shalov & Wein
3
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Proxy Statement
and Prospectus and the Statement of Additional Information constituting parts
of this registration statement on Form N-14 (the "Registration Statement") of
our report dated October 7, 1997, relating to the financial statements and
financial highlights appearing in the August 31, 1997 Annual Report to
Shareholders of Dean Witter Liquid Asset Fund Inc. (the "Fund"), which is
also incorporated by reference into the Registration Statement and to the
reference to us under the heading "Financial Statements and Experts" in such
Proxy Statement and Prospectus. We also consent to the references to us under
the headings "Independent Accountants" and "Experts" in the Fund's Statement
of Additional Information dated October 24, 1997 and to the reference to us
under the heading "Financial Highlights" in the Fund's Prospectus dated
October 24, 1997, which Statement of Additional Information and Prospectus
have been incorporated by reference into this Registration Statement. We also
consent to the incorporation by reference in the Proxy Statement and
Prospectus of our report dated September 12, 1997 relating to the July 31,
1997 financial statements and financial highlights of Dean Witter Retirement
Series -Liquid Assets Portfolio, which appears in that fund's Statement of
Additional Information dated October 31, 1997 which is incorporated by
reference into this Registration Statement and to the incorporation by
reference of our report into that fund's Prospectus dated October 31, 1997
which is incorporated by reference into this Registration Statement. We also
consent to the references to us under the headings "Independent Accountants"
and "Experts" in that fund's Statement of Additional Information and to the
reference to us under the heading "Financial Highlights" in that fund's
Prospectus.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
May 6, 1998
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David M. Butowsky, Stuart M. Strauss and
Ronald M. Feiman and each and any one of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacitites, to sign any or all amendments (including post-effective
amendments) to the Registration Statement on Form N-14 relating to each of
the funds listed on Appendix A attached hereto, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitutes, may lawfully do or cause
to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------- -------------------- --------------------
<S> <C> <C>
/s/Michael Bozic Trustee/Director January 29, 1998
- --------------------------
Michael Bozic
/s/Edwin J. Garn Trustee/Director January 29, 1998
- --------------------------
Edwin J. Garn
/s/John R. Haire Trustee/Director January 29, 1998
- --------------------------
John R. Haire
/s/Manuel H. Johnson Trustee/Director January 29, 1998
- --------------------------
Manuel H. Johnson
/s/Michael E. Nugent Trustee/Director January 29, 1998
- --------------------------
Michael E. Nugent
/s/John L. Schroeder Trustee/Director January 29, 1998
- --------------------------
John L. Schroeder
/s/Wayne E. Hedien Trustee/Director January 29, 1998
- --------------------------
Wayne E. Hedien
</TABLE>
<PAGE>
APPENDIX A
DEAN WITTER LIQUID ASSET FUND INC.
DEAN WITTER U.S. GOVERNMENT MONEY MARKET TRUST
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
DEAN WITTER CAPITAL GROWTH SECURITIES
DEAN WITTER UTILITIES FUND
DEAN WITTER INTERMEDIATE INCOME SECURITIES
DEAN WITTER STRATEGIST FUND
DEAN WITTER GLOBAL DIVIDEND GROWTH SECURITIES
DEAN WITTER AMERICAN VALUE FUND
DEAN WITTER VALUE-ADDED MARKET SERIES
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Barry Fink and Marilyn K. Cranney and each and
any one of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacitites, to sign any or all amendments (including
post-effective amendments) to the Registration Statement on Form N-14
relating to each of the funds listed on Appendix A attached hereto, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitutes,
may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------- --------------------
<S> <C> <C>
/s/Charles A. Fiumefreddo Trustee/Director January 29, 1998
- -------------------------------
Charles A. Fiumefreddo
/s/Philip J. Purcell Trustee/Director January 29, 1998
- -------------------------------
Philip J. Purcell
</TABLE>
<PAGE>
APPENDIX A
DEAN WITTER LIQUID ASSET FUND INC.
DEAN WITTER U.S. GOVERNMENT MONEY MARKET TRUST
DEAN WITTER U.S. GOVERNMENT SECURITIES TRUST
DEAN WITTER DIVIDEND GROWTH SECURITIES INC.
DEAN WITTER CAPITAL GROWTH SECURITIES
DEAN WITTER UTILITIES FUND
DEAN WITTER INTERMEDIATE INCOME SECURITIES
DEAN WITTER STRATEGIST FUND
DEAN WITTER GLOBAL DIVIDEND GROWTH SECURITIES
DEAN WITTER AMERICAN VALUE FUND
DEAN WITTER VALUE-ADDED MARKET SERIES
<PAGE>
DEAN WITTER RETIREMENT SERIES
LIQUID ASSET SERIES
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 19, 1998
The undersigned shareholder of the Liquid Asset Series ("Liquid Asset"), one
of eleven portfolios of Dean Witter Retirement Series, does hereby appoint
BARRY FINK, ROBERT M. SCANLAN and ROBERT GIAMBRONE and each of them, as
attorneys-in-fact and proxies of the undersigned, each with the full power of
substitution, to attend the Special Meeting of Shareholders of Liquid Asset
to be held on August 19, 1998, at the Career Development Room, 61st Floor,
Two World Trade Center, New York, New York at 9:00 A.M., New York time, and
at all adjournments thereof and to vote the shares held in the name of the
undersigned on the record date for said meeting for the Proposal specified on
the reverse side hereof. Said attorneys-in-fact shall vote in accordance with
their best judgment as to any other matter.
(Continued on reverse side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE PROPOSAL SET FORTH ON THE REVERSE HEREOF AND AS RECOMMENDED
BY THE BOARD OF TRUSTEES.
IMPORTANT--This Proxy must be signed and dated on the reverse side.
<PAGE>
X PLEASE MARK BOXES
IN BLACK OR BLUE INK
The Proposal: FOR AGAINST ABSTAIN
Approval of the Agreement and Plan of [ ] [ ] [ ]
Reorganization, dated as of April 30, 1998,
pursuant to which substantially all of the assets
of Liquid Asset would be combined with those
of Dean Witter Liquid Asset Fund Inc. and shareholders of Liquid Asset
would become shareholders of Dean Witter Liquid Asset Fund Inc. receiving
shares in Dean Witter Liquid Asset Fund Inc. with a value equal to the
value of their holdings in Liquid Asset.
Please Sign personally. If the shares are registered in more than one
name, each joint owner or each fiduciary should sign personally. Only
authorized officers should sign for corporations.
Date
-------------------------
Please make sure to sign and date this
Proxy using black or blue ink.
---------------------------------------
Shareholder sign in the box above
---------------------------------------
Co-Owner (if any) sign in the box above
- -------------------------------------------------------------------------------
PRX 00107 PLEASE DETACH AT PERFORATION
DEAN WITTER RETIREMENT SERIES
LIQUID ASSET SERIES
IMPORTANT
PLEASE SEND IN YOUR PROXY.........TODAY!
YOU ARE URGED TO DATE AND SIGN THE ATTACHED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE. THIS WILL HELP SAVE THE EXPENSE OF FOLLOW-UP LETTERS TO
SHAREHOLDERS WHO HAVE NOT RESPONDED.
