Morgan Stanley Income Trust – ‘N-14AE’ on 5/8/98

As of:  Friday, 5/8/98   ·   Accession #:  950136-98-883   ·   File #:  333-52179

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Registration Statement of an Open-End Investment Company (Business Combination) with Automatic Effectiveness   —   Form N-14
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: N-14AE      Initial Registration; Business Combination           469   2.85M 
 4: EX-99.(11)(A)  Opinion and Consent of Gordon Altman Butowsky       1      9K 
                          Weitzen Shalov & Wein                                  
 5: EX-99.(11)(B)  Opinion and Consent of Lane Altman & Owens LLP      2     15K 
 6: EX-99.(12)  Opinon and Consent of Gordon Altman Butowksy           3     20K 
                          Weitzen Shalov & Wein Regarding Tax                    
                          Matters                                                
 7: EX-99.(14)  Consent of Independent Accountants                     1     10K 
 8: EX-99.(16)  Powers of Attorney                                     4     15K 
 9: EX-99.(17)(B)  Form of Proxy                                       2     10K 
 2: EX-99.(2)   Amended and Restated By-Laws of Registrant            10     53K 
 3: EX-99.(9)(C)  Amendment and Restated Transfer Agency and          13     55K 
                          Service Agreement                                      

N-14AE   —   Initial Registration; Business Combination
Document Table of Contents

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 8, 1998   
                                              REGISTRATION NO. 33-
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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 INTERMEDIATE INCOME SECURITIES  
(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 29, 1997.                                    

Pursuant to Rule 429, this Registration Statement relates to shares             
previously registered by the Registrant on Form N-1A (Registration Nos.         
33-24245; 811-5654).                                                            
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FORM N-14   
DEAN WITTER INTERMEDIATE INCOME SECURITIES  
Cross Reference Sheet   
Pursuant to Rule 481(a) under the Securities Act of 1933  

                                                                [Download Table]

  PART A OF FORM N-14                                                          
        ITEM NO.         PROXY STATEMENT AND PROSPECTUS HEADING                
-----------------------  ------------------------------------------------------
                                                                               
           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 Intermediate Income Securities Series   
            (b)          Available Information                                 
            (c)          *                                                     
            (d)          *                                                     
           7(a)          Introduction--Proxies                                 
            (b)          *                                                     
            (c)          Introduction; The Reorganization--Appraisal Rights    
           8(a)          The Reorganization                                    
            (b)          *                                                     
           9             *                                                     

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  PART B OF FORM N-14                                                                               
        ITEM NO.         STATEMENT OF ADDITIONAL INFORMATION HEADING                                
-----------------------  ----------------------------------------------------                       
                                                                                                    
          10(a)          Cover Page                                                                 
            (b)          *                                                                          
            11           Table of Contents                                                          
          12(a)          Additional Information about Dean Witter Intermediate Income Securities    
            (b)          *                                                                          
            (c)          *                                                                          
          13(a)          Additional Information about Intermediate Income Securities Series         
            (b)          *                                                                          
            (c)          *                                                                          
            14           Registrant's Annual Report for the fiscal year ended August 31, 1997;      
                         Registrant's Semi-Annual Report for the six months ended February 28, 1998;
                         Annual Report for Intermediate Income Securities Series for the fiscal year
                         ended July 31, 1997; Semi-Annual Report for Intermediate Income Securities 
                         Series for the six-month period ended January 31, 1998.                    

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  PART C OF FORM N-14                                 
        ITEM NO.         OTHER INFORMATION HEADING    
-----------------------  -----------------------------
                                                      
           15            Indemnification              
           16            Exhibits                     
           17            Undertakings                 

------------                                                                    
*      Not Applicable or negative answer                                        

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DEAN WITTER RETIREMENT SERIES   
INTERMEDIATE INCOME SECURITIES 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 INTERMEDIATE INCOME SECURITIES SERIES,                   
A SERIES OF DEAN WITTER RETIREMENT SERIES:                                      

Notice is hereby given of a Special Meeting of the Shareholders of the    
Intermediate Income Securities Series ("Intermediate Income Securities"), 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 Intermediate Income Securities, and Dean Witter            
Intermediate Income Securities (the "Acquiring Fund"), pursuant to which        
substantially all of the assets of Intermediate Income Securities would be      
combined with those of the Acquiring Fund and shareholders of Intermediate      
Income Securities would become shareholders of the Acquiring Fund receiving     
Class D shares of the Acquiring Fund with a value equal to the value of their   
holdings in Intermediate Income Securities (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                                                                   

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   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.                                                                     
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DEAN WITTER INTERMEDIATE INCOME SECURITIES  
Two World Trade Center, New York, New York 10048  
(212) 392-1600  
Acquisition of the Assets of  
the Intermediate Income Securities Series, A Series of  
Dean Witter Retirement Series   
By and in Exchange for Shares of  
Dean Witter Intermediate Income Securities  

This Proxy Statement and Prospectus is being furnished to shareholders of 
the Intermediate Income Securities Series ("Intermediate Income Securities"),   
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 Intermediate Income Securities will be          
combined with those of Dean Witter Intermediate Income Securities (the          
"Acquiring Fund") in exchange for shares of the Acquiring Fund. As a result     
of this transaction, shareholders of Intermediate Income Securities will        
become shareholders of the Acquiring Fund and will receive Class D shares of    
the Acquiring Fund with a value equal to the value of their holdings in         
Intermediate Income Securities. 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 Intermediate   
Income Securities, and the Acquiring Fund, attached hereto as Exhibit A. The    
address of Intermediate Income Securities 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 objective is to achieve high current income            
consistent with safety of principal. The Acquiring Fund seeks to achieve its    
investment objective by investing, under normal circumstances, at least 65%     
of its total assets in intermediate term, investment grade fixed-income         
securities.                                                                     

This Proxy Statement and Prospectus sets forth concisely information about
the Acquiring Fund that shareholders of Intermediate Income Securities should   
know before voting on the Reorganization Agreement. A copy of the Prospectus    
for the Acquiring Fund, dated October 28, 1997, is attached as Exhibit B and    
is incorporated herein by reference. Also enclosed and incorporated herein by   
reference is the Acquiring Fund's Annual Report for the fiscal year ended       
August 31, 1997 and its unaudited Semi-Annual Report for the six months ended   
February 28, 1998. A Statement of Additional Information relating to the        
Reorganization, described in this Proxy Statement and Prospectus, 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 its fiscal year ended July 31, 1997 and the Semi-Annual Report for   
Retirement Series for the six-month period ended January 31, 1998. Such         
documents are available without charge by calling Nina Maceda at Dean Witter    
Trust Company at (800) 869-NEWS (TOLL FREE).                                    

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.   

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TABLE OF CONTENTS   
PROXY STATEMENT AND PROSPECTUS  

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                                                                                                 PAGE  
                                                                                               --------
                                                                                                       
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 Intermediate Income Securities and the Acquiring Fund..........................     7   
PRINCIPAL RISK FACTORS........................................................................     8   
THE REORGANIZATION............................................................................     9   
 The Proposal ................................................................................     9   
 The Board's Consideration ...................................................................     9   
 The Reorganization Agreement ................................................................    10   
 Tax Aspects of the Reorganization ...........................................................    12   
 Description of Shares .......................................................................    13   
 Capitalization Table (unaudited) ............................................................    13   
 Appraisal Rights ............................................................................    13   
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS ...............................    14   
 Investment Objectives and Policies...........................................................    14   
 Investment Restrictions .....................................................................    14   
 Financial Information .......................................................................    15   
 Management...................................................................................    15   
 Description of Securities and Shareholder Inquiries..........................................    15   
 Dividends, Distributions and Taxes...........................................................    15   
 Purchases, Repurchases and Redemptions ......................................................    15   
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE ..................................................    15   
FINANCIAL STATEMENTS AND EXPERTS..............................................................    16   
LEGAL MATTERS.................................................................................    16   
AVAILABLE INFORMATION.........................................................................    16   
OTHER BUSINESS................................................................................    16   
Exhibit A--Agreement and Plan of Reorganization, dated as of April 30, 1998, by and between            
 Dean Witter Intermediate Income Securities and Dean Witter Retirement Series, on behalf of            
 Intermediate Income Securities Series........................................................    A-1  
Exhibit B--Prospectus of Dean Witter Intermediate Income Securities, dated                             
 October 28, 1997.............................................................................    B-1  

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DEAN WITTER RETIREMENT SERIES   
INTERMEDIATE INCOME SECURITIES 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 Intermediate Income Securities Series ("Intermediate Income              
Securities"), one of eleven portfolios of Dean Witter Retirement Series         
("Retirement Series"), an open-end diversified 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 Intermediate Income Securities 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, Intermediate Income Securities 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 Intermediate Income Securities, and     
Dean Witter Intermediate Income Securities (the "Acquiring Fund") pursuant to   
which substantially all of the assets of Intermediate Income Securities 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 Class D shares of the       
Acquiring Fund equal to the value of their holdings in Intermediate Income      
Securities on the date of such transaction (the "Reorganization"). The shares   
to be issued by the Acquiring Fund pursuant to the Reorganization will be       
Class D shares of the Acquiring Fund which will be issued at net asset value    
without any sales charge (the "Acquiring Fund Shares"). Further information     
relating to the Acquiring Fund, its Class D shares as well as the other three   
classes of shares (each, a "Class" and collectively, the "Classes") offered     
by the Acquiring Fund, is set forth herein and in the Acquiring Fund's          
current Prospectus, dated October 28, 1997 (the "Acquiring Fund's               
Prospectus"), attached to this Proxy Statement and Prospectus and               
incorporated herein by reference.                                               

The information concerning Intermediate Income Securities 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 Intermediate Income Securities issued and outstanding.    
Shareholders on the Record                                                      

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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 Intermediate     
Income Securities. As of the Record Date, the trustees and officers of          
Intermediate Income Securities, as a group, owned less than 1% of the           
outstanding shares of Intermediate Income Securities.]                          

[Include 5% owners of Acquiring Fund] [As of the Record Date, the trustees
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 Intermediate Income Securities' 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. (the "Investment Manager" or "InterCapital"). In addition     
to the solicitation of proxies by mail, proxies may be solicited by officers    
of Retirement Series including officers and regular employees of InterCapital   
and/or Dean Witter Trust FSB ("DWTFSB"), personally or by mail, telephone,      
telegraph or otherwise, without compensation other than regular compensation.   
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                                                         

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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. Retirement Series, on behalf of             
Intermediate Income Securities, 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     
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 Intermediate Income Securities 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,       
Intermediate Income Securities will continue in existence and the Board will    
consider alternative actions.                                                   

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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 Intermediate Income Securities, 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 Intermediate       
Income Securities received by the Acquiring Fund. On or after the closing       
date scheduled for the Reorganization (the "Closing Date"), Intermediate        
Income Securities will distribute the Acquiring Fund Shares received by         
Intermediate Income Securities to Shareholders as of the Valuation Date (as     
defined below under "The Reorganization Agreement") in complete liquidation     
of Intermediate Income Securities. 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 INTERMEDIATE INCOME SECURITIES ("INDEPENDENT TRUSTEES"), AS THAT    
TERM IS DEFINED IN THE 1940 ACT, HAS CONCLUDED THAT THE REORGANIZATION IS IN    
THE BEST INTERESTS OF INTERMEDIATE INCOME SECURITIES AND ITS SHAREHOLDERS AND   
RECOMMENDS APPROVAL OF THE REORGANIZATION AGREEMENT.                            

FEE TABLE                                                                       

Intermediate Income Securities and the Acquiring Fund each pay expenses   
for management of their assets and other services. Neither Intermediate         
Income Securities nor Class D shares of the Acquiring Fund pay                  
distribution-related fees; however, the other three Classes offered by the      
Acquiring Fund pay fees for the distribution of their shares. The expenses      
paid by Intermediate Income Securities and the Acquiring Fund are reflected     
in the net asset value per share of each such fund. The following table         
illustrates expenses and fees incurred during Intermediate Income Securities'   
fiscal year ended July 31, 1997. On July 28, 1997, the Acquiring Fund began     
offering its shares in multiple classes, each with different distribution       
arrangements and sales charges. Class D shares of the Acquiring Fund will be    
issued to Intermediate Income Securities Shareholders in connection with the    
Reorganization. Accordingly, expenses of Class D shares of the Acquiring Fund   
for the fiscal year ended August 31, 1997 ("Class D Fees and Expenses") are     
set forth in the table. 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                                            

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to that date and assuming Class D Fees and Expenses. Further information on     
the fees and expenses applicable to the Acquiring Fund's Class D shares, as     
well as the other three Classes of the Acquiring Fund shares, is set forth      
herein and in the Acquiring Fund's Prospectus, attached hereto and              
incorporated herein by reference.                                               

Shareholder Transaction Expenses                                                

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                                                                             INTERMEDIATE      ACQUIRING     PRO FORMA  
                                                                                INCOME           FUND         COMBINED  
                                                                              SECURITIES       (CLASS D)     (CLASS D)  
                                                                           ---------------- -------------  -------------
                                                                                                                        
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    

Annual Fund Operating Expenses (As a Percentage of Average Net Assets)                                                  
                                                                             Intermediate      Acquiring     Pro-Forma  
                                                                                Income           Fund         Combined  
                                                                              Securities       (Class D)     (Class D)  
                                                                           ---------------- -------------  -------------
Management ...............................................................       0.65%           0.60%          0.60%   
12b-1 Fees................................................................       0.00%           0.00%          0.00%   
Other Expenses............................................................       1.35%           0.20%          0.21%   

Total Fund Operating Expenses ............................................       2.00%(1)        0.80%          0.81%   

------------                                                                    
(1)    Pursuant to an undertaking, InterCapital has agreed to assume all        
   expenses relating to the operations of Intermediate Income Securities
(except for any brokerage fees and a portion of organizational    
    expenses) and has agreed to waive the compensation provided for in its
 Management Agreement with respect to Intermediate Income Securities
   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    
Intermediate Income Securities. Taking such waiver into effect,   
Intermediate Income Securities' total fund operating expenses were
1.00%. After June 30, 1998, Intermediate Income Securities, if it 
 continues in operation, will bear all fees and expenses. The actual
    expenses (before any waiver) of Intermediate Income Securities for the
period ended July 31, 1997 are set forth in the table.            

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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 Intermediate Income Securities     
or Class D Shares of 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:                                                   

                                                                [Download Table]

                                  1 YEAR    3 YEARS   5 YEARS    10 YEARS
                                 -------- ---------  --------- ----------
                                                                         
Intermediate Income Securities      $20       $63       $108       $233  
Acquiring Fund (Class D)  ......    $ 8       $26       $ 44       $ 99  
Pro Forma Combined (Class D)  ..    $ 8       $26       $ 45       $100  

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.                                                          

TAX CONSEQUENCES OF THE REORGANIZATION                                          

As a condition to the Reorganization, Intermediate Income Securities 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     
Intermediate Income Securities or the shareholders of Intermediate Income       
Securities 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 INTERMEDIATE INCOME SECURITIES AND THE ACQUIRING FUND             

INVESTMENT OBJECTIVES AND POLICIES. Intermediate Income Securities and the
Acquiring Fund have identical investment objectives which is high current       
income consistent with safety of principal. Both Intermediate Income            
Securities and the Acquiring Fund seek to achieve their investment objectives   
by investing, under normal circumstances, at least 65% of their total assets    
in intermediate term, investment grade fixed-income securities.                 

The investment policies of both funds are essentially the same; the       
principal differences between them are described under "Comparison of           
Investment Objectives, Policies and Restrictions" below.                        

The investment policies of both Intermediate Income Securities and the    
Acquiring Fund are not fundamental and may be changed by their respective       
Boards of Trustees.                                                             

INVESTMENT MANAGEMENT AND DISTRIBUTION-RELATED FEES. Intermediate Income  
Securities and the Acquiring Fund obtain investment management services from    
InterCapital. With respect to Intermediate Income Securities, the fund pays     
InterCapital monthly compensation calculated daily by applying the annual       
rate of 0.65% 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 0.60% to the daily net assets of the fund up to $500         
million, scaled down at various asset levels to 0.30% on the portion of daily   
net assets over $1 billion.                                                     

Neither Intermediate Income Securities nor Class D shares of the Acquiring
Fund pay distribution-related fees; however, in accordance with the terms of    
a distribution plan adopted by the Acquiring Fund pursuant to Rule 12b-1        
under the 1940 Act, the other three Classes of the Acquiring Fund do pay        
distribution-related expenses. For further information relating to the 12b-1    
fees applicable to each of the other Classes, see the section entitled          
"Purchase of Fund Shares" in the Acquiring Fund's Prospectus, attached          
hereto.                                                                         

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OTHER SIGNIFICANT FEES. Both Intermediate Income Securities 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. Intermediate Income Securities      
continuously issues its shares to investors at a price equal to net asset       
value at the time of such issuance. Shares of Intermediate Income Securities    
may be redeemed for cash without redemption or other charge at any time at      
the net asset value per share next determined. Likewise, Class D shares of      
the Acquiring Fund are currently offered at net asset value and such shares     
may be redeemed for cash without redemption or other charge. Subsequent to      
the Reorganization, Shareholders who continuously hold Class D shares of the    
Acquiring Fund may purchase additional Class D shares of the fund for the       
same account. The Acquiring Fund may, on sixty days' notice, redeem             
involuntarily, at net asset value, shares (other than shares held in an         
Individual Retirement Account or custodial account under Section 403(b)(7) of   
the Internal Revenue Code) having a value of less than $100 or such lesser      
amount as may be fixed by the fund's board or, in the case of an account        
opened through EasyInvest (Service Mark), if after twelve months the            
shareholder has invested less than $1,000 in the account; Intermediate Income   
Securities does not involuntarily redeem accounts.                              

Shares of Intermediate Income Securities may be exchanged only for shares 
of the other portfolios of Retirement Series. However, Class D shares of the    
Acquiring Fund may be exchanged for Class D shares of any other Dean Witter     
fund that offers its shares in more than one Class or any of Dean Witter        
Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal Trust,       
Dean Witter Short-Term Bond Fund, Dean Witter Intermediate Term U.S. Treasury   
Trust and five Dean Witter funds which are money market funds, without the      
imposition of an exchange fee. Both Intermediate Income Securities and the      
Acquiring Fund provide telephone exchange privileges to their shareholders.     
For greater details relating to exchange privileges applicable to the           
Acquiring Fund, see the section entitled "Shareholder Services--Exchange        
Privilege" in the Acquiring Fund's Prospectus.                                  

DIVIDENDS. Intermediate Income Securities declares dividends daily, pays  
all dividends from net investment income monthly, and distributes               
distributions from net short-term capital gains, if any, at least once each     
year. The Acquiring Fund declares dividends separately for each of its          
Classes and intends to pay monthly income dividends and to distribute net       
short-term and net long-term capital gains, if any, at least once each year.    
Dividends and capital gains distributions of both Intermediate Income           
Securities and the Acquiring Fund are automatically reinvested in additional    
shares at net asset value unless the shareholder elects to receive cash.        

SHAREHOLDER SERVICES.  The shareholder services provided by both funds are
similar. The material difference is that: shareholders of the Acquiring Fund    
may subscribe to EasyInvest (Service Mark), 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 and Intermediate Income       
Securities does not offer this arrangement. The Acquiring Fund has a Targeted   
Dividends arrangement whereby, 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 other Dean Witter funds, subject to certain conditions;   
Intermediate Income Securities 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 net asset value of shares of Intermediate Income Securities and the   
Acquiring Fund will fluctuate with changes in the market value of each fund's   
respective portfolio securities. Both Intermediate Income Securities and the    
Acquiring Fund invest in lower rated fixed-income securities which present      
greater risks than securities with higher ratings, and investments in such      
lower rated securities may be considered speculative. Additionally,             

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both funds' portfolios are subject to interest rate risk; specifically, an      
increase in prevailing interest rates will reduce the value of their            
portfolios. Both funds may invest in foreign securities which involve certain   
special risks not associated with U.S. issued securities. In addition, both     
funds may purchase securities on a when-issued, delayed delivery and when, as   
and if issued, basis and enter into reverse repurchase agreements, each of      
which presents other special risks. The overall risks of investments in both    
funds are substantially similar.                                                

The foregoing discussion is a summary of the principal risk factors. For a
more complete discussion of the risks of each fund, see "Investment             
Objectives and Policies--General Investment Techniques and Risk                 
Considerations" in the Prospectus for Retirement Series and "Investment         
Objective and Policies--Risk Considerations" in the Acquiring Fund's            
Prospectus.                                                                     

THE REORGANIZATION  

THE PROPOSAL                                                                    

The Board of Trustees of Retirement Series, on behalf of Intermediate     
Income Securities, including the Independent Trustees, having reviewed          
Intermediate Income Securities' economic position, determined that the          
Reorganization is in the best interests of Intermediate Income Securities and   
its Shareholders and that the interests of Intermediate Income Securities'      
Shareholders will not be diluted as a result thereof, recommends approval of    
the Reorganization by Intermediate Income Securities 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 Intermediate Income Securities     
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 Intermediate Income    
Securities and Class D shares of the Acquiring Fund. The Board also             
considered other factors, including, but not limited to: the comparative        
investment performance and past growth in assets of Intermediate Income         
Securities and the Acquiring Fund; the compatibility of the investment          
objectives, policies, restrictions and portfolios of Intermediate Income        
Securities 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 Intermediate Income Securities 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, on behalf of Intermediate Income Securities, considered      
that the Reorganization would have the following benefits for Shareholders:     

1. Once the Reorganization is consummated, the expenses which would be    
borne by Class D shareholders of the "combined fund" should be substantially    
lower on a percentage basis than the actual expenses per share of               
Intermediate Income Securities. In part, this is because the rate of the        
investment management fee payable by the surviving Acquiring Fund is lower      
than the fees currently paid by Intermediate Income Securities. 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                     

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Intermediate Income Securities' actual expense ratio, for its fiscal year       
ended July 31, 1997, was 2.00% (absent fee waivers), whereas the expense        
ratio for Class D shares of the Acquiring Fund was 0.80% (based on the fiscal   
year ended August 31, 1997).                                                    

2. The investment objectives of Intermediate Income Securities and the    
Acquiring Fund are identical. The principal reason for having two funds with    
identical investment objectives was to address different marketing needs:       
Intermediate Income Securities is a no-load fund and prior to July 28, 1997     
(when the Acquiring Fund began offering its shares in multiple classes), the    
Acquiring Fund was sold with a back-end sales charge. Maintaining two           
separate funds for marketing purposes is no longer necessary since the          
Acquiring Fund has converted to a multi-class structure and, consequently,      
separate classes of a single fund (i.e., the Acquiring Fund) will satisfy the   
different marketing needs.                                                      

3. Shareholders would have expanded exchange privileges. Rather than being
able to exchange their shares of Intermediate Income Securities 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          
Intermediate Income Securities or its Shareholders for federal income tax       
purposes as a result of transactions included in the Reorganization.            

The Board of Trustees of the Acquiring Fund, including a majority of such 
Trustees who are not "interested persons" of the Acquiring Fund, also have      
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 transaction     
will enable the Acquiring Fund to acquire investment securities which are       
consistent with the Acquiring Fund's investment objective, without the          
brokerage costs attendant to the purchase of such securities in the market.     

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) Intermediate Income        
Securities will transfer all of its assets, including portfolio securities,     
cash (other than cash amounts retained by Intermediate Income Securities as a   
"Cash Reserve" in the amount sufficient to discharge its liabilities not        
discharged prior to the Valuation Date (as defined below) and for expenses of   
the liquidation), cash equivalents and receivables to the Acquiring Fund on     
the Closing Date in exchange for the assumption by the Acquiring Fund of        
Intermediate Income Securities' stated liabilities, including all expenses,     
costs, charges and reserves, as reflected on an unaudited statement of assets   
and liabilities of Intermediate Income Securities 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     
Intermediate Income Securities on the Closing Date or as soon as practicable    
thereafter, (iii) Intermediate Income Securities would be dissolved and (iv)    
the outstanding shares of Intermediate Income Securities would be canceled.     

The number of Acquiring Fund Shares to be delivered to Intermediate Income
Securities will be determined by dividing the value of Intermediate Income      
Securities assets acquired by the Acquiring Fund (net of stated liabilities     
assumed by the Acquiring Fund) by the net asset value of an Acquiring Fund      
Share; these                                                                    

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values will be calculated 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 Intermediate Income            
Securities of the Reorganization Agreement or at such other time as             
Intermediate Income Securities and the Acquiring Fund may agree (the            
"Valuation Date"). As an illustration, if on the Valuation Date, Intermediate   
Income Securities were to have securities with a market value of $95,000 and    
cash in the amount of $10,000 (of which $5,000 was to be retained by it as      
the Cash Reserve), the value of the assets which would be transferred to the    
Acquiring Fund would be $100,000. If the net asset value per share of Class D   
of the Acquiring Fund were $10 per share at the close of business on the        
Valuation Date, the number of shares to be issued would be 10,000 ($100,000     
(divided by) $10). These 10,000 Class D shares of the Acquiring Fund would be   
distributed to the former shareholders of Intermediate Income Securities.       
This example is given for illustration purposes only and does not bear any      
relationship to the dollar amounts or shares expected to be involved in the     
Reorganization.                                                                 

On the Closing Date or as soon as practicable thereafter, Intermediate    
Income Securities 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 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, Plaza Two, Jersey City, New Jersey 07311. 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 (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 next business day following the Valuation    
Date. The consummation of the Reorganization is contingent upon the approval    
of the Reorganization by the shareholders of Intermediate Income Securities     
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 Intermediate     
Income Securities 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 Intermediate Income          
Securities' Shareholders by mutual consent of Retirement Series, on behalf of   
Intermediate Income Securities, 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.         

Under the Reorganization Agreement, within one year after the Closing     
Date, Retirement Series, on behalf of Intermediate Income Securities, shall:    
either pay or make provision for all of its liabilities and distribute any      
remaining amount of the Cash Reserve (after paying or making provision for      
such liabilities and the estimated cost of making the distribution) to former   
shareholders of Intermediate Income Securities that received the Acquiring      
Fund Shares. Intermediate Income Securities shall be liquidated promptly        
following the distributions of shares of the Acquiring Fund to Shareholders     
of record of Intermediate Income Securities.                                    

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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 Intermediate Income Securities (at net asset value on the Valuation   
Date calculated after subtracting the Cash Reserve) 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 Intermediate Income Securities 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           
Intermediate Income Securities at net asset value next determined after         
receipt of the redemption request until the close of business on the business   
day next preceding the Closing Date. Redemption requests received by            
Retirement Series, on behalf of Intermediate Income Securities, 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, Intermediate Income Securities 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 Intermediate Income Securities'   
investment company taxable income for all periods since inception of            
Intermediate Income Securities through and including the Valuation Date         
(computed without regard to any dividends paid deduction), and all of           
Intermediate Income Securities' 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"). Retirement Series, on behalf     
of Intermediate Income Securities, 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 number of shares having a value,    
as of the Closing Date, of less than 50% of the value of all of the formerly    
outstanding Intermediate Income Securities shares as of the same date.          
Retirement Series, on behalf of Intermediate Income Securities, and the         
Acquiring Fund have each further represented that, as of the Closing Date,      
Intermediate Income Securities and the Acquiring Fund will qualify as           
regulated investment companies.                                                 

As a condition to the Reorganization, Retirement Series, on behalf of     
Intermediate Income Securities, 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 Retirement Series, on behalf of Intermediate Income Securities,     
and the Acquiring Fund:                                                         

1. The transfer of substantially all of Intermediate Income Securities'   
assets in exchange for the Acquiring Fund Shares and the assumption by the      
Acquiring Fund of certain stated liabilities of Intermediate Income             
Securities followed by the distribution by Intermediate Income Securities of    
the Acquiring Fund Shares to Shareholders in exchange for their Intermediate    
Income Securities shares will constitute a "reorganization" within the          
meaning of Section 368(a)(1)(C) of the Code, and Intermediate Income            
Securities 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 Intermediate Income Securities solely in exchange      
for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the   
stated liabilities of Intermediate Income Securities;                           

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3. No gain or loss will be recognized by Intermediate Income Securities   
upon the transfer of the assets of Intermediate Income Securities 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 Intermediate    
Income Securities shares;                                                       

4. No gain or loss will be recognized by Shareholders upon the exchange of
the shares of Intermediate Income Securities 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 Intermediate Income Securities 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 Intermediate     
Income Securities surrendered in exchange therefor were held (provided such     
shares in Intermediate Income Securities were held as capital assets on the     
date of the Reorganization);                                                    

7. The tax basis of the assets of Intermediate Income Securities acquired 
by the Acquiring Fund will be the same as the tax basis of such assets to       
Intermediate Income Securities immediately prior to the Reorganization; and     

8. The holding period of the assets of Intermediate Income Securities in  
the hands of the Acquiring Fund will include the period during which those      
assets were held by Intermediate Income Securities.                             

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                                                           

Class D 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. As stated above, Class D shares of the Acquiring Fund are    
not subject to any sales charge on purchase or redemption or any 12b-1 fee.     

CAPITALIZATION TABLE (UNAUDITED)                                                

The following table sets forth the capitalization of the Acquiring Fund   
and Intermediate Income Securities as of March 31, 1998 and on a pro forma      
combined basis as if the Reorganization had occurred on that date:              

                                                                [Download Table]

                                                                  NET ASSET 
                                                      SHARES        VALUE   
                                      NET ASSETS    OUTSTANDING   PER SHARE 
                                     ------------ -------------  -----------
                                                                            
Intermediate Income Securities  ....  $2,429,821      250,154       $9.71   
Acquiring Fund (Class D) ...........  $5,737,164      592,129       $9.69   
Combined Fund (pro forma)(Class D) .  $8,166,985      842,885       $9.69   

APPRAISAL RIGHTS                                                                

Shareholders will have no appraisal rights in connection with the         
Reorganization.                                                                 

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COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS  

INVESTMENT OBJECTIVES AND POLICIES                                              

The Acquiring Fund and Intermediate Income Securities have identical      
investment objectives which is to achieve high current income consistent with   
safety of principal. Both funds seek to achieve their investment objective by   
investing at least 65% of their respective total assets in intermediate term,   
investment grade fixed-income securities. Both funds employ substantially       
similar processes and policies in allocating their respective assets.           

The material differences are as follows: (a) the Acquiring Fund may invest
in U.S. dollar denominated fixed-income securities issued by foreign issuers;   
whereas, Intermediate Income Securities may invest in both U.S. dollar and      
non-U.S. dollar denominated foreign securities; (b) the Acquiring Fund may      
enter into reverse repurchase agreements up to 10% of its total assets;         
whereas, Intermediate Income Securities may enter into reverse repurchase       
agreements up to 5% of its total assets; (c) Intermediate Income Securities     
may invest up to 15% of its net assets in securities which are subject to       
restrictions on resale; whereas, the Acquiring Fund is subject to a 5% (of      
total assets) limitation on purchases of such securities (Securities eligible   
for resale pursuant to Rule 144A under the Securities Act of 1933, and          
determined to be liquid pursuant to procedures adopted by the boards of         
trustees, are not subject to the foregoing limitations.); (d) Intermediate      
Income Securities may enter into options, warrants and futures transaction;     
whereas, the Acquiring Fund may not enter into such transactions; and (e)       
Intermediate Income Securities will not lend its portfolio securities if such   
loans have a value of more than 10% of its total assets; whereas, the           
Acquiring Fund is subject to a similar limitation prohibiting it from lending   
more than 25% of its total assets.                                              

The investment policies of both the Acquiring Fund and Intermediate Income
Securities are not fundamental and may be changed by their respective Boards.   
The foregoing discussion is a summary of the principal differences between      
the investment policies of the funds. For a more complete discussion of each    
fund's policies, see "Investment Objective 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 Intermediate Income Securities 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 the majority of    
the outstanding voting securities of a fund as defined in the 1940 Act. The     
material differences are as follows: (a) the Acquiring Fund has a fundamental   
restriction that, as to 100% of its assets, it may not 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); whereas, Intermediate Income Securities is      
subject to a similar 5% fundamental limitation with respect to only 75% of      
its total assets; (b) the Acquiring Fund has a fundamental restriction that,    
as to 100% of its assets, it may not purchase more than 10% of all              
outstanding voting securities or any class of securities of any one issuer;     
whereas, Intermediate Income Securities is subject to a similar 10%             
fundamental limitation with respect to only 75% of its total assets; (c) the    
Acquiring Fund has a fundamental restriction that it may not invest more than   
10% of its assets in illiquid securities; whereas, Intermediate Income          
Securities may not invest more than 15% of its assets in such securities; and   
(d) neither fund may purchase securities of other investment companies,         
except in connection with a merger, consolidation, reorganization or            
acquisition of assets; however, Intermediate Income Securities carves out an    
additional exception for purchases made in accordance with Section 12(d) of     
the 1940 Act.                                                                   

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Notwithstanding any other investment policy or restriction, the Acquiring 
Fund reserves the right to seek to achieve its investment objective by          
investing all or substantially all of its assets in another investment          
company having substantially the same investment objective and policies as      
those of the Acquiring Fund; Intermediate Income Securities 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 the Investment Manager, 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 if 1% own in the aggregate more than 5% of      
the outstanding securities of such issuer; whereas, Intermediate Income         
Securities is subject to such limitation on a non-fundamental basis.            

For a more complete discussion of each fund's investment restrictions see 
"Investment Restrictions" in each fund's respective Prospectus and Statement    
of Additional Information.                                                      

FINANCIAL INFORMATION                                                           

For certain financial information about the Acquiring Fund and            
Intermediate Income Securities, see "Financial Highlights" and "Performance     
Information" in their respective Prospectuses.                                  

MANAGEMENT                                                                      

For information about the Acquiring Fund's and Intermediate Income        
Securities' Board of Trustees, the Investment Manager and the Distributor,      
see "The Fund and its Management" and "Investment Objective and Policies" in    
their respective Prospectuses.                                                  

DESCRIPTION OF SECURITIES AND SHAREHOLDER INQUIRIES                             

For a description of the nature and most significant attributes of shares 
of Intermediate Income Securities 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 Intermediate Income          
Securities' 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--Dividends," "Synopsis--Investment     
Management and Distribution-Related Fees" and "Tax Aspects of the               
Reorganization."                                                                

PURCHASES, REPURCHASES AND REDEMPTIONS                                          

For a discussion of how the Acquiring Fund's and Intermediate Income      
Securities' shares may be purchased, repurchased and redeemed, see "Purchase    
of Fund Shares," "Shareholder Services" and "Redemptions and Repurchases" in    
their respective Prospectuses.                                                  

MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE   

For a discussion of the Acquiring Fund's performance, see management's    
letter to shareholders in its Annual Report for its fiscal year ended August    
31, 1997, accompanying this Proxy Statement and Prospectus. For a discussion    
of Intermediate Income Securities' performance, see its Annual Report for its   
fiscal year ended July 31, 1997 and its unaudited Semi-Annual Report for the    
six-month period ended January 31, 1998.                                        

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FINANCIAL STATEMENTS AND EXPERTS  

The financial statements of the Acquiring Fund and Intermediate Income    
Securities 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 Lane Altman & Owens LLP as to matters    
of Massachusetts law.                                                           

AVAILABLE INFORMATION   

Additional information about the Acquiring Fund and Intermediate Income   
Securities is available, as applicable, in the following documents which are    
incorporated herein by reference: (i) the Acquiring Fund's Prospectus dated     
October 28, 1997, attached to this Proxy Statement and Prospectus, which        
Prospectus forms a part of Post-Effective Amendment No. 11 to the Acquiring     
Fund's Registration Statement on Form N-1A (File Nos. 811-5654; 33-24245);      
(ii) the Acquiring Fund's Annual Report for its fiscal year ended August 31,    
1997 and its Semi-Annual Report for the six months ended February 28, 1998,     
accompanying this Proxy Statement and Prospectus; (iii) the Prospectus for      
Retirement Series dated October 31, 1997, which Prospectus forms a part of      
Post-Effective Amendment No. 6 to Intermediate Income Securities'               
Registration Statement 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 unaudited Semi-Annual Report for the six-month period 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.             

Intermediate Income Securities 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             
Intermediate Income Securities 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 Intermediate Income Securities 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                                                                   

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                                                                   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 INTERMEDIATE INCOME         
SECURITIES, a Massachusetts business trust (the "Acquiring Fund") and DEAN      
WITTER RETIREMENT SERIES, a Massachusetts business trust ("Retirement           
Series"), on behalf of its series, INTERMEDIATE INCOME SECURITIES SERIES        
("Intermediate Income Securities").                                             

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     
Intermediate Income Securities in exchange for the assumption by the            
Acquiring Fund of all stated liabilities of Intermediate Income Securities      
and the issuance by the Acquiring Fund of Class D shares of common stock (the   
"Acquiring Fund Shares"), to be distributed, after the Closing Date             
hereinafter referred to, to the shareholders of Intermediate Income             
Securities in liquidation of Intermediate Income Securities 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 INTERMEDIATE                           
INCOME SECURITIES                                                         

1.1 Subject to the terms and conditions herein set forth and on the basis 
of the representations and warranties contained herein, Intermediate Income     
Securities agrees to assign, deliver and otherwise transfer the Intermediate    
Income Securities Assets (as defined in paragraph 1.2) to the Acquiring Fund    
and the Acquiring Fund agrees in exchange therefor to assume all of             
Intermediate Income Securities' stated liabilities on the Closing Date as set   
forth in paragraph 1.3(a) and to deliver to Intermediate Income Securities      
the number of Acquiring Fund Shares, including fractional Acquiring Fund        
Shares, determined by dividing the value of the Intermediate Income             
Securities Assets, net of such stated liabilities, computed as of the           
Valuation Date (as defined in paragraph 2.1) in the manner set forth in         
paragraph 2.1, by the net asset value of an Acquiring Fund Share, computed at   
the time and date and in the manner set forth in paragraph 2.2. Such            
transactions shall take place at the closing provided for in paragraph 3.1      
("Closing").                                                                    

1.2 (a) The "Intermediate Income Securities Assets" shall consist of all  
property, including without limitation, all cash (other than the "Cash          
Reserve" (as defined in paragraph 1.3(b)), cash equivalents, securities and     
dividend and interest receivables owned by Intermediate Income Securities,      
and any deferred or prepaid expenses shown as an asset on Intermediate Income   
Securities' 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 Intermediate Income Securities' 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. Intermediate Income Securities 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 Intermediate Income        
Securities with a statement of the Acquiring Fund's investment objectives,      
policies and restrictions and a list of                                         

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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 Intermediate Income Securities     
holds any investments that the Acquiring Fund is not permitted to hold,         
Intermediate Income Securities will dispose of such securities on or prior to   
the Valuation Date. In addition, if it is determined that the portfolios of     
Intermediate Income Securities and the Acquiring Fund, when aggregated, would   
contain investments exceeding certain percentage limitations imposed upon the   
Acquiring Fund with respect to such investments, Intermediate Income            
Securities, 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).                                     

1.3 (a) Intermediate Income Securities 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 Intermediate Income            
Securities prepared by the Treasurer of Intermediate Income Securities as of    
the Valuation Date in accordance with generally accepted accounting             
principles consistently applied from the prior audited period.                  

(b) On the Valuation Date, Intermediate Income Securities may establish a 
cash reserve, which shall not exceed 5% of Intermediate Income Securities'      
net assets as of the close of business on the Valuation Date ("Cash Reserve")   
to be retained by Intermediate Income Securities and used for the payment of    
its liabilities not discharged prior to the Valuation Date and for the          
expenses of liquidation.                                                        

1.4 In order for Intermediate Income Securities 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) in the short taxable year ending with its               
liquidation, Intermediate Income Securities 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, Intermediate
Income Securities will distribute the Acquiring Fund Shares received by         
Intermediate Income Securities pursuant to paragraph 1.1 pro rata to its        
shareholders of record determined as of the close of business on the            
Valuation Date ("Intermediate Income Securities 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    
Intermediate Income Securities' account on the books of the Acquiring Fund to   
open accounts on the books of the Acquiring Fund in the names of the            
Intermediate Income Securities Shareholders and representing the respective     
pro rata number of Acquiring Fund Shares due such Intermediate Income           
Securities Shareholders. All issued and outstanding shares of Intermediate      
Income Securities simultaneously will be canceled on Intermediate Income        
Securities' books; however, share certificates representing interests in        
Intermediate Income Securities 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 an     
Intermediate Income Securities Shareholder.                                     

1.6 Ownership of 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      
Intermediate Income Securities' 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.                                                                    

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1.8 Any reporting responsibility of Retirement Series, on behalf of       
Intermediate Income Securities, 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 Within one year after the Closing Date, Intermediate Income Securities
shall pay or make provision for the payment of all its liabilities and taxes,   
and distribute to the shareholders of Intermediate Income Securities as of      
the close of business on the Valuation Date any remaining amount of the Cash    
Reserve (as reduced by the estimated cost of distributing it to                 
shareholders). Intermediate Income Securities shall be liquidated and           
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 Intermediate 
Income Securities 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 Intermediate Income           
Securities is subject under the 1940 Act.                                       

2. VALUATION                                                                    

2.1 The value of the Intermediate Income Securities Assets shall be the   
value of such assets 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 Intermediate Income        
Securities 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"), using the valuation        
procedures set forth in the Acquiring Fund's then current Prospectus and        
Statement of Additional Information.                                            

2.2 The net asset value of an Acquiring Fund Share shall be the net asset 
value per share computed on the Valuation Date, using the valuation             
procedures set forth in the Acquiring Fund's then current Prospectus and        
Statement of Additional Information.                                            

2.3 The number of the Acquiring Fund Shares (including fractional shares, 
if any) to be issued hereunder shall be determined by dividing the value of     
the Intermediate Income Securities Assets, net of the liabilities of            
Intermediate Income Securities assumed by the Acquiring Fund pursuant to        
paragraph 1.1, determined in accordance with paragraph 2.1, by the net asset    
value of an Acquiring Fund Share determined in accordance with paragraph 2.2.   

2.4 All computations of value shall be made by Dean Witter Services       
Company Inc. ("Services") in accordance with its regular practice in pricing    
the Acquiring Fund. The Acquiring Fund shall cause Services to deliver a copy   
of its valuation report at the Closing.                                         

3. CLOSING AND CLOSING DATE                                                     

3.1 The Closing shall take place on the next business day following 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 Intermediate Income Securities 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            

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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 Intermediate Income             
Securities 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        
Intermediate Income Securities".                                                

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            
Intermediate Income Securities, accurate appraisal of the value of the net      
assets of the Acquiring Fund or the Intermediate Income Securities 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 Intermediate        
Income Securities Shareholders and the number and percentage ownership of       
outstanding Intermediate Income Securities shares owned by each such            
Intermediate Income Securities 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 Intermediate Income Securities 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 Intermediate Income Securities or provide    
evidence satisfactory to Intermediate Income Securities that such the           
Acquiring Fund Shares have been credited to Intermediate Income Securities'     
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.                                                 

4. COVENANTS OF THE ACQUIRING FUND AND INTERMEDIATE INCOME SECURITIES           

4.1 Except as otherwise expressly provided herein with respect to         
Intermediate Income Securities, the Acquiring Fund and Intermediate Income      
Securities 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. Retirement Series       
will further provide the Acquiring Fund with such other information and         
documents relating to Intermediate Income Securities as are reasonably          
necessary for the preparation of the Registration Statement.                    

4.3 Retirement Series will call a meeting of the Intermediate Income      
Securities shareholders to consider and act upon this Agreement and to take     
all other action necessary to obtain approval of the transactions               

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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 Intermediate Income Securities shares.                  

4.5 Subject to the provisions of this Agreement, the Acquiring Fund and   
Retirement Series, on behalf of Intermediate Income Securities, 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             
Intermediate Income Securities' 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, Intermediate Income Securities 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 Intermediate Income Securities' 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 Intermediate Income Securities 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.                                                                           

5. REPRESENTATIONS AND WARRANTIES                                               

5.1 The Acquiring Fund represents and warrants to Retirement Series, on   
behalf of Intermediate Income Securities, as follows:                           

   (a) The Acquiring Fund is a validly existing Massachusetts business trust
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;                                            

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   (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 Declaration of Trust 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 Intermediate
Income Securities), fairly present, in all materials 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 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 Intermediate Income Securities           
 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        

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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 Intermediate Income Securities,       
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;                        

(c) All of the issued and outstanding shares of beneficial interest of
  Intermediate Income Securities have been offered and sold in compliance in
all material respects with applicable requirements of the 1933 Act and  
state securities laws. Shares of Intermediate Income Securities 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 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;

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(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 Intermediate Income Securities 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, Intermediate  
  Income Securities' 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 Intermediate Income     
Securities (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 Intermediate Income Securities
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 Intermediate Income Securities' current     
Prospectus incorporated by reference in the Registration Statement.     
Intermediate Income Securities 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 of Intermediate
Income Securities' shareholders, this Agreement constitutes a valid and 
binding obligation of Retirement Series, 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        
Intermediate Income Securities;                                         

(k) All material federal and other tax returns and reports of         
Intermediate Income Securities 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 of Intermediate Income Securities' 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, Intermediate Income    
Securities 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 Intermediate Income Securities to continue to meet the       
requirements of Subchapter M of the Code;                               

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   (m) At the Closing Date, Retirement Series will have good and valid title
to the Intermediate Income Securities Assets, subject to no liens (other
than the obligation, if any, to pay the purchase price of portfolio     
securities purchased by Intermediate Income Securities 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 Intermediate Income Securities' 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 (the "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) Intermediate Income Securities 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) Intermediate Income Securities 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.      

6. CONDITIONS PRECEDENT TO OBLIGATIONS OF INTERMEDIATE                          
INCOME SECURITIES                                                         

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 Intermediate Income        
Securities 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;         

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6.3 Intermediate Income Securities 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 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) 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 Intermediate Income Securities, 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 Intermediate Income Securities    
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 (Massachusetts 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 Declaration of Trust 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 from those described in the Acquiring Fund's         
Prospectus and Statement of Additional Information dated August 31, 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:                                                                     

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;                                                             

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7.3 Retirement Series shall have delivered to the Acquiring Fund a        
statement of the Intermediate Income Securities Assets and its liabilities,     
together with a list of Intermediate Income Securities' 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 Intermediate Income Securities 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 materials 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 Intermediate Income Securities       
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 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 Intermediate Income Securities Assets shall  
include no assets that the Acquiring Fund, by reason of limitations of the      
fund's Declaration of Trust or otherwise, may not properly acquire.             

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8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND        
INTERMEDIATE INCOME SECURITIES                                            

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 Intermediate Income Securities 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             
Intermediate Income Securities;                                                 

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 Intermediate Income Securities 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 Intermediate Income Securities Shareholders all of          
Intermediate Income Securities' 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 Intermediate Income Securities, which opinion may be relied upon by the     
shareholders of Intermediate Income Securities, substantially to the effect     
that, for federal income tax purposes:                                          

  (a) The transfer of substantially all of Intermediate Income Securities'
  assets in exchange for the Acquiring Fund Shares and the assumption by the
Acquiring Fund of certain stated liabilities of Intermediate Income     
 Securities followed by the distribution by Intermediate Income Securities
of the Acquiring Fund Shares to the Intermediate Income Securities      
Shareholders in exchange for their Intermediate Income Securities shares
will constitute a "reorganization" within the meaning of Section        
368(a)(1)(C) of the Code, and Intermediate Income Securities and the    
Acquiring Fund will each be a "party to a reorganization" within the    
meaning of Section 368(b) of the Code;                                  

(b) No gain or loss will be recognized by the Acquiring Fund upon the 
  receipt of the assets of Intermediate Income Securities solely in exchange
 for the Acquiring Fund Shares and the assumption by the Acquiring Fund of
the stated liabilities of Intermediate Income Securities;               

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  (c) No gain or loss will be recognized by Intermediate Income Securities
upon the transfer of the assets of Intermediate Income Securities 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 Intermediate Income    
Securities Shareholders in exchange for their Intermediate Income       
Securities shares;                                                      

(d) No gain or loss will be recognized by the Intermediate Income     
Securities Shareholders upon the exchange of the Intermediate Income    
Securities shares for the Acquiring Fund Shares;                        

(e) The aggregate tax basis for the Acquiring Fund Shares received by 
each Intermediate Income Securities Shareholder pursuant to the         
reorganization will be the same as the aggregate tax basis of the       
Intermediate Income Securities Shares held by each such Intermediate    
Income Securities Shareholder immediately prior to the Reorganization;  

(f) The holding period of the Acquiring Fund Shares to be received by 
each Intermediate Income Securities Shareholder will include the period 
during which the Intermediate Income Securities Shares surrendered in   
 exchange therefor were held (provided such Intermediate Income Securities
Shares were held as capital assets on the date of the Reorganization);  

(g) The tax basis of the assets of Intermediate Income Securities     
acquired by the Acquiring Fund will be the same as the tax basis of such
assets to Intermediate Income Securities immediately prior to the       
Reorganization; and                                                     

   (h) The holding period of the assets of Intermediate Income Securities in
  the hands of the Acquiring Fund will include the period during which those
assets were held by Intermediate Income Securities.                     

Notwithstanding anything herein to the contrary, neither the Acquiring    
Fund nor Intermediate Income Securities 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 Intermediate Income Securities 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 Intermediate Income Securities' 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 complete liquidation of       
Intermediate Income Securities in accordance with Section 1.9.                  

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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  
Intermediate Income Securities, and the Acquiring Fund;                 

(b) by either the Acquiring Fund or Retirement Series, on behalf of   
 Intermediate Income Securities, 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   
Intermediate Income Securities, 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    
  Intermediate Income Securities 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 trustees 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 Intermediate Income Securities' 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 Intermediate Income Securities        
Shareholders under this Agreement to the detriment of such Intermediate         
Income Securities 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.                                              

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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 Intermediate      
Income Securities 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 INTERMEDIATE INCOME SECURITIES

                        By: /s/ Charles A. Fiumefreddo
                                  ..............................
                              Name: Charles A. Fiumefreddo
                 Title: Chairman

                        DEAN WITTER RETIREMENT SERIES,
                          on behalf of Intermediate Income
           Securities Series

            By: /s/ Barry Fink
                                  ..............................
                  Name: Barry Fink
                       Title: Vice President

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                                             Exhibit B
PROSPECTUS                                          
OCTOBER 28, 1997                                    

         Dean Witter Intermediate Income Securities (the "Fund") is an
open-end, diversified management investment company, whose investment objective 
is high current income consistent with safety of principal. The Fund seeks to   
achieve its investment objective by investing primarily in intermediate term,   
investment grade fixed-income securities. See "Investment Objective and         
Policies."                                                                      

            The Fund offers four classes of shares (each, a "Class"), each
with a different combination of sales charges, ongoing fees and other features. 
The different distribution arrangements permit an investor to choose the method 
of purchasing shares that the investor believes is most beneficial given the    
amount of the purchase, the length of time the investor expects to hold the     
shares and other relevant circumstances. See "Purchase of Fund                  
Shares--Alternative Purchase Arrangements."                                     

             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 28, 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 on this page. The
Statement of Additional Information is incorporated herein by reference.        

DEAN WITTER DISTRIBUTORS INC.                                         
DISTRIBUTOR                                                         

TABLE OF CONTENTS                                                   

Prospectus Summary/2                                                            
Summary of Fund Expenses/4                                                      
Financial Highlights/6                                                          
The Fund and its Management/9                                                   
Investment Objective and Policies/9                                             
Risk Considerations/13                                                      
Investment Restrictions/13                                                      
Purchase of Fund Shares/14                                                      
Shareholder Services/25                                                         
Redemptions and Repurchases/28                                                  
Dividends, Distributions and Taxes/29                                           
Performance Information/30                                                      
Additional Information/31                                                       

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 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.                                                               

Dean Witter                                                             
Intermediate Income Securities                                          
Two World Trade Center                                                  
New York, New York 10048                                                
(212) 392-2550 or                                                       
(800) 869-NEWS (Toll-Free)                                              

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PROSPECTUS SUMMARY                                                              
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                                                                      
The               The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is an       
Fund              open-end, diversified management investment company. The Fund invests primarily in intermediate     
                  term, investment grade fixed-income securities.                                                     
----------------------------------------------------------------------------------------------------------------------
Shares            Shares of beneficial interest with $0.01 par value (see page 31). The Fund offers four Classes of   
Offered           shares, each with a different combination of sales charges, ongoing fees and other features (see    
                  pages 14-25).                                                                                       
----------------------------------------------------------------------------------------------------------------------
Minimum           The minimum initial investment for each Class is $1,000 ($100 if the account is opened through      
Purchase          EasyInvest-SM-). Class D shares are only available to persons investing $5 million or more and to   
                  certain other limited categories of investors. For the purpose of meeting the minimum $5 million    
                  investment for Class D shares, and subject to the $1,000 minimum initial investment for each Class  
                  of the Fund, an investor's existing holdings of Class A shares and shares of funds for which Dean   
                  Witter InterCapital Inc. serves as investment manager ("Dean Witter Funds") that are sold with a    
                  front-end sales charge, and concurrent investments in Class D shares of the Fund and other Dean     
                  Witter Funds that are multiple class funds, will be aggregated. The minimum subsequent investment is
                  $100 (see page 14).                                                                                 
----------------------------------------------------------------------------------------------------------------------
Investment        The investment objective of the Fund is high current income consistent with safety of principal.    
Objective                                                                                                             
----------------------------------------------------------------------------------------------------------------------
Investment        Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of the Fund, and its wholly- 
Manager           owned subsidiary, Dean Witter Services Company Inc., serve in various investment management,        
                  advisory, management and administrative capacities to 100 investment companies and other portfolios 
                  with assets of approximately $102.4 billion at September 30, 1997 (see page 9).                     
----------------------------------------------------------------------------------------------------------------------
Management        The Investment Manager receives a monthly fee at the annual rate of 0.60% of daily net assets,      
Fee               scaled down on assets over $500 million (see page 9).                                               
----------------------------------------------------------------------------------------------------------------------
Distributor       Dean Witter Distributors Inc. (the "Distributor"). The Fund has adopted a distribution plan pursuant
and               to Rule 12b-1 under the Investment Company Act (the "12b-1 Plan") with respect to the distribution  
Distribution      fees paid by the Class A, Class B and Class C shares of the Fund to the Distributor. The entire     
Fee               12b-1 fee payable by Class A and a portion of the 12b-1 fee payable by each of Class B and Class C  
                  equal to 0.20% of the average daily net assets of Class B and 0.25% of the average daily net assets 
                  of Class C are currently each characterized as a service fee within the meaning of the National     
                  Association of Securities Dealers, Inc. guidelines. The remaining portion of the 12b-1 fee, if any, 
                  is characterized as an asset-based sales charge (see pages 14 and 23).                              
----------------------------------------------------------------------------------------------------------------------
Alternative       Four classes of shares are offered:                                                                 
Purchase                                                                                                              
Arrangements      - Class A shares are offered with a front-end sales charge, starting at 4.25% and reduced for larger
                  purchases. Investments of $1 million or more (and investments by certain other limited categories of
                  investors) are not subject to any sales charge at the time of purchase but a contingent deferred    
                  sales charge ("CDSC") of 1.0% may be imposed on redemptions within one year of purchase. The Fund is
                  authorized to reimburse the Distributor for specific expenses incurred in promoting the distribution
                  of the Fund's Class A shares and servicing shareholder accounts pursuant to the Fund's 12b-1 Plan.  
                  Reimbursement may in no event exceed an amount equal to payments at an annual rate of 0.25% of      
                  average daily net assets of the Class (see pages 14, 18 and 23).                                    
----------------------------------------------------------------------------------------------------------------------

                                       2                                                                              

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----------------------------------------------------------------------------------------------------------------------
                  - Class B shares are offered without a front-end sales charge, but will in most cases be subject to 
                  a CDSC (scaled down from 5.0% to 1.0%) if redeemed within six years after purchase. The CDSC will be
                  imposed on any redemption of shares if after such redemption the aggregate current value of a Class 
                  B account with the Fund falls below the aggregate amount of the investor's purchase payments made   
                  during the six years preceding the redemption. A different CDSC schedule applies to investments by  
                  certain qualified plans. Class B shares are also subject to a 12b-1 fee assessed at the annual rate 
                  of 0.85% of the lesser of: (a) the average daily net sales of the Fund's Class B shares or (b) the  
                  average daily net assets of Class B. All shares of the Fund held prior to July 28, 1997 (other than 
                  the shares held by certain employee benefit plans established by Dean Witter Reynolds Inc. and its  
                  affiliate, SPS Transaction Services, Inc.) have been designated Class B shares. Shares held by those
                  employee benefit plans prior to July 28, 1997 have been designated Class D shares. Shares held      
                  before May 1, 1997 that have been designated Class B shares will convert to Class A shares in May   
                  2007. In all other instances, Class B shares convert to Class A shares approximately ten years after
                  the date of the original purchase (see pages 14, 20 and 23).                                        

                  - Class C shares are offered without a front-end sales charge, but will in most cases be subject to 
                  a CDSC of 1.0% if redeemed within one year after purchase. The Fund is authorized to reimburse the  
                  Distributor for specific expenses incurred in promoting the distribution of the Fund's Class C      
                  shares and servicing shareholder accounts pursuant to the Fund's 12b-1 Plan. Reimbursement may in no
                  event exceed an amount equal to payments at an annual rate of 0.85% of average daily net assets of  
                  the Class (see pages 14, 22 and 23).                                                                

                  - Class D shares are offered only to investors meeting an initial investment minimum of $5 million  
                  and to certain other limited categories of investors. Class D shares are offered without a front-end
                  sales charge or CDSC and are not subject to any 12b-1 fee (see pages 14 and 23).                    
----------------------------------------------------------------------------------------------------------------------
Dividends         Dividends are declared daily, and either paid monthly in additional shares of the Fund or, at the   
and               shareholder's option, paid monthly in cash. Dividends from net short-term, mid-term and long- term  
Capital Gains     capital gains, if any, are distributed at least once each year. The Fund may, however, determine to 
Distributions     retain all or part of any net long-term and net mid-term capital gains in any year for reinvestment.
                  Dividends and capital gains distributions paid on shares of a Class are automatically reinvested in 
                  additional shares of the same Class at net asset value unless the shareholder elects to receive     
                  cash. Shares acquired by dividend and distribution reinvestment will not be subject to any sales    
                  charge or CDSC (see pages 25 and 29).                                                               
----------------------------------------------------------------------------------------------------------------------
Redemption        Shares are redeemable by the shareholder at net asset value less any applicable CDSC on Class A,    
                  Class B or Class C shares. An account may be involuntarily redeemed if the total value of the       
                  account is less than $100 or, if the account was opened through EasyInvest-SM-, if after twelve     
                  months the shareholder has invested less than $1,000 in the account (see page 28).                  
----------------------------------------------------------------------------------------------------------------------
Risk              The net asset value of the Fund's shares will fluctuate with changes in the market value of its     
Considerations    portfolio securities. Interest rate fluctuations will affect the Fund's net asset value but not the 
                  income received by the Fund from its portfolio securities. The Fund may engage in various investment
                  strategies including reverse repurchase agreements, when-issued and delayed delivery securities and 
                  forward commitments and when, as and if issued securities. The risks associated with these          
                  investments are included in their description (pages 9-13) and in the "Risk Considerations" section 
                  (page 13).                                                                                          
----------------------------------------------------------------------------------------------------------------------

THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE IN THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION. 

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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 based on  
the expenses and fees for the fiscal year ended August 31, 1997.                

                                                        [Enlarge/Download Table]

                                                                 CLASS A   CLASS B   CLASS C   CLASS D
                                                                 -------   -------   -------   -------
                                                                                                      
SHAREHOLDER TRANSACTION EXPENSES                                                                      
---------------------------------------------------------------                                       
Maximum Sales Charge Imposed on Purchases (as a percentage of                                         
  offering price)..............................................   4.25%(1)  None      None      None  
Sales Charge Imposed on Dividend Reinvestments.................   None      None      None      None  
Maximum Contingent Deferred Sales Charge (as a percentage of                                          
  original purchase price or redemption proceeds)..............   None(2)   5.00%(3)  1.00%(4)  None  
Redemption Fees................................................   None      None      None      None  
Exchange Fee...................................................   None      None      None      None  
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET                                        
  ASSETS)                                                                                             
---------------------------------------------------------------                                       
Management Fees................................................   0.60%     0.60%     0.60%     0.60% 
12b-1 Fees (5) (6).............................................   0.25%     0.85%     0.85%     None  
Other Expenses.................................................   0.20%     0.20%     0.20%     0.20% 
Total Fund Operating Expenses (7)..............................   1.05%     1.65%     1.65%     0.80% 

------------                                                                    
(1) REDUCED FOR PURCHASES OF $25,000 AND OVER (SEE "PURCHASE OF FUND            
SHARES--INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES").             
(2) INVESTMENTS THAT ARE NOT SUBJECT TO ANY SALES CHARGE AT THE TIME OF PURCHASE
ARE SUBJECT TO A CDSC OF 1.00% THAT WILL BE IMPOSED ON REDEMPTIONS MADE 
 WITHIN ONE YEAR AFTER PURCHASE, EXCEPT FOR CERTAIN SPECIFIC CIRCUMSTANCES
(SEE "PURCHASE OF FUND SHARES--INITIAL SALES CHARGE ALTERNATIVE--CLASS A
SHARES").                                                               
(3) THE CDSC IS SCALED DOWN TO 1.00% DURING THE SIXTH YEAR, REACHING ZERO       
THEREAFTER.                                                             
(4) ONLY APPLICABLE TO REDEMPTIONS MADE WITHIN ONE YEAR AFTER PURCHASE (SEE     
"PURCHASE OF FUND SHARES-- LEVEL LOAD ALTERNATIVE--CLASS C SHARES").    
(5) THE 12b-1 FEE IS ACCRUED DAILY AND PAYABLE MONTHLY. THE ENTIRE 12b-1 FEE    
    PAYABLE BY CLASS A AND A PORTION OF THE 12b-1 FEE PAYABLE BY EACH OF CLASS B
 AND CLASS C EQUAL TO 0.20% OF THE AVERAGE DAILY NET ASSETS OF CLASS B AND
0.25% OF THE AVERAGE DAILY NET ASSETS OF CLASS C ARE CURRENTLY EACH     
    CHARACTERIZED AS A SERVICE FEE WITHIN THE MEANING OF NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC. ("NASD") GUIDELINES AND ARE PAYMENTS MADE FOR  
  PERSONAL SERVICE AND/OR MAINTENANCE OF SHAREHOLDER ACCOUNTS. THE REMAINDER
OF THE 12b-1 FEE, IF ANY, IS AN ASSET-BASED SALES CHARGE, AND IS A      
  DISTRIBUTION FEE PAID TO THE DISTRIBUTOR TO COMPENSATE IT FOR THE SERVICES
PROVIDED AND THE EXPENSES BORNE BY THE DISTRIBUTOR AND OTHERS IN THE    
DISTRIBUTION OF THE FUND'S SHARES (SEE "PURCHASE OF FUND SHARES--PLAN OF
DISTRIBUTION").                                                         
(6) UPON CONVERSION OF CLASS B SHARES TO CLASS A SHARES, SUCH SHARES WILL BE    
    SUBJECT TO THE LOWER 12b-1 FEE APPLICABLE TO CLASS A SHARES. NO SALES CHARGE
 IS IMPOSED AT THE TIME OF CONVERSION OF CLASS B SHARES TO CLASS A SHARES.
   CLASS C SHARES DO NOT HAVE A CONVERSION FEATURE AND, THEREFORE, ARE SUBJECT
TO AN ONGOING 0.85% DISTRIBUTION FEE (SEE "PURCHASE OF FUND             
SHARES--ALTERNATIVE PURCHASE ARRANGEMENTS").                            
(7) THERE WERE NO OUTSTANDING SHARES OF CLASS A, CLASS C OR CLASS D PRIOR TO    
   JULY 28, 1997. ACCORDINGLY, "TOTAL FUND OPERATING EXPENSES," AS SHOWN ABOVE
WITH RESPECT TO THOSE CLASSES, ARE ESTIMATES BASED UPON THE SUM OF 12b-1
FEES, MANAGEMENT FEES AND ESTIMATED "OTHER EXPENSES."                   

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                                                        [Enlarge/Download Table]

EXAMPLES                                                                              1 YEAR       3 YEARS      5 YEARS  
----------------------------------------------------------------------------------  -----------  -----------  -----------
                                                                                                                         
You would pay the following expenses on a $1,000 investment assuming (1) a 5%                                            
annual return and (2) redemption at the end of each time period:                                                         
    Class A.......................................................................   $      53    $      74    $      98 
    Class B.......................................................................   $      67    $      82    $     110 
    Class C.......................................................................   $      27    $      52    $      90 
    Class D.......................................................................   $       8    $      26    $      44 

You would pay the following expenses on the same $1,000 investment assuming no                                           
redemption at the end of the period:                                                                                     
    Class A.......................................................................   $      53    $      74    $      98 
    Class B.......................................................................   $      17    $      52    $      90 
    Class C.......................................................................   $      17    $      52    $      90 
    Class D.......................................................................   $       8    $      26    $      44 

EXAMPLES                                                                             10 YEARS                            
----------------------------------------------------------------------------------  -----------                          

You would pay the following expenses on a $1,000 investment assuming (1) a 5%                                            
annual return and (2) redemption at the end of each time period:                                                         
    Class A.......................................................................   $     165                           
    Class B.......................................................................   $     195                           
    Class C.......................................................................   $     195                           
    Class D.......................................................................   $      99                           
You would pay the following expenses on the same $1,000 investment assuming no                                           
redemption at the end of the period:                                                                                     
    Class A.......................................................................   $     165                           
    Class B.......................................................................   $     195                           
    Class C.......................................................................   $     195                           
    Class D.......................................................................   $      99                           

THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR 
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF EACH CLASS 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--Plan of Distribution"  
and "Redemptions and Repurchases."                                              

    Long-term shareholders of Class B and Class C may pay more in sales charges,
including distribution fees, than the economic equivalent of the maximum        
front-end sales charges permitted by the NASD.                                  

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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 is contained 
in the Fund's Annual Report to Shareholders, which may be obtained without      
charge upon request to the Fund.                                                

                                                        [Enlarge/Download Table]

                                                                                                            FOR THE       
                                                                                                             PERIOD       
                                                                                                             MAY 3,       
                                                                                                             1989*        
                                               FOR THE YEAR ENDED AUGUST 31                                 THROUGH       
                  --------------------------------------------------------------------------------------   AUGUST 31,     
CLASS B SHARES    1997**++     1996       1995       1994       1993       1992       1991       1990         1989        
                  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------   ----------     
                                                                                                                          
PER SHARE OPERATING                                                                                                       
 PERFORMANCE:                                                                                                             
Net asset value,                                                                                                          
 beginning of                                                                                                             
 period.......... $    9.39  $    9.69  $    9.51  $   10.26  $   10.05  $    9.59  $    9.42  $    9.98   $   10.00      
                  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------   ----------     
Net investment                                                                                                            
 income..........      0.53       0.55       0.59       0.58       0.62       0.70       0.79       0.86        0.28      
Net realized and                                                                                                          
 unrealized gain                                                                                                          
 (loss)..........      0.20      (0.30)      0.19      (0.73)      0.20       0.46       0.17      (0.55)      (0.02)     
                  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------   ----------     
Total from                                                                                                                
 investment                                                                                                               
 operations......      0.73       0.25       0.78      (0.15)      0.82       1.16       0.96       0.31        0.26      
                  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------   ----------     
Less dividends and                                                                                                        
 distributions from:                                                                                                      
  Net investment                                                                                                          
   income........     (0.53)     (0.55)     (0.59)     (0.56)     (0.61)     (0.70)     (0.79)     (0.86)      (0.28)     
  Net realized                                                                                                            
   gain..........        --         --      (0.01)     (0.04)        --         --         --      (0.01)         --      
                  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------   ----------     
Total dividends                                                                                                           
 and                                                                                                                      
 distributions...     (0.53)     (0.55)     (0.60)     (0.60)     (0.61)     (0.70)     (0.79)     (0.87)      (0.28)     
                  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------   ----------     
Net asset value,                                                                                                          
 end of period... $    9.59  $    9.39  $    9.69  $    9.51  $   10.26  $   10.05  $    9.59  $    9.42   $    9.98      
                  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------   ----------     
                  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------   ----------     

TOTAL INVESTMENT                                                                                                          
 RETURN+.........     7.93%      2.58%      8.56%    (1.50)%      8.43%     12.58%     10.78%      3.22%       2.57%(1)   

RATIOS TO AVERAGE                                                                                                         
 NET ASSETS:                                                                                                              
Expenses.........     1.65%      1.62%      1.63%      1.63%      1.62%      1.69%      1.69%      1.75%       1.42%(2)(3)
Net investment                                                                                                            
 income..........     5.52%      5.69%      6.23%      5.80%      6.12%      7.11%      8.49%      8.78%       8.18%(2)(3)

SUPPLEMENTAL                                                                                                              
 DATA:                                                                                                                    
Net assets, end                                                                                                           
 of period, in                                                                                                            
 thousands.......  $162,959   $208,911   $232,752   $245,750   $254,431   $187,285   $115,204   $114,086     $69,946      
Portfolio                                                                                                                 
 turnover rate...       98%       115%       114%       122%       132%        93%       150%       135%         30%(1)   

-----------------                                                               

* COMMENCEMENT OF OPERATIONS.                                                 

** PRIOR TO JULY 28, 1997, THE FUND ISSUED ONE CLASS OF SHARES. ALL SHARES OF 
    THE FUND HELD PRIOR TO THAT DATE, OTHER THAN SHARES HELD BY CERTAIN EMPLOYEE
 BENEFIT PLANS ESTABLISHED BY DEAN WITTER REYNOLDS INC. AND ITS AFFILIATE,
SPS TRANSACTION SERVICES, INC., HAVE BEEN DESIGNATED AS CLASS B SHARES. 
    SHARES HELD BY THOSE EMPLOYEE BENEFIT PLANS PRIOR TO JULY 28, 1997 HAVE BEEN
DESIGNATED CLASS D SHARES.                                              

++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES      
OUTSTANDING DURING THE PERIOD.                                          

+  DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.                  

(1) NOT ANNUALIZED.                                                             

(2) ANNUALIZED.                                                                 

(3) IF THE FUND HAD BORNE ALL THE EXPENSES THAT WERE ASSUMED OR WAIVED BY THE   
    INVESTMENT MANAGER, THE ABOVE EXPENSE AND NET INVESTMENT INCOME RATIOS WOULD
HAVE BEEN 2.15% AND 7.44%, RESPECTIVELY.                                

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                                                               FOR THE PERIOD 
                                                               JULY 28, 1997* 
                                                                  THROUGH     
                                                                 AUGUST 31,   
CLASS A SHARES                                                     1997++     
                                                              ----------------
                                                                              
PER SHARE OPERATING PERFORMANCE:                                              
Net asset value, beginning of period........................      $  9.68     
                                                                   ------     
Net investment income.......................................         0.06     
Net realized and unrealized loss............................        (0.10)    
                                                                   ------     
Total from investment operations............................        (0.04)    
                                                                   ------     
Less dividends from net investment income...................        (0.05)    
                                                                   ------     
Net asset value, end of period..............................      $  9.59     
                                                                   ------     
                                                                   ------     
TOTAL INVESTMENT RETURN+....................................        (0.46)%(1)

RATIOS TO AVERAGE NET ASSETS:                                                 
Expenses....................................................         2.18%(2) 
Net investment income.......................................         6.10%(2) 

SUPPLEMENTAL DATA:                                                            
Net assets, end of period, in thousands.....................       $1,855     
Portfolio turnover rate.....................................           98%    

CLASS C SHARES                                                                
PER SHARE OPERATING PERFORMANCE:                                              
Net asset value, beginning of period........................      $  9.68     
                                                                   ------     
Net investment income.......................................         0.04     
Net realized and unrealized loss............................        (0.07)    
                                                                   ------     
Total from investment operations............................        (0.03)    
                                                                   ------     
Less dividends from net investment income...................        (0.04)    
                                                                   ------     
Net asset value, end of period..............................      $  9.61     
                                                                   ------     
                                                                   ------     
TOTAL INVESTMENT RETURN+....................................        (0.31)%(1)

RATIOS TO AVERAGE NET ASSETS:                                                 
Expenses....................................................         2.02%(2) 
Net investment income.......................................         4.22%(2) 

SUPPLEMENTAL DATA:                                                            
Net assets, end of period, in thousands.....................          $38     
Portfolio turnover rate.....................................           98%    

-------------                                                                   

*  THE DATE SHARES WERE FIRST ISSUED.                                         

++  THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES       
OUTSTANDING DURING THE PERIOD.                                          

+  DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.                  

(1) NOT ANNUALIZED.                                                             

(2) ANNUALIZED.                                                                 

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                                                               FOR THE PERIOD 
                                                               JULY 28, 1997* 
                                                                  THROUGH     
                                                                 AUGUST 31,   
CLASS D SHARES                                                     1997++     
                                                              ----------------
                                                                              
PER SHARE OPERATING PERFORMANCE:                                              
Net asset value, beginning of period........................      $  9.68     
                                                                   ------     
Net investment income.......................................         0.05     
Net realized and unrealized loss............................        (0.09)    
                                                                   ------     
Total from investment operations............................        (0.04)    
                                                                   ------     
Less dividends from net investment income...................        (0.05)    
                                                                   ------     
Net asset value, end of period..............................      $  9.59     
                                                                   ------     
                                                                   ------     
TOTAL INVESTMENT RETURN+....................................        (0.44)%(1)

RATIOS TO AVERAGE NET ASSETS:                                                 
Expenses....................................................         1.11%(2) 
Net investment income.......................................         5.91%(2) 

SUPPLEMENTAL DATA:                                                            
Net assets, end of period, in thousands.....................       $4,880     
Portfolio turnover rate.....................................           98%    

-------------                                                                   

* THE DATE SHARES WERE FIRST ISSUED.                                          

++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES        
OUTSTANDING DURING THE PERIOD.                                            

+ CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE  
PERIOD.                                                                   

(1) NOT ANNUALIZED.                                                             

(2) ANNUALIZED.                                                                 

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THE FUND AND ITS MANAGEMENT                                                     
--------------------------------------------------------------------------------

Dean Witter Intermediate Income Securities (the "Fund") is an open-end, 
diversified management investment company. 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 September 1, 1988.                 

    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 at September 30, 1997. The Investment Manager also manages        
portfolios of pension plans, other institutions and individuals which aggregated
approximately $3.8 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      
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 0.60% to the Fund's daily net assets up to $500 million, scaled  
down at various levels to 0.30% on assets over $1 billion. For the fiscal year  
ended August 31, 1997, the Fund accrued total compensation to the Investment    
Manager amounting to 0.60% of the Fund's average daily net assets and the total 
expenses of Class B amounted to 1.65% of the average daily net assets of Class  
B. Shares of Class A, Class C and Class D were first issued on July 28, 1997.   
The expenses of the Fund include: the fee of the Investment Manager; the fee    
pursuant to the Plan of Distribution (see "Purchase of Fund Shares"); taxes;    
transfer agent, custodian and auditing fees; certain legal fees; and printing   
and other expenses relating to the Fund's operations which are not expressly    
assumed by the Investment Manager under its Investment Management Agreement with
the Fund.                                                                       

INVESTMENT OBJECTIVE AND POLICIES                                               
--------------------------------------------------------------------------------

   The investment objective of the Fund is high current income consistent with
safety of principal. There is no assurance that the objective will be achieved. 
This investment objective is a fundamental policy and may not be changed without
approval of the Fund's shareholders. The Fund seeks to achieve its objective by 
investing at least 65% of its total assets in intermediate term, investment     
grade fixed-income securities. The Fund will maintain an average 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 Fund's average weighted maturity will not be less than three years.         

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(Under the current interpretation by the staff of the Securities and Exchange   
Commission, an intermediate bond fund must have an average weighted maturity    
between three and ten years.)                                                   

    Under normal circumstances, the Fund 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     
("Standard & Poor's"), or which, if unrated, are deemed to be of comparable     
quality by the Fund's Trustees. Fixed-income securities rated Baa by Moody's    
have speculative characteristics. (A more detailed description of bond ratings  
is contained in the Appendix to the Statement of Additional Information.) The   
Fund 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 Fund 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 Fund will be achieved.                                                      

The Investment Manager believes that the Fund's policies of purchasing  
intermediate term securities will reduce the volatility of the Fund's 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 Fund 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. Those risks include the       
political or economic instability of the issuer or of the country of issue, the 
difficulty of predicting international trade patterns and the possibility of    
imposition of exchange controls. In addition, there may be less publicly        
available information about a foreign company than about a domestic company. A  
more detailed description of the general risks of foreign issuers is contained  
in the Statement of Additional Information. The Fund believes that those risks  
are substantially lessened because the foreign securities in which the Fund may 
invest are investment grade.                                                    

While the Fund will invest primarily in investment grade fixed-income   
securities, under ordinary circumstances it also may invest up to 35% of its    
total assets in money market instruments, repurchase agreements, as discussed   
below, and up to 5% of the Fund's net assets may be invested in lower rated     
fixed-income securities.                                                        

  Lower rated fixed-income securities, which are those rated from Ba to C or
BB to C by Moody's or Standard & Poor's, respectively, are considered to be     
speculative investments. Such lower rated securities, while producing higher    
yield than investment grade securities, are subject to credit risk to a greater 
extent than investment grade securities. The Fund 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 Fund's securities     
holdings. During such periods, the Fund may adopt a temporary "defensive"       
posture in which greater than 35% of its total assets are invested in cash or   
money market instruments.                                                       

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Money market instruments in which the Fund 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 Standard & Poor's or Aa by Moody's.                  

   ZERO COUPON SECURITIES.  A portion of the fixed-income securities purchased
by the Fund 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 the Fund 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 the Fund) of a zero coupon security accrue a    
portion of the discount at which the security was purchased as income each year 
even though the Fund receives no interest payments in cash on the security      
during the year.                                                                

    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 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 Fund may also use reverse repurchase
agreements for purposes of meeting redemptions or 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. 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 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 Fund. The use of borrowed funds for 
other than emergency purposes                                                   

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constitutes leveraging, which is a speculative technique. Reverse repurchase    
agreements may not exceed 10% of the Fund's total assets.                       

  WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS.  From
time to time, in the ordinary course of business, 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 at the time of the commitment, but delivery and payment can  
take place a month or more after the date of the commitment. There is no overall
limit on the percentage of the Fund's assets which may be committed to the      
purchase of securities on a when-issued, delayed delivery or forward commitment 
basis. An increase in the percentage of the Fund's assets committed to the      
purchase of securities on a when-issued, delayed delivery or forward commitment 
basis may increase the volatility of the Fund's net asset value.                

 WHEN, AS AND IF ISSUED SECURITIES.  The Fund 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. If the        
anticipated event does not occur and the securities are not issued, the Fund    
will have lost an investment opportunity. There is no overall limit on the      
percentage of the Fund's assets which may be committed to the purchase of       
securities on a "when, as and if issued" basis. An increase in the percentage of
the Fund's assets committed to the purchase of securities on a "when, as and if 
issued" basis may increase the volatility of its net asset value.               

PRIVATE PLACEMENTS.  The Fund may invest up to 5% of its total assets in
securities which are subject to restrictions on resale because they have not    
been registered under the Securities Act of 1933, as amended (the "Securities   
Act"), or which are otherwise not readily marketable. (Securities eligible for  
resale pursuant to Rule 144A under the Securities Act, and determined to be     
liquid pursuant to the procedures discussed in the following paragraph, are not 
subject to the foregoing restriction.) These securities are generally referred  
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 Fund from disposing of them promptly at reasonable prices. The Fund 
may have to bear the expense of registering such securities for resale and the  
risk of substantial delays in effecting such registration.                      

The Securities and Exchange Commission has adopted Rule 144A under the  
Securities Act, which permits the Fund to sell restricted securities to         
qualified institutional buyers without limitation. The Investment Manager,      
pursuant to procedures adopted by the Trustees of the Fund, will make a         
determination as to the liquidity of each restricted security purchased by the  
Fund. If a restricted security is determined to be "liquid," such security will 
not be included within the category "illiquid securities," which is limited by  
the Fund's investment restrictions to 10% of the Fund's total assets. Investing 
in Rule 144A securities could have the effect of increasing the level of Fund   
illiquidity to the extent the Fund, at a particular point in time, may be unable
to find qualified institutional buyers interested in purchasing such securities.

LENDING OF PORTFOLIO SECURITIES.  Consistent with applicable regulatory 
requirements, 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 Fund (subject to certain notice provisions described in the Statement of 
Additional Information), and are at all times secured by cash or cash           
equivalents, which are maintained in a segregated account pursuant to applicable
regulations and that are at least equal to the market value, determined daily,  
of the loaned securities.                                                       

PORTFOLIO MANAGEMENT                                                            

 The Fund's portfolio is actively managed by its Investment Manager with a
view to achieving the Fund's investment objective. In determining which         
securities to purchase for the Fund or hold in the                              

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Fund's portfolio, 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. The Fund's portfolio is managed within InterCapital's Taxable   
Income Group, which manages twenty-four funds and fund portfolios, with         
approximately $13.1 billion in assets as of September 30, 1997. Rochelle G.     
Siegel, Senior Vice President of InterCapital and a member of InterCapital's    
Taxable Group, has been the primary portfolio manager since the Fund's inception
and has been a portfolio manager at InterCapital since July, 1985.              

    Orders for transactions in portfolio securities are placed for the Fund with
a number of brokers and dealers, including Dean Witter Reynolds Inc. ("DWR") and
other brokers and dealers that are affiliates of InterCapital. 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 and other 
affiliated broker dealers. It is not anticipated that the portfolio trading will
result in the Fund's portfolio turnover rate exceeding 200%. A more extensive   
discussion of the Fund's portfolio brokerage policies is set forth in the       
Statement of Additional Information. Except as specifically noted, all          
investment objectives, policies and practices discussed above are not           
fundamental policies of the Fund and, as such, may be changed without           
shareholder approval.                                                           

RISK CONSIDERATIONS                                                             

    An increase in prevailing levels of interest rates will generally reduce the
value of securities in the Fund's portfolio, while a decline in rates will      
generally increase the value of these securities. As a result, the fluctuations 
or changes in interest rates will cause the Fund's net asset value to rise and  
fall, in an inverse relationship; however, the income received by the Fund from 
its portfolio securities will not be affected. Because yields on debt securities
available for purchase by a Fund vary over time, no specific yield on shares of 
the Fund can be assured. In addition, if the bonds in the Fund's portfolio      
contain call, prepayment or redemption provisions, during a period of declining 
interest rates, these securities are likely to be redeemed, and the Fund will   
probably be unable to replace them with securities having an equal yield.       

 For additional risk disclosure, please refer to the "Investment Objective
and Policies" section of the Prospectus and to the "Investment Practices and    
Policies" section in the Statement of Additional Information.                   

INVESTMENT RESTRICTIONS                                                         
--------------------------------------------------------------------------------

 The investment restrictions listed below are among the restrictions which
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.                     

The Fund may not:                                                       

  1. 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. Purchase more than 10% of all outstanding voting securities or any class
of securities of any one issuer.                                                

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3. 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 10% of its total assets in "illiquid securities"      
(securities for which market quotations are not readily available) and          
repurchase agreements which have a maturity of longer than seven days.          

5. 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.                                                              

  6. Borrow money, except that the Fund may borrow from banks for temporary or
emergency purposes in an amount up to 5% (taken at the lower of cost or current 
value) of its total assets (not including the amount borrowed), and may enter   
into reverse repurchase agreements in an amount not exceeding 10% of the Fund's 
total assets.                                                                   

Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective by investing all or substantially all  
of its assets in another investment company having substantially the same       
investment objective and policies as the Fund.                                  

PURCHASE OF FUND SHARES                                                         
--------------------------------------------------------------------------------

GENERAL                                                                         

The Fund offers each class of its shares for sale to the public on a    
continuous basis. 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 Fund offers four classes of shares (each, a "Class"). Class A shares are
sold to investors with an initial sales charge that declines to zero for larger 
purchases; however, Class A shares sold without an initial sales charge are     
subject to a contingent deferred sales charge ("CDSC") of 1.0% if redeemed      
within one year of purchase, except for certain specific circumstances. Class B 
shares are sold without an initial sales charge but are subject to a CDSC       
(scaled down from 5.0% to 1.0%) payable upon most redemptions within six years  
after purchase. (Class B shares purchased by certain qualified                  
employer-sponsored benefit plans are subject to a CDSC scaled down from 2.0% to 
1.0% if redeemed within three years after purchase.) Class C shares are sold    
without an initial sales charge but are subject to a CDSC of 1.0% on most       
redemptions made within one year after purchase. Class D shares are sold without
an initial sales charge or CDSC and are available only to investors meeting an  
initial investment minimum of $5 million, and to certain other limited          
categories of investors. At the discretion of the Board of Trustees of the Fund,
Class A shares may be sold to categories of investors in addition to those set  
forth in this prospectus at net asset value without a front-end sales charge,   
and Class D shares may be sold to certain other categories of investors, in each
case as may be described in the then current prospectus of the Fund. See        
"Alternative Purchase Arrangements--Selecting a Particular Class" for a         
discussion of factors to consider in selecting which Class of shares to         
purchase.                                                                       

 The minimum initial purchase is $1,000 for each Class of shares, although
Class D shares are only available to persons investing $5 million or more and to
certain other limited categories of investors. For the purpose of meeting the   
minimum $5 million initial investment for Class D shares, and subject to the    
$1,000 minimum initial investment for each Class of the Fund, an investor's     
existing holdings of                                                            

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Class A shares of the Fund and other Dean Witter Funds that are multiple class  
funds ("Dean Witter Multi-Class Funds") and shares of Dean Witter Funds sold    
with a front-end sales charge ("FSC Funds") and concurrent investments in Class 
D shares of the Fund and other Dean Witter Multi-Class Funds will be aggregated.
Subsequent purchases of $100 or more may be made by sending a check, payable to 
Dean Witter Intermediate Income Securities, directly to Dean Witter Trust FSB   
(the "Transfer Agent" or "DWT") at P.O. Box 1040, Jersey City, NJ 07303 or by   
contacting an account executive of DWR or other Selected Broker-Dealer. When    
purchasing shares of the Fund, investors must specify whether the purchase is   
for Class A, Class B, Class C or Class D shares. If no Class is specified, the  
Transfer Agent will not process the transaction until the proper Class is       
identified. The minimum initial purchase in the case of investments through     
EasyInvest-SM-, an automatic purchase plan (see "Shareholder Services") , is    
$100, provided that the schedule of automatic investments will result in        
investments totalling at least $1,000 within the first twelve months. 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. In the 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 $1,000. Certificates
for shares purchased will not be issued unless a request is made by the         
shareholder in writing to the Transfer Agent.                                   

Shares of the Fund 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. Shares of the 
Fund purchased through the Distributor are entitled to dividends beginning on   
the next business day following settlement date. Since DWR and other Selected   
Broker-Dealers forward investors' funds on settlement date, they will benefit   
from the temporary use of the funds where payment is made prior thereto. Shares 
purchased through the Transfer Agent are entitled to dividends beginning on the 
next business day following receipt of an order. As noted above, orders placed  
directly with the Transfer Agent must be accompanied by payment. Investors will 
be entitled to receive capital gains distributions if their order is received by
the close of business on the day prior to the record date for such              
distributions. Sales personnel of a Selected Broker-Dealer are compensated for  
selling shares of the Fund at the time of their sale 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. The Fund and the Distributor reserve the     
right to reject any purchase orders.                                            

ALTERNATIVE PURCHASE ARRANGEMENTS                                               

  The Fund offers several Classes of shares to investors designed to provide
them with the flexibility of selecting an investment best suited to their needs.
The general public is offered three Classes of shares: Class A shares, Class B  
shares and Class C shares, which differ principally in terms of sales charges   
and rate of expenses to which they are subject. A fourth Class of shares, Class 
D shares, is offered only to limited categories of investors (see "No Load      
Alternative--Class D Shares" below).                                            

 Each Class A, Class B, Class C or Class D share of the Fund represents an
identical interest in                                                           

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the investment portfolio of the Fund except that Class A, Class B and Class C   
shares bear the expenses of the ongoing shareholder service fees, Class B and   
Class C shares bear the expenses of the ongoing distribution fees and Class A,  
Class B and Class C shares which are redeemed subject to a CDSC bear the expense
of the additional incremental distribution costs resulting from the CDSC        
applicable to shares of those Classes. The ongoing distribution fees that are   
imposed on Class A, Class B and Class C shares will be imposed directly against 
those Classes and not against all assets of the Fund and, accordingly, such     
charges against one Class will not affect the net asset value of any other Class
or have any impact on investors choosing another sales charge option. See "Plan 
of Distribution" and "Redemptions and Repurchases."                             

   Set forth below is a summary of the differences between the Classes and the
factors an investor should consider when selecting a particular Class. This     
summary is qualified in its entirety by detailed discussion of each Class that  
follows this summary.                                                           

   CLASS A SHARES.  Class A shares are sold at net asset value plus an initial
sales charge of up to 4.25%. The initial sales charge is reduced for certain    
purchases. Investments of $1 million or more (and investments by certain other  
limited categories of investors) are not subject to any sales charges at the    
time of purchase but are subject to a CDSC of 1.0% on redemptions made within   
one year after purchase, except for certain specific circumstances. Class A     
shares are also subject to a 12b-1 fee of up to 0.25% of the average daily net  
assets of the Class. See "Initial Sales Charge Alternative--Class A Shares."    

CLASS B SHARES.  Class B shares are offered at net asset value with no  
initial sales charge but are subject to a CDSC (scaled down from 5.0% to 1.0%)  
if redeemed within six years of purchase. (Class B shares purchased by certain  
qualified employer-sponsored benefit plans are subject to a CDSC scaled down    
from 2.0% to 1.0% if redeemed within three years after purchase.) This CDSC may 
be waived for certain redemptions. Class B shares are also subject to an annual 
12b-1 fee of 0.85% of the lesser of: (a) the average daily aggregate gross sales
of the Fund's Class B shares since the inception of the Fund (not including     
reinvestments of dividends or capital gains distributions), less the average    
daily aggregate net asset value of the Fund's Class B shares redeemed since the 
Fund's inception upon which a CDSC has been imposed or waived, or (b) the       
average daily net assets of Class B. The Class B shares' distribution fee will  
cause that Class to have higher expenses and pay lower dividends than Class A or
Class D shares.                                                                 

After approximately ten (10) years, Class B shares will convert         
automatically to Class A shares of the Fund, based on the relative net asset    
values of the shares of the two Classes on the conversion date. In addition, a  
certain portion of Class B shares that have been acquired through the           
reinvestment of dividends and distributions will be converted at that time. See 
"Contingent Deferred Sales Charge Alternative--Class B Shares."                 

   CLASS C SHARES.  Class C shares are sold at net asset value with no initial
sales charge but are subject to a CDSC of 1.0% on redemptions made within one   
year after purchase. This CDSC may be waived for certain redemptions. They are  
subject to an annual 12b-1 fee of up to 0.85% of the average daily net assets of
the Class C shares. The Class C shares' distribution fee may cause that Class to
have higher expenses and pay lower dividends than Class A or Class D shares. See
"Level Load Alternative--Class C Shares."                                       

   CLASS D SHARES.  Class D shares are available only to limited categories of
investors (see "No Load Alternative--Class D Shares" below). Class D shares are 
sold at net asset value with no initial sales charge or CDSC. They are not      
subject to any 12b-1 fees. See "No Load Alternative--Class D Shares."           

SELECTING A PARTICULAR CLASS.  In deciding which Class of Fund shares to
purchase, investors should consider the following factors, as well as any other 
relevant facts and circumstances:                                               

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  The decision as to which Class of shares is more beneficial to an investor
depends on the amount and intended length of his or her investment. Investors   
who prefer an initial sales charge alternative may elect to purchase Class A    
shares. Investors qualifying for significantly reduced or, in the case of       
purchases of $1 million or more, no initial sales charges may find Class A      
shares particularly attractive because similar sales charge reductions are not  
available with respect to Class B or Class C shares. Moreover, Class A shares   
are subject to lower ongoing expenses than are Class B or Class C shares over   
the term of the investment. As an alternative, Class B and Class C shares are   
sold without any initial sales charge so the entire purchase price is           
immediately invested in the Fund. Any investment return on these additional     
investment amounts may partially or wholly offset the higher annual expenses of 
these Classes. Because the Fund's future return cannot be predicted, however,   
there can be no assurance that this would be the case.                          

Finally, investors should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of their own investment time    
frame. For example, although Class C shares are subject to a significantly lower
CDSC upon redemptions, they do not, unlike Class B shares, convert into Class A 
shares after approximately ten years, and, therefore, are subject to an ongoing 
12b-1 fee of 0.85% (rather than the 0.25% fee applicable to Class A shares) for 
an indefinite period of time. Thus, Class B shares may be more attractive than  
Class C shares to investors with longer term investment outlooks. Other         
investors, however, may elect to purchase Class C shares if, for example, they  
determine that they do not wish to be subject to a front-end sales charge and   
they are uncertain as to the length of time they intend to hold their shares.   

For the purpose of meeting the $5 million minimum investment amount for 
Class D shares, holdings of Class A shares in all Dean Witter Multi-Class Funds,
shares of FSC Funds and shares of Dean Witter Funds for which such shares have  
been exchanged will be included together with the current investment amount.    

    Sales personnel may receive different compensation for selling each Class of
shares. Investors should understand that the purpose of a CDSC is the same as   
that of the initial sales charge in that the sales charges applicable to each   
Class provide for the financing of the distribution of shares of that Class.    

Set forth below is a chart comparing the sales charge, 12b-1 fees and   
conversion options applicable to each Class of shares:                          

              CONVERSION
CLASS     SALES CHARGE     12b-1 FEE      FEATURE                           
-----------------------------------------------------------                     
A      Maximum 4.25%         0.25%        No                            
initial sales                                             
charge reduced                                            
for purchases                                             
of $25,000 and                                            
over; shares                                              
sold without an                                           
initial sales                                             
charge                                                    
generally                                                 
subject to a                                              
1.0% CDSC                                                 
during first                                              
year.                                                     
-----------------------------------------------------------                     
B      Maximum 5.0%        0.85%     B shares                           
CDSC during the               convert to A                
first year                    shares                      
decreasing to 0               automatically               
after six years               after                       
               approximately
           ten years
-----------------------------------------------------------                     
C      1.0% CDSC           0.85%          No                            
during first                                              
year                                                      
-----------------------------------------------------------                     
D           None           None           No                            

See "Purchase of Fund Shares" and "The Fund and its Management" for a   
complete description of the sales charges and service and distribution fees for 
each Class of shares and "Determination of Net Asset Value," "Dividends,        
Distributions and Taxes" and "Shareholder Services--Exchange Privilege" for     
other differences between the Classes of shares.                                

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INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES                                

   Class A shares are sold at net asset value plus an initial sales charge. In
some cases, reduced sales charges may be available, as described below.         
Investments of $1 million or more (and investments by certain other limited     
categories of investors) are not subject to any sales charges at the time of    
purchase but are subject to a CDSC of 1.0% on redemptions made within one year  
after purchase (calculated from the last day of the month in which the shares   
were purchased), except for certain specific circumstances. The CDSC will be    
assessed on an amount equal to the lesser of the current market value or the    
cost of the shares being redeemed. The CDSC will not be imposed (i) in the      
circumstances set forth below in the section "Contingent Deferred Sales Charge  
Alternative--Class B Shares--CDSC Waivers," except that the references to six   
years in the first paragraph of that section shall mean one year in the case of 
Class A shares, and (ii) in the circumstances identified in the section         
"Additional Net Asset Value Purchase Options" below. Class A shares are also    
subject to an annual 12b-1 fee of up to 0.25% of the average daily net assets of
the Class.                                                                      

  The offering price of Class A shares will be the net asset value per share
next determined following receipt of an order (see "Determination of Net Asset  
Value" below), plus a sales charge (expressed as a percentage of the offering   
price) on a single transaction as shown in the following table:                 

                SALES CHARGE
                ------------------------------------------
              PERCENTAGE OF          APPROXIMATE
AMOUNT OF SINGLE         PUBLIC OFFERING    PERCENTAGE OF AMOUNT        
TRANSACTION                PRICE               INVESTED           
-------------------------  -------------------  ---------------------           

Less than $25,000........           4.25%                 4.44%                 
$25,000 but less                                                                
than $50,000........           4.00%                 4.17%            
$50,000 but less                                                                
than $100,000.......           3.50%                 3.63%            
$100,000 but less                                                               
than $250,000.......           2.75%                 2.83%            
$250,000 but less                                                               
than $1 million.....           1.75%                 1.78%            
$1 million and over......              0                     0                  

  Upon notice to all Selected Broker-Dealers, the Distributor may reallow up
to the full applicable sales charge as shown in the above schedule during       
periods specified in such notice. During periods when 90% or more of the sales  
charge is reallowed, such Selected Broker-Dealers may be deemed to be           
underwriters as that term is defined in the Securities Act of 1933.             

  The above schedule of sales charges is applicable to purchases in a single
transaction by, among others: (a) an individual; (b) an individual, his or her  
spouse and their children under the age of 21 purchasing shares for his, her or 
their own accounts; (c) a trustee or other fiduciary purchasing shares for a    
single trust estate or a single fiduciary account; (d) a pension, profit-sharing
or other employee benefit plan qualified or non-qualified under Section 401 of  
the Internal Revenue Code; (e) tax-exempt organizations enumerated in Section   
501(c)(3) or (13) of the Internal Revenue Code; (f) employee benefit plans      
qualified under Section 401 of the Internal Revenue Code of a single employer or
of employers who are "affiliated persons" of each other within the meaning of   
Section 2(a)(3)(c) of the Act; and for investments in Individual Retirement     
Accounts of employees of a single employer through Systematic Payroll Deduction 
plans; or (g) any other organized group of persons, whether incorporated or not,
provided the organization has been in existence for at least six months and has 
some purpose other than the purchase of redeemable securities of a registered   
investment company at a discount.                                               

COMBINED PURCHASE PRIVILEGE.  Investors may have the benefit of reduced 
sales charges in accordance with the above schedule by combining purchases of   
Class A shares of the Fund in single transactions with the purchase of Class A  
shares of other Dean Witter Multi-Class Funds and shares of FSC Funds. The sales
charge payable on the purchase of the Class A shares of the Fund, the Class A   
shares of the other Dean Witter Multi-Class Funds and the shares of the FSC     
Funds will be at their                                                          

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respective rates applicable to the total amount of the combined concurrent      
purchases of such shares.                                                       

 RIGHT OF ACCUMULATION.  The above persons and entities may benefit from a
reduction of the sales charges in accordance with the above schedule if the     
cumulative net asset value of Class A shares purchased in a single transaction, 
together with shares of the Fund and other Dean Witter Funds previously         
purchased at a price including a front-end sales charge (including shares of the
Fund and other Dean Witter Funds acquired in exchange for those shares, and     
including in each case shares acquired through reinvestment of dividends and    
distributions), which are held at the time of such transaction, amounts to      
$25,000 or more. If such investor has a cumulative net asset value of shares of 
FSC Funds and Class A and Class D shares equal to at least $5 million, such     
investor is eligible to purchase Class D shares subject to the $1,000 minimum   
initial investment requirement of that Class of the Fund. See "No Load          
Alternative-- Class D Shares" below.                                            

  The Distributor must be notified by DWR or a Selected Broker-Dealer or the
shareholder at the time a purchase order is placed that the purchase qualifies  
for the reduced charge under the Right of Accumulation. Similar notification    
must be made in writing by the dealer or shareholder when such an order is      
placed by mail. The reduced sales charge will not be granted if: (a) such       
notification is not furnished at the time of the order; or (b) a review of the  
records of the Selected Broker-Dealer or the Transfer Agent fails to confirm the
investor's represented holdings.                                                

    LETTER OF INTENT.  The foregoing schedule of reduced sales charges will also
be available to investors who enter into a written Letter of Intent providing   
for the purchase, within a thirteen-month period, of Class A shares of the Fund 
from DWR or other Selected Broker-Dealers. The cost of Class A shares of the    
Fund or shares of other Dean Witter Funds which were previously purchased at a  
price including a front-end sales charge during the 90-day period prior to the  
date of receipt by the Distributor of the Letter of Intent, or of Class A shares
of the Fund or shares of other Dean Witter Funds acquired in exchange for shares
of such funds purchased during such period at a price including a front-end     
sales charge, which are still owned by the shareholder, may also be included in 
determining the applicable reduction.                                           

  ADDITIONAL NET ASSET VALUE PURCHASE OPTIONS. In addition to investments of
$1 million or more, Class A shares also may be purchased at net asset value by  
the following:                                                                  

(1) trusts for which DWT (an affiliate of the Investment Manager) provides
discretionary trustee services;                                                 

   (2) persons participating in a fee-based program approved by the Distributor,
pursuant to which such persons pay an asset based fee for services in the nature
of investment advisory or administrative services (such investments are subject 
to all of the terms and conditions of such programs, which may include          
termination fees, mandatory redemption upon termination and such other          
circumstances as specified in the programs' agreements, and restrictions on     
transferability of Fund shares);                                                

 (3) retirement plans qualified under Section 401(k) of the Internal Revenue
Code ("401(k) plans") and other employer-sponsored plans qualified under Section
401(a) of the Internal Revenue Code with at least 200 eligible employees and for
which DWT serves as Trustee or the 401(k) Support Services Group of DWR serves  
as recordkeeper;                                                                

   (4) 401(k) plans and other employer-sponsored plans qualified under Section
401(a) of the Internal Revenue Code for which DWT serves as Trustee or the      
401(k) Support Services Group of DWR serves as recordkeeper whose Class B shares
have converted to Class A shares, regardless of the plan's asset size or number 
of eligible employees;                                                          

   (5) investors who are clients of a Dean Witter account executive who joined
Dean Witter from another investment firm within six months prior to             

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the date of purchase of Fund shares by such investors, if the shares are being  
purchased with the proceeds from a redemption of shares of an open-end          
proprietary mutual fund of the account executive's previous firm which imposed  
either a front-end or deferred sales charge, provided such purchase was made    
within sixty days after the redemption and the proceeds of the redemption had   
been maintained in the interim in cash or a money market fund; and              

(6) other categories of investors, at the discretion of the Board, as     
disclosed in the then current prospectus of the Fund.                           

No CDSC will be imposed on redemptions of shares purchased pursuant to  
paragraphs (1), (2) or (5), above.                                              

  For further information concerning purchases of the Fund's shares, contact
DWR or another Selected Broker-Dealer or consult the Statement of Additional    
Information.                                                                    

CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--                                  
CLASS B SHARES                                                                  

Class B shares are sold at net asset value next determined without an   
initial sales charge so that the full amount of an investor's purchase payment  
may be immediately invested in the Fund. A CDSC, however, will be imposed on    
most Class B shares redeemed within six years after purchase. The CDSC will be  
imposed on any redemption of shares if after such redemption the aggregate      
current value of a Class B account with the Fund falls below the aggregate      
amount of the investor's purchase payments for Class B shares made during the   
six years (or, in the case of shares held by certain employer-sponsored benefit 
plans, three years) preceding the redemption. In addition, Class B shares are   
subject to an annual 12b-1 fee of 0.85% of the lesser of: (a) the average daily 
aggregate gross sales of the Fund's Class B shares since the inception of the   
Fund (not including reinvestments of dividends or capital gains distributions), 
less the average daily aggregate net asset value of the Fund's Class B shares   
redeemed since the Fund's inception upon which a CDSC has been imposed or       
waived, or (b) the average daily net assets of Class B.                         

Except as noted below, Class B shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in which
the shares were purchased) will not be subject to any CDSC upon redemption.     
Shares redeemed earlier than six years after purchase may, however, be subject  
to a CDSC which will be a percentage of the dollar amount of shares redeemed and
will be assessed on an amount equal to the lesser of the current market value or
the cost of the shares being redeemed. The size of this percentage will depend  
upon how long the shares have been held, as set forth in the following table:   

YEAR SINCE                     CDSC AS A                  
PURCHASE                    PERCENTAGE OF               
PAYMENT MADE                 AMOUNT REDEEMED                
---------------------------------  -----------------------                      

First............................              5.0%                             
Second...........................              4.0%                             
Third............................              3.0%                             
Fourth...........................              2.0%                             
Fifth............................              2.0%                             
Sixth............................              1.0%                             
Seventh and thereafter...........              None                             

In the case of Class B shares of the Fund held by 401 (k) plans or other
employer-sponsored plans qualified under Section 401(a) of the Internal Revenue 
Code for which DWT serves as Trustee or the 401(k) Support Services Group of DWR
serves as recordkeeper and whose accounts are opened on or after July 28, 1997, 
shares held for three years or more after purchase (calculated as described in  
the paragraph above) will not be subject to any CDSC upon redemption. However,  
shares redeemed earlier than three years after purchase may be subject to a CDSC
(calculated as described in the paragraph above), the percentage of which will  
depend                                                                          

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on how long the shares have been held, as set forth in the following table:     

YEAR SINCE                                                
PURCHASE               CDSC AS A PERCENTAGE OF          
PAYMENT MADE                 AMOUNT REDEEMED                
---------------------------------  -----------------------                      

First............................              2.0%                             
Second...........................              2.0%                             
Third............................              1.0%                             
Fourth and thereafter............              None                             

CDSC WAIVERS.  A CDSC will not be imposed on: (i) any amount which      
represents an increase in value of shares purchased within the six years (or, in
the case of shares held by certain employer-sponsored benefit plans, three      
years) preceding the redemption; (ii) the current net asset value of shares     
purchased more than six years (or, in the case of shares held by certain        
employer-sponsored benefit plans, three years) prior to the redemption; and     
(iii) the current net asset value of shares purchased through reinvestment of   
dividends or distributions and/or shares acquired in exchange for shares of FSC 
Funds or of other Dean Witter Funds acquired in exchange for such shares.       
Moreover, in determining whether a CDSC is applicable it will be assumed that   
amounts described in (i), (ii) and (iii) above (in that order) are redeemed     
first.                                                                          

  In addition, the CDSC, if otherwise applicable, will be waived in the case
of:                                                                             

(1) redemptions of shares held at the time a shareholder dies or becomes  
disabled, only if the shares are:  (a) registered either in the name of an      
individual shareholder (not a trust), or in the names of such shareholder and   
his or her spouse as joint tenants with right of survivorship; or  (b) held in a
qualified corporate or self-employed retirement plan, Individual Retirement     
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal    
Revenue Code ("403(b) Custodial Account"), provided in either case that the     
redemption is requested within one year of the death or initial determination of
disability;                                                                     

(2) redemptions in connection with the following retirement plan          
distributions:  (a) lump-sum or other distributions from a qualified corporate  
or self-employed retirement plan following retirement (or, in the case of a "key
employee" of a "top heavy" plan, following attainment of age 59 1/2); (b)       
distributions from an IRA or 403(b) Custodial Account following attainment of   
age 59 1/2; or  (c) a tax-free return of an excess contribution to an IRA; and  

(3) all redemptions of shares held for the benefit of a participant in a  
401(k) plan or other employer-sponsored plan qualified under Section 401(a) of  
the Internal Revenue Code which offers investment companies managed by the      
Investment Manager or its subsidiary, Dean Witter Services Company Inc., as     
self-directed investment alternatives and for which DWT serves as Trustee or the
401(k) Support Services Group of DWR serves as recordkeeper ("Eligible Plan"),  
provided that either:  (a) the plan continues to be an Eligible Plan after the  
redemption; or  (b) the redemption is in connection with the complete           
termination of the plan involving the distribution of all plan assets to        
participants.                                                                   

   With reference to (1) above, for the purpose of determining disability, the
Distributor utilizes the definition of disability contained in Section 72(m)(7) 
of the Internal Revenue Code, which relates to the inability to engage in       
gainful employment. With reference to (2) above, the term "distribution" does   
not encompass a direct transfer of IRA, 403(b) Custodial Account or retirement  
plan assets to a successor custodian or trustee. All waivers will be granted    
only following receipt by the Distributor of confirmation of the shareholder's  
entitlement.                                                                    

    CONVERSION TO CLASS A SHARES.  All shares of the Fund held prior to July 28,
1997 (other than shares held by certain employee benefit plans established by   
DWR and its affiliate, SPS Transaction Services, Inc.) have been designated     
Class B shares. Shares held before May 1, 1997 that have been designated Class B
shares will convert to Class A shares in May, 2007. In all other instances Class
B shares will convert automatically to Class A shares, based on the relative net
asset values of the                                                             

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shares of the two Classes on the conversion date, which will be approximately   
ten (10) years after the date of the original purchase. The ten year period is  
calculated from the last day of the month in which the shares were purchased or,
in the case of Class B shares acquired through an exchange or a series of       
exchanges, from the last day of the month in which the original Class B shares  
were purchased, provided that shares originally purchased before May 1, 1997    
will convert to Class A shares in May, 2007. The conversion of shares purchased 
on or after May 1, 1997 will take place in the month following the tenth        
anniversary of the purchase. There will also be converted at that time such     
proportion of Class B shares acquired through automatic reinvestment of         
dividends and distributions owned by the shareholder as the total number of his 
or her Class B shares converting at the time bears to the total number of       
outstanding Class B shares purchased and owned by the shareholder. In the case  
of Class B shares held by a 401(k) plan or other employer-sponsored plan        
qualified under Section 401(a) of the Internal Revenue Code and for which DWT   
serves as Trustee or the 401(k) Support Services Group of DWR serves as         
recordkeeper, the plan is treated as a single investor and all Class B shares   
will convert to Class A shares on the conversion date of the first shares of a  
Dean Witter Multi-Class Fund purchased by that plan. In the case of Class B     
shares previously exchanged for shares of an "Exchange Fund" (see "Shareholder  
Services-- Exchange Privilege"), the period of time the shares were held in the 
Exchange Fund (calculated from the last day of the month in which the Exchange  
Fund shares were acquired) is excluded from the holding period for conversion.  
If those shares are subsequently re-exchanged for Class B shares of a Dean      
Witter Multi-Class Fund, the holding period resumes on the last day of the month
in which Class B shares are reacquired.                                         

 If a shareholder has received share certificates for Class B shares, such
certificates must be delivered to the Transfer Agent at least one week prior to 
the date for conversion. Class B shares evidenced by share certificates that are
not received by the Transfer Agent at least one week prior to any conversion    
date will be converted into Class A shares on the next scheduled conversion date
after such certificates are received.                                           

Effectiveness of the conversion feature is subject to the continuing    
availability of a ruling of the Internal Revenue Service or an opinion of       
counsel that (i) the conversion of shares does not constitute a taxable event   
under the Internal Revenue Code, (ii) Class A shares received on conversion will
have a basis equal to the shareholder's basis in the converted Class B shares   
immediately prior to the conversion, and (iii) Class A shares received on       
conversion will have a holding period that includes the holding period of the   
converted Class B shares. The conversion feature may be suspended if the ruling 
or opinion is no longer available. In such event, Class B shares would continue 
to be subject to Class B 12b-1 fees.                                            

LEVEL LOAD ALTERNATIVE--CLASS C SHARES                                          

Class C shares are sold at net asset value next determined without an   
initial sales charge but are subject to a CDSC of 1.0% on most redemptions made 
within one year after purchase (calculated from the last day of the month in    
which the shares were purchased). The CDSC will be assessed on an amount equal  
to the lesser of the current market value or the cost of the shares being       
redeemed. The CDSC will not be imposed in the circumstances set forth above in  
the section "Contingent Deferred Sales Charge Alternative--Class B Shares--CDSC 
Waivers," except that the references to six years in the first paragraph of that
section shall mean one year in the case of Class C shares. Class C shares are   
subject to an annual 12b-1 fee of up to 0.85% of the average daily net assets of
the Class. Unlike Class B shares, Class C shares have no conversion feature and,
accordingly, an investor that purchases Class C shares will be subject to 12b-1 
fees applicable to Class C shares for an indefinite period subject to annual    
approval by the Fund's Board of Trustees and regulatory limitations.            

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NO LOAD ALTERNATIVE--CLASS D SHARES                                             

Class D shares are offered without any sales charge on purchase or      
redemption and without any 12b-1 fee. Class D shares are offered only to        
investors meeting an initial investment minimum of $5 million and the following 
categories of investors: (i) investors participating in the InterCapital mutual 
fund asset allocation program pursuant to which such persons pay an asset based 
fee; (ii) persons participating in a fee-based program approved by the          
Distributor, pursuant to which such persons pay an asset based fee for services 
in the nature of investment advisory or administrative services (subject to all 
of the terms and conditions of such programs, referred to in (i) and (ii) above,
which may include termination fees, mandatory redemption upon termination and   
such other circumstances as specified in the programs agreements, and           
restrictions on transferability of Fund shares); (iii) 401(k) plans established 
by DWR and SPS Transaction Services, Inc. (an affiliate of DWR) for their       
employees; (iv) certain Unit Investment Trusts sponsored by DWR; (v) certain    
other open-end investment companies whose shares are distributed by the         
Distributor; and (vi) other categories of investors, at the discretion of the   
Board, as disclosed in the then current prospectus of the Fund. Shares of the   
Fund held by the employee benefit plans referred to in clause (iii) above prior 
to July 28, 1997 have been designated Class D shares. Investors who require a $5
million minimum initial investment to qualify to purchase Class D shares may    
satisfy that requirement by investing that amount in a single transaction in    
Class D shares of the Fund and other Dean Witter Multi-Class Funds, subject to  
the $1,000 minimum initial investment required for that Class of the Fund. In   
addition, for the purpose of meeting the $5 million minimum investment amount,  
holdings of Class A shares in all Dean Witter Multi-Class Funds, shares of FSC  
Funds and shares of Dean Witter Funds for which such shares have been exchanged 
will be included together with the current investment amount. If a shareholder  
redeems Class A shares and purchases Class D shares, such redemption may be a   
taxable event.                                                                  

PLAN OF DISTRIBUTION                                                            

    The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act with respect to the distribution of Class A, Class B and Class C shares of  
the Fund. In the case of Class A and Class C shares, the Plan provides that the 
Fund will reimburse the Distributor and others for the expenses of certain      
activities and services incurred by them specifically on behalf of those shares.
Reimbursements for these expenses will be made in monthly payments by the Fund  
to the Distributor, which will in no event exceed amounts equal to payments at  
the annual rates of 0.25% and 0.85% of the average daily net assets of Class A  
and Class C, respectively. In the case of Class B shares, the Plan provides that
the Fund will pay the Distributor a fee, which is accrued daily and paid        
monthly, at the annual rate of 0.85% of the lesser of: (a) the average daily    
aggregate gross sales of the Fund's Class B shares since the inception of the   
Fund (not including reinvestments of dividends or capital gains distributions), 
less the average daily aggregate net asset value of the Fund's Class B shares   
redeemed since the Fund's inception upon which a CDSC has been imposed or       
waived, or (b) the average daily net assets of Class B. The fee is treated by   
the Fund as an expense in the year it is accrued. In the case of Class A shares,
the entire amount of the fee currently represents a service fee within the      
meaning of the NASD guidelines. In the case of Class B and Class C shares, a    
portion of the fee payable pursuant to the Plan, equal to 0.20% and 0.25% of the
average daily net assets of each of these Classes, respectively, is currently   
characterized as a service fee. A service fee is a payment made for personal    
service and/or the maintenance of shareholder accounts.                         

 Additional amounts paid under the Plan in the case of Class B and Class C
shares are paid to the Distributor for services provided and the expenses borne 
by the Distributor and others in the distribution of the shares of those        
Classes, including the payment of commissions for sales of the shares of those  
Classes and incentive compensation to and expenses of DWR's account executives  
and others                                                                      

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who engage in or support distribution of shares or who service shareholder      
accounts, including overhead and telephone expenses; printing and distribution  
of prospectuses and reports used in connection with the offering of the Fund's  
shares to other than current shareholders; and preparation, printing and        
distribution of sales literature and advertising materials. In addition, the    
Distributor may utilize fees paid pursuant to the Plan in the case of Class B   
shares to compensate DWR and other Selected Broker-Dealers for their opportunity
costs in advancing such amounts, which compensation would be in the form of a   
carrying charge on any unreimbursed expenses.                                   

For the fiscal year ended August 31, 1997, Class B shares of the Fund   
accrued payments under the Plan amounting to $1,578,380, which amount is equal  
to 0.85% of the average daily net assets of Class B for the fiscal year. These  
payments were calculated pursuant to clause (b) of the compensation formula     
under the Plan. All shares held prior to July 28, 1997 (other than shares held  
by certain employee benefit plans established by DWR and its affiliate, SPS     
Transaction Services, Inc.) have been designated Class B shares. For the period 
July 28 through August 31,1997, Class A and Class C shares of the Fund accrued  
payments under the Plan amounting to $3 and $18, respectively, which amounts on 
an annualized basis are equal to 0.25% and 0.85% of the average daily net assets
of Class A and Class C, respectively, for such period.                          

In the case of Class B shares, at any given time, the expenses in       
distributing Class B shares of the Fund may be in excess of the total of (i) the
payments made by the Fund pursuant to the Plan, and (ii) the proceeds of CDSCs  
paid by investors upon the redemption of Class B shares. For example, if $1     
million in expenses in distributing Class B shares of the Fund had been incurred
and $750,000 had been received as described in (i) and (ii) above, the excess   
expense would amount to $250,000. The Distributor has advised the Fund that such
excess amounts, including the carrying charge described above, totalled         
$5,734,755 at August 31, 1997, which was equal to 3.52% of the net assets of    
Class B on such date. Because there is no requirement under the Plan that the   
Distributor be reimbursed for all distribution expenses or any requirement that 
the Plan be continued from year to year, such excess amount does not constitute 
a liability of the Fund. Although there is no legal obligation for the Fund to  
pay expenses incurred in excess of payments made to the Distributor under the   
Plan, and the proceeds of CDSCs paid by investors upon redemption of shares, if 
for any reason the Plan is terminated the Trustees will consider at that time   
the manner in which to treat such expenses. Any cumulative expenses incurred,   
but not yet recovered through distribution fees or CDSCs, may or may not be     
recovered through future distribution fees or CDSCs.                            

    In the case of Class A and Class C shares, expenses incurred pursuant to the
Plan in any calendar year in excess of 0.25% or 0.85% of the average daily net  
assets of Class A or Class C, respectively, will not be reimbursed by the Fund  
through payments in any subsequent year, except that expenses representing a    
gross sales commission credited to account executives at the time of sale may be
reimbursed in the subsequent calendar year. The Distributor has advised the Fund
that there were no such expenses which may be reimbursed in the subsequent year 
in the case of Class A and Class C on such date. No interest or other financing 
charges will be incurred on any Class A or Class C distribution expenses        
incurred by the Distributor under the Plan or on any unreimbursed expenses due  
to the Distributor pursuant to the Plan.                                        

DETERMINATION OF NET ASSET VALUE                                                

The net asset value per share is determined 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 that the New York Stock Exchange is    
open by taking the net assets of the Fund, dividing by the number of shares     
outstanding and adjusting to the nearest cent. The assets belonging to the Class
A, Class B, Class C and Class D shares will be invested together in a single    
portfolio. The net asset value of each Class,                                   

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however, will be determined separately by subtracting each Class's accrued      
expenses and liabilities. 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.                                        

 In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other   
domestic or foreign 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 latest bid price (in cases where a security is traded 
on more than one exchange, the security is valued on the exchange designated as 
the primary market pursuant to procedures adopted by the Trustees); and (2) all 
portfolio securities for which over-the-counter market quotations are readily   
available are valued at the latest bid price. When market quotations are not    
readily available, including circumstances under which it is determined by the  
Investment Manager that sale and bid prices are not reflective of a security's  
market value, portfolio securities are valued at their fair value as determined 
in good faith under procedures established by and under the general supervision 
of the Board of Trustees.                                                       

Certain of the Fund's portfolio securities 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. (See "Determination of Net Asset Value" in the Statement of Additional 
Information.)                                                                   

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 applicable Class of the Fund (or, if specified by the shareholder,
in shares of any other open-end Dean Witter Fund), unless the shareholder       
requests that they be paid in cash. Shares so acquired are acquired at net asset
value and are not subject to the imposition of a front-end sales charge or a    
CDSC (see "Redemptions and Repurchases"). Such dividends and distributions will 
be paid, at the net asset value per share (without sales charge), in shares of  
the applicable Class of the Fund (or in cash if the shareholder so requests) 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. Processing of      
dividend checks begins immediately following the monthly payment date.          
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.                                                                          

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 or following       
redemption of shares of a Dean Witter money market fund, on a semi-monthly,     
monthly or quarterly basis, to the Fund's Transfer Agent for investment in      
shares of the Fund (see "Purchases of Fund Shares" and "Redemptions and         
Repurchases--Involuntary Redemption").                                          

   INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH.  Any shareholder
who receives a cash payment representing a dividend or capital gains            
distribution may invest such dividend or distribution in shares of the          
applicable Class at the net asset value per share next determined after receipt 
by the Transfer Agent, by returning the check or the proceeds to the Transfer   
Agent within thirty days after the payment date. Shares so acquired are acquired
at net asset value and are not subject to the imposition of a front-end sales   
charge or a CDSC (see "Redemptions and Repurchases").                           

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  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. Any applicable CDSC  
will be imposed on shares redeemed under the Withdrawal Plan (see "Purchase of  
Fund Shares"). Therefore, any shareholder participating in the Withdrawal Plan  
will have sufficient shares redeemed from his or her account so that the        
proceeds (net of any applicable CDSC) to the shareholder will be the designated 
monthly or quarterly amount. 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. Each withdrawal constitutes a redemption of shares and any gain or   
loss realized must be recognized for federal income tax purposes.               

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
corporations, the self-employed, eligible 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.                                 

EXCHANGE PRIVILEGE                                                              

 Shares of each Class may be exchanged for shares of the same Class of any
other Dean Witter Multi-Class Fund without the imposition of any exchange fee.  
Shares may also be exchanged for shares of the following funds: Dean Witter     
Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal Trust, Dean  
Witter Short-Term Bond Fund, Dean Witter Intermediate Term U.S. Treasury Trust  
and five Dean Witter funds which are money market funds (the "Exchange Funds"). 
Class A shares may also be exchanged for shares of Dean Witter Multi-State      
Municipal Series Trust and Dean Witter Hawaii Municipal Trust, which are Dean   
Witter Funds sold with a front-end sales charge ("FSC Funds"). Class B shares   
may also be exchanged for shares of Dean Witter Global Short-Term Income Fund   
Inc., Dean Witter High Income Securities and Dean Witter National Municipal     
Trust, which are Dean Witter Funds offered with a CDSC ("CDSC Funds"). 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.   

   An exchange to another Dean Witter Multi-Class Fund, any FSC Fund, any CDSC
Fund or any 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 from the Fund, shares of  
the Fund are redeemed out of the Fund at their next calculated net asset value  
and the proceeds of the redemption are used to purchase shares of the money     
market fund at their net asset value determined the following business day.     
Subsequent exchanges between any of the Dean Witter Multi-Class Funds, FSC Funds
or CDSC Funds or any Exchange Fund that is not a money market fund can be       
effected on the same basis.                                                     

No CDSC is imposed at the time of any exchange of shares, although any  
applicable CDSC will be imposed upon ultimate redemption. During the period of  
time the shareholder remains in an Exchange Fund (calculated from the last day  
of the month in which the Exchange Fund shares were                             

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acquired), the holding period (for the purpose of determining the rate of the   
CDSC) is frozen. If those shares are subsequently re-exchanged for shares of a  
Dean Witter Multi-Class Fund or shares of a CDSC 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 Dean Witter Multi-Class Fund or shares of a CDSC 
Fund are reacquired. Thus, the CDSC is based upon the time (calculated as       
described above) the shareholder was invested in shares of a Dean Witter        
Multi-Class Fund or in shares of a CDSC Fund (see "Purchase of Fund Shares"). In
the case of exchanges of Class A shares 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   
incurred on or after that date which are attributable to those shares. (Exchange
Fund 12b-1 distribution fees are described in the prospectuses for those funds.)
Class B shares of the Fund acquired in exchange for Class B shares of another   
Dean Witter Multi-Class Fund or shares of a CDSC Fund having a different CDSC   
schedule than that of this Fund will be subject to the higher CDSC schedule,    
even if such shares are subsequently re-exchanged for shares of the fund with   
the lower CDSC schedule.                                                        

  ADDITIONAL INFORMATION REGARDING EXCHANGES. 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 and each of the other Dean
Witter 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 of
the shareholder not later than ten days following such shareholder's most recent
exchange. Also, the Exchange Privilege may be terminated or revised at any time 
by the Fund and/or any of such Dean Witter Funds for which shares of the Fund   
have been exchanged, upon such notice as may be required by applicable          
regulatory agencies. Shareholders maintaining margin accounts with DWR or       
another Selected Broker-Dealer are referred to their account executive regarding
restrictions on exchange of shares of the Fund pledged in the margin account.   

   The current prospectus for each fund describes its investment objective and
policies, and shareholders should obtain a copy and examine it carefully before 
investing. Exchanges are subject to the minimum investment requirement of each  
Class of shares and any other conditions imposed by each fund. In the case of a 
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.                                                            

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    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 Dean Witter 
Funds (for which the Exchange Privilege is available) 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 other Selected Broker-Dealers 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 with the Dean 
Witter Funds in the past.                                                       

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                                                     
--------------------------------------------------------------------------------

 REDEMPTION.  Shares of each Class of the Fund can be redeemed for cash at
any time at the net asset value per share next determined less the amount of any
applicable CDSC in the case of Class A, Class B or Class C shares (see "Purchase
of Fund Shares"). If shares are held in a shareholder's account without a share 
certificate, a written request for redemption to the Fund's Transfer Agent at   
P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are held by the
shareholder, the shares may be redeemed by surrendering the certificates with a 
written request for redemption along with any additional documentation required 
by the Transfer Agent.                                                          

REPURCHASE.  DWR and other Selected Broker-Dealers are authorized to    
repurchase 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 or telegraphic request of the shareholder. The repurchase   
price is the net asset value next computed (see "Purchase of Fund Shares") after
such repurchase order is received by DWR and other Selected Broker-Dealers,     
reduced by any applicable CDSC.                                                 

The CDSC, if any, will be the only fee imposed by the Fund or the       
Distributor. The offer by DWR and other Selected Broker-Dealers to repurchase   
shares may be suspended without notice by them at any time. In that event,      
shareholders may redeem their                                                   

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shares through the Fund's Transfer Agent as set forth above under "Redemption." 

 PAYMENT FOR SHARES REDEEMED OR REPURCHASED.  Payment for shares presented
for repurchase or redemption will be made by check within seven days after      
receipt by the Transfer Agent of the certificate and/or written request in good 
order. Such payment may be postponed or the right of redemption suspended under 
unusual circumstances, e.g., when normal trading is not taking place on the New 
York Stock Exchange. If the shares to be redeemed have recently been purchased  
by check, payment of the redemption proceeds 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 receipt of the check by the Transfer Agent). 
Shareholders maintaining margin accounts with DWR or another Selected           
Broker-Dealer are referred to their account executive regarding restrictions on 
redemption of shares of the Fund pledged in the margin account.                 

REINSTATEMENT PRIVILEGE.  A shareholder who has had his or her shares   
redeemed or repurchased and has not previously exercised this reinstatement     
privilege may, within 35 days after the date of the redemption or repurchase,   
reinstate any portion or all of the proceeds of such redemption or repurchase in
shares of the Fund in the same Class from which such shares were redeemed or    
repurchased, at their net asset value next determined after a reinstatement     
request, together with the proceeds, is received by the Transfer Agent and      
receive a pro rata credit for any CDSC paid in connection with such redemption  
or repurchase.                                                                  

INVOLUNTARY REDEMPTION.  The Fund reserves the right to redeem, on sixty
days' notice and at net asset value, the shares (other than shares held in an   
Individual Retirement Account or Custodial Account under Section 403(b)(7) of   
the Internal Revenue Code) of any shareholder whose shares, due to redemptions  
by the shareholder, have a value of less than $100 or such lesser amount as may 
be fixed by the Trustees or, in the case of an account opened through           
EasyInvest-SM-, if after twelve months the shareholder has invested less than   
$1,000 in the account. However, before the Fund redeems such shares and sends   
the proceeds to the shareholder it will notify the shareholder that the value of
the shares is less than the applicable amount and allow the shareholder sixty   
days to make an additional investment in an amount which will increase the value
of the account to at least the applicable amount before the redemption is       
processed. No CDSC will be imposed on any involuntary redemption.               

DIVIDENDS, DISTRIBUTIONS AND TAXES                                              
--------------------------------------------------------------------------------

DIVIDENDS AND DISTRIBUTIONS.  The Fund declares dividends separately for
each Class of shares and intends to declare dividends from net investment income
on each day the New York Stock Exchange is open for business (see "Purchase of  
Fund Shares"). The amount of the dividend declared may fluctuate from day to    
day. Dividends are declared daily and paid monthly in additional shares of the  
Fund. The Fund intends to distribute dividends from net short-term, mid-term and
long-term capital gains, if any, at least once each year. The Fund may, however,
elect to retain all or a portion of any net long-term capital gains in any year.

    All dividends and any capital gains distributions will be paid in additional
shares of the same Class and automatically credited to the shareholder's account
without issuance of a share certificate unless the shareholder requests in      
writing that all dividends or all dividends and distributions be paid in cash.  
Shares acquired by dividend and distribution reinvestments will not be subject  
to any front-end sales charge or CDSC. Class B shares acquired through dividend 
and distribution reinvestments will become eligible for conversion to Class A   
shares on a pro rata basis. Distributions paid on Class A and Class D shares    
will be higher than for Class B and Class C shares                              

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because distribution fees paid by Class B and Class C shares are higher. (See   
"Shareholder Services--Automatic Investment of Dividends and Distributions".)   

TAXES.  Because 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 the Fund will be required to pay any federal income tax.   
Shareholders who are required to pay taxes on their income will normally have to
pay federal income taxes, and any state income taxes, on the dividends and      
distributions they receive from the Fund. Such dividends and distributions, to  
the extent that they are derived from net investment income or net short-term   
capital gains, are taxable to the shareholder as ordinary dividend 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 to shareholders of record in such period in the following   
year prior to February 1 will be deemed, for tax purposes, to have been received
by the shareholder in the prior year.                                           

Long-term, mid-term and short-term capital gains may be generated by the
sale of portfolio securities by the Fund. Distributions of net long-term capital
gains and net mid-term capital gains, if any, are taxable to shareholders as    
long-term capital gains and mid-term capital gains, respectively, 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. After the end of the  
calendar year, shareholders will receive full information on their dividends and
capital gains distributions for tax purposes, including information as to the   
portion taxable as ordinary income and the portion taxable as mid-term and      
long-term capital gains.                                                        

 The Fund may at times make payments from sources other than income or net
capital gains. Payments from such sources would, in effect, represent a return  
of a portion of each shareholder's investment. All, or a portion, of such       
payments would not be taxable to shareholders.                                  

 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 accuracy. The foregoing discussion relates solely to the federal
income tax consequences of an investment in the Fund. Distributions may also be 
subject to state and local taxes; therefore, each shareholder is advised to     
consult his or her own tax adviser.                                             

PERFORMANCE INFORMATION                                                         
--------------------------------------------------------------------------------

  From time to time the Fund may quote its "yield" and/or its "total return"
in advertisements and sales literature. These figures are computed separately   
for Class A, Class B, Class C and Class D shares. Both the yield and the total  
return of the Fund are based on historical earnings and are not intended to     
indicate future performance. The yield of each Class of the Fund is computed by 
dividing the Class's net investment income over a 30-day period by an average   
value (using the average number of shares entitled to receive dividends and the 
maximum offering price 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 Fund's yield 
for each Class.                                                                 

   The "average annual total return" of the Fund refers to a figure reflecting
the average annualized percentage increase (or decrease) in the value of an     
initial investment in a Class of the Fund of $1,000 over periods of one, five   
and ten years, or over the life of the Fund, if less than any of the foregoing. 
Average annual total return reflects all income earned by the Fund, any         
appreciation or depreciation of the Fund's assets, all expenses incurred by the 
applicable Class and all sales charges incurred by shareholders, for the stated 
periods. It also                                                                

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assumes reinvestment of all dividends and distributions paid by the Fund.       

 In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average,       
year-by-year or other types of total return figures. The Fund may also advertise
the growth of hypothetical investments of $10,000, $50,000 and $100,000 in each 
Class of shares of the Fund. Such calculations may or may not reflect the       
deduction of any sales charge which, if reflected, would reduce the performance 
quoted. The Fund 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.                                                                  

ADDITIONAL INFORMATION                                                          
--------------------------------------------------------------------------------

  VOTING RIGHTS.  All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges except that
each Class will have exclusive voting privileges with respect to matters        
relating to distribution expenses borne solely by such Class or any other matter
in which the interests of one Class differ from the interests of any other      
Class. In addition, Class B shareholders will have the right to vote on any     
proposed material increase in Class A's expenses, if such proposal is submitted 
separately to Class A shareholders. Also, as discussed herein, Class A, Class B 
and Class C bear the expenses related to the distribution of their respective   
shares.                                                                         

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 shareholder    
vote as may be required by the Act or the Declaration of Trust.                 

    Under Massachusetts law, shareholders of a business trust may, under certain
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 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 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, the possibility of the Fund being unable to meet its obligations is 
remote and, 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             

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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 objective by investing all of its investable assets in a         
diversified, open-end management investment company having the same investment  
objective and policies and substantially the same investment restrictions as    
those applicable to the Fund.                                                   

   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.                                                                

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THE DEAN WITTER FAMILY OF FUNDS 

MONEY MARKET FUNDS                       DEAN WITTER RETIREMENT SERIES          
Dean Witter Liquid Asset Fund Inc.       Liquid Asset Series                    
Dean Witter U.S. Government Money        U.S. Government Money Market Series    
Market Trust                            U.S. Government Securities Series     
Dean Witter Tax-Free Daily Income Trust  Intermediate Income Securities Series  
Dean Witter California Tax-Free Daily    American Value Series                  
Income Trust                            Capital Growth Series                 
Dean Witter New York Municipal Money     Dividend Growth Series                 
Market Trust                            Strategist Series                     
                  Utilities Series
EQUITY FUNDS                             Value-Added Market Series              
Dean Witter American Value Fund          Global Equity Series                   
Dean Witter Natural Resource                                                    
Development Securities Inc.              ASSET ALLOCATION FUNDS                 
Dean Witter Dividend Growth Securities   Dean Witter Strategist Fund            
Inc.                                    Dean Witter Global Asset Allocation   
Dean Witter Developing Growth             Fund                                  
Securities Trust                                                              
Dean Witter World Wide Investment Trust  ACTIVE ASSETS ACCOUNT PROGRAM          
Dean Witter Value-Added Market Series    Active Assets Money Trust              
Dean Witter Utilities Fund               Active Assets Tax-Free Trust           
Dean Witter Capital Growth Securities    Active Assets California Tax-Free Trust
Dean Witter European Growth Fund Inc.    Active Assets Government Securities    
Dean Witter Precious Metals and           Trust                                 
Minerals Trust                                                                
Dean Witter Pacific Growth Fund Inc.                                            
Dean Witter Health Sciences Trust                                               
Dean Witter Global Dividend Growth                                              
Securities                                                                    
Dean Witter Global Utilities Fund                                               
Dean Witter International SmallCap Fund                                         
Dean Witter Mid-Cap Growth Fund                                                 
Dean Witter Balanced Growth Fund                                                
Dean Witter Capital Appreciation Fund                                           
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                                                       

FIXED INCOME FUNDS                                                              
Dean Witter High Yield Securities Inc.                                          
Dean Witter Tax-Exempt Securities Trust                                         
Dean Witter U.S. Government Securities                                          
Trust                                                                         
Dean Witter Intermediate Term U.S.                                              
Treasury Trust                                                                
Dean Witter Federal Securities Trust                                            
Dean Witter Convertible Securities                                              
Trust                                                                         
Dean Witter California Tax-Free Income                                          
Fund                                                                          
Dean Witter New York Tax-Free Income                                            
Fund                                                                          
Dean Witter World Wide Income Trust                                             
Dean Witter Intermediate Income                                                 
Securities                                                                    
Dean Witter Global Short-Term Income                                            
Fund Inc.                                                                     
Dean Witter Multi-State Municipal                                               
Series Trust                                                                  
Dean Witter Short-Term U.S. Treasury                                            
Trust                                                                         
Dean Witter Diversified Income Trust                                            
Dean Witter Limited Term Municipal                                              
Trust                                                                         
Dean Witter Short-Term Bond Fund                                                
Dean Witter National Municipal Trust                                            
Dean Witter High Income Securities                                              
Dean Witter Balanced Income Fund                                                
Dean Witter Hawaii Municipal Trust                                              
Dean Witter Intermediate Term U.S.                                              
Treasury Trust                                                                

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Dean Witter                                                 Dean Witter         
Intermediate Income Securities                             Intermediate         
Two World Trade Center                                           Income         
New York, New York 10048                                     Securities         

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                                                                 
Rochelle G. Siegel                                                              
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.                                                   
                                PROSPECTUS -- OCTOBER 28, 1997

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DEAN WITTER INTERMEDIATE INCOME SECURITIES  TWO WORLD TRADE CENTER, NEW YORK,   
                      NEW YORK 10048

LETTER TO THE SHAREHOLDERS AUGUST 31, 1997                                      

DEAR SHAREHOLDER:                                                               

Interest rates have been volatile over the past twelve months. A brief bond     
market rally in the early autumn of 1996, which was produced by a slowing       
third-quarter economy, came to a halt in October. At that time, firming labor   
markets, increases in consumer spending and revived growth in manufacturing     
foreshadowed two consecutive quarters of GDP growth that approached 5 percent.  

However, as calendar year 1996 came to a close, the continued absence of        
inflation, as evidenced by controlled labor costs and declining wholesale       
prices, supported the theory that a strong economy and low inflation were       
compatible, making higher interest rates unnecessary. This hypothesis gave rise 
to the perception of a "Goldilocks" economy, which was neither too hot nor too  
cold but just right, paving the way for another market rally.                   

By February, Federal Reserve Board Chairman Alan Greenspan, not yet willing to  
embrace this new paradigm in the face of reports of continued economic vigor,   
began to prepare market participants for the prospect of higher interest rates. 
At the end of March, the Fed raised the federal-funds rate by 25 basis points to
5.5 percent, adding to expectations of even higher rates in the coming months.  

Yields peaked in mid-April with evidence of renewed weakness in areas that had  
previously been strong, including retail sales and industrial production. These 
signs that the economy was slowing were widely interpreted as a reprieve from   
inflationary concerns, and attitudes toward bond markets turned positive once   
again, pushing Treasury yields lower. But in August, robust economic news,      
including second-quarter GDP growth of 3.4 percent along with a low unemployment
rate of 4.8 percent, again overshadowed the benign inflation picture and rates  
once more shifted direction. Five-year and ten-year Treasuries, after reaching  
respective highs of 6.86 percent and 6.99 percent in April, and lows of 5.90    
percent and 6.00 percent in July, ended the period yielding 6.22 percent and    
6.34 percent, lower by 50 and 60 basis points, respectively, from their levels  
one year earlier.                                                               

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
LETTER TO THE SHAREHOLDERS AUGUST 31, 1997, CONTINUED                           

PERFORMANCE AND PORTFOLIO                                                       

For the fiscal year ended August 31, 1997, Dean Witter Intermediate Income      
Fund's Class B shares returned 7.93 percent versus 9.21 percent for the Lipper  
Intermediate Investment Grade Debt Funds Index. During the same period,         
intermediate-term (one- to ten-year maturity) government and corporate bonds, as
measured by the Lehman Brothers Intermediate Government/Corporate Bond Index,   
returned 8.44 percent. Intermediate-term (5- to 10-year maturity) corporate     
bonds, as measured by Lehman Brothers Intermediate Investment Grade Debt Index, 
returned 10.91 percent, and                                                     
intermediate-term government bonds, as                                          
measured by the Lehman Brothers                                                 
Intermediate Government Bond Index,                                             
returned 8.05 percent. The accompanying                [GRAPHIC OMITTED]        
chart illustrates the performance of                                            
the Fund versus the Lehman Brothers                                             
Intermediate Investment Grade Debt                                              
Index, the Lehman Brothers Intermediate                                         
Government/Corporate Bond Index and the                                         
Lipper Intermediate Investment Grade                                            
Debt Index.                                                                     

The Fund's return during the fiscal                                             
year reflected the decline in interest                                          
rates experienced over the period. The                                          
Fund's corporate bond holdings,                                                 
especially those rated below A, by                                              
Standard & Poor's and Moody's, aided                                            
its performance, as credit perceptions                                          
improved with the economy. At fiscal                                            
year-end, 41 percent of the Fund's                                              
noncash invested assets were rated less                                         
than A while the portfolio's average                                            
credit rating was A3. To enhance                                                
income, we increased corporate                                                  
allocations from 76 percent to 86                                               
percent of noncash investments, with                                            
most of the shift occurring during the                                          
first six months of the Fund's fiscal                                           
year. We increased the Fund's                                                   
commitment to utilities, industrials                                            
and Yankee bonds (dollar-denominated                                            
bonds issued in the United States by                                            
foreign entities) while decreasing the                                          
Fund's allocation to finance through                                            
sales and maturities.                                                           

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
LETTER TO THE SHAREHOLDERS AUGUST 31, 1997, CONTINUED                           

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC                     

Growth of $10,000 - Class B                                                     
($ in Thousands)                                                  
5/3/1989                           $10,000     $10,000     $10,000    $10,000   
8/31/1989                          $10,257     $10,375     $10,327    $10,294   
8/31/1990                          $10,587     $11,047     $11,161    $10,848   
8/31/1991                          $11,728     $12,621     $12,589    $12,158   
8/31/1992                          $13,204     $14,686     $14,241    $13,832   
8/31/1993                          $14,318     $16,076     $15,556    $15,322   
8/31/1994                          $14,103     $16,382     $16,505    $15,046   
8/31/1995                          $15,310     $18,552     $16,973    $16,581   
8/31/1996                          $15,705     $19,244     $17,726    $17,227   
8/31/1997                          $16,950(3)  $21,345     $19,222    $18,814   
Average Annual Total Return (Fund)                                              
1 Year                            7.93%(1)    2.93%(2)                          
5 Years                           5.12%(1)    4.81%(2)                          
Life of Fund                      6.54%(1)    6.54%(2)                          
Fund     Lehman(4)   Lehman(5)   Lipper(6)                                      

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS.                       

(1) Figure shown assumes reinvestment of all distributions and does not reflect 
the deduction of any sales charges.                                     

(2) Figure shown assumes reinvestment of all distributions and the deduction of 
    the maximum applicable contingent deferred sales charge (CDSC) (1 year-5%, 5
years-2%, since inception-0%). See the Fund's prospectus for complete   
details on fees and sales charges.                                      

(3) Closing value assuming a complete redemption on August 31, 1997.            

(4) The Lehman Brothers Intermediate Investment Grade Debt Index measures the   
   performance 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.                             

(5) The Lehman Brothers Intermediate Government/Corporate Bond Index tracks the 
performance of government and corporate debt obligations, including US  
    government agency and US Treasury securities and corporate and yankee bonds,
  with maturities of one to ten years. The Index is unmanaged and should not
be considered and investment.                                           

(6) The Lipper Intermediate Investment Grade Debt 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.                       

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
LETTER TO THE SHAREHOLDERS AUGUST 31, 1997, CONTINUED                           

Redemptions throughout the period necessitated selling securities as interest   
rates fell and rose. Unfortunately, new cash, which would have allowed us to    
take advantage of the higher interest rate environment, was not always          
available, so once again the Fund was unable to participate in interim rallies. 
The Fund's net assets declined by more than $39 million, despite an increase in 
its net asset value per share of $0.20. During the most recent rally in interest
rates we allowed the Fund's cash position to decline to about 2 percent of      
investable assets from nearly 5 percent last year. This shift increased the     
Fund's overall duration (and thus its sensitivity to changes in interest rates) 
to 4.05 years on August 29, 1997, up from 3.91 on August 31, 1996.              

On July 28, 1997, the Fund began offering four classes of shares: A, B, C and D,
each with its own sales charge and distribution fee structure. A revised        
prospectus, which includes complete details regarding the Fund's conversion to  
multiple classes of shares, was mailed to shareholders in mid-summer.           

LOOKING AHEAD                                                                   

Economic strength is once again overshadowing the current inflation picture.    
While inflation still appears dormant, a reduction in the federal-funds rate by 
the Federal Reserve Board is highly unlikely. How much longer economic growth of
better than 3.5 percent in conjunction with an unemployment rate of 4.8 percent 
can continue before inflation is ignited is unknown. What is known is that the  
Federal Reserve Board has clearly expressed its intention to raise rates in the 
face of inflationary threats. Demand for workers continues, despite declines in 
marginal productivity. The anticipated decline in exports arising from the      
stronger dollar has yet to surface. Should overseas economies, principally those
of western Europe, show signs of growth, even greater demand could bid up prices
and eventually translate into higher inflation in the United States. However,   
potentially deflationary effects could arise from cheaper Southeast Asian goods 
as sizable currency devaluations make their products more competitive with those
of the United States. We will continue to monitor events, both domestic and     
international, for signs of inflationary or deflationary pressures.             

We appreciate your ongoing support of Dean Witter Intermediate Income Securities
and look forward to continuing to serve your investment needs.                  

Very truly yours,                                                               

/s/ Charles A. Fiumefreddo                                                      
CHARLES A. FIUMEFREDDO                                                          
CHAIRMAN OF THE BOARD                                                           

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
RESULTS OF SPECIAL MEETING (UNAUDITED)                                          

On May 21, 1997, a special meeting of shareholders of Dean Witter Intermediate  
Income Securities 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..............           10,884,145                                          
Against..........              160,845                                          
Abstain..........            1,186,270                                          

2) ELECTION OF TRUSTEES:                                                        

Michael Bozic                                                                   
For...............    11,347,656                                                
Withheld..........       883,604                                                

Charles A. Fiumefreddo                                                          
For...............    11,373,167                                                
Withheld..........       858,093                                                

Edwin J. Garn                                                                   
For...............    11,356,513                                                
Withheld..........       874,747                                                

John R. Haire                                                                   
For...............    11,357,271                                                
Withheld..........       873,989                                                

Wayne E. Hedien                                                                 
For...............    11,346,322                                                
Withheld..........       884,938                                                

Dr. Manuel H. Johnson                                                           
For...............    11,350,927                                                
Withheld..........       880,333                                                

Michael E. Nugent                                                               
For...............    11,363,138                                                
Withheld..........       868,122                                                

Philip J. Purcell                                                               
For...............    11,374,222                                                
Withheld..........       857,038                                                

John L. Schroeder                                                               
For...............    11,363,651                                                
Withheld..........       867,609                                                

3) APPROVAL OF A NEW INVESTMENT POLICY WITH RESPECT TO INVESTMENTS IN CERTAIN   
OTHER INVESTMENT COMPANIES:                                               

VOTE                  NO. OF SHARES                                             
----                 ----------------                                           

For.............        10,034,056                                              
Against.........           820,437                                              
Abstain.........         1,376,767                                              

4) RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP AS THE FUND'S          
INDEPENDENT ACCOUNTANTS:                                                  

VOTE                  NO. OF SHARES                                             
----                 ----------------                                           

For.............        11,084,649                                              
Against.........            97,023                                              
Abstain.........         1,049,588                                              

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997                                        

                                                        [Enlarge/Download Table]


PRINCIPAL                                                                                                                      
AMOUNT IN                                                                                     COUPON  MATURITY                 
THOUSANDS                                                                                     RATE      DATE          VALUE    
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                                               
             CORPORATE BONDS (83.3%)                                                                                           
             AUTOMOBILE - RENTALS (1.8%)                                                                                       
$   3,250    Hertz Corp.....................................................................  6.00%    01/15/03   $   3,138,687
                                                                                                                  -------------
             AUTOMOTIVE - FINANCE (4.2%)                                                                                       
    2,000    Ford Motor Credit Co...........................................................  6.50     02/28/02       1,990,760
    4,975    General Motors Acceptance Corp.................................................  8.40     10/15/99       5,177,383
                                                                                                                  -------------
                                                                                                                      7,168,143
                                                                                                                  -------------
             BANK HOLDING COMPANIES (2.8%)                                                                                     
    4,975    Star Bank N.A..................................................................  6.375    03/01/04       4,846,894
                                                                                                                  -------------
             BANKS (10.5%)                                                                                                     
    4,000    Bank One Corp..................................................................  7.60     05/01/07       4,160,440
    3,000    Banque Nationale De Paris (France).............................................  7.20     01/15/07       3,005,880
    5,045    Shawmut Bank Connecticut, N.A..................................................  8.625    02/15/05       5,529,320
    5,000    Societe Generale...............................................................  7.40     06/01/06       5,092,700
                                                                                                                  -------------
                                                                                                                     17,788,340
                                                                                                                  -------------
             BANKS - INTERNATIONAL (1.2%)                                                                                      
    2,000    Industrial Finance Corp. (Thailand) - 144A*....................................  7.00     08/04/07       1,972,700
                                                                                                                  -------------
             BANKS - THRIFT INSTITUTIONS (2.9%)                                                                                
    4,900    Long Island Savings Bank.......................................................  7.00     06/13/02       4,928,714
                                                                                                                  -------------
             BROKERAGE (4.7%)                                                                                                  
    3,000    Lehman Brothers Inc............................................................  6.125    02/01/01       2,950,950
    5,000    Salomon, Inc...................................................................  7.00     05/15/99       5,050,850
                                                                                                                  -------------
                                                                                                                      8,001,800
                                                                                                                  -------------
             CABLE & TELECOMMUNICATIONS (3.5%)                                                                                 
    4,000    News American Holdings, Inc....................................................  7.50     03/01/00       4,084,680
    2,000    Tele-Communications, Inc.......................................................  6.875    02/15/06       1,919,140
                                                                                                                  -------------
                                                                                                                      6,003,820
                                                                                                                  -------------
             CHEMICALS (1.2%)                                                                                                  
    2,000    Millennium America, Inc........................................................  7.00     11/15/06       1,970,620
                                                                                                                  -------------
             CHEMICALS - SPECIALTY (1.2%)                                                                                      
    2,000    W. R. Grace & Co...............................................................  7.40     02/01/00       2,045,400
                                                                                                                  -------------
             COMPUTERS (1.1%)                                                                                                  
    1,900    Oracle Corp....................................................................  6.91     02/15/07       1,889,645
                                                                                                                  -------------
             ELECTRONICS -                                                                                                     
             SEMICONDUCTORS/COMPONENTS (1.9%)                                                                                  
    3,000    Applied Materials Inc..........................................................  8.00     09/01/04       3,179,040
                                                                                                                  -------------
             FINANCIAL (4.2%)                                                                                                  
    2,000    Ikon Capital Inc...............................................................  6.73     06/15/01       2,009,320
    5,037    Nac Re Corp. ..................................................................  8.00     06/15/99       5,177,331
                                                                                                                  -------------
                                                                                                                      7,186,651
                                                                                                                  -------------

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997, CONTINUED                             

                                                        [Enlarge/Download Table]

PRINCIPAL                                                                                                                      
AMOUNT IN                                                                                     COUPON  MATURITY                 
THOUSANDS                                                                                     RATE      DATE          VALUE    
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                                               
             FOREIGN GOVERNMENT (3.0%)                                                                                         
$   5,250    Israel (State of)..............................................................  6.375%   12/15/05   $   5,025,563
                                                                                                                  -------------
             FUNERAL SERVICES (1.7%)                                                                                           
    3,000    Stewart Enterprises............................................................  6.70     12/01/03       2,956,290
                                                                                                                  -------------
             HEALTHCARE (2.9%)                                                                                                 
    4,975    Columbia/HCA Healthcare Corp...................................................  6.87     09/15/03       4,884,455
                                                                                                                  -------------
             LEISURE (1.8%)                                                                                                    
    2,900    Royal Caribbean Cruises, Ltd. (Liberia)........................................  8.25     04/01/05       3,071,520
                                                                                                                  -------------
             OIL INTEGRATED - INTERNATIONAL (3.0%)                                                                             
    5,000    Societe Nationale Elf Aquitaine (France).......................................  7.75     05/01/99       5,124,050
                                                                                                                  -------------
             PAPER & FOREST PRODUCTS (4.7%)                                                                                    
    3,000    Donohue Forest Products (Canada)...............................................  7.625    05/15/07       3,079,200
    4,900    Noranda Forest, Inc. (Canada)..................................................  6.875    11/15/05       4,824,785
                                                                                                                  -------------
                                                                                                                      7,903,985
                                                                                                                  -------------
             PHOTOGRAPHY/IMAGING (2.4%)                                                                                        
    4,000    Polaroid Corp..................................................................  8.00     03/15/99       4,101,320
                                                                                                                  -------------
             RETAIL STORES (1.8%)                                                                                              
    3,000    TJX Companies, Inc.............................................................  6.625    06/15/00       3,008,250
                                                                                                                  -------------
             STEEL & IRON (3.4%)                                                                                               
    6,000    Pohang Iron & Steel Co. (South Korea)..........................................  7.125    11/01/06       5,787,120
                                                                                                                  -------------
             TEXTILES (1.7%)                                                                                                   
    2,975    Burlington Industries, Inc.....................................................  7.25     09/15/05       2,953,699
                                                                                                                  -------------
             TRANSPORTATION (3.0%)                                                                                             
    5,000    Norfolk Southern Corp..........................................................  6.70     05/01/00       5,039,950
                                                                                                                  -------------
             UTILITIES - ELECTRIC (12.7%)                                                                                      
    2,000    Arizona Public Service Co......................................................  7.625    06/15/99       2,045,980
    2,000    Commonwealth Edison Co.........................................................  7.50     01/01/01       2,015,400
    4,700    Connecticut Light & Power Co...................................................  7.875    06/01/01       4,741,642
    5,000    DR Investments (England) - 144A*...............................................  7.45     05/15/07       5,113,650
    1,500    Niagara Mohawk Power Corp......................................................  8.00     06/01/04       1,534,125
    3,000    System Energy Resources, Inc...................................................  7.71     08/01/01       3,083,160
    3,000    Western Resources, Inc.........................................................  6.875    08/01/04       2,972,100
                                                                                                                  -------------
                                                                                                                     21,506,057
                                                                                                                  -------------

             TOTAL CORPORATE BONDS                                                                                             
             (IDENTIFIED COST $141,069,863)....................................................................     141,482,713
                                                                                                                  -------------

             U.S. GOVERNMENT & AGENCY OBLIGATIONS (13.3%)                                                                      
    1,700    Federal Home Loan Banks........................................................  7.05     03/24/04       1,690,293
    1,000    Federal Home Loan Mortgage Corp................................................  6.07     11/20/98       1,000,240
      136    Federal Home Loan Mortgage Corp................................................  8.50     12/01/01         138,357
       99    Federal Home Loan Mortgage Corp................................................  8.50     01/01/02         100,375
      299    Federal Home Loan Mortgage Corp................................................  8.50     07/01/02         303,290

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997, CONTINUED                             

                                                        [Enlarge/Download Table]

PRINCIPAL                                                                                                                      
AMOUNT IN                                                                                     COUPON  MATURITY                 
THOUSANDS                                                                                     RATE      DATE          VALUE    
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                                               
$     150    Federal Home Loan Mortgage Corp................................................  9.00%    08/01/02   $     153,747
    3,230    Federal National Mortgage Assoc................................................  5.30     03/11/98       3,225,284
       41    Federal National Mortgage Assoc................................................  8.50     12/01/01          42,204
    2,000    Federal National Mortgage Assoc................................................  7.55     06/10/04       2,024,180
    2,000    Federal National Mortgage Assoc................................................  7.73     08/26/04       2,036,580
    2,520    Private Export Funding Corp....................................................  6.86     04/30/04       2,550,164
    1,000    U.S. Treasury Note.............................................................  6.125    03/31/98       1,003,080
    1,425    U.S. Treasury Note.............................................................  7.75     11/30/99       1,475,787
    1,700    U.S. Treasury Note.............................................................  5.875    02/15/00       1,693,285
    5,000    U.S. Treasury Note.............................................................  6.875    05/15/06       5,153,400
                                                                                                                  -------------

             TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS                                                                        
             (IDENTIFIED COST $22,232,549).....................................................................      22,590,266
                                                                                                                  -------------

             SHORT-TERM INVESTMENT (1.9%)                                                                                      
             REPURCHASE AGREEMENT                                                                                              
    3,163    The Bank of New York (dated 08/29/97; proceeds $3,165,341) (a)                                                    
             (IDENTIFIED COST $3,163,496)...................................................  5.25     09/02/97       3,163,496
                                                                                                                  -------------

             TOTAL INVESTMENTS                                                                                                 
             (IDENTIFIED COST $166,465,908) (b).............................................  98.5%                 167,236,475

             OTHER ASSETS IN EXCESS OF LIABILITIES..........................................   1.5                    2,496,070
                                                                                            -------               -------------

             NET ASSETS..................................................................... 100.0%               $ 169,732,545
                                                                                            -------               -------------
                                                                                            -------               -------------

---------------------                                                           

*   Resale is restricted to qualified institutional investors.                
(a)  Collateralized by $3,863,343 Federal National Mortgage Assoc. 6.114% due   
05/01/22 valued at $3,226,766.                                        
(b)  The aggregate cost for federal income tax purposes approximates identified 
 cost. The aggregate gross unrealized appreciation is $1,776,246 and the
 aggregate gross unrealized depreciation is $1,005,679, resulting in net
unrealized appreciation of $770,567.                                  

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
FINANCIAL STATEMENTS                                                            

STATEMENT OF ASSETS AND LIABILITIES                                             
AUGUST 31, 1997                                                                 

                                                        [Enlarge/Download Table]
                                                                                                             
ASSETS:                                                                                                      
Investments in securities, at value (identified cost $166,465,908)............................  $167,236,475 
Receivable for:                                                                                              
    Interest..................................................................................     3,191,411 
    Shares of beneficial interest sold........................................................     1,890,398 
    Principal paydowns........................................................................        21,657 
Prepaid expenses and other assets.............................................................        37,219 
                                                                                                ------------ 
     TOTAL ASSETS.............................................................................   172,377,160 
                                                                                                ------------ 
LIABILITIES:                                                                                                 
Payable for:                                                                                                 
    Shares of beneficial interest repurchased.................................................     2,292,281 
    Plan of distribution fee..................................................................       121,084 
    Investment management fee.................................................................        87,953 
    Dividends and distributions to shareholders...............................................        39,006 
Accrued expenses and other payables...........................................................       104,291 
                                                                                                ------------ 
     TOTAL LIABILITIES........................................................................     2,644,615 
                                                                                                ------------ 
     NET ASSETS...............................................................................  $169,732,545 
                                                                                                ------------ 
                                                                                                ------------ 
COMPOSITION OF NET ASSETS:                                                                                   
Paid-in-capital...............................................................................  $180,124,413 
Net unrealized appreciation...................................................................       770,567 
Accumulated undistributed net investment income...............................................        52,362 
Accumulated net realized loss.................................................................   (11,214,797)
                                                                                                ------------ 
     NET ASSETS...............................................................................  $169,732,545 
                                                                                                ------------ 
                                                                                                ------------ 
CLASS A SHARES:                                                                                              
Net Assets....................................................................................    $1,854,754 
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE).....................................       193,352 
     NET ASSET VALUE PER SHARE................................................................        $ 9.59 
                                                                                                ------------ 
                                                                                                ------------ 

     MAXIMUM OFFERING PRICE PER SHARE,                                                                       
       (NET ASSET VALUE PLUS 4.44% OF NET ASSET                                                              
       VALUE).................................................................................        $10.02 
                                                                                                ------------ 
                                                                                                ------------ 
CLASS B SHARES:                                                                                              
Net Assets....................................................................................  $162,958,969 
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE).....................................    16,985,340 
     NET ASSET VALUE PER SHARE................................................................        $ 9.59 
                                                                                                ------------ 
                                                                                                ------------ 
CLASS C SHARES:                                                                                              
Net Assets....................................................................................       $38,430 
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE).....................................         3,999 
     NET ASSET VALUE PER SHARE................................................................        $ 9.61 
                                                                                                ------------ 
                                                                                                ------------ 
CLASS D SHARES:                                                                                              
Net Assets....................................................................................    $4,880,392 
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE).....................................       508,841 
     NET ASSET VALUE PER SHARE................................................................        $ 9.59 
                                                                                                ------------ 
                                                                                                ------------ 


STATEMENT OF OPERATIONS                                                                                      
FOR THE YEAR ENDED AUGUST 31, 1997*                                                                          

                                                                                                             
NET INVESTMENT INCOME:                                                                                       

INTEREST INCOME................................................................................  $13,337,718 
                                                                                                 ----------- 
EXPENSES                                                                                                     

Plan of distribution fee (Class B shares)......................................................    1,578,380 
Investment management fee......................................................................    1,116,809 
Transfer agent fees and expenses...............................................................      159,748 
Registration fees..............................................................................       63,901 
Professional fees..............................................................................       58,016 
Shareholder reports and notices................................................................       47,777 
Custodian fees.................................................................................       17,464 
Trustees' fees and expenses....................................................................       14,160 
Other..........................................................................................        8,926 
                                                                                                 ----------- 

     TOTAL EXPENSES............................................................................    3,065,181 
                                                                                                 ----------- 

     NET INVESTMENT INCOME.....................................................................   10,272,537 
                                                                                                 ----------- 

NET REALIZED AND UNREALIZED GAIN (LOSS):                                                                     
Net realized loss..............................................................................   (2,567,762)
Net change in unrealized depreciation..........................................................    6,828,218 
                                                                                                 ----------- 

     NET GAIN..................................................................................    4,260,456 
                                                                                                 ----------- 

NET INCREASE...................................................................................  $14,532,993 
                                                                                                 ----------- 
                                                                                                 ----------- 

---------------------                                                           
* Class A, Class C and Class D shares were issued July 28, 1997.                

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
FINANCIAL STATEMENTS, CONTINUED                                                 

STATEMENT OF CHANGES IN NET ASSETS                                              

                                                        [Enlarge/Download Table]

                                                                             FOR THE YEAR     FOR THE YEAR   
                                                                                ENDED             ENDED      
                                                                           AUGUST 31, 1997*  AUGUST 31, 1996 
------------------------------------------------------------------------------------------------------------ 
                                                                                                             
INCREASE (DECREASE) IN NET ASSETS:                                                                           

OPERATIONS:                                                                                                  
Net investment income....................................................  $     10,272,537  $    12,684,563 
Net realized loss........................................................        (2,567,762)        (788,498)
Net change in unrealized depreciation....................................         6,828,218       (6,023,150)
                                                                           ----------------  --------------- 

     NET INCREASE........................................................        14,532,993        5,872,915 
                                                                           ----------------  --------------- 

DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME                                                         
Class A shares...........................................................               (58)       --        
Class B shares...........................................................       (10,229,881)     (12,688,795)
Class C shares...........................................................               (83)       --        
Class D shares...........................................................           (25,048)       --        
                                                                           ----------------  --------------- 

     TOTAL DIVIDENDS.....................................................       (10,255,070)     (12,688,795)
                                                                           ----------------  --------------- 
Net decrease from transactions in shares of beneficial interest..........       (43,456,259)     (17,024,823)
                                                                           ----------------  --------------- 

     NET DECREASE........................................................       (39,178,336)     (23,840,703)

NET ASSETS:                                                                                                  
Beginning of period......................................................       208,910,881      232,751,584 
                                                                           ----------------  --------------- 

     END OF PERIOD                                                                                           
    (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $52,362 AND                                            
    $34,895, RESPECTIVELY)...............................................  $    169,732,545  $   208,910,881 
                                                                           ----------------  --------------- 
                                                                           ----------------  --------------- 

---------------------                                                           
* Class A, Class C, and Class D Shares were issued July 28, 1997.               

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997                                   

1. ORGANIZATION AND ACCOUNTING POLICIES                                         

Dean Witter Intermediate Income Securities (the "Fund") is registered under the 
Investment Company Act of 1940, as amended (the "Act"), as a diversified,       
open-end management investment company. The Fund's investment objective is high 
current income consistent with safety of principal. The Fund was organized as a 
Massachusetts business trust on September 1, 1988 and commenced operations on   
May 3, 1989. On July 28, 1997, the Fund commenced offering three additional     
classes of shares, with the then current shares, other than shares held by      
certain employee benefit plans established by Dean Witter Reynolds Inc. and its 
affiliate, SPS Transaction Services, Inc., designated as Class B shares. Shares 
held by those employee benefit plans prior to July 28, 1997 have been designated
Class D shares.                                                                 

The Fund offers Class A shares, Class B shares, Class C shares and Class D      
shares. The four classes are substantially the same except that most Class A    
shares are subject to a sales charge imposed at the time of purchase, some Class
A shares, and most Class B shares and Class C shares are subject to a contingent
deferred sales charge imposed on shares redeemed within one year, six years and 
one year, respectively. Class D shares are not subject to a sales charge.       
Additionally, Class A shares, Class B shares and Class C shares incur           
distribution expenses.                                                          

The preparation of financial statements in accordance with generally accepted   
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from   
those estimates.                                                                

The following is a summary of significant accounting policies:                  

A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the   
New York, American or other domestic or foreign stock exchange is valued at its 
latest sale price on that exchange prior to the time when assets are valued; if 
there were no sales that day, the security is valued at the latest bid price;   
(2) all other portfolio securities for which over-the-counter market quotations 
are readily available are valued at the latest available bid price; (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 and bid prices are not reflective of a security's market value, portfolio  
securities are valued at their fair value as determined in good faith under     
procedures established by and under the general supervision of the Trustees     
(valuation of debt securities for which market quotations are not readily       
available may be based upon current market prices of securities which are       
comparable in coupon, rating and maturity or an appropriate matrix utilizing    
similar factors); (4) certain portfolio securities may be valued by an outside  
pricing service approved                                                        

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997, CONTINUED                        

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, in determining what it believes is the fair valuation of the  
portfolio securities valued by such pricing service; and (5) short-term debt    
securities having a maturity date of more than sixty days at time of purchase   
are valued on a mark-to-market basis until sixty days prior to maturity and     
thereafter at amortized cost based on their value on the 61st day. Short-term   
debt securities having a maturity date of sixty days or less at the time of     
purchase are valued at amortized cost.                                          

B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the 
trade date (date the order to buy or sell is executed). Realized gains and      
losses on security transactions are determined on the identified cost method.   
Dividend income and other distributions are recorded on the ex-dividend date.   
Discounts are accreted over the life of the respective securities. Interest     
income is accrued daily.                                                        

C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than        
distribution fees), and realized and unrealized gains and losses are allocated  
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective  
class.                                                                          

D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the      
requirements of the Internal Revenue Code applicable to regulated investment    
companies and to distribute all of its taxable income to its shareholders.      
Accordingly, no federal income tax provision is required.                       

E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the record date. The amount of dividends   
and distributions from net investment income and net realized capital gains are 
determined in accordance with federal income tax regulations which may differ   
from generally accepted accounting principles. These "book/tax" differences are 
either considered temporary or permanent in nature. To the extent these         
differences are permanent in nature, such amounts are reclassified within the   
capital accounts based on their federal tax-basis treatment; temporary          
differences do not require 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.  

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997, CONTINUED                        

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, calculated 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: 0.60% of the portion of the daily net assets not exceeding $500   
million; 0.50% of the portion of daily net assets exceeding $500 million but not
exceeding $750 million; 0.40% of the portion of the daily net assets exceeding  
$750 million but not exceeding $1 billion; and 0.30% of the portion of the daily
net assets exceeding $1 billion.                                                

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.                          

3. PLAN OF DISTRIBUTION                                                         

Shares of the Fund are distributed by Dean Witter Distributors Inc. (the        
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a  
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The Plan
provides that the Fund will pay the Distributor a fee which is accrued daily and
paid monthly at the following annual rates: (i) Class A - 0.25% of the average  
daily net assets of Class A; (ii) Class B - 0.85% of the lesser of: (a) the     
average daily aggregate gross sales of the Class B shares since the inception of
the Fund (not including reinvestment of dividend or capital gain distributions) 
less the average daily aggregate net asset value of the Class B shares redeemed 
since the Fund's inception upon which a contingent deferred sales charge had    
been imposed or waived; or (b) the average daily net assets of Class B; and     
(iii) Class C - 0.85% of the average daily net assets of Class C. In the case of
Class A shares, amounts paid under the Plan are paid to the Distributor for     
services provided. In the case of Class B and Class C shares, amounts paid under
the Plan are paid to the Distributor for services provided and the expenses     
borne by it and others in the distribution of the shares of these Classes,      
including the payment of commissions for sales of these Classes and incentive   
compensation to, and expenses of, the account executives of Dean Witter Reynolds
Inc. ("DWR"), an affiliate of the Investment Manager and Distributor, and others
who engage in or support distribution of the shares or who service shareholder  
accounts, including overhead and telephone expenses; printing and distribution  
of prospectuses and reports used in                                             

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997, CONTINUED                        

connection with the offering of these shares to other than current shareholders;
and preparation, printing and distribution of sales literature and advertising  
materials. In addition, the Distributor may utilize fees paid pursuant to the   
Plan, in the case of Class B shares, to compensate DWR and other selected       
broker-dealers for their opportunity costs in advancing such amounts, which     
compensation would be in the form of a carrying charge on any unreimbursed      
expenses.                                                                       

In the case of Class B shares, provided that the Plan continues in effect, any  
cumulative expenses incurred by the Distributor but not yet recovered may be    
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon        
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors    
upon redemption of shares, if for any reason the Plan is terminated, the        
Trustees will consider at that time the manner in which to treat such expenses. 
The Distributor has advised the Fund that such excess amounts, including        
carrying charges, totaled $5,734,753 at August 31, 1997.                        

In the case of Class A shares and Class C shares, expenses incurred pursuant to 
the Plan in any calendar year in excess of 0.25% or 0.85% of the average daily  
net assets of Class A or Class C, respectively, will not be reimbursed by the   
Fund through payments in any subsequent year, except that expenses representing 
a gross sales credit to account executives may be reimbursed in the subsequent  
calendar year. For the year ended August 31, 1997, the distribution fee was     
accrued for Class A shares and Class C shares at the annual rate of 0.25% and   
0.85%, respectively.                                                            

The Distributor has informed the Fund that for the year ended August 31, 1997,  
it received contingent deferred sales charges from certain redemptions of the   
Fund's Class B shares of $285,035, and received $300 in front-end sales charges 
from sales of the Fund's Class A shares. The respective shareholders pay such   
charges which are not an expense of the Fund.                                   

4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES                       

The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended August 31, 1997, aggregated          
$170,907,463 and $188,266,523, respectively. Included in the aforementioned are 
purchases and sales of U.S. Government securities of $50,361,139 and            
$66,518,238, respectively.                                                      

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997, CONTINUED                        

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 $2,000.                              

The Fund has an unfunded noncontributory defined benefit pension plan covering  
all independent Trustees of the Fund who will have served as independent        
Trustees 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. At August 31, 1997, the Fund had an accrued pension liability of    
$48,811 which is included in accrued expenses in the Statement of Assets and    
Liabilities. Aggregate pension costs for the year ended August 31, 1997 included
in Director's fees and expenses in the Statement of Operations amounted to      
$3,294.                                                                         

5. SHARES OF BENEFICIAL INTEREST+                                               

Transactions in shares of beneficial interest were as follows:                  

                                                        [Enlarge/Download Table]

                                                                          FOR THE YEAR                  FOR THE YEAR        
                                                                             ENDED                         ENDED            
                                                                        AUGUST 31, 1997               AUGUST 31, 1996       
                                                                  ----------------------------   -------------------------- 
                                                                    SHARES          AMOUNT         SHARES         AMOUNT    
                                                                  -----------   --------------   -----------   ------------ 
                                                                                                                            
CLASS A SHARES*                                                                                                             
Sold.............................................................     193,347   $    1,854,318       --             --      
Reinvestment of dividends........................................           5               54       --             --      
                                                                  -----------   --------------   -----------   ------------ 
Net increase - Class A...........................................     193,352        1,854,372       --             --      
                                                                  -----------   --------------   -----------   ------------ 
CLASS B SHARES                                                                                                              
Sold.............................................................   8,499,296       80,974,547     5,122,000   $ 49,165,458 
Reinvestment of dividends........................................     587,192        5,604,585       725,423      6,970,644 
Redeemed......................................................... (13,839,797)    (131,962,423)   (7,617,219)   (73,160,925)
                                                                  -----------   --------------   -----------   ------------ 
Net decrease - Class B...........................................  (4,753,309)     (45,383,291)   (1,769,796)   (17,024,823)
                                                                  -----------   --------------   -----------   ------------ 
CLASS C SHARES*                                                                                                             
Sold.............................................................       3,993           38,561       --             --      
Reinvestment of dividends........................................           6               56       --             --      
                                                                  -----------   --------------   -----------   ------------ 
Net increase - Class C...........................................       3,999           38,617       --             --      
                                                                  -----------   --------------   -----------   ------------ 
CLASS D SHARES*                                                                                                             
Sold.............................................................      10,611          102,479       --             --      
Reinvestment of dividends........................................       2,476           23,704       --             --      
Redeemed.........................................................      (9,547)         (92,140)      --             --      
                                                                  -----------   --------------   -----------   ------------ 
Net increase - Class D...........................................       3,540           34,043       --             --      
                                                                  -----------   --------------   -----------   ------------ 
Net decrease in Fund.............................................  (4,552,418)  $  (43,456,259)   (1,769,796)  $(17,024,823)
                                                                  -----------   --------------   -----------   ------------ 
                                                                  -----------   --------------   -----------   ------------ 

---------------------                                                           
+   On July 28, 1997, 505,301 shares representing $4,891,310 were transferred 
to Class D.                                                           
*   For the period July 28, 1997 (issue date) through August 31, 1997.        

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997, CONTINUED                        

6. FEDERAL INCOME TAX STATUS                                                    

At August 31, 1997, the Fund had a net capital loss carryover of approximately  
$9,320,000, which may be used to offset future capital gains to the extent      
provided by regulations, which is available through August 31 of the following  
years:                                                                          

                                                                [Download Table]

     AMOUNTS IN THOUSANDS      
-------------------------------
  2003       2004       2005   
---------  ---------  ---------
                               
$   6,656  $     313  $   2,351
---------  ---------  ---------
---------  ---------  ---------

Capital losses incurred after October 31 ("post-October" losses) within the     
taxable year are deemed to arise on the first business day of the Fund's next   
taxable year. The Fund incurred and will elect to defer net capital losses of   
approximately $1,877,000 during fiscal 1997.                                    

As of August 31, 1997, the Fund had temporary book/tax differences primarily    
attributable to post-October losses.                                            

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
FINANCIAL HIGHLIGHTS                                                            

Selected ratios and per share data for a share of beneficial interest           
outstanding throughout each period:                                             

                                                        [Enlarge/Download Table]

                                                                                                                    FOR THE         
                                                                                                                    PERIOD          
                                                   FOR THE YEAR ENDED AUGUST 31                                   MAY 3, 1989*      
                  ----------------------------------------------------------------------------------------------   THROUGH          
                   1997**++      1996        1995        1994        1993        1992        1991        1990    AUGUST 31, 1989    
--------------------------------------------------------------------------------------------------------------------------------    
                                                                                                                                    
CLASS B SHARES                                                                                                                      

PER SHARE                                                                                                                           
OPERATING                                                                                                                           
PERFORMANCE:                                                                                                                        

Net asset value,                                                                                                                    
 beginning of                                                                                                                       
 period.......... $     9.39  $     9.69  $     9.51  $    10.26  $    10.05  $     9.59  $     9.42  $     9.98      $10.00        
                  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------      ------        

Net investment                                                                                                                      
 income..........       0.53        0.55        0.59        0.58        0.62        0.70        0.79        0.86        0.28        

Net realized and                                                                                                                    
 unrealized gain                                                                                                                    
 (loss)..........       0.20       (0.30)       0.19       (0.73)       0.20        0.46        0.17       (0.55)      (0.02)       
                  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------      ------        

Total from                                                                                                                          
 investment                                                                                                                         
 operations......       0.73        0.25        0.78       (0.15)       0.82        1.16        0.96        0.31        0.26        
                  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------      ------        

Less dividends                                                                                                                      
 and                                                                                                                                
 distributions                                                                                                                      
 from:                                                                                                                              
   Net investment                                                                                                                   
   income........      (0.53)      (0.55)      (0.59)      (0.56)      (0.61)      (0.70)      (0.79)      (0.86)      (0.28)       
   Net realized                                                                                                                     
   gain..........     --          --           (0.01)      (0.04)     --          --          --           (0.01)       --          
                  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------      ------        

Total dividends                                                                                                                     
 and                                                                                                                                
 distributions...      (0.53)      (0.55)      (0.60)      (0.60)      (0.61)      (0.70)      (0.79)      (0.87)       (0.28)      
                  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------       ------       

Net asset value,                                                                                                                    
 end of period... $     9.59  $     9.39  $     9.69  $     9.51  $    10.26  $    10.05  $     9.59  $     9.42        $9.98       
                  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------       ------       
                  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------       ------       

TOTAL INVESTMENT                                                                                                                    
RETURN+..........       7.93%       2.58%       8.56%      (1.50)%       8.43%      12.58%      10.78%       3.22%       2.57%(1)   

RATIOS TO AVERAGE                                                                                                                   
NET ASSETS:                                                                                                                         
Expenses.........       1.65%       1.62%       1.63%       1.63%       1.62%       1.69%       1.69%       1.75%        1.42%(2)(3)

Net investment                                                                                                                      
 income..........       5.52%       5.69%       6.23%       5.80%       6.12%       7.11%       8.49%       8.78%        8.18%(2)(3)

SUPPLEMENTAL DATA:                                                                                                                  
Net assets, end                                                                                                                     
 of period, in                                                                                                                      
 thousands.......   $162,959    $208,911    $232,752    $245,750    $254,431    $187,285    $115,204    $114,086      $69,946       

Portfolio                                                                                                                           
 turnover rate...         98%        115%        114%        122%        132%         93%        150%        135%          30%(1)   

---------------------                                                           
*   Commencement of operations.                                               
**   Prior to July 28, 1997, the Fund issued one class of shares. All shares of 
the Fund held prior to that date, other than shares held by certain   
 employee benefit plans established by Dean Witter Reynolds Inc. and its
    affiliate, SPS Transaction Services, Inc., have been designated as Class B
    shares. Shares held by those employee benefit plans prior to July 28, 1997
have been designated Class D shares.                                  
++   The per share amounts were computed using an average number of shares      
outstanding during the period.                                        
 +   Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.                
(1)  Not annualized.                                                            
(2)  Annualized.                                                                
(3)  If the Fund had borne all the expenses that were assumed or waived by the  
Investment Manager, the above expense and net investment income ratios
would have been 2.15% and 7.44%, respectively.                        

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
FINANCIAL HIGHLIGHTS, CONTINUED                                                 

                                                                [Download Table]

                                                               FOR THE PERIOD 
                                                               JULY 28, 1997* 
                                                                  THROUGH     
                                                                 AUGUST 31,   
                                                                   1997++     
------------------------------------------------------------------------------
                                                                              
CLASS A SHARES                                                                
PER SHARE OPERATING PERFORMANCE:                                              
Net asset value, beginning of period........................      $  9.68     
                                                                   ------     
Net investment income.......................................         0.06     
Net realized and unrealized loss............................        (0.10)    
                                                                   ------     
Total from investment operations............................        (0.04)    
                                                                   ------     
Less dividends from net investment income...................        (0.05)    
                                                                   ------     
Net asset value, end of period..............................      $  9.59     
                                                                   ------     
                                                                   ------     
TOTAL INVESTMENT RETURN+....................................        (0.46)%(1)
RATIOS TO AVERAGE NET ASSETS:                                                 
Expenses....................................................         2.18%(2) 
Net investment income.......................................         6.10%(2) 
SUPPLEMENTAL DATA:                                                            
Net assets, end of period, in thousands.....................       $1,855     
Portfolio turnover rate.....................................           98%    

CLASS C SHARES                                                                
PER SHARE OPERATING PERFORMANCE:                                              
Net asset value, beginning of period........................      $  9.68     
                                                                   ------     
Net investment income.......................................         0.04     
Net realized and unrealized loss............................        (0.07)    
                                                                   ------     
Total from investment operations............................        (0.03)    
                                                                   ------     
Less dividends from net investment income...................        (0.04)    
                                                                   ------     
Net asset value, end of period..............................      $  9.61     
                                                                   ------     
                                                                   ------     
TOTAL INVESTMENT RETURN+....................................        (0.31)%(1)
RATIOS TO AVERAGE NET ASSETS:                                                 
Expenses....................................................         2.02%(2) 
Net investment income.......................................         4.22%(2) 
SUPPLEMENTAL DATA:                                                            
Net assets, end of period, in thousands.....................          $38     
Portfolio turnover rate.....................................           98%    

---------------------                                                           
*   The date shares were first issued.                                        
++   The per share amounts were computed using an average number of shares      
outstanding during the period.                                        
 +   Does not reflect the deduction of sales charge. 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 

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
FINANCIAL HIGHLIGHTS, CONTINUED                                                 

                                                                [Download Table]

                                                               FOR THE PERIOD 
                                                               JULY 28, 1997* 
                                                                  THROUGH     
                                                                 AUGUST 31,   
                                                                   1997++     
------------------------------------------------------------------------------
                                                                              
CLASS D SHARES                                                                

PER SHARE OPERATING PERFORMANCE:                                              

Net asset value, beginning of period........................      $  9.68     
                                                                   ------     

Net investment income.......................................         0.05     

Net realized and unrealized loss............................        (0.09)    
                                                                   ------     

Total from investment operations............................        (0.04)    
                                                                   ------     

Less dividends from net investment income...................        (0.05)    
                                                                   ------     

Net asset value, end of period..............................      $  9.59     
                                                                   ------     
                                                                   ------     

TOTAL INVESTMENT RETURN+....................................        (0.44)%(1)

RATIOS TO AVERAGE NET ASSETS:                                                 
Expenses....................................................         1.11%(2) 

Net investment income.......................................         5.91%(2) 

SUPPLEMENTAL DATA:                                                            
Net assets, end of period, in thousands.....................       $4,880     

Portfolio turnover rate.....................................           98%    


---------------------                                                           
*   The date shares were first issued.                                        
++   The per share amounts were computed using an average number of shares      
outstanding during the period.                                        
+   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 

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
REPORT OF INDEPENDENT ACCOUNTANTS                                               

TO THE SHAREHOLDERS AND TRUSTEES                                                
OF DEAN WITTER INTERMEDIATE INCOME SECURITIES                                   

In our opinion, the accompanying statement of assets and liabilities, including 
the portfolio of investments, and the related statements of operations and of   
changes in net assets and the financial highlights present fairly, in all       
material respects, the financial position of Dean Witter Intermediate Income    
Securities (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 periods      
presented, 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 10, 1997                                                                

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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                                   

Rochelle G. Siegel                                                              
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                                                        

This report is submitted for the general information of shareholders of the     
Fund. For more detailed information about the Fund, its officers and trustees,  
fees, expenses and other pertinent information, please see the prospectus of    
the Fund.                                                                       

This report is not authorized for distribution to prospective investors in the  
Fund unless preceded or accompanied by an effective prospectus.                 

DEAN WITTER                                                                     
INTERMEDIATE                                                                    
INCOME                                                                          
SECURITIES                                                                      

ANNUAL REPORT                                                                   
AUGUST 31, 1997                                                                 

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DEAN WITTER INTERMEDIATE INCOME SECURITIES              Two World Trade Center, 
                                                       New York,New York 10048

LETTER TO THE SHAREHOLDERS February 28, 1998                                    

DEAR SHAREHOLDER:                                                               

Over the past six months, interest rates trended lower and inflation remained   
benign, even slowing, despite a robust economy and tight labor markets. Turmoil 
in the Asian financial markets brought with it a flight to quality in U.S.      
government securities amid concerns that demand for U.S. products would slow,   
eventually weakening the U.S. economy. This combination of factors pushed       
interest rates on intermediate- and longer-term maturities down far more than   
on shorter-term Treasuries.                                                     

The markets anticipated continued low interest rates throughout 1998 due to the 
potential for a balanced federal budget and fallout from the financial          
disruptions in Asia. Yet as 1998 began, the outlook for Asia appeared to        
brighten and economic activity continued at a rapid pace, reducing the          
probability of lower interest rates in the near term. As a result, interest     
rates began to retrace their recent path, rising by 25 to 35 basis points by    
the end of February. On February 27, 1998, five-year Treasuries yielded 5.58    
percent while ten-year notes yielded 5.63 percent, still down 64 and 72 basis   
points, respectively, from where they were in September.                        

PERFORMANCE AND PORTFOLIO                                                       

For the six-month period ended February 28, 1998, the Fund's Class A, B, C, and 
D shares had total returns of 4.17 percent, 3.73 percent, 3.49 percent and 4.17 
percent, respectively versus 4.60 and 4.94 percent for the Lehman Intermediate  
Government/Corporate Bond Index (which tracks U.S. government and corporate     
bonds with maturities of one to ten years) and the Lipper Intermediate          
Investment Grade Debt Index. For the six months ended February 28, 1998, the    
Lehman Intermediate Corporate Bond Index returned 4.72 percent. Performance of  
the Fund's four share classes varies because of differing sales charges and     
expenses.                                                                       

The Fund's performance was aided by modest maturity extensions that allowed it  
to benefit to an extent from the decline in interest rates. However,            
performance was negatively affected by Korean debt                              

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      

LETTER TO THE SHAREHOLDERS February 28, 1998, continued                         

investments which the Fund purchased before the Korean currency suddenly lost   
value in November-December. While these securities have since appreciated       
significantly from their year-end lows, they remain substantially below their   
purchase price. We believe that our investments in Korean debt may have a       
positive impact on performance in 1998, continuing to improve in price over the 
coming months as Korea seeks solutions to its economic problems.                

With credit risk heightened by Asia's potential impact on the U.S. economy, the 
Fund increased its U.S. Government and Agency obligations allocation from 14    
percent of invested assets to nearly 17 percent. The Fund reduced its           
allocations to industrials and lower-rated utilities while marginally           
increasing its bank and finance holdings. In an attempt to protect the          
portfolio from possible future credit risk, the Fund reduced its exposure to    
BBB-rated corporates in favor of higher-rated corporates and Treasuries. On     
February 28, 1998, approximately 31 percent of the invested portion of the      
portfolio was rated Baa by Moody's and BBB by Standard & Poor's, compared to    
just over 36 percent on August 29, 1997. At the end of the period, the average  
maturity of the Fund, including cash reserves, was 5.37 years, the average      
duration (a measure of a portfolio's sensitivity to interest-rate changes) was  
4.09 years and the average quality rating was A3.                               

LOOKING AHEAD                                                                   

In the near term we believe that corporate yields are likely to remain          
volatile. This has been seen in recent months as investor concerns about future 
earnings have pushed yields on BBB-rated corporates higher and widened the      
yield differentials between these bonds and comparable maturity Treasuries by   
as much as 0.5 percentage points. The near-record supply of new corporate debt  
appears to have further contributed to yield pressures on many corporate bonds. 

As 1998 progresses, we expect that yield differentials between shorter- and     
longer-maturity securities may return to their historical norms, with investors 
adjusting to a stable interest-rate environment within a healthy economy.       

We appreciate your ongoing support of Dean Witter Intermediate Income           
Securities and look forward to continuing to serve your investment needs.       

Very truly yours,                                                               

/S/ CHARLES A. FIUMEFREDDO                                                      
CHARLES A. FIUMEFREDDO                                                          
Chairman of the Board                                                           

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      

PORTFOLIO OF INVESTMENTS February 28, 1998 (unaudited)                          

                                                        [Enlarge/Download Table]

PRINCIPAL                                                                            
AMOUNT IN                                          COUPON    MATURITY                
THOUSANDS                                           RATE       DATE         VALUE    
-------------------------------------------------------------------------------------
                                                                                     
            CORPORATE BONDS (81.6)                                                   
            Automobile - Rentals (2.1%)                                              
$  3,250    Hertz Corp. .........................  6.00  %   01/15/03    $ 3,219,092 
                                                                         ----------- 

            Automotive - Finance (3.3%)                                              
   4,975    General Motors Acceptance Corp. .....  8.40      10/15/99      5,156,985 
                                                                         ----------- 

            Bank Holding Companies (6.6%)                                            
   4,900    Citicorp. ...........................  7.75      06/15/06      5,322,576 
   4,975    Star Bank N.A. ......................  6.375     03/01/04      4,990,373 
                                                                         ----------- 
                                                                          10,312,949 
                                                                         ----------- 
            Banks (13.6%)                                                            
   4,000    Bank One Corp. ......................  7.60      05/01/07      4,344,534 
   3,000    Banque Nationale De Paris (France)...  7.20      01/15/07      3,093,900 
   3,000    Capital One Bank.....................  6.375     02/15/03      2,972,670 
   5,045    Shawmut Bank Connecticut, N.A. ......  8.625     02/15/05      5,675,221 
   5,000    Societe Generale N.A. Inc. ..........  7.40      06/01/06      5,211,450 
                                                                         ----------- 
                                                                          21,297,775 
                                                                         ----------- 
            Brokerage (4.0%)                                                         
   6,200    Salomon, Inc. .......................  6.50      03/01/00      6,234,782 
                                                                         ----------- 

            Cable & Telecommunications (2.6%)                                        
   4,000    News American Holdings, Inc. ........  7.50      03/01/00      4,098,600 
                                                                         ----------- 

            Chemicals (1.3%)                                                         
   2,000    Millennium America, Inc. ............  7.00      11/15/06      2,016,040 
                                                                         ----------- 

            Chemicals - Specialty (1.3%)                                             
   2,000    W. R. Grace & Co. ...................  7.40      02/01/00      2,048,420 
                                                                         ----------- 

            Computers (1.2%)                                                         
   1,900    Oracle Corp. ........................  6.91      02/15/07      1,933,611 
                                                                         ----------- 

            Financial (4.6%)                                                         
   2,000    Ikon Capital Inc. ...................  6.73      06/15/01      2,035,120 
   5,037    Nac Re Corp. ........................  8.00      06/15/99      5,159,399 
                                                                         ----------- 
                                                                           7,194,519 
                                                                         ----------- 
            Foreign Government (3.3%)                                                
   5,250    Israel (State of)....................  6.375     12/15/05      5,138,438 
                                                                         ----------- 

            Funeral Services (1.9%)                                                  
   3,000    Stewart Enterprises, Inc. ...........  6.70      12/01/03      3,036,270 
                                                                         ----------- 

            Healthcare (1.2%)                                                        
   2,000    Columbia/HCA Healthcare Corp. .......  7.15      03/30/04      1,916,040 
                                                                         ----------- 

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      

PORTFOLIO OF INVESTMENTS February 28, 1998 (unaudited) continued                

                                                        [Enlarge/Download Table]

PRINCIPAL                                                                            
AMOUNT IN                                          COUPON    MATURITY                
THOUSANDS                                           RATE       DATE         VALUE    
-------------------------------------------------------------------------------------
                                                                                     
            Leisure (1.8%)                                                           
$  2,900    Mirage Resorts, Inc. ................  6.75  %   02/01/08    $ 2,864,098 
                                                                         ----------- 

            Oil & Gas (1.3%)                                                         
   2,000    Williams Companies, Inc. - 144A*.....  5.95      02/15/00      1,991,200 
                                                                         ----------- 

            Oil Integrated - International (3.3%)                                    
   5,000    Societe Nationale Elf Aquitaine                                          
            (France).............................  7.75      05/01/99      5,108,200 
                                                                         ----------- 

            Oil Refineries (2.0%)                                                    
   3,000    Tosco Corp. .........................  7.625     05/15/06      3,195,450 
                                                                         ----------- 

            Paper & Forest Products (5.9%)                                           
   4,000    Donohue Forest Products (Canada).....  7.625     05/15/07      4,283,360 
   4,949    Noranda Forest, Inc. (Canada)........  6.875     11/15/05      4,952,860 
                                                                         ----------- 
                                                                           9,236,220 
                                                                         ----------- 
            Retail Stores (1.9%)                                                     
   3,000    TJX Companies, Inc. .................  6.625     06/15/00      3,026,700 
                                                                         ----------- 

            Semiconductor Equipment (2.9%)                                           
   4,500    Applied Materials, Inc. .............  6.75      10/15/07      4,539,465 
                                                                         ----------- 

            Steel & Iron (2.2%)                                                      
   4,000    Pohang Iron & Steel Co. (South                                           
            Korea)...............................  7.125     11/01/06      3,354,640 
                                                                         ----------- 

            Telecommunications (1.4%)                                                
   2,000    WorldCom, Inc. ......................  7.75      04/01/07      2,158,720 
                                                                         ----------- 

            Textiles (1.9%)                                                          
   2,975    Burlington Industries, Inc. .........  7.25      09/15/05      3,033,161 
                                                                         ----------- 

            Utilities - Electric (10.0%)                                             
   2,000    Arizona Public Service Co. ..........  7.625     06/15/99      2,038,260 
   2,000    Commonwealth Edison Co. .............  7.50      01/01/01      2,013,500 
   5,000    DR Investments (England) - 144A*.....  7.45      05/15/07      5,340,750 
   3,000    System Energy Resources, Inc. .......  7.71      08/01/01      3,109,230 
   3,000    Western Resources, Inc. .............  6.875     08/01/04      3,066,000 
                                                                         ----------- 
                                                                          15,567,740 
                                                                         ----------- 

            TOTAL CORPORATE BONDS                                                    
            (Identified Cost $126,467,445)............................   127,679,115 
                                                                         ----------- 

            U.S. GOVERNMENT & AGENCY OBLIGATIONS (16.4%)                             
   1,000    Federal Home Loan Banks..............  6.25      08/07/00      1,003,080 
     111    Federal Home Loan Mortgage Corp. ....  8.50      12/01/01        112,818 
      80    Federal Home Loan Mortgage Corp. ....  8.50      01/01/02         80,795 

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      

PORTFOLIO OF INVESTMENTS February 28, 1998 (unaudited) continued                

                                                        [Enlarge/Download Table]

PRINCIPAL                                                                            
AMOUNT IN                                          COUPON    MATURITY                
THOUSANDS                                           RATE       DATE         VALUE    
-------------------------------------------------------------------------------------
                                                                                     
$    235    Federal Home Loan Mortgage Corp. ....  8.50  %   07/01/02    $   238,653 
     126    Federal Home Loan Mortgage Corp. ....  9.00      08/01/02        129,132 
   3,230    Federal National Mortgage Assoc. ....  5.30      03/11/98      3,229,774 
   1,000    Federal National Mortgage Assoc. ....  6.00      12/15/00      1,000,180 
      36    Federal National Mortgage Assoc. ....  8.50      12/01/01         37,437 
   2,000    Federal National Mortgage Assoc. ....  7.55      06/10/04      2,036,220 
   2,000    Federal National Mortgage Assoc. ....  7.73      08/26/04      2,047,160 
   2,340    Private Export Funding Corp. ........  6.86      04/30/04      2,414,880 
   4,000    U.S. Treasury Note...................  6.25      03/31/99      4,030,280 
   1,000    U.S. Treasury Note...................  6.375     05/15/00      1,016,390 
   2,000    U.S. Treasury Note...................  5.75      10/31/00      2,008,780 
   1,000    U.S. Treasury Note...................  6.625     06/30/01      1,030,690 
   2,000    U.S. Treasury Note...................  5.875     09/30/02      2,019,680 
   3,000    U.S. Treasury Note...................  6.50      05/15/05      3,146,460 
                                                                         ----------- 

            TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS                               
            (Identified Cost $25,231,640).............................    25,582,409 
                                                                         ----------- 

            SHORT-TERM INVESTMENT (0.6%)                                             
            REPURCHASE AGREEMENT                                                     
     954    The Bank of New York (dated 02/27/98;                                    
             proceeds $954,714) (a)                                                  
             (Identified Cost $954,282)..........  5.438     03/02/98        954,282 
                                                                         ----------- 

            TOTAL INVESTMENTS                                                        
            (Identified Cost $152,653,367) (b).................  98.6%   154,215,806 

            OTHER ASSETS IN EXCESS OF LIABILITIES...............  1.4      2,115,374 
                                                                -----    ----------- 

            NET ASSETS........................................  100.0%  $156,331,180 
                                                                =====   ============ 


---------------------                                                           
*  Resale is restricted to qualified institutional investors.                 
(a) Collateralized by $111,907 Federal Home Loan Banks 7.35% due 09/19/11       
valued at $128,933, $775,000 Federal National Mortgage Assoc. 0.00% due 
03/17/98 valued at $772,742 and $72,363 Federal National Mortgage Assoc.
0.00% due 04/28/98 valued at $71,692.                                   
(b) The aggregate cost for federal income tax purposes approximates identified  
cost. The aggregate gross unrealized appreciation is $2,938,296 and the 
aggregate gross unrealized depreciation is $1,375,857, resulting in net 
unrealized appreciation of $1,562,439.                                  

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      

FINANCIAL STATEMENTS                                                            

                                                                [Download Table]
                                                                           
STATEMENT OF ASSETS AND LIABILITIES                                        
February 28, 1998 (unaudited)                                              

ASSETS:                                                                    
Investments in securities, at value                                        
 (identified cost $152,653,367).............................  $154,215,806 
Receivable for:                                                            
    Investments sold........................................     4,213,284 
    Interest................................................     2,851,210 
    Shares of beneficial interest sold......................        81,018 
    Principal paydowns......................................        11,775 
Prepaid expenses and other assets...........................        28,017 
                                                              ------------ 

    TOTAL ASSETS............................................   161,401,110 
                                                              ------------ 

LIABILITIES:                                                               
Payable for:                                                               
    Investments purchased...................................     4,135,708 
    Shares of beneficial interest repurchased...............       608,202 
    Plan of distribution fee................................       104,822 
    Investment management fee...............................        77,011 
    Dividends and distributions to shareholders.............        46,162 
Accrued expenses and other payables.........................        98,025 
                                                              ------------ 

    TOTAL LIABILITIES.......................................     5,069,930 
                                                              ------------ 

    NET ASSETS..............................................  $156,331,180 
                                                              ============ 

COMPOSITION OF NET ASSETS:                                                 
Paid-in-capital.............................................  $164,974,378 
Net unrealized appreciation.................................     1,562,439 
Accumulated undistributed net investment income.............        24,796 
Accumulated net realized loss...............................   (10,230,433)
                                                              ------------ 

    NET ASSETS..............................................  $156,331,180 
                                                              ============ 

CLASS A SHARES:                                                            
Net Assets..................................................    $1,041,360 
Shares Outstanding (unlimited authorized, $.01 par value)...       107,356 

    NET ASSET VALUE PER SHARE...............................         $9.70 
                                                              ============ 

    MAXIMUM OFFERING PRICE PER SHARE,                                      
     (net asset value plus 4.44% of net asset value)........        $10.13 
                                                              ============ 

CLASS B SHARES:                                                            
Net Assets..................................................  $149,306,757 
Shares Outstanding (unlimited authorized, $.01 par value)...    15,400,533 

    NET ASSET VALUE PER SHARE...............................         $9.69 
                                                              ============ 

CLASS C SHARES:                                                            
Net Assets..................................................      $221,502 
Shares Outstanding (unlimited authorized, $.01 par value)...        22,853 

    NET ASSET VALUE PER SHARE...............................         $9.69 
                                                              ============ 

CLASS D SHARES:                                                            
Net Assets..................................................    $5,761,561 
Shares Outstanding (unlimited authorized, $.01 par value)...       594,380 

    NET ASSET VALUE PER SHARE...............................         $9.69 
                                                              ============ 

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      

FINANCIAL STATEMENTS, continued                                                 

                                                                [Download Table]
                                                                        
STATEMENT OF OPERATIONS                                                 
For the six months ended February 28, 1998 (unaudited)                  

NET INVESTMENT INCOME:                                                  
INTEREST INCOME.............................................  $5,772,405
                                                              ----------

EXPENSES                                                                
Plan of distribution fee (Class A shares)...................       1,174
Plan of distribution fee (Class B shares)...................     669,497
Plan of distribution fee (Class C shares)...................         656
Investment management fee...................................     493,708
Transfer agent fees and expenses............................      86,564
Registration fees...........................................      72,177
Shareholder reports and notices.............................      32,029
Professional fees...........................................      23,222
Custodian fees..............................................      10,914
Trustees' fees and expenses.................................       9,316
Other.......................................................       4,346
                                                              ----------

    TOTAL EXPENSES..........................................   1,403,603
                                                              ----------

    NET INVESTMENT INCOME...................................   4,368,802
                                                              ----------

NET REALIZED AND UNREALIZED GAIN:                                       
Net realized gain...........................................     984,364
Net change in unrealized appreciation.......................     791,872
                                                              ----------

    NET GAIN................................................   1,776,236
                                                              ----------

NET INCREASE................................................  $6,145,038
                                                              ==========

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      

FINANCIAL STATEMENTS, continued                                                 

                                                        [Enlarge/Download Table]

STATEMENT OF CHANGES IN NET ASSETS                                                        
                                                         FOR THE SIX        FOR THE YEAR  
                                                        MONTHS ENDED           ENDED      
                                                      FEBRUARY 28, 1998   AUGUST 31, 1997*
------------------------------------------------------------------------------------------
                                                        (unaudited)                       
                                                                                          
INCREASE (DECREASE) IN NET ASSETS:                                                        

OPERATIONS:                                                                               
Net investment income...............................    $  4,368,802        $ 10,272,537  
Net realized gain (loss)............................         984,364          (2,567,762) 
Net change in unrealized                                                                  
 appreciation/depreciation..........................         791,872           6,828,218  
                                                        ------------        ------------  

    NET INCREASE....................................       6,145,038          14,532,993  
                                                        ------------        ------------  

DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT                                             
INCOME:                                                                                   
Class A shares......................................         (31,749)                (58) 
Class B shares......................................      (4,181,668)        (10,229,881) 
Class C shares......................................          (3,917)                (83) 
Class D shares......................................        (179,034)            (25,048) 
                                                        ------------        ------------  

    TOTAL DIVIDENDS.................................      (4,396,368)        (10,255,070) 
                                                        ------------        ------------  

Net decrease from transactions in shares of                                               
 beneficial interest................................     (15,150,035)        (43,456,259) 
                                                        ------------        ------------  

    NET DECREASE....................................     (13,401,365)        (39,178,336) 

NET ASSETS:                                                                               
Beginning of period.................................     169,732,545         208,910,881  
                                                        ------------        ------------  
    END OF PERIOD                                                                         
    (Including undistributed net investment income                                        
    of $24,796 and $52,362, respectively)...........    $156,331,180        $169,732,545  
                                                        ============        ============  

---------------------                                                           
* Class A, Class C and Class D shares were issued July 28, 1997.                

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      

NOTES TO FINANCIAL STATEMENTS February 28, 1998 (unaudited)                     

1. ORGANIZATION AND ACCOUNTING POLICIES                                         

Dean Witter Intermediate Income Securities (the "Fund") is registered under the 
Investment Company Act of 1940, as amended (the "Act"), as a diversified,       
open-end management investment company. The Fund's investment objective is high 
current income consistent with safety of principal. The Fund was organized as a 
Massachusetts business trust on September 1, 1988 and commenced operations on   
May 3, 1989. On July 28, 1997, the Fund commenced offering three additional     
classes of shares, with the then current shares, other than shares held by      
certain employee benefit plans established by Dean Witter Reynolds Inc. and its 
affiliate, SPS Transaction Services, Inc., designated as Class B shares. Shares 
held by those employee benefit plans prior to July 28, 1997 have been           
designated Class D shares.                                                      

The Fund offers Class A shares, Class B shares, Class C shares and Class D      
shares. The four classes are substantially the same except that most Class A    
shares are subject to a sales charge imposed at the time of purchase, some      
Class A shares, and most Class B shares and Class C shares are subject to a     
contingent deferred sales charge imposed on shares redeemed within one year,    
six years and one year, respectively. Class D shares are not subject to a sales 
charge. Additionally, Class A shares, Class B shares and Class C shares incur   
distribution expenses.                                                          

The preparation of financial statements in accordance with generally accepted   
accounting principles requires management to make estimates and assumptions     
that affect the reported amounts and disclosures. Actual results could differ   
from those estimates.                                                           

The following is a summary of significant accounting policies:                  

A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the   
New York, American or other domestic or foreign stock exchange is valued at its 
latest sale price on that exchange prior to the time when assets are valued; if 
there were no sales that day, the security is valued at the latest bid price;   
(2) all other portfolio securities for which over-the-counter market quotations 
are readily available are valued at the latest available bid price; (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 and bid prices are not reflective of a security's market    
value, portfolio securities are valued at their fair value as determined in     
good faith under procedures established by and under the general supervision of 
the Trustees (valuation of debt securities for which market quotations are not  
readily available may be based upon current market prices of securities which   
are comparable in coupon, rating and maturity or an appropriate matrix          
utilizing similar factors); (4) certain portfolio securities may be valued by   
an outside pricing service approved by the Trustees. The pricing service may    
utilize a matrix system incorporating security quality, maturity and coupon as  
the evaluation model                                                            

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      

NOTES TO FINANCIAL STATEMENTS February 28, 1998 (unaudited) continued           

parameters, and/or research and evaluations by its staff, including review of   
broker-dealer market price quotations, in determining what it believes is the   
fair valuation of the portfolio securities valued by such pricing service; and  
(5) short-term debt securities 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 on the identified cost method.   
Dividend income and other distributions are recorded on the ex-dividend date.   
Discounts are accreted over the life of the respective securities. Interest     
income is accrued daily.                                                        

C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than        
distribution fees), and realized and unrealized gains and losses are allocated  
to each class of shares based upon the relative net asset value on the date     
such items are recognized. Distribution fees are charged directly to the        
respective class.                                                               

D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the      
requirements of the Internal Revenue Code applicable to regulated investment    
companies and to distribute all of its taxable income to its shareholders.      
Accordingly, no federal income tax provision is required.                       

E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends    
and distributions to its shareholders on the record date. The amount of         
dividends and distributions from net investment income and net realized capital 
gains are determined in accordance with federal income tax regulations which    
may differ from generally accepted accounting principles. These "book/tax"      
differences are either considered temporary or permanent in nature. To the      
extent these differences are permanent in nature, such amounts are reclassified 
within the capital accounts based on their federal tax-basis treatment;         
temporary differences do not require 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.                                                                

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, calculated daily and payable monthly, by applying the following 
annual rates to the net assets of the Fund determined as of the                 

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NOTES TO FINANCIAL STATEMENTS February 28, 1998 (unaudited) continued           

close of each business day: 0.60% of the portion of the daily net assets not    
exceeding $500 million; 0.50% of the portion of daily net assets exceeding $500 
million but not exceeding $750 million; 0.40% of the portion of the daily net   
assets exceeding $750 million but not exceeding $1 billion; and 0.30% of the    
portion of the daily net assets exceeding $1 billion.                           

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.                    

3. PLAN OF DISTRIBUTION                                                         

Shares of the Fund are distributed by Dean Witter Distributors Inc. (the        
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a  
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The     
Plan provides that the Fund will pay the Distributor a fee which is accrued     
daily and paid monthly at the following annual rates: (i) Class A -- up to      
0.25% of the average daily net assets of Class A; (ii) Class B -- 0.85% of the  
lesser of : (a) the average daily aggregate gross sales of the Class B shares   
since the inception of the Fund (not including reinvestment of dividend or      
capital gain distributions) less the average daily aggregate net asset value of 
the Class B shares redeemed since the Fund's inception upon which a contingent  
deferred sales charge had been imposed or waived; (b) the average daily net     
assets of Class B; and (iii) Class C -- up to 0.85% of the average daily net    
assets of Class C. In the case of Class A shares, amounts paid under the Plan   
are paid to the Distributor for services provided. In the case of Class B and   
Class C shares, amounts paid under the Plan are paid to the Distributor for     
services provided and the expenses borne by it and others in the distribution   
of the shares of these Classes, including the payment of commissions for sales  
of these Classes and incentive compensation to, and expenses of, the account    
executives of Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Investment 
Manager and Distributor, and others who engage in or support distribution of    
the shares or who service shareholder accounts, including overhead and          
telephone expenses; printing and distribution of prospectuses and reports used  
in connection with the offering of these shares to other than current           
shareholders; and preparation, printing and distribution of sales literature    
and advertising materials. In addition, the Distributor may utilize fees paid   
pursuant to the Plan, in the case of Class B shares, to compensate DWR and      
other selected broker-dealers for their opportunity costs in advancing such     
amounts, which compensation would be in the form of a carrying charge on any    
unreimbursed expenses.                                                          

In the case of Class B shares, provided that the Plan continues in effect, any  
cumulative expenses incurred by the Distributor but not yet recovered may be    
recovered through the payment of future                                         

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NOTES TO FINANCIAL STATEMENTS February 28, 1998 (unaudited) continued           

distribution fees from the Fund pursuant to the Plan and contingent deferred    
sales charges paid by investors upon redemption of Class B shares. Although     
there is no legal obligation for the Fund to pay expenses incurred in excess of 
payments made to the Distributor under the Plan and the proceeds of contingent  
deferred sales charges paid by investors upon redemption of shares, if for any  
reason the Plan is terminated, the Trustees will consider at that time the      
manner in which to treat such expenses. The Distributor has advised the Fund    
that such excess amounts, including carrying charges, totaled $5,489,316 at     
February 28, 1998.                                                              

In the case of Class A shares and Class C shares, expenses incurred pursuant to 
the Plan in any calendar year in excess of 0.25% or 0.85% of the average daily  
net assets of Class A or Class C, respectively, will not be reimbursed by the   
Fund through payments in any subsequent year, except that expenses representing 
a gross sales credit to account executives may be reimbursed in the subsequent  
calendar year. For the six months ended February 28, 1998, the distribution fee 
was accrued for Class A shares and Class C shares at the annual rate of 0.25%   
and 0.85%, respectively.                                                        

The Distributor has informed the Fund that for the six months ended February    
28, 1998, it received contingent deferred sales charges from certain            
redemptions of the Fund's Class B shares and Class C shares of $97,349 and      
$481, respectively and received $8,370 in front-end sales charges from sales of 
the Fund's Class A shares. The respective shareholders pay such charges which   
are not an expense of the Fund.                                                 

4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES                       

The cost of purchases and proceeds from sales of portfolio securities,          
excluding short-term investments, for the six months ended February 28, 1998,   
aggregated $76,623,172 and $89,271,543, respectively. Included in the           
aforementioned are purchases and sales of U.S. Government securities of         
$29,175,281 and $26,229,813, respectively.                                      

Dean Witter Trust FSB, an affiliate of the Investment Manager and Distributor,  
is the Fund's transfer agent. At February 28, 1998, the Fund had transfer agent 
fees and expenses payable of approximately $3,350.                              

The Fund has an unfunded noncontributory defined benefit pension plan covering  
all independent Trustees of the Fund who will have served as independent        
Trustees 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 Trustees' fees and expenses in the Statement of Operations amounted 
to $1,822. At February 28, 1998, the Fund had an accrued pension liability of   
$49,096 which is included in accrued expenses in the Statement of Assets and    
Liabilities.                                                                    

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      

NOTES TO FINANCIAL STATEMENTS February 28, 1998 (unaudited) continued           

5. SHARES OF BENEFICIAL INTEREST                                                

Transactions in shares of beneficial interest were as follows:                  

                                                        [Enlarge/Download Table]

                                                                    FOR THE SIX                 FOR THE YEAR         
                                                                   MONTHS ENDED                     ENDED            
                                                                 FEBRUARY 28, 1998            AUGUST 31, 1997+*      
                                                             -------------------------   --------------------------- 
                                                                    (unaudited)                                      
                                                               SHARES        AMOUNT        SHARES         AMOUNT     
                                                             ----------   ------------   -----------   ------------- 
                                                                                                                     
CLASS A SHARES                                                                                                       
Sold........................................................     88,676   $    859,449       193,347   $   1,854,318 
Reinvestment of dividends...................................        855          8,270             5              54 
Redeemed....................................................   (175,527)    (1,697,377)           --              -- 
                                                             ----------   ------------   -----------   ------------- 
Net increase (decrease) - Class A...........................    (85,996)      (829,658)      193,352       1,854,372 
                                                             ----------   ------------   -----------   ------------- 
CLASS B SHARES                                                                                                       
Sold........................................................  7,803,699     75,617,265     8,499,296      80,974,547 
Reinvestment of dividends...................................    229,703      2,221,684       587,192       5,604,585 
Redeemed.................................................... (9,618,209)   (93,158,822)  (13,839,797)   (131,962,423)
                                                             ----------   ------------   -----------   ------------- 
Net decrease - Class B...................................... (1,584,807)   (15,319,873)   (4,753,309)    (45,383,291)
                                                             ----------   ------------   -----------   ------------- 
CLASS C SHARES                                                                                                       
Sold........................................................     29,269        282,730         3,993          38,561 
Reinvestment of dividends...................................        322          3,110             6              56 
Redeemed....................................................    (10,737)      (103,838)           --              -- 
                                                             ----------   ------------   -----------   ------------- 
Net increase - Class C......................................     18,854        182,002         3,999          38,617 
                                                             ----------   ------------   -----------   ------------- 
CLASS D SHARES                                                                                                       
Sold........................................................    286,140      2,760,341        10,611         102,479 
Reinvestment of dividends...................................     16,933        163,785         2,476          23,704 
Redeemed....................................................   (217,534)    (2,106,632)       (9,547)        (92,140)
                                                             ----------   ------------   -----------   ------------- 
Net increase - Class D......................................     85,539        817,494         3,540          34,043 
                                                             ----------   ------------   -----------   ------------- 
Net decrease in Fund........................................ (1,566,410)  $(15,150,035)   (4,552,418)  $ (43,456,259)
                                                             ==========   ============   ===========   ============= 

---------------------                                                           
+ On July 28, 1997, 505,301 shares representing $4,891,310 were transferred to  
Class D.                                                                    
* For Class A, C, and D shares, for the period July 28, 1997 (issue date)       
through August 31, 1997.                                                    

6. FEDERAL INCOME TAX STATUS                                                    

At August 31, 1997, the Fund had a net capital loss carryover of approximately  
$9,320,000,000, which may be used to offset future capital gains to the extent  
provided by regulations, which is available through August 31 of the following  
years:                                                                          

                                                                [Download Table]

 AMOUNTS IN THOUSANDS 
----------------------
 2003    2004    2005 
------   ----   ------
                      
$6,656   $313   $2,351
======   ====   ======

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      

NOTES TO FINANCIAL STATEMENTS February 28, 1998 (unaudited) continued           

Capital losses incurred after October 31 ("post-October losses") within the     
taxable year are deemed to arise on the first business day of the Fund's next   
taxable year. The Fund incurred and will elect to defer net capital losses of   
approximately $1,877,000 during fiscal 1997.                                    

As of August 31, 1997, the Fund had temporary book/tax differences primarily    
attributable to post-October losses.                                            

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      

FINANCIAL HIGHLIGHTS                                                            

Selected ratios and per share data for a share of beneficial interest           
outstanding throughout each period:                                             

                                                        [Enlarge/Download Table]

                                                           FOR THE SIX                   FOR THE YEAR ENDED AUGUST 31             
                                                          MONTHS ENDED       ---------------------------------------------------- 
                                                       FEBRUARY 28, 1998++   1997*++      1996       1995       1994       1993   
--------------------------------------------------------------------------------------------------------------------------------- 
                                  (unaudited)                                                                                     
                                                                                                                                  
CLASS B SHARES                                                                                                                    
PER SHARE OPERATING PERFORMANCE:                                                                                                  

Net asset value, beginning of period.................         $ 9.59           $ 9.39     $ 9.69     $ 9.51     $10.26     $10.05 
                                                              ------           ------     ------     ------     ------     ------ 

Net investment income................................           0.25             0.53       0.55       0.59       0.58       0.62 

Net realized and unrealized gain (loss)..............           0.11             0.20      (0.30)      0.19      (0.73)      0.20 
                                                              ------           ------     ------     ------     ------     ------ 

Total from investment operations.....................           0.36             0.73       0.25       0.78      (0.15)      0.82 
                                                              ------           ------     ------     ------     ------     ------ 

Less dividends and distributions from:                                                                                            
   Net investment income.............................          (0.26)           (0.53)     (0.55)     (0.59)     (0.56)     (0.61)
   Net realized gain.................................             --               --         --      (0.01)     (0.04)        -- 
                                                              ------           ------     ------     ------     ------     ------ 

Total dividends and distributions....................          (0.26)           (0.53)     (0.55)     (0.60)     (0.60)     (0.61)
                                                              ------           ------     ------     ------     ------     ------ 

Net asset value, end of period.......................         $ 9.69           $ 9.59     $ 9.39     $ 9.69     $ 9.51     $10.26 
                                                              ======           ======     ======     ======     ======     ====== 

TOTAL INVESTMENT RETURN+.............................           3.73%(1)         7.93%      2.58%      8.56%     (1.50)%     8.43%

RATIOS TO AVERAGE NET ASSETS:                                                                                                     
Expenses.............................................           1.74%(2)         1.65%      1.62%      1.63%      1.63%      1.62%

Net investment income................................           5.28%(2)         5.52%      5.69%      6.23%      5.80%      6.12%

SUPPLEMENTAL DATA:                                                                                                                
Net assets, end of period, in thousands..............       $149,307         $162,959   $208,911   $232,752   $245,750   $254,431 

Portfolio turnover rate..............................             48%(1)           98%       115%       114%       122%       132%

---------------------                                                           
*  Prior to July 28, 1997, the Fund issued one class of shares. All shares of 
the Fund held prior to that date, other than shares held by certain     
employee benefit plans established by Dean Witter Reynolds Inc. and its 
  affiliate, SPS Transaction Services, Inc., have been designated as Class B
  shares. Shares held by those employee benefit plans prior to July 28, 1997
have been designated Class D shares.                                    
++ The per share amounts were computed using an average number of shares      
outstanding during the period.                                          
+  Does not reflect the deduction of sales charge. 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 

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      

FINANCIAL HIGHLIGHTS, continued                                                 

                                                        [Enlarge/Download Table]

                                                                                         FOR THE PERIOD  
                                                                  FOR THE SIX            JULY 28, 1997*  
                                                                 MONTHS ENDED                THROUGH     
                                                              FEBRUARY 28, 1998++       AUGUST 31, 1997++
---------------------------------------------------------------------------------------------------------
                                                                  (unaudited)                            
                                                                                                         
CLASS A SHARES                                                                                           
PER SHARE OPERATING PERFORMANCE:                                                                         
Net asset value, beginning of period........................        $ 9.59                   $ 9.68      
                                                                    ------                   ------      
Net investment income.......................................          0.29                     0.06      
Net realized and unrealized gain (loss).....................          0.11                    (0.10)     
                                                                    ------                   ------      
Total from investment operations............................          0.40                    (0.04)     
                                                                    ------                   ------      
Less dividends from net investment income...................         (0.29)                   (0.05)     
                                                                    ------                   ------      
Net asset value, end of period..............................        $ 9.70                   $ 9.59      
                                                                    ======                   ======      
TOTAL INVESTMENT RETURN+....................................          4.17%(1)                (0.46)%(1) 
RATIOS TO AVERAGE NET ASSETS:                                                                            
Expenses....................................................          1.14%(2)                 2.18%(2)  
Net investment income.......................................          5.86%(2)                 6.10%(2)  
SUPPLEMENTAL DATA:                                                                                       
Net assets, end of period, in thousands.....................        $1,041                   $1,855      
Portfolio turnover rate.....................................            48%(1)                   98%     
CLASS C SHARES                                                                                           
PER SHARE OPERATING PERFORMANCE:                                                                         
Net asset value, beginning of period........................        $ 9.61                   $ 9.68      
                                                                    ------                   ------      
Net investment income.......................................          0.24                     0.04      
Net realized and unrealized gain (loss).....................          0.09                    (0.07)     
                                                                    ------                   ------      
Total from investment operations............................          0.33                    (0.03)     
                                                                    ------                   ------      
Less dividends from net investment income...................         (0.25)                   (0.04)     
                                                                    ------                   ------      
Net asset value, end of period..............................        $ 9.69                   $ 9.61      
                                                                    ======                   ======      
TOTAL INVESTMENT RETURN+....................................          3.49%(1)                (0.31)%(1) 
RATIOS TO AVERAGE NET ASSETS:                                                                            
Expenses....................................................          1.66%(2)                 2.02%(2)  
Net investment income.......................................          5.11%(2)                 4.22%(2)  
SUPPLEMENTAL DATA:                                                                                       
Net assets, end of period, in thousands.....................          $222                      $38      
Portfolio turnover rate.....................................            48%(1)                   98%     

---------------------                                                           
*  The date shares were first issued.                                         
++ The per share amounts were computed using an average number of shares      
outstanding during the period.                                          
+  Does not reflect the deduction of sales charge. 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 

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      

FINANCIAL HIGHLIGHTS, continued                                                 

                                                        [Enlarge/Download Table]

                                                                                         FOR THE PERIOD  
                                                                  FOR THE SIX            JULY 28, 1997*  
                                                                 MONTHS ENDED                THROUGH     
                                                              FEBRUARY 28, 1998++       AUGUST 31, 1997++
---------------------------------------------------------------------------------------------------------
                                                                  (unaudited)                            
                                                                                                         
CLASS D SHARES                                                                                           
PER SHARE OPERATING PERFORMANCE:                                                                         

Net asset value, beginning of period........................        $ 9.59                   $ 9.68      
                                                                    ------                   ------      

Net investment income.......................................          0.29                     0.05      

Net realized and unrealized gain (loss).....................          0.11                    (0.09)     
                                                                    ------                   ------      

Total from investment operations............................          0.40                    (0.04)     
                                                                    ------                   ------      

Less dividends from net investment income...................         (0.30)                   (0.05)     
                                                                    ------                   ------      

Net asset value, end of period..............................        $ 9.69                   $ 9.59      
                                                                    ======                   ======      

TOTAL INVESTMENT RETURN+....................................          4.17%(1)                (0.44)%(1) 

RATIOS TO AVERAGE NET ASSETS:                                                                            
Expenses....................................................          0.88%(2)                 1.11%(2)  

Net investment income.......................................          6.13%(2)                 5.91%(2)  

SUPPLEMENTAL DATA:                                                                                       
Net assets, end of period, in thousands.....................        $5,762                   $4,880      
Portfolio turnover rate.....................................            48%(1)                   98%     

---------------------                                                           
*  The date shares were first issued.                                         
++ The per share amounts were computed using an average number of shares      
outstanding during the period.                                          
+  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 

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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                                   

Rochelle G. Siegel                                                              
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 trustees,  
fees, expenses and other pertinent information, please see the prospectus of    
the Fund.                                                                       

This report is not authorized for distribution to prospective investors in the  
Fund unless preceded or accompanied by an effective prospectus.                 

DEAN WITTER                                                                     
INTERMEDIATE                                                                    
INCOME                                                                          
SECURITIES                                                                      

[PHOTO]                                                                         

Semiannual Report                                                               
February 28, 1998                                                               

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[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
                                         -------------------------------------

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DEAN WITTER RETIREMENT SERIES   

CROSS-REFERENCE SHEET   

                                                                [Download Table]

PART A                                                                         
ITEM                   CAPTION PROSPECTUS                                      
----                   ------------------                                      
                                                                               
     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                           


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.        

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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.                                                          

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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                                                       

                                                        [Enlarge/Download Table]

PROSPECTUS SUMMARY                                                                                                
--------------------------------------------------------------------------------------------------------------    
                                                                                                                  
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                                                                          

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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 (see page 12).                                                       

                                       3                                                                          

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----------------------------------------------------------------------------------------------------------------- 
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                                                                                   

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----------------------------------------------------------------------------------------------------------------- 
                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).                      

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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)                              

                                                                [Download Table]

                                                                
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 Operating Expenses (as a Percentage of Average Net Assets for the year   
ended July 31, 1997)*                                                           

                                                        [Enlarge/Download Table]


                                                                       Intermediate                   
                                      U.S. Government U.S. Government     Income     American  Capital
                        Liquid Asset   Money Market      Securities     Securities     Value   Growth 
                           Series         Series           Series         Series      Series   Series 
                           ------         ------           ------         ------      ------   ------ 
                                                                                                      
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  

                                                                [Download Table]


                        Dividend                         Value-Added               
                         Growth   Strategist  Utilities    Market     Global Equity
                         Series     Series      Series     Series         Series   
                         ------     ------      ------     ------         ------   
                                                                                   
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    

*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.                                                 

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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:             

                                                        [Enlarge/Download Table]


                                                              Intermediate                      
                            U.S. Government U.S. Government      Income      American    Capital
             Liquid Asset    Money Market      Securities      Securities      Value     Growth 
                Series          Series           Series          Series       Series     Series 
            -------------- ---------------  --------------- --------------  ---------- ---------
                                                                                                
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  

                                                                [Download Table]


             Dividend                              Value-Added                 
              Growth     Strategist   Utilities      Market      Global Equity 
              Series       Series       Series       Series          Series    
            ---------- ------------  ----------- -------------  ---------------
                                                                               
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     

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:                                                  

                                                        [Enlarge/Download Table]


                                                                          Intermediate                      
                                        U.S. Government U.S. Government      Income      American    Capital
                         Liquid Asset    Money Market      Securities      Securities      Value     Growth 
                            Series          Series           Series          Series       Series     Series 
                        -------------- ---------------  --------------- --------------  ---------- ---------
                                                                                                            
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  

                                                        [Enlarge/Download Table]


                         Dividend                              Value-Added                 
                          Growth     Strategist   Utilities      Market      Global Equity 
                          Series       Series       Series       Series          Series    
                        ---------- ------------  ----------- -------------  ---------------
                                                                                           
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     

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."                                                  

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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.                        

                                                        [Enlarge/Download Table]


                                           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 
----------  ----------- ------------  ------------ ------------  -------------- ---------------  ---------------
                                                                                                                
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)   

------------                                                                    
*       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.                                                        

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                                            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 
-----------  ------------ ------------  ----------- -------------  ----------- -------------  ----------- ------------
                                                                                                                      
   $ 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  

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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.                        

                                                        [Enlarge/Download Table]


                                            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 
----------  ----------- -------------  ------------ ------------  -------------- ---------------  ---------------
                                                                                                                 
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)   

------------                                                                    
*       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.                                                       

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                                                        [Enlarge/Download Table]

                                           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 
-----------  ------------- ------------  ----------- -------------  ---------- -------------  ----------- ------------

                                                                                                                      
   $ 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  

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THE FUND AND ITS MANAGEMENT                                                     
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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                       

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INVESTMENT OBJECTIVE AND POLICIES                                               
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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                                                                  

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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                                      

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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.                                                    

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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.                                                         

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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.             

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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                                                             

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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,                                                                         

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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-                                                                         

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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                        

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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-                                                  

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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             

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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                               

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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-                                                                       

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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                                                          

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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.                                                   

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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                                 

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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                

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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                                                                     

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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                     

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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.                                  

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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                                    

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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                                      

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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.                                                                      

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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                

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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                                                           

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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.                        

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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.                                            

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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-             

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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-                                                                             

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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)                                                 

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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                

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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.                        

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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                                                              

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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                                   

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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                                                        

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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.                  

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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.                                                   

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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.                        

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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.                                                         

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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                 

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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.                                       

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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.                                      

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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                                                                          

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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                                 

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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.                                               

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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.                                                                         

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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                

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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.        

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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.                                   

                                                                [Download Table]

                                           EQUITY      FIXED-INCOME          
                                        EXPOSURE (%)   EXPOSURE (%)  CASH (%)
                                        ------------ --------------  --------
                                                                             
July 31, 1996  .......................       50             40          10   
April 28, 1997 .......................       50             20          30   
May 19, 1997  ........................       60             20          20   
June 26, 1997  .......................       65             20          15   


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.                                                       

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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                                                           

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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                               

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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 

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DEAN WITTER RETIREMENT SERIES - LIQUID ASSET                                    
PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                        [Enlarge/Download Table]

                                                                               ANNUALIZED                                  
 PRINCIPAL                                                                      YIELD ON                                   
 AMOUNT IN                                                                      DATE OF         MATURITY                   
 THOUSANDS                                                                      PURCHASE          DATE           VALUE     
---------------------------------------------------------------------------------------------------------------------------
                                                                                                                           
            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                                                                   

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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
                                                                                                 =====        =============

--------------                                                                  
(a)  Cost is the same for federal income tax purposes.                          

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER RETIREMENT SERIES - U.S. GOVERNMENT MONEY MARKET                    
PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                                [Download Table]

                                         ANNUALIZED                              
 PRINCIPAL                                YIELD ON                               
 AMOUNT IN                                DATE OF        MATURITY                
 THOUSANDS                                PURCHASE         DATE           VALUE  
---------------------------------------------------------------------------------
                                                                                 
            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
                                                          ======       ==========

--------------                                                                  
(a)  Cost is the same for federal income tax purposes.                          

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER RETIREMENT SERIES - U.S. GOVERNMENT SECURITIES                      
PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                                          
 AMOUNT IN                                                                    COUPON       MATURITY                 
 THOUSANDS                                                                     RATE          DATE           VALUE   
--------------------------------------------------------------------------------------------------------------------
                                                                                                                    
            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
                                                                                            =====       ============

--------------                                                                  
(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 

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DEAN WITTER RETIREMENT SERIES - INTERMEDIATE INCOME SECURITIES                  
PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                                    
 AMOUNT IN                                                                    COUPON   MATURITY               
 THOUSANDS                                                                     RATE      DATE        VALUE    
------------------------------------------------------------------------------------------------------------- 
                                                                                                              
            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                                                      

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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
                                                                                                  ------------

                                                        [Enlarge/Download Table]

                                                                                             
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
                                                                         ======== ===========

--------------                                                                  
(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 

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PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                        [Enlarge/Download Table]

 NUMBER OF                                                                                 
   SHARES                                                                         VALUE    
-------------------------------------------------------------------------------------------
                                                                                           
             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                                   

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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                                   

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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 
                                                                              -------------

                                                                [Download Table]

   PRINCIPAL                                                  
   AMOUNT IN                                                  
   THOUSANDS                                                  
--------------------------------------------------------------
                                                              
               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
                                         ======== ============

------------                                                                    
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 

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PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                        [Enlarge/Download Table]

 NUMBER OF                                                                                
   SHARES                                                                         VALUE   
------------------------------------------------------------------------------------------
                                                                                          
             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                                  

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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  
                                                                              ------------

                                                                [Download Table]

                                                      
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
                                    =====   ==========

------------                                                                    
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 

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DEAN WITTER RETIREMENT SERIES - DIVIDEND GROWTH                                 
PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                        [Enlarge/Download Table]

 NUMBER OF                                                                                  
   SHARES                                                                          VALUE    
--------------------------------------------------------------------------------------------
                                                                                            
             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  
                                                                              --------------

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DEAN WITTER RETIREMENT SERIES - DIVIDEND GROWTH                                 
PORTFOLIO OF INVESTMENTS July 31, 1997, continued                               

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                 
 AMOUNT IN                                                                                 
 THOUSANDS                                                                        VALUE    
-------------------------------------------------------------------------------------------
                                                                                           
             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  
                                                                              -------------

                                                                [Download Table]

                                                           
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 
                                    ======== ============= 

------------                                                                    
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.

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DEAN WITTER RETIREMENT SERIES - UTILITIES                                       
PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                        [Enlarge/Download Table]

 NUMBER OF                                                                               
   SHARES                                                                        VALUE   
-----------------------------------------------------------------------------------------
                                                                                         
             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
                                                                              -----------

                                                                [Download Table]

                                                       
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 
                                   =====   =========== 

--------------                                                                  
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 

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PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                        [Enlarge/Download Table]

 NUMBER OF                                                                                 
   SHARES                                                                         VALUE    
-------------------------------------------------------------------------------------------
                                                                                           
             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                                    

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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                                   

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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                                   

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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                                   

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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                                   

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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                                    

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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                                   

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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                                   

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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 
                                                                              -------------

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                             
 AMOUNT IN                                                                                             
 THOUSANDS                                                                                      VALUE  
-------------------------------------------------------------------------------------------------------
                                                                                                       
             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 
                                                                                   =====  ============ 

------------                                                                    
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 

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PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                        [Enlarge/Download Table]

 NUMBER OF                                                                                
   SHARES                                                                        VALUE    
----------------------------------------------------------------------------------------- 
                                                                                          
             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                                  

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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                                  

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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                                  

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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                                  

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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                                   

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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                                  

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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 
                                                                              ----------- 

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                               
AMOUNT IN                                                                                
THOUSANDS                                                                                
-----------                                                                              
                                                                                         
             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 
                                                                   ======== ============ 

SEE NOTES TO FINANCIAL STATEMENTS 

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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:                       

                                                                [Download Table]

                            IN                        UNREALIZED  
   CONTRACTS TO          EXCHANGE        DELIVERY   APPRECIATION/ 
      RECEIVE              FOR             DATE     (DEPRECIATION)
------------------ ------------------- ----------  ---------------
                                                                  
$          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)   
                                                       =======    

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY PORTFOLIO                         
SUMMARY OF INVESTMENTS July 31, 1997                                            

                                                                [Download Table]

                                                 PERCENT OF
INDUSTRY                             VALUE       NET ASSETS
-----------------------------------------------------------
                                                           
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%  
                                 ============= ============

                                                                [Download Table]

                                         PERCENT OF
TYPE OF INVESTMENT           VALUE       NET ASSETS
---------------------------------------------------
                                                   
Common Stocks ..........  $18,572,282       93.8%  
Short-Term Investments      1,399,546        7.1   
                          -----------      -----   
                          $19,971,828      100.9%  
                          ===========      =====   

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DEAN WITTER RETIREMENT SERIES - STRATEGIST                                      
PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                        [Enlarge/Download Table]

 NUMBER OF                                                                                 
   SHARES                                                                         VALUE    
-------------------------------------------------------------------------------------------
                                                                                           
             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                                   

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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 
                                                                              -------------

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                
 AMOUNT IN                                                                                
 THOUSANDS                                                                                
-----------                                                                               
                                                                                          
             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  
                                                                              ------------

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                 
 AMOUNT IN                                                                                 
 THOUSANDS                                                                        VALUE    
-------------------------------------------------------------------------------------------
                                                                                           
             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  

SEE NOTES TO FINANCIAL STATEMENTS 

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PORTFOLIO OF INVESTMENTS July 31, 1997, continued                               

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                            
 AMOUNT IN                                                                                            
 THOUSANDS                                                                                   VALUE    
------------------------------------------------------------------------------------------------------
                                                                                                      
  $ 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  
                                                                               ========  =============

------------                                                                    
*       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 

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DEAN WITTER RETIREMENT SERIES                                                   
FINANCIAL STATEMENTS                                                            

STATEMENTS OF ASSETS AND LIABILITIES                                            
July 31, 1997                                                                   

                                                        [Enlarge/Download Table]

                                                                                                      INTERMEDIATE
                                                                    U.S. GOVERNMENT  U.S. GOVERNMENT     INCOME   
                                                     LIQUID ASSET    MONEY MARKET       SECURITIES     SECURITIES 
------------------------------------------------------------------------------------------------------------------
                                                                                                                  
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 
                                                      ===========     ==========      ===========      ========== 

                                       SEE NOTES TO FINANCIAL STATEMENTS

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                                                        [Enlarge/Download Table]

   AMERICAN       CAPITAL       DIVIDEND                   VALUE-ADDED      GLOBAL                  
     VALUE        GROWTH         GROWTH       UTILITIES       MARKET        EQUITY       STRATEGIST 
-------------  ------------ --------------  ------------  ------------- -------------  -------------
                                                                                                    
 $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 
=============  ============ ==============  ============  ============= =============  =============

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DEAN WITTER RETIREMENT SERIES                                                   
FINANCIAL STATEMENTS, continued                                                 

STATEMENTS OF OPERATIONS                                                        
For the year ended July 31, 1997                                                

                                                        [Enlarge/Download Table]

                                                                                                      INTERMEDIATE
                                                                    U.S. GOVERNMENT  U.S. GOVERNMENT     INCOME   
                                                     LIQUID ASSET    MONEY MARKET      SECURITIES      SECURITIES 
------------------------------------------------------------------------------------------------------------------
                                                                                                                  
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  
                                                    ============== ===============  =============== ==============

--------------                                                                  
*      Net of $1,132, $10, $7,380, $972, $1,050, $18,695 and $63 foreign        
withholding tax, respectively.                                    

                                       SEE NOTES TO FINANCIAL STATEMENTS

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   AMERICAN       CAPITAL      DIVIDEND                   VALUE-ADDED     GLOBAL                 
     VALUE        GROWTH        GROWTH       UTILITIES      MARKET        EQUITY      STRATEGIST 
-------------  ------------ -------------  ------------ -------------  ------------ ------------ 
                                                                                                 
 $   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 
=============  ============ =============  ============ =============  ============ ============ 

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DEAN WITTER RETIREMENT SERIES                                                   
FINANCIAL STATEMENTS, continued                                                 

STATEMENTS OF CHANGES IN NET ASSETS                                             
For the year ended July 31,                                                     

                                                        [Enlarge/Download Table]

                                                                                                  U.S. GOVERNMENT            
                                                                LIQUID ASSET                        MONEY MARKET             
                                                       ------------------------------- --------------------------------------
                                                            1997            1996            1997                1996         
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                             
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)    
                                                        ============    =============   ============        ============     

                                       SEE NOTES TO FINANCIAL STATEMENTS

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       U.S. GOVERNMENT               INTERMEDIATE                                                                            
         SECURITIES                INCOME SECURITIES              AMERICAN VALUE                    CAPITAL GROWTH           
---------------------------- ---------------------------- ----------------------------- -------------------------------------
     1997           1996          1997           1996           1997           1996          1997               1996         
-------------  ------------- -------------  ------------- --------------  ------------- ------------  -----------------------
                                                                                                                             
 $   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      
=============  ============= =============  ============= ==============  ============= ============  =======================

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DEAN WITTER RETIREMENT SERIES                                                   
FINANCIAL STATEMENTS, continued                                                 

STATEMENTS OF CHANGES IN NET ASSSETS, continued                                 
For the year ended July 31,                                                     

                                                        [Enlarge/Download Table]

                                                              DIVIDEND GROWTH                 UTILITIES           
                                                       ----------------------------- -----------------------------
                                                            1997           1996           1997           1996     
-----------------------------------------------------  -------------- -------------  ------------- ---------------
                                                                                                                  
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 
                                                        ============    ===========   ===========     =========== 

                                       SEE NOTES TO FINANCIAL STATEMENTS

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      VALUE-ADDED MARKET              GLOBAL EQUITY                        STRATEGIST              
----------------------------- ---------------------------- ----------------------------------------
      1997           1996          1997           1996          1997                  1996         
--------------  ------------- -------------  ------------- -------------  -------------------------
                                                                                                   
 $    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       
==============  ============= =============  ============= =============  =========================

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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:                             

                                                        [Enlarge/Download Table]

                                      COMMENCEMENT                               COMMENCEMENT      
                                     OF OPERATIONS                               OF OPERATIONS     
                                     -------------                               -------------     
                                                                                                   
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                                             

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.                      
------------------------------------------------------------------------------- 

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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                                    

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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                               

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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%.  

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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:                      

                                                        [Enlarge/Download Table]

                                   U.S. GOVERNMENT SECURITIES               OTHER             
                                 ------------------------------ ------------------------------
                                                     SALES/                                   
                                                  MATURITIES/                       SALES/    
                                    PURCHASES     PREPAYMENTS      PURCHASES      MATURITIES  
                                 -------------- --------------  -------------- -------------- 
                                                                                              
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 

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.                                                                        

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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:      

                                                                [Download Table]

                                     CAPITAL    DIVIDEND                GLOBAL 
                                      GROWTH     GROWTH    UTILITIES    EQUITY 
                                    --------- ----------  ----------- ---------
                                                                               
Payable for investments purchased    $ 4,319    $887,346    $200,025   $    -- 
                                    ========= ==========  =========== =========
Receivable for investments sold  ..  $38,982    $149,533    $ 42,821   $91,462 
                                    ========= ==========  =========== =========


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:                                                             

                                                                [Download Table]

 AMERICAN    CAPITAL    DIVIDEND                GLOBAL              
   VALUE      GROWTH     GROWTH    UTILITIES    EQUITY   STRATEGIST 
----------  --------- ----------  ----------- --------  ------------
                                                                    
  $25,735     $1,487    $43,558     $13,830     $9,201     $6,861   
==========  ========= ==========  =========== ========  ============

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:                            

                                                        [Enlarge/Download Table]

                                                  INTERMEDIATE                         
                U.S. GOVERNMENT  U.S. GOVERNMENT     INCOME        AMERICAN    CAPITAL 
 LIQUID ASSET     MONEY MARKET     SECURITIES      SECURITIES       VALUE       GROWTH 
--------------  --------------- ---------------  -------------- ------------  ---------
                                                                                       
      $120            $100           $1,250           $150           $800        $90   
==============  =============== ===============  ============== ============  =========

  DIVIDEND                         VALUE-ADDED       GLOBAL                            
   GROWTH          UTILITIES         MARKET          EQUITY      STRATEGIST            
--------------  --------------- ---------------  -------------- ------------           
   $280              $80             $140            $210           $500               
==============  =============== ===============  ============== ============           

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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:                          

                                                                [Download Table]

                  INTERMEDIATE          
U.S. GOVERNMENT      INCOME       GLOBAL
   SECURITIES      SECURITIES     EQUITY
---------------  -------------- --------
                                        
      $500           $57,800       $900 
===============  ============== ========

At July 31, 1997, the primary reason(s) for temporary book/tax differences      
were as follows:                                                                

                                                                [Download Table]

                                          TEMPORARY DIFFERENCES     
                                     -------------------------------
                                        POST-        CAPITAL LOSS   
                                       OCTOBER      DEFERRALS FROM  
                                        LOSSES        WASH SALES    
                                     ----------- ------------------ 
                                                                    
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         

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.                                                                 

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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:   

                                                                [Download Table]

                   ACCUMULATED     ACCUMULATED 
                  UNDISTRIBUTED   UNDISTRIBUTED
                 NET INVESTMENT   NET REALIZED 
                     INCOME        GAIN (LOSS) 
                 -------------- ---------------
                                               
Capital Growth       $ 5,965        $ (5,965)  
Global Equity  .     $23,695        $(23,695)  

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.   

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DEAN WITTER RETIREMENT SERIES                                                   
FINANCIAL HIGHLIGHTS                                                            

Selected ratios and per share data for a share of beneficial interest           
outstanding throughout each period:                                             

                                                        [Enlarge/Download Table]

             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 
----------  ----------- ------------  -------------- ------------  -------------- ---------------  ---------------
                                                                                                                  
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)   

------------                                                                    
*       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

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                                          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 
-----------  ------------ ------------  ----------- -------------  ----------- -------------  ----------- ------------
                                                                                                                      
   $ 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  

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DEAN WITTER RETIREMENT SERIES                                                   
FINANCIAL HIGHLIGHTS, continued                                                 

Selected ratios and per share data for a share of beneficial interest           
outstanding throughout each period:                                             

                                                        [Enlarge/Download Table]

             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 
----------  ----------- -------------  -------------- ------------  -------------- ---------------  ---------------
                                                                                                                   
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)   

------------                                                                    
*       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

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                                           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 
-----------  ------------- ------------  ----------- -------------  ---------- -------------  ----------- ------------
                                                                                                                      
   $ 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  

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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:                     

                                                                [Download Table]

 AMERICAN    CAPITAL    DIVIDEND   VALUE-ADDED    GLOBAL              
   VALUE      GROWTH     GROWTH       MARKET      EQUITY   STRATEGIST 
----------  --------- ----------  ------------- --------  ------------
                                                                      
$0.31         $0.32      $0.47        $0.45       $0.05       $0.31   


  Additionally, the following percentages of the income paid qualified
for the dividends received deduction available to corporations:   

                                                                [Download Table]

 AMERICAN    CAPITAL    DIVIDEND                VALUE-ADDED   GLOBAL              
   VALUE      GROWTH     GROWTH    UTILITIES      MARKET      EQUITY    STRATEGIST
----------  --------- ----------  ----------- -------------  -------- ------------
                                                                                  
 5.58%         100%      99.92%      98.72%        74.37%      7.89%      19.47%  

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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                                                               

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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               

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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.                                                                           

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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.                                     

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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                                                            

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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.                                            

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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.               

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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                         

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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-                      

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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               

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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.                                         

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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                                                           

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DEAN WITTER RETIREMENT SERIES - LIQUID ASSET                                    
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)                           

                                                        [Enlarge/Download Table]


                                                                        ANNUALIZED                                
PRINCIPAL                                                                YIELD ON                                 
AMOUNT IN                                                                DATE OF        MATURITY                  
THOUSANDS                                                                PURCHASE         DATE            VALUE   
------------------------------------------------------------------------------------------------------------------
                                                                                                                  
           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 
                                                                                             ------  ------------ 
                                                                                             ------  ------------ 

---------------------                                                           

(a)  Cost is the same for federal income tax purposes.                          

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER RETIREMENT SERIES - U.S. GOVERNMENT MONEY MARKET                    
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)                           

                                                        [Enlarge/Download Table]


                                                                         ANNUALIZED                               
PRINCIPAL                                                                 YIELD ON                                
AMOUNT IN                                                                 DATE OF        MATURITY                 
THOUSANDS                                                                 PURCHASE         DATE           VALUE   
------------------------------------------------------------------------------------------------------------------
                                                                                                                  
           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 
                                                                                              ------  ----------- 
                                                                                              ------  ----------- 

---------------------                                                           

(a)  Cost is the same for federal income tax purposes.                          

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER RETIREMENT SERIES - U.S. GOVERNMENT SECURITIES                      
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)                           

                                                        [Enlarge/Download Table]


PRINCIPAL                                                                                                                 
AMOUNT IN                                                                            COUPON      MATURITY                 
THOUSANDS                                                                            RATE          DATE           VALUE   
--------------------------------------------------------------------------------------------------------------------------
                                                                                                                          
           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
                                                                                                       ------  -----------
                                                                                                       ------  -----------

---------------------                                                           

(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 

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DEAN WITTER RETIREMENT SERIES - INTERMEDIATE INCOME SECURITIES                  
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)                           

                                                        [Enlarge/Download Table]


PRINCIPAL                                                                                                                  
AMOUNT IN                                                                                     COUPON   MATURITY            
THOUSANDS                                                                                      RATE      DATE      VALUE   
---------------------------------------------------------------------------------------------------------------------------
                                                                                                                           
           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
                                                                                                                 ----------

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER RETIREMENT SERIES - INTERMEDIATE INCOME SECURITIES                  
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED                 

                                                        [Enlarge/Download Table]

PRINCIPAL                                                                                                                  
AMOUNT IN                                                                                     COUPON   MATURITY            
THOUSANDS                                                                                      RATE      DATE      VALUE   
---------------------------------------------------------------------------------------------------------------------------
                                                                                                                           
           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
                                                                                                        ------  -----------
                                                                                                        ------  -----------

---------------------                                                           

(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 

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DEAN WITTER RETIREMENT SERIES - AMERICAN VALUE                                  
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)                           

                                                        [Enlarge/Download Table]


NUMBER OF                                                                                                       
 SHARES                                                                                                 VALUE   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
           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

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER RETIREMENT SERIES - AMERICAN VALUE                                  
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED                 

                                                        [Enlarge/Download Table]

NUMBER OF                                                                                                       
 SHARES                                                                                                 VALUE   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
  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
                                                                                                     -----------

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PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED                 

                                                        [Enlarge/Download Table]

NUMBER OF                                                                                                       
 SHARES                                                                                                 VALUE   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
           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
                                                                                                     -----------

                                                        [Enlarge/Download Table]

PRINCIPAL                                                                                                         
AMOUNT IN                                                                                                         
THOUSANDS                                                                                               VALUE     
----------------------------------------------------------------------------------------------------------------  
                                                                                                                  
           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 
                                                                                             ------  ------------ 
                                                                                             ------  ------------ 

---------------------                                                           

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 

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PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)                           

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NUMBER OF                                                                                                       
 SHARES                                                                                                 VALUE   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
           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
                                                                                                      ----------

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NUMBER OF                                                                                                         
 SHARES                                                                                                 VALUE     
----------------------------------------------------------------------------------------------------------------  
                                                                                                                  
           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  
                                                                                                      ----------  



PRINCIPAL                                                                                                         
AMOUNT IN                                                                                                         
THOUSANDS                                                                                               VALUE     
----------------------------------------------------------------------------------------------------------------  
                                                                                                                  
           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 
                                                                                              ------  ----------- 
                                                                                              ------  ----------- 

---------------------                                                           

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 

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PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)                           

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NUMBER OF                                                                                                       
 SHARES                                                                                                VALUE    
----------------------------------------------------------------------------------------------------------------
                                                                                                                
           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

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NUMBER OF                                                                                                         
 SHARES                                                                                                VALUE      
----------------------------------------------------------------------------------------------------------------  
                                                                                                                  
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 
                                                                                            ------  ------------- 
                                                                                            ------  ------------- 

---------------------                                                           

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 

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DEAN WITTER RETIREMENT SERIES - UTILITIES                                       
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)                           

                                                        [Enlarge/Download Table]


NUMBER OF                                                                                                         
 SHARES                                                                                                 VALUE     
----------------------------------------------------------------------------------------------------------------  
                                                                                                                  
           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  
                                                                                                      ----------  

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PRINCIPAL                                                                                                         
AMOUNT IN                                                                                                         
THOUSANDS                                                                                                         
---------                                                                                                         
                                                                                                                  
           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 
                                                                                              ------  ----------- 
                                                                                              ------  ----------- 

---------------------                                                           

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 

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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:                             

                                                        [Enlarge/Download Table]


                                           COMMENCEMENT                                                COMMENCEMENT   
                                           OF OPERATIONS                                               OF OPERATIONS  
                                         -----------------                                           -----------------

                                                                                                                      
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                                                            

The investment objectives of each Series are as follows:                        

                                                                [Download Table]


        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 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.    

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DEAN WITTER RETIREMENT SERIES                                                   
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED            

                                                                [Download Table]

        SERIES                          INVESTMENT OBJECTIVE                    
                                                                                
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.                         

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                     

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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.                                          

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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       

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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:             

                                                        [Enlarge/Download Table]


                                              U.S. GOVERNMENT SECURITIES           OTHER          
                                              --------------------------  ------------------------
                                                            SALES/MATURITIES/            SALES/   
                                               PURCHASES    PREPAYMENTS    PURCHASES   MATURITIES 
                                              ------------  ------------  -----------  -----------
                                                                                                  
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

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        
                                            --------  ----------
                                            --------  ----------

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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.                     

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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:                                                                     

                                                        [Enlarge/Download Table]


                                                           TEMPORARY DIFFERENCES         
                                                   --------------------------------------
                                                    POST-OCTOBER   CAPITAL LOSS DEFERRALS
                                                       LOSSES         FROM WASH SALES    
                                                   --------------  ----------------------

                                                                                         
U.S. Government Securities........................       -                               
Intermediate Income Securities....................       -                   -           
American Value....................................                           -           
Capital Growth....................................                           -           
Dividend Growth...................................                           -           
Value-Added Market................................                           -           
Global Equity.....................................       -                   -           
Strategist........................................                           -           

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.   

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DEAN WITTER RETIREMENT SERIES                                                   
FINANCIAL HIGHLIGHTS                                                            

Selected ratios and per share data for a share of beneficial interest           
outstanding throughout each period:                                             

                                                        [Enlarge/Download Table]


                               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 
--------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                
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)     


---------------------                                                           
*      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.                                                 

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                                                        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 
                   --------------------------------------------------------------------------------------------------------------- 
                                                                                                                                   
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  

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DEAN WITTER RETIREMENT SERIES                                                   
FINANCIAL HIGHLIGHTS, CONTINUED                                                 

Selected ratios and per share data for a share of beneficial interest           
outstanding throughout each period:                                             

                                                        [Enlarge/Download Table]


                               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 
--------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                
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)     

---------------------                                                           
*      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.                                                 

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                                                        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 
                   --------------------------------------------------------------------------------------------------------------- 
                                                                                                                                   
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  

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DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET                              
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)                           

                                                        [Enlarge/Download Table]

NUMBER OF                                                                                                       
 SHARES                                                                                                 VALUE   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
           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
                                                                                                     -----------

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NUMBER OF                                                                                                       
 SHARES                                                                                                 VALUE   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
           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

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NUMBER OF                                                                                                       
 SHARES                                                                                                 VALUE   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
   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

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NUMBER OF                                                                                                       
 SHARES                                                                                                 VALUE   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
   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
                                                                                                     -----------

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NUMBER OF                                                                                                       
 SHARES                                                                                                 VALUE   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
           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
                                                                                                     -----------

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NUMBER OF                                                                                                       
 SHARES                                                                                                 VALUE   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
           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
                                                                                                     -----------

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NUMBER OF                                                                                                       
 SHARES                                                                                                 VALUE   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
           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
                                                                                                     -----------

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NUMBER OF                                                                                                       
 SHARES                                                                                                 VALUE   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
           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

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NUMBER OF                                                                                                        
 SHARES                                                                                                 VALUE    
---------------------------------------------------------------------------------------------------------------- 
                                                                                                                 
   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
                                                                                             ------  ------------
                                                                                             ------  ------------

---------------------                                                           

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.                                

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NUMBER OF                                                                                                       
 SHARES                                                                                                 VALUE   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
           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
                                                                                                     -----------

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NUMBER OF                                                                                                       
 SHARES                                                                                                 VALUE   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
           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
                                                                                                     -----------

SEE NOTES TO FINANCIAL STATEMENTS 

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NUMBER OF                                                                                                       
 SHARES                                                                                                 VALUE   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
           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
                                                                                                     -----------

SEE NOTES TO FINANCIAL STATEMENTS 

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NUMBER OF                                                                                                       
 SHARES                                                                                                 VALUE   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
           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
                                                                                                     -----------

SEE NOTES TO FINANCIAL STATEMENTS 

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NUMBER OF                                                                                                       
 SHARES                                                                                                 VALUE   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
           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

SEE NOTES TO FINANCIAL STATEMENTS 

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NUMBER OF                                                                                                         
 SHARES                                                                                                 VALUE     
----------------------------------------------------------------------------------------------------------------  
                                                                                                                  
   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  
                                                                                                     -----------  



PRINCIPAL                                                                                                         
AMOUNT IN                                                                                                         
THOUSANDS                                                                                                         
---------                                                                                                         
                                                                                                                  
           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 
                                                                                             ------  ------------ 
                                                                                             ------  ------------ 

---------------------                                                           

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 

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FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JANUARY 31, 1998:

                                                                [Download Table]


                            IN                         UNREALIZED   
   CONTRACTS TO          EXCHANGE        DELIVERY    APPRECIATION/  
      RECEIVE               FOR            DATE      (DEPRECIATION) 
--------------------------------------------------------------------

                                                                    
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)  
                                                          -------   
                                                          -------   

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SUMMARY OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)                             

                                                        [Enlarge/Download Table]


                                                                                                  PERCENT OF
INDUSTRY                                                                                VALUE     NET ASSETS

------------------------------------------------------------------------------------------------------------
                                                                                                            
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%
                                                                                 -----------         -----  
                                                                                 -----------         -----  

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PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)                           

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NUMBER OF                                                                                                       
 SHARES                                                                                                 VALUE   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
           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
                                                                                                     -----------

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NUMBER OF                                                                                                       
 SHARES                                                                                                 VALUE   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
           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
                                                                                                     -----------

                                                        [Enlarge/Download Table]


PRINCIPAL                                                                                                      
AMOUNT IN                                                                                                      
THOUSANDS                                                                                                      
---------                                                                                                      
                                                                                                               
           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
                                                                                                    -----------

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PRINCIPAL                                                                                                        
AMOUNT IN                                                                                                        
THOUSANDS                                                                                               VALUE    
---------------------------------------------------------------------------------------------------------------- 
                                                                                                                 
           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
                                                                                             ------  ------------
                                                                                             ------  ------------

---------------------                                                           

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.                                

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FINANCIAL STATEMENTS                                                            

STATEMENTS OF ASSETS AND LIABILITIES                                            

                                                        [Enlarge/Download Table]


JANUARY 31, 1998 (UNAUDITED)                                                                
                                                   U.S.                                     
                                                GOVERNMENT         U.S.        INTERMEDIATE 
                                   LIQUID         MONEY         GOVERNMENT        INCOME    
                                   ASSET          MARKET        SECURITIES      SECURITIES  
                                                                                            
--------------------------------------------------------------------------------------------
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 
                                ------------  --------------  --------------  --------------
                                ------------  --------------  --------------  --------------

SEE NOTES TO FINANCIAL STATEMENTS 

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FINANCIAL STATEMENTS                                                            

STATEMENTS OF ASSETS AND LIABILITIES                                            
JANUARY 31, 1998 (UNAUDITED)                                                    

                                                        [Enlarge/Download Table]


                                 AMERICAN     CAPITAL     DIVIDEND                 VALUE-ADDED    GLOBAL                 
                                   VALUE       GROWTH      GROWTH      UTILITIES     MARKET       EQUITY     STRATEGIST  

------------------------------------------------------------------------------------------------------------------------ 
                                                                                                                         
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 
                                -----------  ----------  -----------  -----------  -----------  -----------  ----------- 
                                -----------  ----------  -----------  -----------  -----------  -----------  ----------- 

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STATEMENTS OF OPERATIONS                                                        

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FOR THE SIX MONTHS ENDED JANUARY 31, 1998 (UNAUDITED)                                       
                                                   U.S.                                     
                                                GOVERNMENT         U.S.        INTERMEDIATE 
                                   LIQUID          MONEY        GOVERNMENT        INCOME    
                                    ASSET         MARKET        SECURITIES      SECURITIES  

--------------------------------------------------------------------------------------------
                                                                                            
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  
                                -------------  -------------   -------------   -------------
                                -------------  -------------   -------------   -------------

------------------                                                              

*   Net of $214, $40, $2,918, $310, $581 and $8,092 foreign withholding tax,  
respectively.                                                         

SEE NOTES TO FINANCIAL STATEMENTS 

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STATEMENTS OF OPERATIONS                                                        
FOR THE SIX MONTHS ENDED JANUARY 31, 1998 (UNAUDITED)                           

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                                 AMERICAN     CAPITAL     DIVIDEND               VALUE-ADDED      GLOBAL                    
                                   VALUE       GROWTH      GROWTH     UTILITIES    MARKET         EQUITY        STRATEGIST  

--------------------------------------------------------------------------------------------------------------------------- 
                                                                                                                            
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)
                                -----------  ----------  -----------  ---------  -----------  --------------   ------------ 
                                -----------  ----------  -----------  ---------  -----------  --------------   ------------ 

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STATEMENTS OF CHANGES IN NET ASSETS                                             

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                                        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 

------------------------------------------------------------------------------------------- 
                                                                                            
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)
                                -------------  -------------  -------------   ------------- 
                                -------------  -------------  -------------   ------------- 

SEE NOTES TO FINANCIAL STATEMENTS 

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STATEMENTS OF CHANGES IN NET ASSETS                                             

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                                                                 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 

------------------------------------------------------------------------------------------------------------------------ 
                                                                                                                         
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 
                                ------------   ------------   -----------   ------------   -------------   ------------- 
                                ------------   ------------   -----------   ------------   -------------   ------------- 
                                                                                                                         

                                     CAPITAL GROWTH                                                                      
                                -------------------------                                                                

                                FOR THE SIX                                                                              
                                  MONTHS        FOR THE                                                                  
                                   ENDED         YEAR                                                                    
                                JANUARY 31,      ENDED                                                                   
                                   1998        JULY 31,                                                                  
                                (UNAUDITED)      1997                                                                    

------------------------------                                                                                           
                                                                                                                         
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                                                                 
                                -----------   -----------                                                                
                                -----------   -----------                                                                

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DEAN WITTER RETIREMENT SERIES                                                   
FINANCIAL STATEMENTS, CONTINUED                                                 

STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED                                  

                                                        [Enlarge/Download Table]


                                         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  

---------------------------------------------------------------------------------------------------- 
                                                                                                     
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)
                                --------------   -----------------   --------------   -------------- 
                                --------------   -----------------   --------------   -------------- 

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER RETIREMENT SERIES                                                   
FINANCIAL STATEMENTS, CONTINUED                                                 

STATEMENTS OF CHANGES IN NET ASSETS                                             

                                                        [Enlarge/Download Table]


                                   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     

----------------------------------------------------------------------------------------------------------------- 
                                                                                                                  
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 
                               ------------  ------------  ------------  ------------  ------------  ------------ 
                               ------------  ------------  ------------  ------------  ------------  ------------ 

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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                                                                

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DEAN WITTER INTERMEDIATE INCOME SECURITIES  

PART B  
STATEMENT OF ADDITIONAL INFORMATION   

This Statement of Additional Information relates to the shares of Dean    
Witter Intermediate Income Securities (the "Acquiring Fund") to be issued       
pursuant to an Agreement and Plan of Reorganization, dated April 30, 1998,      
between the Acquiring Fund and Intermediate Income Securities Series            
("Intermediate Income Securities"), 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 Intermediate Income Securities. 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.  

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TABLE OF CONTENTS   

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                                                       PAGE  
                                                     --------
                                                             
INTRODUCTION .......................................    B-3  
ADDITIONAL INFORMATION ABOUT THE ACQUIRING FUND  ...    B-3  
FINANCIAL STATEMENTS ...............................    B-4  

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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 Intermediate Income Securities shareholders in      
connection with the solicitation of proxies by the Board of Trustees of         
Intermediate Income Securities to be voted at the Special Meeting of            
Shareholders of Intermediate Income Securities 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 28,     
1997 and the Statement of Additional Information of Intermediate Income         
Securities 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 Trustees, officers and      
management personnel of the Acquiring Fund, see "The Fund and its Management"   
and "Trustees 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        
Shares" 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.                                                         

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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.        

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 "Performance Information" in the Acquiring Fund's Statement of Additional   
Information.                                                                    

FINANCIAL STATEMENTS  

The Acquiring Fund's most recent audited financial statements are set     
forth in the Acquiring Fund's Annual Report for the fiscal year ended August    
31, 1997, a copy of which is incorporated by reference in the Proxy Statement   
and Prospectus. Intermediate Income Securities' most recent audited financial   
statements are set forth in Intermediate Income Securities' Annual Report for   
the fiscal year ended July 31, 1997, which is incorporated by reference to      
the Proxy Statement and Prospectus.                                             

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STATEMENT OF ADDITIONAL INFORMATION                                             
DEAN WITTER                                                                     
INTERMEDIATE INCOME                                                             
SECURITIES                                                                      
OCTOBER 28, 1997                                                                

--------------------------------------------------------------------------------

Dean Witter Intermediate Income Securities (the "Fund") is an open-end, 
diversified management investment company whose investment objective is high    
current income consistent with the safety of principal. The Fund seeks to       
achieve its investment objective by investing primarily in intermediate term,   
investment grade fixed-income securities. See "Investment Objective and         
Policies."                                                                      

  A Prospectus for the Fund dated October 28, 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, Dean Witter Distributors Inc., 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                                                                     
Intermediate Income Securities                                                  
Two World Trade Center                                                          
New York, New York 10048                                                        
(212) 392-2550 or                                                               
(800) 869-NEWS (Toll-Free)                                                      

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TABLE OF CONTENTS                                                               
--------------------------------------------------------------------------------

The Fund and its Management.............     3                              

Trustees and Officers...................     6                              

Investment Practices and Policies.......    12                              

Investment Restrictions.................    16                              

Portfolio Transactions and Brokerage....    17                              

The Distributor.........................    18                              

Determination of Net Asset Value........    23                              

Purchase of Fund Shares.................    23                              

Shareholder Services....................    26                              

Redemptions and Repurchases.............    30                              

Dividends, Distributions and Taxes......    32                              

Performance Information.................    33                              

Description of Shares...................    34                              

Custodian and Transfer Agent............    35                              

Independent Accountants.................    36                              

Reports to Shareholders.................    36                              

Legal Counsel...........................    36                              

Experts.................................    36                              

Registration Statement..................    36                              

Report of Independent Accountants.......    37                              

Financial Statements--August 31, 1997...    38                              

Appendix................................    52                              

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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 
September 1, 1988.                                                              

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         
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 management investment companies: Active Assets Money Trust, Active    
Assets Tax-Free Trust, Active Assets California Tax-Free Trust, Active Assets   
Government Securities Trust, Dean Witter Liquid Asset Fund Inc., InterCapital   
Income Securities Inc., InterCapital Insured Municipal Bond Trust, InterCapital 
Insured Municipal Trust, InterCapital Insured Municipal Income Trust,           
InterCapital California Insured Municipal Income Trust, InterCapital Insured    
Municipal Securities, 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
Developing Growth Securities Trust, Dean Witter Tax-Exempt Securities Trust,    
Dean Witter Natural Resource Development Securities Inc., Dean Witter Dividend  
Growth Securities Inc., Dean Witter Capital Appreciation Fund, Dean Witter      
Information Fund, Dean Witter American Value Fund, Dean Witter U.S. Government  
Money Market Trust, Dean Witter Intermediate Term U.S. Treasury 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 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 
World Wide Income Trust, Dean Witter Intermediate Income Securities, Dean Witter
Capital Growth Securities, Dean Witter European Growth Fund Inc., Dean Witter   
Precious Metals and Minerals Trust, Dean Witter New York Municipal Money Market 
Trust, 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     
National Municipal Trust, Dean Witter High Income Securities, 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 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, Dean Witter Intermediate Term    
U.S. Treasury Trust, Municipal Income Trust, Municipal Income Trust II,         
Municipal Income Trust III, Municipal Income Opportunities Trust, Municipal     

3 

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Income Opportunities Trust II, Municipal Income Opportunities Trust III, Prime  
Income Trust and 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: 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 Mid-Cap Equity Trust, TCW/DW Global Telecom  
Trust, TCW/DW Strategic Income Trust, TCW/DW Total Return 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 objective. 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 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 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 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. ("The 
Distributor" or "Distributors") will be paid by the Fund. These expenses will be
allocated among the four classes of shares of the Fund (each, a "Class") pro    
rata based on the net assets of the Fund attributable to each Class, except as  
described below. Such expenses include, but are not limited to: expenses of the 
Plan of Distribution pursuant to Rule 12b-1 (the "12b-1 fee") (see "The         
Distributor"), charges and expenses of any registrar, custodian, stock transfer 
and dividend disbursing agent; brokerage commissions; taxes; engraving and      
printing of share 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 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 of 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; all expenses incident to any dividend,     
withdrawal or redemption options; charges and expenses of any outside service   
used for pricing of the Fund's shares; fees and expenses of legal               

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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; membership dues of industry associations; interest on Fund         
borrowings; postage; insurance premiums on property or personnel (including     
officers and trustees) 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. The 12b-1 fees relating to a particular Class will be  
allocated directly to that Class. In addition, other expenses associated with a 
particular Class (except advisory or custodial fees) may be allocated directly  
to that Class, provided that such expenses are reasonably identified as         
specifically attributable to that Class and the direct allocation to that Class 
is approved by the Trustees.                                                    

  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 business on every business day: 0.60% of the portion of the daily net assets 
not exceeding $500 million; 0.50% of the portion of daily net assets exceeding  
$500 million but not exceeding $750 million; 0.40% of the portion of the daily  
net assets exceeding $750 million but not exceeding $1 billion; and 0.30% of the
portion of the daily net assets exceeding $1 billion. The management fee is     
allocated among the Classes pro rata based on the net assets of the Fund        
attributable to each Class. Total compensation accrued to the Investment Manager
under the Agreement for the fiscal years ended August 31, 1995, 1996 and 1997   
was $1,390,467, $1,337,360 and $1,116,809, 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 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 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 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 has an initial term ending April 30, 1999,
and provides that it 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 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 following owned more than 5% of the outstanding shares of Class C of the
Fund on October 1, 1997: Gene Matter and Toni Carstens, as joint tenants, 103   
Big Valley Court, Folsom, CA, 95630-2305-- 5.4%; Dean M. Maxwell, 15644 Boreas  
Rd., Macomb, MI, 48044-3120--6.4%; William H. Watson & Emmy Lou Watson, 3962 SW 
Arroyo Dr., Seattle, WA, 98146-1659--10.6%; Raymond Elwood Schrader & Fran J.   
Schrader, as Trustees of the Schrader Family Living Trust, 1520 Portsmouth      
Avenue, West Sacramento, CA, 95691-2620--10.7%; Barbara B. Rooke, as Trustee for
the Donald & Barbara Rooke Trust, 7850 Chabolyn Way, Fair Oaks, CA,             
95628-4910--21.3%; David G. Fugate and Sally A. Fugate, as joint tenants, 392   
State Hwy. 139, Tipler, WI, 54542-9730--21.4%; Dean Witter InterCapital, Inc.,  
ATTN: Frank DeVito, Two World Trade Center, 71st Fl., New York, NY              
10048-0203--21.4%.                                                              

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    The following owned more than 5% of the outstanding shares of Class D of the
Fund on October 1, 1997: J. Winterhalter, P.O. Box 3039, Birmingham, MI, as     
Trustee for IAM & AW Local Lodge, Multi-Employer Wage Reduction 401(k)          
Plan--7.9%; Mellon Bank N.A., Mutual Funds Operations, P.O. Box 3198,           
Pittsburgh, PA 15230-3198, as trustee of the Dean Witter START Plan and the SPS 
Transaction Services, Inc. START Plan, employee benefit plans established by DWR
and SPS Transaction Services, Inc. (an affiliate of DWR) for their employees as 
qualified under Section 401(k) of the Internal Revenue Code--90.6%.             

    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 investment management contract between InterCapital and the Fund  
is terminated, or if the affiliation between the Investment Manager 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.                                                                          

                                                        [Enlarge/Download Table]

      NAME, AGE, POSITION WITH FUND AND ADDRESS                PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS       
------------------------------------------------------  ----------------------------------------------------------
                                                                                                                  
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       
6111 Broken Sound Parkway, N.W.                         Executive Officer of Hills Department Stores (May,        
Boca Raton, Florida                                     1991-July 1995); 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      
Chairman of the Board,                                  InterCapital, Distributors and DWSC; Executive Vice       
 President and Chief Executive                          President and Director of DWR; Chairman, Director or      
 Officer and Trustee                                    Trustee, President and Chief Executive Officer of the Dean
Two World Trade Center                                  Witter Funds; Chairman, Chief Executive Officer and       
New York, New York                                      Trustee of the TCW/DW Funds; 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    
Trustee                                                 United States Senator (R-Utah) (1974-1992) and Chairman,  
c/o Huntsman Corporation                                Senate Banking Committee (1980-1986); formerly Mayor of   
500 Huntsman Way                                        Salt Lake City, Utah (1971-1974); formerly Astronaut,     
Salt Lake City, Utah                                    Space Shuttle 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.  

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      NAME, AGE, POSITION WITH FUND AND ADDRESS                PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS       
------------------------------------------------------  ----------------------------------------------------------

John R. Haire (72) ...................................  Chairman of the Audit Committee and Chairman of the       
Trustee                                                 Committee of the Independent Directors or Trustees and    
Two World Trade Center                                  Director or Trustee of the Dean Witter Funds; Chairman of 
New York, New York                                      the Audit 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;    
Trustee                                                 Director of The PMI Group, Inc. (private mortgage         
c/o Gordon Altman Butowsky                              insurance); Trustee and Vice Chairman of The Field Museum 
 Weitzen Shalov & Wein                                  of Natural History; formerly associated with the Allstate 
Counsel to the Independent Trustees                     Companies (1966-1994), most recently as Chairman of The   
114 West 47th Street                                    Allstate Corporation (March, 1993-December, 1994) and     
New York, New York                                      Chairman and Chief Executive Officer 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      
Trustee                                                 consulting firm; Co-Chairman and a founder of the Group of
c/o Johnson Smick International, Inc.                   Seven Council (G7C), an international economic commission;
1133 Connecticut Avenue, N.W.                           Director or Trustee of the Dean Witter Funds; Trustee of  
Washington, DC                                          the TCW/DW Funds; Director of NASDAQ (since June, 1995);  
                                                        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.                           

Michael E. Nugent (61) ...............................  General Partner, Triumph Capital, L.P., a private         
Trustee                                                 investment partnership; Director or Trustee of the Dean   
c/o Triumph Capital, L.P.                               Witter Funds; Trustee of the TCW/DW Funds; formerly Vice  
237 Park Avenue                                         President, Bankers Trust Company and BT Capital           
New York, New York                                      Corporation (1984-1988); director of various business     
                                                        organizations.                                            

Philip J. Purcell* (54) ..............................  Chairman of the Board of Directors and Chief Executive    
Trustee                                                 Officer of MSDWD, DWR and Novus Credit Services Inc.;     
1585 Broadway                                           Director of InterCapital, DWSC and Distributors; Director 
New York, New York                                      or Trustee of the Dean Witter Funds; Director and/or      
                                                        officer of various MSDWD subsidiaries.                    

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      NAME, AGE, POSITION WITH FUND AND ADDRESS                PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS       
------------------------------------------------------  ----------------------------------------------------------

John L. Schroeder (67) ...............................  Retired; Director or Trustee of the Dean Witter Funds;    
Trustee                                                 Trustee of the TCW/DW Funds; Director of Citizens         
c/o Gordon Altman Butowsky                              Utilities Company; formerly Executive Vice President and  
  Weitzen Shalov & Wein                                 Chief Investment Officer of the Home Insurance Company    
Counsel to the Independent Trustees                     (August, 1991-September, 1995).                           
114 West 47th Street                                                                                              
New York, New York                                                                                                

Barry Fink (42) ......................................  Senior Vice President (since March, 1997) and Secretary   
Vice President, Secretary                               and General Counsel (since February, 1997) of InterCapital
 and General Counsel                                    and DWSC; Senior Vice President (since March, 1997) and   
Two World Trade Center                                  Assistant Secretary and Assistant General Counsel (since  
New York, New York                                      February, 1997) 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 the TCW/DW Funds.  

Rochelle G. Siegel (49) ..............................  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           
Treasurer                                               InterCapital and DWSC; Treasurer of the Dean Witter Funds 
Two World Trade Center                                  and the TCW/DW Funds.                                     
New York, New York                                                                                                

------------                                                                    

 *  Denotes Trustees who are "interested persons" of the Fund, 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 and Director of DWR, and Director of  
SPS Transaction Services, Inc. and various other MSDWD subsidiaries. Robert S.  
Giambrone, Senior Vice President of InterCapital, DWSC, Distributors and DWT and
Director of DWT, Joseph J. McAlinden, Executive Vice President and Chief        
Investment Officer of InterCapital and Director of DWT and Kevin Hurley, James  
F. Willison, Peter M. Avelar, and Jonathan R. Page, Senior Vice Presidents of   
InterCapital, are Vice Presidents of the Fund. Marilyn K. Cranney, First Vice   
President and Assistant General Counsel of InterCapital and DWSC, 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.             

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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 six 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 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                              

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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 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.                                                                           

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The following table illustrates the compensation paid to the Fund's     
Independent Trustees by the Fund for the fiscal year ended August 31, 1997.     

FUND COMPENSATION 

                                                               AGGREGATE
                                                              COMPENSATION
NAME OF INDEPENDENT TRUSTEE                                      FROM THE FUND  
--------------------------------------------------------------  --------------- 

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      

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 

                                                        [Enlarge/Download Table]

                                                                 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 TRUSTEE               FUNDS             FUNDS            FUNDS           FUNDS          FUNDS    
---------------------------  ----------------  ----------------  --------------  -------------  -------------
                                                                                                             
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   

  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 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 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 Fund for the fiscal year ended August 31,    
1997 and by the 57 Dean Witter Funds (including the Fund) for the year ended    
December 31, 1996, and the estimated retirement benefits for the Fund's         

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Independent Trustees, 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 

                                                        [Enlarge/Download Table]

                                                                      RETIREMENT BENEFITS     ESTIMATED ANNUAL
                                      FOR ALL ADOPTING FUNDS                                      BENEFITS    
                                ----------------------------------    ACCRUED AS EXPENSES           UPON      
                                   ESTIMATED                                                   RETIREMENT(2)  
                                CREDITED YEARS        ESTIMATED     ------------------------  ----------------
                                 OF SERVICE AT      PERCENTAGE OF                    BY ALL    FROM   FROM ALL
                                  RETIREMENT          ELIGIBLE        BY THE        ADOPTING   THE    ADOPTING
NAME OF INDEPENDENT TRUSTEE      (MAXIMUM 10)       COMPENSATION       FUND          FUNDS     FUND    FUNDS  
------------------------------  ---------------    ---------------  ----------      --------  ------  --------
                                                                                                              
Michael Bozic.................         10               50.0%             $373      $20,147   $  925  $ 51,325
Edwin J. Garn.................         10               50.0               538       27,772      925    51,325
John R. Haire.................         10               50.0          (662)(3)       46,952    2,246   129,550
Dr. Manuel H. Johnson.........         10               50.0               226       10,926      925    51,325
Michael E. Nugent.............         10               50.0               386       19,217      925    51,325
John L. Schroeder.............          8               41.7               718       38,700      771    42,771

------------                                                                    

(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.

(3) This number reflects the effect of the extension of Mr. Haire's term as     
Trustee 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 Trustees as a group was less than 1 percent of the Fund's shares of         
beneficial interest outstanding.                                                

INVESTMENT PRACTICES AND POLICIES                                               
--------------------------------------------------------------------------------

SPECIAL INVESTMENT CONSIDERATIONS                                               

   As stated in the Prospectus, the Fund 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 certain special considerations in assessing
the risks associated with such investments. Although the growth of the high     
yield securities market in the 1980s had paralleled a long economic expansion,  
recently many issuers have been affected by adverse economic and market         
conditions. It should be recognized that 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 Fund, 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 Fund
defaults, the Fund 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 the Fund. Moreover, the market  
prices of certain of the Fund's portfolio securities which are structured as    
zero coupon and                                                                 

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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 Fund to sell certain securities.                              

    Current laws and proposed new laws may have a potentially negative impact on
the market for high yield bonds. For example, 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 Fund.                

U.S. GOVERNMENT SECURITIES.  As stated in the Prospectus, while the Fund
under normal circumstances will invest primarily in corporate debt securities,  
it may also invest in U.S. Government securities. Securities issued by the U.S. 
Government, its agencies or instrumentalities in which the Fund 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     
remaining maturities of more than twelve years.                         

     (3) Securities issued by agencies and instrumentalities 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 Banks.                          

ZERO COUPON SECURITIES.  A portion of the U.S. Government securities    
purchased by the Fund 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 if prevailing interest rates rise. For this   
reason, zero coupon securities are subject to substantially greater price       
fluctuations during periods of changing prevailing interest rates than are      
comparable securities which pay interest currently. Zero coupon securities may  
not exceed 5% of the Fund's total assets.                                       

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 SECURITIES OF FOREIGN ISSUERS.  As stated in the Prospectus, the Fund may
invest in fixed-income securities issued by foreign governments and other       
foreign issuers, provided such securities are denominated in U.S. Dollars. With 
regard to foreign fixed-income securities, the Investment Manager believes that 
in many instances such securities may provide higher yields than similar        
securities of domestic issuers. With the expiration of the Interest Equalization
Tax in 1974, many of these investments currently enjoy increased liquidity,     
although such securities are generally less liquid than the securities of United
States corporations, and are certainly less liquid than securities issued by the
United States Government or its agencies.                                       

Foreign investments involve certain risks, including the political or   
economic instability of the issuer or of the country of issue, the difficulty of
predicting international trade patterns and the possibility of imposition of    
exchange controls. Such securities may also be subject to greater fluctuations  
in price than securities of United States corporations or of the United States  
Government. In addition, there may be less publicly available information about 
a foreign company than about a domestic company. Foreign companies generally are
not subject to uniform accounting, auditing and financial reporting standards   
comparable to those applicable to domestic companies. There is generally less   
government regulation of stock exchanges, brokers and listed companies abroad   
than in the United States, and with respect to certain foreign countries, there 
is a possibility of expropriation or confiscatory taxation, or diplomatic       
developments which could affect investment in those countries. Finally, in the  
event of a default of any such foreign debt obligations, it may be more         
difficult for the Fund to obtain or to enforce a judgment against the issuers of
such securities.                                                                

LENDING OF PORTFOLIO SECURITIES                                                 

As discussed in the Prospectus, consistent with applicable regulatory   
requirements, 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 Fund (subject to notice provisions described below), and are at all times
secured by cash or cash equivalents, which are maintained in a segregated       
account pursuant to applicable regulations and that are equal to at least the   
market value, including accrued interest, determined daily, of the loaned       
securities. The advantage of such loans is that the Fund 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. 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 25% of the value of its total    
assets. A loan may be terminated by the borrower on one business day's notice,  
or by the Fund on two business days' notice. If the borrower fails to deliver   
the loaned securities within two days after receipt of notice, the Fund could   
use the collateral to replace the securities while holding the borrower liable  
for any excess of replacement cost over the value of the 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 to  
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 Fund. The creditworthiness of firms to which the Fund lends its    
portfolio securities will be monitored on an ongoing basis by the Investment    
Manager pursuant to procedures adopted and reviewed, on an ongoing basis, by the
Board of Trustees of the Fund.                                                  

   When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, 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 Fund's investment in
such loaned securities. The Fund will pay reasonable finder's, administrative   
and custodial fees in connection with a loan of its securities. However, the    
Fund does not presently intend to lend any of its portfolio securities in the   
foreseeable future.                                                             

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REPURCHASE AGREEMENTS                                                           

 When cash may be available 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. A repurchase agreement may be     
viewed as a type of secured lending by the Fund which typically involves the    
acquisition by the Fund of government 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, usually not more than seven  
days from the date of purchase. In the event the original seller defaults on its
obligation to repurchase, as a result of its bankruptcy or otherwise, the Fund  
will seek to sell the collateral, which action could involve costs or delays. In
such case, the Fund's ability to dispose of the collateral to recover its       
investment may be restricted or delayed.                                        

  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 one year.    

    While repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Fund 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. The Fund does not presently   
intend to enter into repurchase agreements so that more than 5% of the Fund's   
net assets are subject to such agreements.                                      

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES                                     

    As discussed in the Prospectus, from time to time, in the ordinary course of
business, the Fund may purchase securities on a when-issued or delayed delivery 
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  
the Fund will only purchase securities on a when-issued, delayed delivery or    
forward commitment basis with the intention of acquiring the securities, the    
Fund may sell the securities before the settlement date, if it is deemed        
advisable. At the time the Fund makes the commitment to purchase securities on a
when-issued or delayed delivery basis, the Fund will record the transaction and 
thereafter reflect the value, each day, of such security in determining the net 
asset value of the Fund. At the time of delivery of the securities, the value   
may be more or less than the purchase price. The Fund will also establish a     
segregated account with the Fund's 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 Fund may purchase securities on    
such basis without limit. An increase in the percentage of the Fund's assets    
committed to the purchase of securities on a when-issued or delayed delivery    
basis may increase the volatility of the Fund's net asset value. The Investment 
Manager and the Board of Trustees do not believe that the Fund's 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, the Fund 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 in the portfolio of the    
Fund until the Investment Manager determines that issuance of the security is   
probable. At such time, the Fund will record the transaction and, in determining
its net asset value, will reflect the value of the security daily. At such time,
the Fund 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                                            

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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 Fund's commitments to purchase the securities of any one       
issuer, together with the value of all securities of such issuer owned by the   
Fund, may not exceed 5% of the value of the Fund's total assets at the time the 
initial commitment to purchase such securities is made (see "Investment         
Restrictions"). Subject to the foregoing restrictions, the Fund may purchase    
securities on such basis without limit. An increase in the percentage of the    
Fund's 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 the Fund    
will be adversely affected by its purchase of securities on such basis. The Fund
may also sell securities on a "when, as and if issued" basis provided that the  
issuance of the security will result automatically from the exchange or         
conversion of a security owned by the Fund at the time of sale.                 

OPTIONS TRANSACTIONS                                                            

   The Fund has no current intention to engage in options transactions. In the
event the Fund wishes to engage in options transactions in the future, the      
Fund's Prospectus and Statement of Additional Information will be amended and   
sent to shareholders in advance of the change.                                  

PORTFOLIO TURNOVER                                                              

    The Fund's portfolio turnover rate for the fiscal year ended August 31, 1997
was 98%. A 100% turnover rate would occur, for example, if 100% of the          
securities held in the Fund's portfolio (excluding all securities whose         
maturities at acquisition were one year or less) were sold and replaced within  
one year.                                                                       

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, except as otherwise indicated. Under 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. Such a        
majority is defined as the lesser of (a) 67% or more of the shares present at a 
meeting of shareholders, if the holders of 50% of the outstanding shares of the 
Fund are present or represented by proxy or (b) more than 50% of the outstanding
shares of the Fund.                                                             

The Fund may not:                                                       

         1. Invest in securities of any issuer if, to the knowledge of the Fund,
 any officer or trustee/ director of the Fund or of the Investment Manager
  owns more than 1/2 of 1% of the outstanding securities of such issuer, and
   such officers and trustees/directors who own more than 1/2 of 1% own in the
aggregate more than 5% of the outstanding securities of such issuers.   

         2. Purchase or sell real estate or interests therein, although the Fund
 may purchase securities of issuers which engage in real estate operations
and securities secured by real estate or interests therein.             

 3. Purchase oil, gas or other mineral leases, rights or royalty
  contracts or exploration or development programs, except that the Fund may
  invest in the securities of companies which operate, invest in, or sponsor
such programs.                                                          

 4. Purchase securities of other investment companies, except in
 connection with a merger, consolidation, reorganization or acquisition of
assets.                                                                 

     5. Pledge its assets or assign or otherwise encumber them except to
  secure borrowings effected within the limitations set forth in restriction
(6) in the Prospectus.                                                  

        6. Issue senior securities as defined in the Act except insofar as the
  Fund may be deemed to have issued a senior security by reason of borrowing
money in accordance with restriction (6) in the Prospectus.             

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      7. Make loans of money or securities, except: (a) by the purchase of
publicly distributed debt obligations in which the Fund may invest      
   consistent with its investment objective and policies; (b) by investment in
repurchase agreements; or (c) by lending its portfolio securities.      

8. Make short sales of securities.                            

 9. Purchase or sell commodities or commodity futures contracts.

      10. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of portfolio securities.                

        11. Engage in the underwriting of securities, except insofar as the Fund
  may be deemed an underwriter under the Securities Act of 1933 in disposing
of a portfolio security.                                                

     12. Invest for the purpose of exercising control or management of any
other issuer.                                                           

In addition, the Fund, as a non-fundamental policy, will not invest in  
warrants, although it may acquire warrants attached to other securities         
purchased by the Fund.                                                          

    If a percentage restriction is adhered to at the time of 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.                                 

Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective by investing all or substantially all  
of its assets in another investment company having substantially the same       
investment objective and policies as the Fund.                                  

PORTFOLIO TRANSACTIONS AND BROKERAGE                                            
--------------------------------------------------------------------------------

    Subject to the general supervision of the Board of Trustees of the Fund, the
Investment Manager is responsible for the investment decisions and the placing  
of orders for portfolio transactions for the Fund. The Fund's portfolio         
transactions will occur primarily with issuers, underwriters or major dealers in
fixed-income securities acting as principals. Such transactions are normally on 
a net basis which do not involve payment of brokerage commissions. The cost of  
securities purchased from an underwriter usually includes a commission paid by  
the issuer to the underwriter; transactions with dealers normally reflect the   
spread between bid and asked prices. During the fiscal years ended August 31,   
1995, 1996 and 1997, the Fund did not pay any brokerage commissions.            

    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, 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.                            

  The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most     
favorable prices and efficient executions 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 prices 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                                          

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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 all cases 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 management fee paid to the Investment     
Manager is not reduced 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    
Bankers' 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.                                                             

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 affiliated brokers and dealers. In order for an  
affiliated broker or dealer to effect any 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 Board of 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 an affiliated broker or dealer  
are consistent with the foregoing standard. For the fiscal years ended August   
31, 1995, 1996 and 1997, the Fund did not effect any securities transactions    
with or through DWR. During the period June 1 through August 31, 1997, the Fund 
did not effect any securities transactions with or through Morgan Stanley & Co.,
Incorporated, which broker-dealer 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. 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 an affiliated broker or dealer.                                          

THE DISTRIBUTOR                                                                 
--------------------------------------------------------------------------------

  As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). 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 selected  
dealer agreements with other selected broker-dealers. The Distributor, a        
Delaware corporation, is a wholly-owned subsidiary of MSDWD. The Trustees of the
Fund, including a majority of 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 June 30, 1997, the  
current Distribution Agreement appointing the Distributor 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 remain in effect from year to year  
thereafter if approved by the Board.                                            

   The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. Such expenses include the payment of commissions for
sales of the Fund's shares and incentive compensation to account executives. The
Distributor also pays certain expenses in connection with the                   

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distribution of the Fund's shares, including the costs of preparing, printing   
and distributing advertising or promotional materials, and 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 bears the costs of initial 
typesetting, printing and distribution of prospectuses and supplements thereto  
to shareholders. The Fund also bears the costs of registering the Fund and its  
shares under federal securities laws and pays filing fees in accordance with    
state securities laws. The Fund and the Distributor have agreed to indemnify    
each other against certain liabilities, including liabilities under the         
Securities Act of 1933, as amended. Under the Distribution Agreement, 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.        

PLAN OF DISTRIBUTION.                                                           

    The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act (the "Plan") pursuant to which each Class, other than Class D, pays the     
Distributor compensation accrued daily and payable monthly at the following     
annual rates: 0.25% and 0.85% of the average daily net assets of Class A and    
Class C, respectively, and, with respect to Class B, 0.85% of the lesser of: (a)
the average daily aggregate gross sales of the Fund's Class B shares since the  
inception of the Fund (not including reinvestments of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's  
Class B shares redeemed since the Fund's inception upon which a contingent      
deferred sales charge has been imposed or upon which such charge has been       
waived; or (b) the average daily net assets of Class B. The Distributor also    
receives the proceeds of front-end sales charges and of contingent deferred     
sales charges imposed on certain redemptions of shares, which are separate and  
apart from payments made pursuant to the Plan (see "Purchase of Fund Shares" in 
the Prospectus). The Distributor has informed the Fund that it and/or DWR       
received approximately $500,000, $364,492 and $285,035 in contingent deferred   
sales charges for the fiscal years ended August 31, 1995, 1996 and 1997         
respectively, none of which was retained by the Distributor. These amounts were 
received from Class B only. No front-end sales charges were received from Class 
A and no contingent deferred sales charges were received from Class A or Class C
for the period July 28 through August 31, 1997.                                 

    The Distributor has informed the Fund that the entire fee payable by Class A
and a portion of the fees payable by each of Class B and Class C each year      
pursuant to the Plan equal to 0.20% of the average daily net assets of Class B  
and 0.25% of the average daily net assets of Class C are currently each         
characterized as a "service fee" under the Rules of the Association of the      
National Association of Securities Dealers, Inc. (of which the Distributor is a 
member). The "service fee" is a payment made for personal service and/or the    
maintenance of shareholder accounts. The remaining portion of the Plan fees     
payable by a Class, if any, is characterized as an "asset-based sales charge" as
such is defined by the aforementioned Rules of the Association.                 

The Plan was adopted by a vote of the Trustees of the Fund on April 27, 
1989, at a Meeting of the Trustees called for the purpose of voting on such     
Plan. The vote included the vote of a majority of the Trustees of the Fund who  
are not "interested persons" of the Fund (as defined in the Act) and who have no
direct or indirect financial interest in the operation of the Plan (the         
"Independent 12b-1 Trustees"). In making their decision to adopt the Plan, the  
Trustees requested from DWR and received such information as they deemed        
necessary to make an informed determination as to whether or not adoption of the
Plan was in the best interests of the shareholders of the Fund. After due       
consideration of the information received, the Trustees, including the          
Independent 12b-1 Trustees, determined that adoption of the Plan would benefit  
the shareholders of the Fund. DWR, as then sole shareholder of the Fund,        
approved the Plan on April 28, 1989, and the Plan was approved by shareholders  
of the Fund at a Meeting of Shareholders on December 21, 1989.                  

At their meeting held on October 30, 1992, the Trustees of the Fund,    
including all of the Independent 12b-1 Trustees, approved certain amendments to 
the Plan which took effect in January, 1993 and were                            

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designed to reflect the fact that upon an internal reorganization the share     
distribution activities theretofore performed for the Fund by DWR were assumed  
by the Distributor and DWR's sales activities are now being 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 DWR 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 compensation for   
its own distribution-related expenses. At their meeting held on April 28, 1993, 
the Trustees, including a majority of the Independent 12b-1 Trustees, also      
approved certain technical amendments to the Plan in connection with amendments 
adopted by the National Association of Securities Dealers, Inc. to its Rules of 
the Association. At their meeting held on October 26, 1995, the Trustees of the 
Fund, including all of the Independent 12b-1 Trustees, approved an amendment to 
the Plan to permit payments to be made under the Plan with respect to certain   
distribution expenses incurred in connection with the distribution of shares,   
including personal services to shareholders with respect to holdings of such    
shares, of an investment company whose assets are acquired by the Fund in a     
tax-free reorganization. At their meeting held on June 30, 1997, the Trustees,  
including a majority of the Independent 12b-1 Trustees, approved amendments to  
the Plan to reflect the multiple-class structure for the Fund, which took effect
on July 28, 1997.                                                               

   Under the Plan and as required by Rule 12b-1, the Trustees will receive and
review promptly after the end of each fiscal quarter a written report provided  
by the Distributor of the amounts expended by the Distributor under the Plan and
the purpose for which such expenditures were made. Class B shares of the Fund   
accrued $1,578,380 payable to the Distributor, pursuant to the Plan, for the    
fiscal year ended August 31, 1997. This is an accrual at an annual rate of 0.85%
of the average daily net assets of Class B and was calculated pursuant to clause
(b) of the compensation formula under the Plan. This amount is treated by the   
Fund as an expense in the year it is accrued. For the period July 28 through    
August 31, 1997, Class A and Class C shares of the Fund accrued payments under  
the Plan amounting to $3 and $18, respectively, which amounts are equal to 0.25%
and 0.85% of the average daily net assets of Class A and Class C, respectively, 
for such period.                                                                

The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four     
Classes of shares, each with a different distribution arrangement as set forth  
in the Prospectus.                                                              

 With respect to Class A shares, DWR compensates its account executives by
paying them, from proceeds of the front-end sales charge, commissions for the   
sale of Class A shares, currently a gross sales credit of up to 4.0% of the     
amount sold (except as provided in the following sentence) and an annual        
residual commission, currently a residual of up to 0.20% of the current value of
the respective accounts for which they are the account executives or dealers of 
record in all cases. On orders of $1 million or more (for which no sales charge 
was paid) or net asset value purchases by 401(k) plans or other                 
employer-sponsored plans qualified under Section 401(a) of the Internal Revenue 
Code for which Dean Witter Trust FSB ("DWT") serves as Trustee or the 401(k)    
Support Services Group of DWR serves as recordkeeper, the Investment Manager    
compensates DWR's account executives by paying them, from its own funds, a gross
sales credit of 1.0% of the amount sold.                                        

 With respect to Class B shares, DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of Class B shares,    
currently a gross sales credit of up to 4.0% of the amount sold (except as      
provided in the following sentence) and an annual residual commission, currently
a residual of up to 0.20% of the current value (not including reinvested        
dividends or distributions) of the amount sold in all cases. In the case of     
retirement plans qualified under Section 401(k) of the Internal Revenue Code and
other employer-sponsored plans qualified under Section 401(a) of the Internal   
Revenue Code for which DWT serves as Trustee or the 401(k) Support Services     
Group of DWR serves as recordkeeper, and which plans are opened on or after July
28, 1997, DWR compensates its account executives by paying them, from its own   
funds, a gross sales credit of 3.0% of the amount sold.                         

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 With respect to Class C shares, DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of Class C shares,    
currently a gross sales credit of up to 1.0% of the amount sold and an annual   
residual commission, currently a residual of up to 0.85% of the current value of
the respective accounts for which they are the account executives of record.    

With respect to Class D shares other than shares held by participants in
InterCapital's mutual fund asset allocation program, the Investment Manager     
compensates DWR's account executives by paying them, from its own funds,        
commissions for the sale of Class D shares, currently a gross sales credit of up
to 1.0% of the amount sold. There is a chargeback of 100% of the amount paid if 
the Class D shares are redeemed in the first year and a chargeback of 50% of the
amount paid if the Class D shares are redeemed in the second year after         
purchase. The Investment Manager also compensates DWR's account executives by   
paying them, from its own funds, 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 (not including accounts of      
participants in the InterCapital mutual fund asset allocation program).         

    The gross sales credit is a charge which reflects commissions paid by DWR to
its account executives and DWR's Fund-associated distribution-related expenses, 
including sales compensation, and overhead and other branch office              
distribution-related expenses including (a) the expenses of operating DWR's     
branch offices in connection with the sale of Fund shares, including lease      
costs, the salaries and employee benefits of operations and sales support       
personnel, utility costs, communications costs and the costs of stationery and  
supplies, (b) the costs of client sales seminars, (c) travel expenses of mutual 
fund sales coordinators to promote the sale of Fund shares and (d) other        
expenses relating to branch promotion of Fund sales. The distribution fee that  
the Distributor receives from the Fund under the Plan, in effect, offsets       
distribution expenses incurred under the Plan on behalf of the Fund and, in the 
case of Class B shares, opportunity costs, such as the gross sales credit and an
assumed interest charge thereon ("carrying charge"). In the Distributor's       
reporting of the distribution expenses to the Fund, in the case of Class B      
shares, such assumed interest (computed at the "broker's call rate") has been   
calculated on the gross credit as it is reduced by amounts received by the      
Distributor under the Plan and any contingent deferred sales charges received by
the Distributor upon redemption of shares of the Fund. No other interest charge 
is included as a distribution expense in the Distributor's calculation of its   
distribution costs for this purpose. The broker's call rate is the interest rate
charged to securities brokers on loans secured by exchange-listed securities.   

  The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in      
servicing shareholder accounts. Reimbursement will be 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 0.25%, in the case of Class  
A, and 0.85%, in the case of Class C, of the average net assets of the          
respective Class during the month. No interest or other financing charges, if   
any, incurred on any distribution expenses on behalf of Class A and Class C will
be reimbursable under the Plan. With respect to Class A, in the case of all     
expenses other than expenses representing the service fee, and, with respect to 
Class C, in the case of all expenses other than expenses representing a gross   
sales credit or a residual to account executives, such amounts shall be         
determined at the beginning of each calendar quarter by the Trustees, including 
a majority of the Independent 12b-1 Trustees. Expenses representing the service 
fee (for Class A) or a gross sales credit or a residual to account executives   
(for Class C) 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    
reimbursed by the Fund, the Distributor will provide and the Trustees will      
review a quarterly budget of projected 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 Trustees 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 Class A and
Class C shares.                                                                 

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  Each Class paid 100% of the amounts accrued under the Plan with respect to
the Class for the fiscal year ended August 31, 1997, to the Distributor. The    
Distributor and DWR estimate that they have spent, pursuant to the Plan,        
$21,554,000 on behalf of Class B since the inception of the Plan. It is         
estimated that this amount was spent in approximately the following ways: (i)   
11.15% ($2,404,293)--advertising and promotional expenses; (ii) 0.75%           
($161,334)--printing of prospectuses for distribution to other than current     
shareholders; and (iii) 88.10% ($18,989,037)--other expenses, including the     
gross sales credit and the carrying charge, of which 9.53% ($1,809,826)         
represents carrying charges, 35.85% ($6,808,121) represents commission credits  
to DWR branch offices for payments of commissions to account executives and     
54.62% ($10,371,090) represents overhead and other branch office                
distribution-related expenses. The amounts accrued by Class A and Class C for   
distribution during the period July 28 through August 31, 1997 were for expenses
which relate to compensation of sales personnel and associated overhead         
expenses.                                                                       

In the case of Class B shares, at any given time, the expenses in       
distributing shares of the Fund may be more or less than the total of (i) the   
payments made by the Fund pursuant to the Plan and (ii) the proceeds of         
contingent deferred sales charges paid by investors upon redemption of shares.  
The Distributor has advised the Fund that in the case of Class B shares such    
excess amount, including the carrying charge designed to approximate the        
opportunity costs incurred which arise from it having advanced monies without   
having received the amount of any sales charges imposed at the time of sale of  
the Fund's Class B shares, totalled $5,734,753 as of August 31, 1997. Because   
there is no requirement under the Plan that the Distributor be reimbursed for   
all expenses with respect to Class B shares or any requirement that the Plan be 
continued from year to year, this excess amount does not constitute a liability 
of the Fund. Although there is no legal obligation for the Fund to pay          
distribution expenses in excess of payments made under the Plan and the proceeds
of contingent deferred sales charges paid by investors upon redemption of       
shares, if for any reason the Plan is terminated, the Trustees will consider at 
that time the manner in which to treat such expenses. Any cumulative expenses   
incurred, but not yet recovered through distribution fees or contingent deferred
sales charges, may or may not be recovered through future distribution fees or  
contingent deferred sales charges.                                              

   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, InterCapital, DWR, DWSC 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.                                                

   Under its terms, the Plan continued until April 30, 1990 and will remain in
effect from year to year thereafter, provided such continuance is approved      
annually by a vote of the Trustees in the manner described above. Prior to the  
Board's approval of amendments to the Plan to reflect the multiple-class        
structure for the Fund, the most recent continuance of the Plan for one year,   
until April 30, 1998, was approved by the Board of Trustees of the Fund,        
including a majority of the Independent 12b-1 Trustees, at a Board meeting held 
on April 24, 1997. Prior to approving the continuation of the Plan, the Trustees
requested and received from the Distributor and reviewed all the information    
which they deemed necessary to arrive at an informed determination. In making   
their determination to continue the Plan, the Trustees considered: (1) the      
Fund's experience under the Plan and whether such experience indicates that the 
Plan is operating as anticipated; (2) the benefits the Fund had obtained, was   
obtaining and would be likely to obtain under the Plan; and (3) what services   
had been provided and were continuing to be provided under the Plan the         
Distributor to the Fund and its shareholders. Based upon their review, the      
Trustees of the Fund, including each of the Independent 12b-1 Trustees,         
determined that continuation of the Plan would be in the best interest of the   
Fund and would have a reasonable likelihood of continuing to benefit the Fund   
and its shareholders. In the Trustees' quarterly review of the Plan, they will  
consider its continued appropriateness and the level of compensation provided   
therein.                                                                        

 The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval of the shareholders of the  
affected Class or Classes of the Fund, and all material amendments of the Plan  
must also be approved by the Trustees in the manner described                   

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above. The Plan may be terminated at any time, without payment of any penalty,  
by vote of a majority of the Independent 12b-1 Trustees or by a vote 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 election and nomination of Independent    
12b-1 Trustees shall be committed to the discretion of the Independent 12b-1    
Trustees.                                                                       

DETERMINATION OF NET ASSET VALUE                                                
--------------------------------------------------------------------------------

    Short-term 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. All other securities and other assets are valued at their fair value  
as determined in good faith under procedures established by and under the       
supervision of the Trustees.                                                    

    As discussed in the Prospectus, the net asset value per share for each Class
of shares of the Fund is determined 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 that the New York Stock Exchange is open by taking   
the value of all assets of the Fund, subtracting its liabilities, dividing by   
the number of shares outstanding and adjusting to the nearest cent. 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.           

PURCHASE OF FUND SHARES                                                         
--------------------------------------------------------------------------------

 As discussed in the Prospectus, the Fund offers four Classes of shares as
follows:                                                                        

INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES                                

Class A shares are sold to investors with an initial sales charge that  
declines to zero for larger purchases; however, Class A shares sold without an  
initial sales charge are subject to a contingent deferred sales charge ("CDSC") 
of 1.0% if redeemed within one year of purchase, except in the circumstances    
discussed in the Prospectus.                                                    

RIGHT OF ACCUMULATION.  As discussed in the Prospectus, investors may   
combine the current value of shares purchased in separate transactions for      
purposes of benefitting from the reduced sales charges available for purchases  
of shares of the Fund totalling at least $25,000 in net asset value. For        
example, if any person or entity who qualifies for this privilege holds Class A 
shares of the Fund and/or other Dean Witter Funds that are multiple class funds 
("Dean Witter Multi-Class Funds") or shares of other Dean Witter Funds sold with
a front-end sales charge purchased at a price including a front-end sales charge
having a current value of $5,000, and purchases $20,000 of additional shares of 
the Fund, the sales charge applicable to the $20,000 purchase would be 4.0% of  
the offering price.                                                             

The Distributor must be notified by the selected broker-dealer or the   
shareholder at the time a purchase order is placed that the purchase qualifies  
for the reduced charge under the Right of Accumulation. Similar notification    
must be made in writing by the selected broker-dealer or shareholder when such  
an order is placed by mail. The reduced sales charge will not be granted if: (a)
such notification is not furnished at the time of the order; or (b) a review of 
the records of the Distributor or Dean Witter Trust FSB (the "Transfer Agent")  
fails to confirm the investor's represented holdings.                           

    LETTER OF INTENT.  As discussed in the Prospectus, reduced sales charges are
available to investors who enter into a written Letter of Intent providing for  
the purchase, within a thirteen-month period, of Class A shares of the Fund from
the Distributor or from a single Selected Broker-Dealer.                        

   A Letter of Intent permits an investor to establish a total investment goal
to be achieved by any number of purchases over a thirteen-month period. Each    
purchase of Class A shares made during the                                      

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period will receive the reduced sales commission applicable to the amount       
represented by the goal, as if it were a single purchase. A number of shares    
equal in value to 5% of the dollar amount of the Letter of Intent will be held  
in escrow by the Transfer Agent, in the name of the shareholder. The initial    
purchase under a Letter of Intent must be equal to at least 5% of the stated    
investment goal.                                                                

The Letter of Intent does not obligate the investor to purchase, nor the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is   
not achieved within the thirteen-month period, the investor is required to pay  
the difference between the sales charge otherwise applicable to the purchases   
made during this period and sales charges actually paid. Such payment may be    
made directly to the Distributor or, if not paid, the Distributor is authorized 
by the shareholder to liquidate a sufficient number of his or her escrowed      
shares to obtain such difference.                                               

   If the goal is exceeded and purchases pass the next sales charge level, the
sales charge on the entire amount of the purchase that results in passing that  
level and on subsequent purchases will be subject to further reduced sales      
charges in the same manner as set forth above under "Right of Accumulation," but
there will be no retroactive reduction of sales charges on previous purchases.  
For the purpose of determining whether the investor is entitled to a further    
reduced sales charge applicable to purchases at or above a sales charge level   
which exceeds the stated goal of a Letter of Intent, the cumulative current net 
asset value of any shares owned by the investor in any other Dean Witter Funds  
held by the shareholder which were previously purchased at a price including a  
front-end sales charge (including shares of the Fund and other Dean Witter Funds
acquired in exchange for those shares, and including in each case shares        
acquired through reinvestment of dividends and distributions) will be added to  
the cost or net asset value of shares of the Fund owned by the investor.        
However, shares of "Exchange Funds" (see "Shareholder Services--Exchange        
Privilege") and the purchase of shares of other Dean Witter Funds will not be   
included in determining whether the stated goal of a Letter of Intent has been  
reached.                                                                        

At any time while a Letter of Intent is in effect, a shareholder may, by
written notice to the Distributor, increase the amount of the stated goal. In   
that event, only shares purchased during the previous 90-day period and still   
owned by the shareholder will be included in the new sales charge reduction. The
5% escrow and minimum purchase requirements will be applicable to the new stated
goal. Investors electing to purchase shares of the Fund pursuant to a Letter of 
Intent should carefully read such Letter of Intent.                             

CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES                    

    Class B shares are sold without an initial sales charge but are subject to a
CDSC payable upon most redemptions within six years after purchase. As stated in
the Prospectus, a CDSC will be imposed on any redemption by an investor if after
such redemption the current value of the investor's Class B shares of the Fund  
is less than the dollar amount of all payments by the shareholder for the       
purchase of Class B shares during the preceding six years (or, in the case of   
shares held by certain employer-sponsored benefit plans, three years). However, 
no CDSC will be imposed to the extent that the net asset value of the shares    
redeemed does not exceed: (a) the current net asset value of shares purchased   
more than six years (or, in the case of shares held by certain                  
employer-sponsored benefit plans, three years) prior to the redemption, plus (b)
the current net asset value of shares purchased through reinvestment of         
dividends or distributions of the Fund or another Dean Witter Fund (see         
"Shareholder Services-- Targeted Dividends"), plus (c) the current net asset    
value of shares acquired in exchange for (i) shares of Dean Witter front-end    
sales charge funds, or (ii) shares of other Dean Witter Funds for which shares  
of front-end sales charge funds have been exchanged (see "Shareholder           
Services--Exchange Privilege"), plus (d) increases in the net asset value of the
investor's shares above the total amount of payments for the purchase of Fund   
shares made during the preceding six (three) years. The CDSC will be paid to the
Distributor.                                                                    

   In determining the applicability of the CDSC to each redemption, the amount
which represents an increase in the net asset value of the investor's shares    
above the amount of the total payments for the purchase of shares within the    
last six years (or, in the case of shares held by certain employer-sponsored    
benefit plans, three years) will be redeemed first. In the event the redemption 
amount exceeds such increase in value, the next portion of the amount redeemed  
will be the amount which represents the net                                     

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asset value of the investor's shares purchased more than six (three) years prior
to the redemption and/or shares purchased through reinvestment of dividends or  
distributions and/or shares acquired in exchange for shares of Dean Witter      
front-end sales charge funds, or for shares of other Dean Witter funds for which
shares of front-end sales charge funds have been exchanged. A portion of the    
amount redeemed which exceeds an amount which represents both such increase in  
value and the value of shares purchased more than six years (or, in the case of 
shares held by certain employer-sponsored benefit plans, three years) prior to  
the redemption and/or shares purchased through reinvestment of dividends or     
distributions and/or shares acquired in the above-described exchanges will be   
subject to a CDSC.                                                              

  The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Class B shares of the Fund until   
the time of redemption of such shares. For purposes of determining the number of
years from the time of any payment for the purchase of shares, all payments made
during a month will be aggregated and deemed to have been made on the last day  
of the month. The following table sets forth the rates of the CDSC applicable to
most Class B shares of the Fund:                                                

YEAR SINCE              
                     PURCHASE            CDSC AS A PERCENTAGE OF
               PAYMENT MADE              AMOUNT REDEEMED
---------------------------------------------  ---------------------------      

First........................................                5.0%               
Second.......................................                4.0%               
Third........................................                3.0%               
Fourth.......................................                2.0%               
Fifth........................................                2.0%               
Sixth........................................                1.0%               
Seventh and thereafter.......................             None                  

  The following table sets forth the rates of the CDSC applicable to Class B
shares of the Fund held by 401(k) plans or other employer-sponsored plans       
qualified under Section 401(a) of the Internal Revenue Code for which DWT serves
as Trustee or the 401(k) Support Services Group of DWR serves as recordkeeper   
and whose accounts are opened on or after July 28, 1997:                        

YEAR SINCE          
                        PURCHASE           CDSC AS A PERCENTAGE OF
                  PAYMENT MADE             AMOUNT REDEEMED
----------------------------------------------  ---------------------------     

First.........................................                2.0%              
Second........................................                2.0%              
Third.........................................                1.0%              
Fourth and thereafter.........................             None                 

    In determining the rate of the CDSC, it will be assumed that a redemption is
made of shares held by the investor for the longest period of time within the   
applicable six-year or three-year period. This will result in any such CDSC     
being imposed at the lowest possible rate. The CDSC will be imposed, in         
accordance with the table shown above, on any redemptions within six years (or, 
in the case of shares held by certain employer-sponsored benefit plans, three   
years) of purchase which are in excess of these amounts and which redemptions do
not qualify for waiver of the CDSC, as described in the Prospectus.             

LEVEL LOAD ALTERNATIVE--CLASS C SHARES                                          

   Class C shares are sold without a sales charge but are subject to a CDSC of
1.0% on most redemptions made within one year after purchase, except in the     
circumstances discussed in the Prospectus.                                      

NO LOAD ALTERNATIVE--CLASS D SHARES                                             

Class D shares are offered without any sales charge on purchase or      
redemption. Class D shares are offered only to those persons meeting the        
qualifications set forth in the Prospectus.                                     

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SHAREHOLDER SERVICES                                                            
--------------------------------------------------------------------------------

    Upon the purchase of shares of the Fund, a Shareholder Investment Account is
opened for the investor on the books of the Fund and maintained by 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     
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. Whenever a shareholder-instituted       
transaction takes place in the Shareholder Investment Account, the shareholder  
will be mailed a confirmation of the transaction from the Fund or from DWR or   
another selected broker-dealer.                                                 

   INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH.  As discussed in
the Prospectus, any shareholder who receives a cash payment representing a      
dividend or distribution may invest such dividend or distribution in shares of  
the applicable Class at net asset value, without the imposition of a CDSC upon  
redemption, by returning the check or the proceeds to the Transfer Agent within 
30 days after the payment date. If the shareholder returns the proceeds of a    
dividend or distribution, such funds must be accompanied by a signed statement  
indicating that the proceeds constitute a dividend or distribution to be        
invested. Such investment will be made at the net asset value per share next    
determined after receipt of the check or proceeds by the Transfer Agent.        

AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS.  As stated in the  
Prospectus, all income dividends and capital gains distributions are            
automatically paid in full and fractional shares of the applicable Class 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. Such 
dividends and distributions will be paid, at the net asset value per share, in  
shares of the applicable Class of the Fund (or in cash if the shareholder so    
requests) as of the close of business on the monthly payment date, as stated in 
the Prospectus. At any time an investor may request the Transfer Agent, in      
writing, to have subsequent dividends and/or capital gains distributions paid to
him or her in cash rather than shares. To assure sufficient time to process the 
change, such request should be received by the Transfer Agent as least five     
business days prior to the payment date of the dividend or distribution or the  
record date of the distribution. In the 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, which will be forwarded to the        
shareholder, upon the receipt of proper instructions. 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.                                                           

TARGETED DIVIDENDS-SM-.  In states where it is legally permissible,     
shareholders may also have all income dividends and capital gains distributions 
automatically invested in shares of any Class of a Dean Witter Fund other than  
Dean Witter Intermediate Income Securities or in another Class of Dean Witter   
Intermediate Income Securities. Such investment will be made as described above 
for automatic investment in shares of the applicable Class of the Fund, at the  
net asset value per share of the selected Dean Witter Fund as of the close of   
business on the payment date of the dividend or distribution and will begin to  
earn dividends, if any, in the selected Dean Witter Fund the next business day. 
To participate in the Targeted Dividends program, shareholders should contact   
their DWR or other selected broker-dealer account executive or the Transfer     
Agent. Shareholders of the Fund must be shareholders of the selected Class of   
the Dean 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 or following       
redemption of shares of a Dean Witter money market fund, 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                              

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the same business day the transfer of funds is effected (subject to any         
applicable sales charges). Shares of the Dean Witter money market funds redeemed
in connection with EasyInvest are redeemed on the business day preceding the    
transfer of Funds. For further information or to subscribe to Easyinvest,       
shareholders should contact their DWR or other selected broker-dealer account   
executive or the Transfer Agent.                                                

 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 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. Any applicable CDSC will be imposed on shares redeemed under  
the Withdrawal Plan (see "Purchase of Fund Shares"). Therefore, any shareholder 
participating in the Withdrawal Plan will have sufficient shares redeemed from  
his or her account so that the proceeds (net of any applicable CDSC) to the     
shareholder will be the designated monthly or quarterly amount.                 

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, or amounts credited to a shareholder's DWR or other      
selected broker-dealer brokerage account 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.                               

Each withdrawal constitutes a redemption of shares and any gain or loss 
realized must be recognized for federal income tax purposes. Although the       
shareholder may make additional investments of $2,500 or more under the         
Withdrawal Plan, withdrawals made concurrently with purchases of additional     
shares may be inadvisable because of sales charges which may be applicable to   
purchases or redemptions of shares (see "Purchase of Fund Shares").             

  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 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 "Redemptions and            
Repurchases" in the Prospectus) at any time.                                    

   DIRECT INVESTMENTS THROUGH TRANSFER AGENT.  As discussed in the Prospectus,
shareholders may make additional investments in any Class of shares of the Fund 
for which they qualify at any time by sending a check in any amount, not less   
than $100, payable to Dean Witter Intermediate Income Securities, and indicating
the selected Class, directly to the Fund's Transfer Agent. In the case of Class 
A shares, after deduction of any applicable sales charge, the balance will be   
applied to the purchase of Fund shares, and, in the case of shares of the other 
Classes, the entire amount will be applied to the purchase of Fund shares, at   
the net asset value per share next computed after receipt of the check or       

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purchase payment by the Transfer Agent. The shares so purchased will be credited
to the investor's account.                                                      

EXCHANGE PRIVILEGE                                                              

    As discussed in the Prospectus, the Fund makes available to its shareholders
an Exchange Privilege whereby shareholders of each Class of shares of the Fund  
may exchange their shares for shares of the same Class of shares of any other   
Dean Witter Multi-Class Fund without the imposition of any exchange fee. Shares 
may also be exchanged for shares of any of the following funds: Dean Witter     
Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal Trust, Dean  
Witter Short-Term Bond Fund, Dean Witter Intermediate Term U.S. Treasury Trust  
and five Dean Witter Funds which are money market funds (the foregoing nine     
funds are hereinafter referred to as the "Exchange Funds"). Class A shares may  
also be exchanged for shares of Dean Witter Multi-State Municipal Series Trust  
and Dean Witter Hawaii Municipal Trust, which are Dean Witter Funds sold with a 
front-end sales charge ("FSC Funds"). Class B shares may also be exchanged for  
shares of Dean Witter Global Short-Term Income Fund Inc., Dean Witter High      
Income Securities and Dean Witter National Municipal Trust, which are Dean      
Witter Funds offered with a CDSC ("CDSC Funds"). 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. 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.)                                                               

As described below, and in the Prospectus under the caption "Purchase of
Fund Shares," a CDSC may be imposed upon a redemption, depending on a number of 
factors, including the number of years from the time of purchase until the time 
of redemption or exchange ("holding period"). When shares of a Dean Witter      
Multi-Class Fund or any CDSC Fund are exchanged for shares of an 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 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 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 reacquired. 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 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,                                              

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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 an 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, with respect to Class B shares, 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 Prospectus under the caption         
"Purchase of Fund Shares," 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.                                         

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 the purchase of 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.                               

 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 $5,000 for Dean Witter Liquid Asset 
Fund Inc., 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 $10,000 for Dean Witter Short-Term U.S. Treasury Trust,
although that fund, in its discretion, may accept initial purchases as low as   
$5,000. 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 for all other Dean  
Witter Funds for which the Exchange Privilege is available is $1,000.) Upon     

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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 Dean Witter 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 the Fund and/or any of the Dean Witter Funds for which   
shares of the Fund have been 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      
Exchange Funds, pursuant to the Exchange Privilege, and provided further 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.            

    The current prospectus for each fund describes its investment objectives and
policies, and shareholders should obtain a copy and examine it carefully before 
investing. 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.                 

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                                                     
--------------------------------------------------------------------------------

  REDEMPTION.  As stated in the Prospectus, shares of each Class of the Fund
can be redeemed for cash at any time at the net asset value per share next      
determined; however, such redemption proceeds will be reduced by the amount of  
any applicable CDSC. If shares are held in shareholder's account without a share
certificate, a written request for redemption to the Fund's Transfer Agent at   
P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are held by the
shareholder, the shares may be redeemed by surrendering the certificates with a 
written request for redemption. The share certificate, or an accompanying stock 
power, and the request for redemption, must be signed by the shareholder or     
shareholders exactly as the shares are registered. Each request for redemption, 
whether or not accompanied by a share certificate, must be sent to the Fund's   
Transfer Agent, which will redeem the shares at their net asset value next      
computed (see "Purchase of Fund Shares") after it receives the request, and     
certificate, 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. If redemption is requested by a corporation, partnership, trust 
or fiduciary, the Transfer Agent may require that written evidence of authority 
acceptable to the Transfer Agent be submitted before such request is accepted.  

Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other than  
the record owner, or if the proceeds are to be paid to a corporation (other than
the Distributor or a selected broker-dealer for the account of the shareholder),

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partnership, trust or fiduciary, or sent to a shareholder at an address other   
than the registered address, signatures must be guaranteed by an eligible       
guarantor. 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 supplement to the prospectus 
or a new prospectus.                                                            

REPURCHASE.  As stated in the Prospectus, DWR and other selected        
broker-dealers are authorized to repurchase 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 computed after    
such purchase order is received by DWR or other selected broker-dealer reduced  
by any applicable CDSC.                                                         

    PAYMENT FOR SHARES REDEEMED OR REPURCHASED.  As discussed in the Prospectus,
payment for shares of any Class presented for repurchase or redemption will be  
made by check within seven days after receipt by the Transfer Agent of the      
certificate and/or written request in good order. 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. Such      
payment may be postponed or the right of redemption suspended 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, or (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. If the      
shares to be redeemed have recently been purchased by check (including a        
certified check or bank cashier's check), payment of the redemption proceeds 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 receipt
of the check by the Transfer Agent). 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.            
Shareholders maintaining accounts with DWR or another selected broker-dealer are
referred to their account executive regarding restrictions on redemption of     
shares of the Fund pledged in the margin account.                               

   TRANSFERS OF SHARES.  In the event a shareholder requests a transfer of any
shares to a new registration, such shares will be transferred without sales     
charge at the time of transfer. With regard to the status of shares which are   
either subject to the CDSC or free of such charge (and with regard to the length
of time shares subject to the charge have been held), any transfer involving    
less than all of the shares in an account will be made on a pro rata basis (that
is, by transferring shares in the same proportion that the transferred shares   
bear to the total shares in the account immediately prior to the transfer). The 
transferred shares will continue to be subject to any applicable CDSC as if they
had not been so transferred.                                                    

   REINSTATEMENT PRIVILEGE.  As discussed in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously        
exercised this reinstatement privilege may within 35 days after the date of     
redemption or repurchase reinstate any portion or all of the proceeds of such   
redemption or repurchase in shares of the Fund in the same Class at the net     
asset value next determined after a reinstatement request, together with such   
proceeds, is received by the Transfer Agent.                                    

  Exercise of the reinstatement privilege will not affect the federal income
tax treatment of any gain or loss realized upon the redemption or repurchase,   
except that if the redemption or repurchase resulted in a loss and reinstatement
is made in shares of the Fund, some or all of the loss, depending on the amount 
reinstated, will not be allowed as a deduction for federal income tax purposes, 
but will be applied to adjust the cost basis of the shares acquired upon        
reinstatement.                                                                  

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DIVIDENDS, DISTRIBUTIONS AND TAXES                                              
--------------------------------------------------------------------------------

    As discussed in the Prospectus, the Fund will determine either to distribute
or to retain all or part of any net long-term and mid-term capital gains in any 
year for reinvestment. If any such gains are retained, the Fund will pay federal
income tax thereon, and will notify shareholders that, following an election by 
the Fund, the shareholders will be required to include such undistributed gains 
in determining their taxable income and may claim their share of the tax paid by
the Fund as a credit against their individual federal income tax.               

  In computing net investment income, the Fund will not amortize premiums or
accrue discounts on fixed-income securities in the portfolio, except those      
original issue discounts for which amortization is required for federal income  
tax purposes. Additionally, with respect to market discounts on bonds issued    
after July 18, 1984, and all bonds purchased after April 30, 1993, a portion of 
any capital gain realized upon disposition may be re-characterized as taxable   
ordinary income in accordance with the provisions of the Internal Revenue Code. 
Realized gains and losses on security transactions are determined on the        
identified cost method.                                                         

    Gains or losses on 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      
eighteen months and will be mid-term gains if the securities have been held by  
the Fund for more than twelve months and not more than eighteen months. Gains or
losses on the sale of securities held for twelve months or less will be         
short-term gains or losses.                                                     

   Because 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 the Fund will be required to pay any federal income tax.          
Shareholders will normally have to pay federal income taxes, and any state      
income taxes, on the dividends and distributions they receive from 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 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 
year to shareholders of record of such period which are paid in the following   
calendar year prior to February 1 will be deemed received by the shareholder in 
the prior calendar year.                                                        

 Any dividend or capital gains distribution received by a shareholder from
any regulated investment company will have the effect of reducing the net asset 
value of the shareholder's stock in that company by the exact amount of the     
dividend or capital gains distribution. Furthermore, capital gains distributions
and dividends are subject to federal income taxes. If the net asset value of the
shares should be reduced below a shareholder's cost as a result of the payment  
of dividends or realized net long-term and mid-term capital gains, such payment 
would be in part a return of the shareholder's investment to the extent of such 
reduction below the shareholder's cost, but nonetheless would be fully taxable. 
Therefore, an investor should consider the tax implications of purchasing Fund  
shares immediately prior to a distribution record date.                         

  Distributions of net long-term and net mid-term capital gains, if any, are
taxable to shareholders as long-term and mid-term capital gains, respectively,  
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. It is
expected that the Treasury will issue regulations or other guidance to permit   
shareholders to take into account their proportionate share of the Fund's       
capital gains distributions that will be subject to a reduced rate under the    
Taxpayer Relief Act of 1997. The Taxpayer Relief Act reduces the maximum tax on 
long-term capital gains from 28% to 20%, however, it also lengthens the required
holding period to obtain the lower rate from more than 12 months to more than 18
months. The lower rates do not apply to collectibles and certain other assets.  
Additionally, the maximum capital gain rate for assets that are held more than 5
years and that are acquired after December 31, 2000 is 18%.                     

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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 Fund would be eligible for the deduction if 
the Fund were the shareholder claiming the dividends received deduction. The    
amount of dividends paid by the Fund which may qualify for the dividends        
received deduction is limited to the aggregate amount of qualifying dividends   
which the Fund derives from its portfolio investments which the Fund has held   
for a minimum period, usually 46 days within a 90 day period beginning 45 days  
before the ex-dividend date of each qualifying dividend. Shareholders must meet 
a similar holding period requirement with respect to their shares to claim the  
dividends received deduction with respect to any distribution of qualifying     
dividends. Any long-term and mid-term capital gain distributions will also not  
be eligible for the dividends received deduction. The ability to take the       
dividends received deduction will also be limited in the case of a Fund         
shareholder which incurs or continues indebtedness which is directly            
attributable to its investment in the Fund.                                     

After the end of the calendar 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 long-term and mid-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 are urged to consult their attorneys or tax advisers regarding
specific questions as to federal, state or local taxes.                         

PERFORMANCE INFORMATION                                                         
--------------------------------------------------------------------------------

As discussed in the Prospectus, from time to time the Fund may quote its
"yield" and/or its "total return" in advertisements and sales literature. These 
figures are computed separately for Class A, Class B, Class C and Class D       
shares. Yield is calculated for any 30-day period as follows: the amount of     
interest income for each security in the Fund's portfolio is determined in      
accordance with regulatory requirements; the total for the entire portfolio     
constitutes the Fund's gross income for the period. Expenses accrued during the 
period are subtracted to arrive at "net investment income" of each Class. The   
resulting amount is divided by the product of the maximum offering price per    
share on the last day of the period multiplied by the average number of shares  
of the applicable Class 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 August 31, 1997, the yield,   
calculated pursuant to this formula, was 3.56% for Class A, 4.88% for Class B,  
2.41% for Class C and 5.65% for Class D.                                        

   The Fund's "average annual total return" represents an annualization of the
Fund's 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, five or ten year 
period, or for the period from the date of commencement of the Fund's           
operations, if shorter than any of the foregoing. The ending redeemable value is
reduced by any CDSC at the end of the one, five or ten year or other period. 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 of Class B for the fiscal year     
ended August 31, 1997, the five year period ended August 31, 1997 and for the   
period from May 3, 1989 (commencement of operations) through August 31, 1997    
were 2.93%, 4.81% and 6.54%, respectively.                                      

For periods of less than one year, the Fund quotes its total return on a
non-annualized basis. Accordingly, the Fund may compute its aggregate total     
return for each of Class A, Class C and Class D 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                                                                 

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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. The ending redeemable value is reduced by any CDSC at the end  
of the period. Based on the foregoing calculations, the total returns for the   
period July 28, 1997 through August 31, 1997 were -0.46%, -0.31% and -0.44% for 
Class A, Class C and Class D, respectively.                                     

 In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average,       
year-by-year or other types of total return figures. Such calculations may or   
may not reflect the imposition of the maximum front-end sales charge for Class A
or the deduction of the CDSC for each of Class B and Class C which, if          
reflected, would reduce the performance quoted. For example, the average annual 
total returns of the Fund may be calculated in the manner described above, but  
without deduction for any applicable sales charge. Based on this calculation,   
the average annual total returns for Class B for the fiscal year ended August   
31, 1997, the five year period ended August 31, 1997 and for the period from May
3, 1989 through August 31, 1997 were 7.93%, 5.12% and 6.54%, respectively.      

   In addition, the Fund may compute its aggregate total return for each Class
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 (without reduction for any sales charge) by the initial $1,000 investment 
and subtracting 1 from the result. Based on the foregoing calculation, the total
returns for Class B for the fiscal year ended August 31, 1997 was 7.93% and the 
total return for the five year period ended August 31, 1997 and for the period  
from May 3, 1989 through August 31, 1997 were 28.36% and 69.50%, respectively.  
Based on the foregoing calculations, the total returns for Class A, Class C and 
Class D for the period July 28 through August 31, 1997 were -0.46%, -0.31% and  
-0.44%, respectively.                                                           

The Fund may also advertise the growth of hypothetical investments of   
$10,000, $50,000 and $100,000 in each Class of shares of the Fund by adding 1 to
the Fund's aggregate total return to date (expressed as a decimal and without   
taking into account the effect of any applicable CDSC) and multiplying by       
$9,575, $48,250 and $97,250 in the case of Class A (investments of $10,000,     
$50,000 and $100,000 adjusted for the initial sales charge) or by $10,000,      
$50,000 and $100,000 in the case of each of Class B, Class C and Class D, as the
case may be. Investments of $10,000, $50,000 and $100,000 in each Class at      
inception of the Class would have grown (or declined) to the following amounts  
at August 31, 1997:                                                             

 INVESTMENT AT INCEPTION OF:
INCEPTION   ---------------------------------           
CLASS       DATE:      $10,000    $50,000    $100,000                       
---------  -----------  ---------  ---------  -----------                       

Class A       7/28/97   $   9,531  $  48,028  $    96,803                       
Class B        5/3/89      16,950     84,750      169,500                       
Class C       7/28/97       9,969     49,845       99,690                       
Class D       7/28/97       9,956     49,780       99,560                       

 The Fund from time to time may also advertise its performance relative to
certain performance rankings and indices compiled by independent organizations. 

DESCRIPTION OF SHARES                                                           
--------------------------------------------------------------------------------

    As discussed in the Prospectus, the shareholders of the Fund are entitled to
a full vote for each full share held. All of the Trustees have been elected by  
the shareholders of the Fund, most recently at a Special Meeting of Shareholders
on May 21, 1997. The Trustees themselves have the power to alter the number and 
the terms of office of the Trustees, and they may at any time lengthen their own
terms or                                                                        

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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 the 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 selected, 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 shareholder    
vote as may be required by the Act or the 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. The Trustees have not authorized any such additional series  
or classes of shares other than as set forth in the Prospectus.                 

    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     
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 shareholders of personal liability is remote.  

    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 is authorized to issue an unlimited number of shares of beneficial
interest. 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 with the        
Custodian in excess of $100,000 are unprotected by federal deposit insurance.   
Such balances may, at times, be substantial.                                    

Dean Witter Trust FSB ("DWT"), 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 on Fund    
shares and Agent for shareholders under various investment plans described      
herein. DWT 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, DWT's             
responsibilities include maintaining shareholder 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 DWT receives a per
shareholder account fee from the Fund.                                          

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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 a 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 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 the Fund for the fiscal year ended August
31, 1997, which are included in this Statement of Additional Information and    
incorporated by reference in the Prospectus, 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.   

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
REPORT OF INDEPENDENT ACCOUNTANTS                                               

TO THE SHAREHOLDERS AND TRUSTEES                                                
OF DEAN WITTER INTERMEDIATE INCOME SECURITIES                                   

In our opinion, the accompanying statement of assets and liabilities, including 
the portfolio of investments, and the related statements of operations and of   
changes in net assets and the financial highlights present fairly, in all       
material respects, the financial position of Dean Witter Intermediate Income    
Securities (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 periods      
presented, 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 10, 1997                                                                

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997                                        

                                                        [Enlarge/Download Table]

PRINCIPAL                                                                                                                      
AMOUNT IN                                                                                     COUPON  MATURITY                 
THOUSANDS                                                                                     RATE      DATE          VALUE    
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                                               
             CORPORATE BONDS (83.3%)                                                                                           
             AUTOMOBILE - RENTALS (1.8%)                                                                                       
$   3,250    Hertz Corp.....................................................................  6.00%    01/15/03   $   3,138,687
                                                                                                                  -------------
             AUTOMOTIVE - FINANCE (4.2%)                                                                                       
    2,000    Ford Motor Credit Co...........................................................  6.50     02/28/02       1,990,760
    4,975    General Motors Acceptance Corp.................................................  8.40     10/15/99       5,177,383
                                                                                                                  -------------
                                                                                                                      7,168,143
                                                                                                                  -------------
             BANK HOLDING COMPANIES (2.8%)                                                                                     
    4,975    Star Bank N.A..................................................................  6.375    03/01/04       4,846,894
                                                                                                                  -------------
             BANKS (10.5%)                                                                                                     
    4,000    Bank One Corp..................................................................  7.60     05/01/07       4,160,440
    3,000    Banque Nationale De Paris (France).............................................  7.20     01/15/07       3,005,880
    5,045    Shawmut Bank Connecticut, N.A..................................................  8.625    02/15/05       5,529,320
    5,000    Societe Generale...............................................................  7.40     06/01/06       5,092,700
                                                                                                                  -------------
                                                                                                                     17,788,340
                                                                                                                  -------------
             BANKS - INTERNATIONAL (1.2%)                                                                                      
    2,000    Industrial Finance Corp. (Thailand) - 144A*....................................  7.00     08/04/07       1,972,700
                                                                                                                  -------------
             BANKS - THRIFT INSTITUTIONS (2.9%)                                                                                
    4,900    Long Island Savings Bank.......................................................  7.00     06/13/02       4,928,714
                                                                                                                  -------------
             BROKERAGE (4.7%)                                                                                                  
    3,000    Lehman Brothers Inc............................................................  6.125    02/01/01       2,950,950
    5,000    Salomon, Inc...................................................................  7.00     05/15/99       5,050,850
                                                                                                                  -------------
                                                                                                                      8,001,800
                                                                                                                  -------------
             CABLE & TELECOMMUNICATIONS (3.5%)                                                                                 
    4,000    News American Holdings, Inc....................................................  7.50     03/01/00       4,084,680
    2,000    Tele-Communications, Inc.......................................................  6.875    02/15/06       1,919,140
                                                                                                                  -------------
                                                                                                                      6,003,820
                                                                                                                  -------------
             CHEMICALS (1.2%)                                                                                                  
    2,000    Millennium America, Inc........................................................  7.00     11/15/06       1,970,620
                                                                                                                  -------------
             CHEMICALS - SPECIALTY (1.2%)                                                                                      
    2,000    W. R. Grace & Co...............................................................  7.40     02/01/00       2,045,400
                                                                                                                  -------------
             COMPUTERS (1.1%)                                                                                                  
    1,900    Oracle Corp....................................................................  6.91     02/15/07       1,889,645
                                                                                                                  -------------
             ELECTRONICS -                                                                                                     
             SEMICONDUCTORS/COMPONENTS (1.9%)                                                                                  
    3,000    Applied Materials Inc..........................................................  8.00     09/01/04       3,179,040
                                                                                                                  -------------
             FINANCIAL (4.2%)                                                                                                  
    2,000    Ikon Capital Inc...............................................................  6.73     06/15/01       2,009,320
    5,037    Nac Re Corp. ..................................................................  8.00     06/15/99       5,177,331
                                                                                                                  -------------
                                                                                                                      7,186,651
                                                                                                                  -------------

                       SEE NOTES TO FINANCIAL STATEMENTS                                                                       
                                       38                                                                                      

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                                                                     
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997, CONTINUED                                                                            

PRINCIPAL                                                                                                                      
AMOUNT IN                                                                                     COUPON  MATURITY                 
THOUSANDS                                                                                     RATE      DATE          VALUE    
-------------------------------------------------------------------------------------------------------------------------------

             FOREIGN GOVERNMENT (3.0%)                                                                                         
$   5,250    Israel (State of)..............................................................  6.375%   12/15/05   $   5,025,563
                                                                                                                  -------------
             FUNERAL SERVICES (1.7%)                                                                                           
    3,000    Stewart Enterprises............................................................  6.70     12/01/03       2,956,290
                                                                                                                  -------------
             HEALTHCARE (2.9%)                                                                                                 
    4,975    Columbia/HCA Healthcare Corp...................................................  6.87     09/15/03       4,884,455
                                                                                                                  -------------
             LEISURE (1.8%)                                                                                                    
    2,900    Royal Caribbean Cruises, Ltd. (Liberia)........................................  8.25     04/01/05       3,071,520
                                                                                                                  -------------
             OIL INTEGRATED - INTERNATIONAL (3.0%)                                                                             
    5,000    Societe Nationale Elf Aquitaine (France).......................................  7.75     05/01/99       5,124,050
                                                                                                                  -------------
             PAPER & FOREST PRODUCTS (4.7%)                                                                                    
    3,000    Donohue Forest Products (Canada)...............................................  7.625    05/15/07       3,079,200
    4,900    Noranda Forest, Inc. (Canada)..................................................  6.875    11/15/05       4,824,785
                                                                                                                  -------------
                                                                                                                      7,903,985
                                                                                                                  -------------
             PHOTOGRAPHY/IMAGING (2.4%)                                                                                        
    4,000    Polaroid Corp..................................................................  8.00     03/15/99       4,101,320
                                                                                                                  -------------
             RETAIL STORES (1.8%)                                                                                              
    3,000    TJX Companies, Inc.............................................................  6.625    06/15/00       3,008,250
                                                                                                                  -------------
             STEEL & IRON (3.4%)                                                                                               
    6,000    Pohang Iron & Steel Co. (South Korea)..........................................  7.125    11/01/06       5,787,120
                                                                                                                  -------------
             TEXTILES (1.7%)                                                                                                   
    2,975    Burlington Industries, Inc.....................................................  7.25     09/15/05       2,953,699
                                                                                                                  -------------
             TRANSPORTATION (3.0%)                                                                                             
    5,000    Norfolk Southern Corp..........................................................  6.70     05/01/00       5,039,950
                                                                                                                  -------------
             UTILITIES - ELECTRIC (12.7%)                                                                                      
    2,000    Arizona Public Service Co......................................................  7.625    06/15/99       2,045,980
    2,000    Commonwealth Edison Co.........................................................  7.50     01/01/01       2,015,400
    4,700    Connecticut Light & Power Co...................................................  7.875    06/01/01       4,741,642
    5,000    DR Investments (England) - 144A*...............................................  7.45     05/15/07       5,113,650
    1,500    Niagara Mohawk Power Corp......................................................  8.00     06/01/04       1,534,125
    3,000    System Energy Resources, Inc...................................................  7.71     08/01/01       3,083,160
    3,000    Western Resources, Inc.........................................................  6.875    08/01/04       2,972,100
                                                                                                                  -------------
                                                                                                                     21,506,057
                                                                                                                  -------------

             TOTAL CORPORATE BONDS                                                                                             
             (IDENTIFIED COST $141,069,863)....................................................................     141,482,713
                                                                                                                  -------------

             U.S. GOVERNMENT & AGENCY OBLIGATIONS (13.3%)                                                                      
    1,700    Federal Home Loan Banks........................................................  7.05     03/24/04       1,690,293
    1,000    Federal Home Loan Mortgage Corp................................................  6.07     11/20/98       1,000,240
      136    Federal Home Loan Mortgage Corp................................................  8.50     12/01/01         138,357
       99    Federal Home Loan Mortgage Corp................................................  8.50     01/01/02         100,375
      299    Federal Home Loan Mortgage Corp................................................  8.50     07/01/02         303,290

                       SEE NOTES TO FINANCIAL STATEMENTS                                                                       
                                       39                                                                                      

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                                                                     
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997, CONTINUED                                                                            

PRINCIPAL                                                                                                                      
AMOUNT IN                                                                                     COUPON  MATURITY                 
THOUSANDS                                                                                     RATE      DATE          VALUE    
-------------------------------------------------------------------------------------------------------------------------------

$     150    Federal Home Loan Mortgage Corp................................................  9.00%    08/01/02   $     153,747
    3,230    Federal National Mortgage Assoc................................................  5.30     03/11/98       3,225,284
       41    Federal National Mortgage Assoc................................................  8.50     12/01/01          42,204
    2,000    Federal National Mortgage Assoc................................................  7.55     06/10/04       2,024,180
    2,000    Federal National Mortgage Assoc................................................  7.73     08/26/04       2,036,580
    2,520    Private Export Funding Corp....................................................  6.86     04/30/04       2,550,164
    1,000    U.S. Treasury Note.............................................................  6.125    03/31/98       1,003,080
    1,425    U.S. Treasury Note.............................................................  7.75     11/30/99       1,475,787
    1,700    U.S. Treasury Note.............................................................  5.875    02/15/00       1,693,285
    5,000    U.S. Treasury Note.............................................................  6.875    05/15/06       5,153,400
                                                                                                                  -------------

             TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS                                                                        
             (IDENTIFIED COST $22,232,549).....................................................................      22,590,266
                                                                                                                  -------------

             SHORT-TERM INVESTMENT (1.9%)                                                                                      
             REPURCHASE AGREEMENT                                                                                              
    3,163    The Bank of New York (dated 08/29/97; proceeds $3,165,341) (a)                                                    
             (IDENTIFIED COST $3,163,496)...................................................  5.25     09/02/97       3,163,496
                                                                                                                  -------------

TOTAL INVESTMENTS                                                                                                              
(IDENTIFIED COST $166,465,908) (B)........................................................    98.5%                 167,236,475

OTHER ASSETS IN EXCESS OF LIABILITIES.....................................................     1.5                    2,496,070
                                                                                            -------               -------------

NET ASSETS................................................................................   100.0%               $ 169,732,545
                                                                                            -------               -------------
                                                                                            -------               -------------

---------------------                                                           

*   Resale is restricted to qualified institutional investors.                
(a)  Collateralized by $3,863,343 Federal National Mortgage Assoc. 6.114% due   
05/01/22 valued at $3,226,766.                                        
(b)  The aggregate cost for federal income tax purposes approximates identified 
 cost. The aggregate gross unrealized appreciation is $1,776,246 and the
 aggregate gross unrealized depreciation is $1,005,679, resulting in net
unrealized appreciation of $770,567.                                  

SEE NOTES TO FINANCIAL STATEMENTS 
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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
FINANCIAL STATEMENTS                                                            

STATEMENT OF ASSETS AND LIABILITIES                                             
AUGUST 31, 1997                                                                 

ASSETS:                                                                         
Investments in securities, at value                                             
(identified cost $166,465,908).............................  $167,236,475   
Receivable for:                                                                 
Interest.................................................     3,191,411 
Shares of beneficial interest sold.......................     1,890,398 
Principal paydowns.......................................        21,657 
Prepaid expenses and other assets............................        37,219     
                                                          ------------
TOTAL ASSETS............................................   172,377,160
                                                          ------------
LIABILITIES:                                                                    
Payable for:                                                                    
Shares of beneficial interest repurchased................     2,292,281 
Plan of distribution fee.................................       121,084 
Investment management fee................................        87,953 
Dividends and distributions to shareholders..............        39,006 
Accrued expenses and other payables..........................       104,291     
                                                          ------------
TOTAL LIABILITIES.......................................     2,644,615
                                                          ------------
NET ASSETS..............................................  $169,732,545
                                                          ------------
                                                          ------------
COMPOSITION OF NET ASSETS:                                                      
Paid-in-capital..............................................  $180,124,413     
Net unrealized appreciation..................................       770,567     
Accumulated undistributed net investment income..............        52,362     
Accumulated net realized loss................................   (11,214,797)    
                                                          ------------
NET ASSETS..............................................  $169,732,545
                                                          ------------
                                                          ------------
CLASS A SHARES:                                                                 
Net Assets...................................................    $1,854,754     
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)....       193,352     
NET ASSET VALUE PER SHARE...............................        $ 9.59
                                                          ------------
                                                          ------------

MAXIMUM OFFERING PRICE PER SHARE,                                     
(NET ASSET VALUE PLUS 4.44% OF NET ASSET                          
  VALUE)................................................        $10.02
                                                          ------------
                                                          ------------
CLASS B SHARES:                                                                 
Net Assets...................................................  $162,958,969     
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)....    16,985,340     
NET ASSET VALUE PER SHARE...............................        $ 9.59
                                                          ------------
                                                          ------------
CLASS C SHARES:                                                                 
Net Assets...................................................       $38,430     
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)....         3,999     
NET ASSET VALUE PER SHARE...............................        $ 9.61
                                                          ------------
                                                          ------------
CLASS D SHARES:                                                                 
Net Assets...................................................    $4,880,392     
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)....       508,841     
NET ASSET VALUE PER SHARE...............................        $ 9.59
                                                          ------------
                                                          ------------

STATEMENT OF OPERATIONS                                                         
FOR THE YEAR ENDED AUGUST 31, 1997*                                             

NET INVESTMENT INCOME:                                                          

INTEREST INCOME...........................................  $13,337,718         
                                                   -----------

EXPENSES                                                                        
Plan of distribution fee (Class B shares).................    1,578,380         
Investment management fee.................................    1,116,809         
Transfer agent fees and expenses..........................      159,748         
Registration fees.........................................       63,901         
Professional fees.........................................       58,016         
Shareholder reports and notices...........................       47,777         
Custodian fees............................................       17,464         
Trustees' fees and expenses...............................       14,160         
Other.....................................................        8,926         
                                                   -----------

TOTAL EXPENSES.......................................    3,065,181    
                                                   -----------

NET INVESTMENT INCOME................................   10,272,537    
                                                   -----------

NET REALIZED AND UNREALIZED GAIN (LOSS):                                        
Net realized loss.........................................   (2,567,762)        
Net change in unrealized depreciation.....................    6,828,218         
                                                   -----------

NET GAIN.............................................    4,260,456    
                                                   -----------

NET INCREASE..............................................  $14,532,993         
                                                   -----------
                                                   -----------

---------------------                                                           
* Class A, Class C and Class D shares were issued July 28, 1997.                

SEE NOTES TO FINANCIAL STATEMENTS 
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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
FINANCIAL STATEMENTS, CONTINUED                                                 

STATEMENT OF CHANGES IN NET ASSETS                                              

                                                        [Enlarge/Download Table]

                                                                             FOR THE YEAR     FOR THE YEAR   
                                                                                ENDED             ENDED      
                                                                           AUGUST 31, 1997*  AUGUST 31, 1996 
------------------------------------------------------------------------------------------------------------ 
                                                                                                             
INCREASE (DECREASE) IN NET ASSETS:                                                                           

OPERATIONS:                                                                                                  
Net investment income....................................................  $     10,272,537  $    12,684,563 
Net realized loss........................................................        (2,567,762)        (788,498)
Net change in unrealized depreciation....................................         6,828,218       (6,023,150)
                                                                           ----------------  --------------- 

     NET INCREASE........................................................        14,532,993        5,872,915 
                                                                           ----------------  --------------- 

DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME                                                         
Class A shares...........................................................               (58)       --        
Class B shares...........................................................       (10,229,881)     (12,688,795)
Class C shares...........................................................               (83)       --        
Class D shares...........................................................           (25,048)       --        
                                                                           ----------------  --------------- 

     TOTAL DIVIDENDS.....................................................       (10,255,070)     (12,688,795)
                                                                           ----------------  --------------- 
Net decrease from transactions in shares of beneficial interest..........       (43,456,259)     (17,024,823)
                                                                           ----------------  --------------- 

     NET DECREASE........................................................       (39,178,336)     (23,840,703)

NET ASSETS:                                                                                                  
Beginning of period......................................................       208,910,881      232,751,584 
                                                                           ----------------  --------------- 

     END OF PERIOD                                                                                           
    (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $52,362 AND                                            
    $34,895, RESPECTIVELY)...............................................  $    169,732,545  $   208,910,881 
                                                                           ----------------  --------------- 
                                                                           ----------------  --------------- 

---------------------                                                           
* Class A, Class C, and Class D Shares were issued July 28, 1997.               

SEE NOTES TO FINANCIAL STATEMENTS 
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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997                                   

1. ORGANIZATION AND ACCOUNTING POLICIES                                         

Dean Witter Intermediate Income Securities (the "Fund") is registered under the 
Investment Company Act of 1940, as amended (the "Act"), as a diversified,       
open-end management investment company. The Fund's investment objective is high 
current income consistent with safety of principal. The Fund was organized as a 
Massachusetts business trust on September 1, 1988 and commenced operations on   
May 3, 1989. On July 28, 1997, the Fund commenced offering three additional     
classes of shares, with the then current shares, other than shares held by      
certain employee benefit plans established by Dean Witter Reynolds Inc. and its 
affiliate, SPS Transaction Services, Inc., designated as Class B shares. Shares 
held by those employee benefit plans prior to July 28, 1997 have been designated
Class D shares.                                                                 

The Fund offers Class A shares, Class B shares, Class C shares and Class D      
shares. The four classes are substantially the same except that most Class A    
shares are subject to a sales charge imposed at the time of purchase, some Class
A shares, and most Class B shares and Class C shares are subject to a contingent
deferred sales charge imposed on shares redeemed within one year, six years and 
one year, respectively. Class D shares are not subject to a sales charge.       
Additionally, Class A shares, Class B shares and Class C shares incur           
distribution expenses.                                                          

The preparation of financial statements in accordance with generally accepted   
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from   
those estimates.                                                                

The following is a summary of significant accounting policies:                  

A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the   
New York, American or other domestic or foreign stock exchange is valued at its 
latest sale price on that exchange prior to the time when assets are valued; if 
there were no sales that day, the security is valued at the latest bid price;   
(2) all other portfolio securities for which over-the-counter market quotations 
are readily available are valued at the latest available bid price; (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 and bid prices are not reflective of a security's market value, portfolio  
securities are valued at their fair value as determined in good faith under     
procedures established by and under the general supervision of the Trustees     
(valuation of debt securities for which market quotations are not readily       
available may be based upon current market prices of securities which are       
comparable in coupon, rating and maturity or an appropriate matrix utilizing    
similar factors); (4) certain portfolio securities may be valued by an outside  
pricing service approved                                                        

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NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997, CONTINUED                        

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, in determining what it believes is the fair valuation of the  
portfolio securities valued by such pricing service; and (5) short-term debt    
securities having a maturity date of more than sixty days at time of purchase   
are valued on a mark-to-market basis until sixty days prior to maturity and     
thereafter at amortized cost based on their value on the 61st day. Short-term   
debt securities having a maturity date of sixty days or less at the time of     
purchase are valued at amortized cost.                                          

B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the 
trade date (date the order to buy or sell is executed). Realized gains and      
losses on security transactions are determined on the identified cost method.   
Dividend income and other distributions are recorded on the ex-dividend date.   
Discounts are accreted over the life of the respective securities. Interest     
income is accrued daily.                                                        

C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than        
distribution fees), and realized and unrealized gains and losses are allocated  
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective  
class.                                                                          

D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the      
requirements of the Internal Revenue Code applicable to regulated investment    
companies and to distribute all of its taxable income to its shareholders.      
Accordingly, no federal income tax provision is required.                       

E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the record date. The amount of dividends   
and distributions from net investment income and net realized capital gains are 
determined in accordance with federal income tax regulations which may differ   
from generally accepted accounting principles. These "book/tax" differences are 
either considered temporary or permanent in nature. To the extent these         
differences are permanent in nature, such amounts are reclassified within the   
capital accounts based on their federal tax-basis treatment; temporary          
differences do not require 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.  

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997, CONTINUED                        

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, calculated 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: 0.60% of the portion of the daily net assets not exceeding $500   
million; 0.50% of the portion of daily net assets exceeding $500 million but not
exceeding $750 million; 0.40% of the portion of the daily net assets exceeding  
$750 million but not exceeding $1 billion; and 0.30% of the portion of the daily
net assets exceeding $1 billion.                                                

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.                          

3. PLAN OF DISTRIBUTION                                                         

Shares of the Fund are distributed by Dean Witter Distributors Inc. (the        
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a  
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The Plan
provides that the Fund will pay the Distributor a fee which is accrued daily and
paid monthly at the following annual rates: (i) Class A - 0.25% of the average  
daily net assets of Class A; (ii) Class B - 0.85% of the lesser of: (a) the     
average daily aggregate gross sales of the Class B shares since the inception of
the Fund (not including reinvestment of dividend or capital gain distributions) 
less the average daily aggregate net asset value of the Class B shares redeemed 
since the Fund's inception upon which a contingent deferred sales charge had    
been imposed or waived; or (b) the average daily net assets of Class B; and     
(iii) Class C - 0.85% of the average daily net assets of Class C. In the case of
Class A shares, amounts paid under the Plan are paid to the Distributor for     
services provided. In the case of Class B and Class C shares, amounts paid under
the Plan are paid to the Distributor for services provided and the expenses     
borne by it and others in the distribution of the shares of these Classes,      
including the payment of commissions for sales of these Classes and incentive   
compensation to, and expenses of, the account executives of Dean Witter Reynolds
Inc. ("DWR"), an affiliate of the Investment Manager and Distributor, and others
who engage in or support distribution of the shares or who service shareholder  
accounts, including overhead and telephone expenses; printing and distribution  
of prospectuses and reports used in                                             

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NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997, CONTINUED                        

connection with the offering of these shares to other than current shareholders;
and preparation, printing and distribution of sales literature and advertising  
materials. In addition, the Distributor may utilize fees paid pursuant to the   
Plan, in the case of Class B shares, to compensate DWR and other selected       
broker-dealers for their opportunity costs in advancing such amounts, which     
compensation would be in the form of a carrying charge on any unreimbursed      
expenses.                                                                       

In the case of Class B shares, provided that the Plan continues in effect, any  
cumulative expenses incurred by the Distributor but not yet recovered may be    
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon        
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors    
upon redemption of shares, if for any reason the Plan is terminated, the        
Trustees will consider at that time the manner in which to treat such expenses. 
The Distributor has advised the Fund that such excess amounts, including        
carrying charges, totaled $5,734,753 at August 31, 1997.                        

In the case of Class A shares and Class C shares, expenses incurred pursuant to 
the Plan in any calendar year in excess of 0.25% or 0.85% of the average daily  
net assets of Class A or Class C, respectively, will not be reimbursed by the   
Fund through payments in any subsequent year, except that expenses representing 
a gross sales credit to account executives may be reimbursed in the subsequent  
calendar year. For the year ended August 31, 1997, the distribution fee was     
accrued for Class A shares and Class C shares at the annual rate of 0.25% and   
0.85%, respectively.                                                            

The Distributor has informed the Fund that for the year ended August 31, 1997,  
it received contingent deferred sales charges from certain redemptions of the   
Fund's Class B shares of $285,035, and received $300 in front-end sales charges 
from sales of the Fund's Class A shares. The respective shareholders pay such   
charges which are not an expense of the Fund.                                   

4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES                       

The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended August 31, 1997, aggregated          
$170,907,463 and $188,266,523, respectively. Included in the aforementioned are 
purchases and sales of U.S. Government securities of $50,361,139 and            
$66,518,238, respectively.                                                      

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997, CONTINUED                        

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 $2,000.                              

The Fund has an unfunded noncontributory defined benefit pension plan covering  
all independent Trustees of the Fund who will have served as independent        
Trustees 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. At August 31, 1997, the Fund had an accrued pension liability of    
$48,811 which is included in accrued expenses in the Statement of Assets and    
Liabilities. Aggregate pension costs for the year ended August 31, 1997 included
in Director's fees and expenses in the Statement of Operations amounted to      
$3,294.                                                                         

5. SHARES OF BENEFICIAL INTEREST+                                               

Transactions in shares of beneficial interest were as follows:                  

                                                        [Enlarge/Download Table]

                                                                          FOR THE YEAR                  FOR THE YEAR        
                                                                             ENDED                         ENDED            
                                                                        AUGUST 31, 1997               AUGUST 31, 1996       
                                                                  ----------------------------   -------------------------- 
                                                                    SHARES          AMOUNT         SHARES         AMOUNT    
                                                                  -----------   --------------   -----------   ------------ 
                                                                                                                            
CLASS A SHARES*                                                                                                             
Sold.............................................................     193,347   $    1,854,318       --             --      
Reinvestment of dividends........................................           5               54       --             --      
                                                                  -----------   --------------   -----------   ------------ 
Net increase - Class A...........................................     193,352        1,854,372       --             --      
                                                                  -----------   --------------   -----------   ------------ 
CLASS B SHARES                                                                                                              
Sold.............................................................   8,499,296       80,974,547     5,122,000   $ 49,165,458 
Reinvestment of dividends........................................     587,192        5,604,585       725,423      6,970,644 
Redeemed......................................................... (13,839,797)    (131,962,423)   (7,617,219)   (73,160,925)
                                                                  -----------   --------------   -----------   ------------ 
Net decrease - Class B...........................................  (4,753,309)     (45,383,291)   (1,769,796)   (17,024,823)
                                                                  -----------   --------------   -----------   ------------ 
CLASS C SHARES*                                                                                                             
Sold.............................................................       3,993           38,561       --             --      
Reinvestment of dividends........................................           6               56       --             --      
                                                                  -----------   --------------   -----------   ------------ 
Net increase - Class C...........................................       3,999           38,617       --             --      
                                                                  -----------   --------------   -----------   ------------ 
CLASS D SHARES*                                                                                                             
Sold.............................................................      10,611          102,479       --             --      
Reinvestment of dividends........................................       2,476           23,704       --             --      
Redeemed.........................................................      (9,547)         (92,140)      --             --      
                                                                  -----------   --------------   -----------   ------------ 
Net increase - Class D...........................................       3,540           34,043       --             --      
                                                                  -----------   --------------   -----------   ------------ 
Net decrease in Fund.............................................  (4,552,418)  $  (43,456,259)   (1,769,796)  $(17,024,823)
                                                                  -----------   --------------   -----------   ------------ 
                                                                  -----------   --------------   -----------   ------------ 

---------------------                                                           
+   On July 28, 1997, 505,301 shares representing $4,891,310 were transferred 
to Class D.                                                           
*   For the period July 28, 1997 (issue date) through August 31, 1997.        

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997, CONTINUED                        

6. FEDERAL INCOME TAX STATUS                                                    

At August 31, 1997, the Fund had a net capital loss carryover of approximately  
$9,320,000, which may be used to offset future capital gains to the extent      
provided by regulations, which is available through August 31 of the following  
years:                                                                          

AMOUNTS IN THOUSANDS                                                  
-------------------------------                                                 
2003       2004       2005                                                  
---------  ---------  ---------                                                 

$   6,656  $     313  $   2,351                                                 
---------  ---------  ---------                                                 
---------  ---------  ---------                                                 

Capital losses incurred after October 31 ("post-October" losses) within the     
taxable year are deemed to arise on the first business day of the Fund's next   
taxable year. The Fund incurred and will elect to defer net capital losses of   
approximately $1,877,000 during fiscal 1997.                                    

As of August 31, 1997, the Fund had temporary book/tax differences primarily    
attributable to post-October losses.                                            

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
FINANCIAL HIGHLIGHTS                                                            

Selected ratios and per share data for a share of beneficial interest           
outstanding throughout each period:                                             

                                                        [Enlarge/Download Table]

                                                                                                                     FOR THE     
                                                                                                                     PERIOD      
                                                                                                                     MAY 3,      
                                                                                                                      1989*      
                                                   FOR THE YEAR ENDED AUGUST 31                                      THROUGH     
                  -----------------------------------------------------------------------------------------------    AUGUST      
                   1997**++      1996        1995        1994         1993        1992        1991        1990      31, 1989     
-----------------------------------------------------------------------------------------------------------------------------    
                                                                                                                                 
CLASS B SHARES                                                                                                                   

PER SHARE                                                                                                                        
OPERATING                                                                                                                        
PERFORMANCE:                                                                                                                     

Net asset value,                                                                                                                 
 beginning of                                                                                                                    
 period.......... $     9.39  $     9.69  $     9.51  $     10.26  $    10.05  $     9.59  $     9.42  $     9.98   $10.00       
                  ----------  ----------  ----------  -----------  ----------  ----------  ----------  ----------   ---------    

Net investment                                                                                                                   
 income..........       0.53        0.55        0.59         0.58        0.62        0.70        0.79        0.86     0.28       

Net realized and                                                                                                                 
 unrealized gain                                                                                                                 
 (loss)..........       0.20       (0.30)       0.19        (0.73)       0.20        0.46        0.17       (0.55)   (0.02)      
                  ----------  ----------  ----------  -----------  ----------  ----------  ----------  ----------   ---------    

Total from                                                                                                                       
 investment                                                                                                                      
 operations......       0.73        0.25        0.78        (0.15)       0.82        1.16        0.96        0.31     0.26       
                  ----------  ----------  ----------  -----------  ----------  ----------  ----------  ----------   ---------    

Less dividends                                                                                                                   
 and                                                                                                                             
 distributions                                                                                                                   
 from:                                                                                                                           
   Net investment                                                                                                                
   income........      (0.53)      (0.55)      (0.59)       (0.56)      (0.61)      (0.70)      (0.79)      (0.86)   (0.28)      
   Net realized                                                                                                                  
   gain..........     --          --           (0.01)       (0.04)     --          --          --           (0.01)    --         
                  ----------  ----------  ----------  -----------  ----------  ----------  ----------  ----------   ---------    

Total dividends                                                                                                                  
 and                                                                                                                             
 distributions...      (0.53)      (0.55)      (0.60)       (0.60)      (0.61)      (0.70)      (0.79)      (0.87)   (0.28)      
                  ----------  ----------  ----------  -----------  ----------  ----------  ----------  ----------   ---------    

Net asset value,                                                                                                                 
 end of period... $     9.59  $     9.39  $     9.69  $      9.51  $    10.26  $    10.05  $     9.59  $     9.42   $ 9.98       
                  ----------  ----------  ----------  -----------  ----------  ----------  ----------  ----------   ---------    
                  ----------  ----------  ----------  -----------  ----------  ----------  ----------  ----------   ---------    

TOTAL INVESTMENT                                                                                                                 
RETURN+..........       7.93%       2.58%       8.56%       (1.50)%       8.43%      12.58%      10.78%       3.22%   2.57%(1)   

RATIOS TO AVERAGE                                                                                                                
NET ASSETS:                                                                                                                      
Expenses.........       1.65%       1.62%       1.63%        1.63%       1.62%       1.69%       1.69%       1.75%    1.42%(2)(3)

Net investment                                                                                                                   
 income..........       5.52%       5.69%       6.23%        5.80%       6.12%       7.11%       8.49%       8.78%    8.18%(2)(3)

SUPPLEMENTAL DATA:                                                                                                               
Net assets, end                                                                                                                  
 of period, in                                                                                                                   
 thousands.......   $162,959    $208,911    $232,752     $245,750    $254,431    $187,285    $115,204    $114,086     $69,946    

Portfolio                                                                                                                        
 turnover rate...         98%        115%        114%         122%        132%         93%        150%        135%      30%(1)   

---------------------                                                           
*   Commencement of operations.                                               
**   Prior to July 28, 1997, the Fund issued one class of shares. All shares of 
the Fund held prior to that date, other than shares held by certain   
 employee benefit plans established by Dean Witter Reynolds Inc. and its
    affiliate, SPS Transaction Services, Inc., have been designated as Class B
    shares. Shares held by those employee benefit plans prior to July 28, 1997
have been designated Class D shares.                                  
++   The per share amounts were computed using an average number of shares      
outstanding during the period.                                        
 +   Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.                
(1)  Not annualized.                                                            
(2)  Annualized.                                                                
(3)  If the Fund had borne all the expenses that were assumed or waived by the  
Investment Manager, the above expense and net investment income ratios
would have been 2.15% and 7.44%, respectively.                        

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
FINANCIAL HIGHLIGHTS, CONTINUED                                                 

                                                            FOR THE PERIOD
                                                            JULY 28, 1997*
                                                           THROUGH
                                                            AUGUST 31,
                                                            1997++
------------------------------------------------------------------------------  

CLASS A SHARES                                                                  
PER SHARE OPERATING PERFORMANCE:                                                
Net asset value, beginning of period........................      $  9.68       
                                                            ------
Net investment income.......................................         0.06       
Net realized and unrealized loss............................        (0.10)      
                                                            ------
Total from investment operations............................        (0.04)      
                                                            ------
Less dividends from net investment income...................        (0.05)      
                                                            ------
Net asset value, end of period..............................      $  9.59       
                                                            ------
                                                            ------
TOTAL INVESTMENT RETURN+....................................        (0.46)%(1)  
RATIOS TO AVERAGE NET ASSETS:                                                   
Expenses....................................................         2.18%(2)   
Net investment income.......................................         6.10%(2)   
SUPPLEMENTAL DATA:                                                              
Net assets, end of period, in thousands.....................       $1,855       
Portfolio turnover rate.....................................           98%      

CLASS C SHARES                                                                  
PER SHARE OPERATING PERFORMANCE:                                                
Net asset value, beginning of period........................      $  9.68       
                                                            ------
Net investment income.......................................         0.04       
Net realized and unrealized loss............................        (0.07)      
                                                            ------
Total from investment operations............................        (0.03)      
                                                            ------
Less dividends from net investment income...................        (0.04)      
                                                            ------
Net asset value, end of period..............................      $  9.61       
                                                            ------
                                                            ------
TOTAL INVESTMENT RETURN+....................................        (0.31)%(1)  
RATIOS TO AVERAGE NET ASSETS:                                                   
Expenses....................................................         2.02%(2)   
Net investment income.......................................         4.22%(2)   
SUPPLEMENTAL DATA:                                                              
Net assets, end of period, in thousands.....................          $38       
Portfolio turnover rate.....................................           98%      

---------------------                                                           
*   The date shares were first issued.                                        
++   The per share amounts were computed using an average number of shares      
outstanding during the period.                                        
 +   Does not reflect the deduction of sales charge. 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 

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DEAN WITTER INTERMEDIATE INCOME SECURITIES                                      
FINANCIAL HIGHLIGHTS, CONTINUED                                                 

                                                            FOR THE PERIOD
                                                            JULY 28, 1997*
                                                           THROUGH
                                                            AUGUST 31,
                                                            1997++
------------------------------------------------------------------------------  

CLASS D SHARES                                                                  

PER SHARE OPERATING PERFORMANCE:                                                

Net asset value, beginning of period........................      $  9.68       
                                                            ------

Net investment income.......................................         0.05       

Net realized and unrealized loss............................        (0.09)      
                                                            ------

Total from investment operations............................        (0.04)      
                                                            ------

Less dividends from net investment income...................        (0.05)      
                                                            ------

Net asset value, end of period..............................      $  9.59       
                                                            ------
                                                            ------

TOTAL INVESTMENT RETURN+....................................        (0.44)%(1)  

RATIOS TO AVERAGE NET ASSETS:                                                   
Expenses....................................................         1.11%(2)   

Net investment income.......................................         5.91%(2)   

SUPPLEMENTAL DATA:                                                              
Net assets, end of period, in thousands.....................       $4,880       

Portfolio turnover rate.....................................           98%      

---------------------                                                           
*   The date shares were first issued.                                        
++   The per share amounts were computed using an average number of shares      
outstanding during the period.                                        
+   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 

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APPENDIX                                                                        
--------------------------------------------------------------------------------

RATINGS OF INVESTMENTS                                                          
MOODY'S INVESTORS SERVICE INC. ("MOODY'S")                                      

BOND RATINGS

                                                        [Enlarge/Download Table]

                                                                                        
Aaa  Bonds which are rated Aaa are judged to be of the best quality. They carry the     
     smallest degree of investment risk and are generally referred to as "gilt edge."   
     Interest payments are protected by a large or by an exceptionally stable margin and
     principal is secure. While the various protective elements are likely to change,   
     such changes as can be visualized are                                              
     most unlikely to impair the fundamentally strong position of such issues.          
Aa   Bonds which are rated Aa are judged to be of high quality by all standards.        
     Together with the Aaa group they comprise what are generally known as high grade   
     bonds. They are rated lower than the best bonds because margins of protection may  
     not be as large as in Aaa securities or fluctuation 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 securities.                     
A    Bonds which are rated A possess many favorable investment attributes and are to be 
     considered as upper medium grade obligations. Factors giving security to principal 
     and interest are considered adequate, but elements may be present which suggest a  
     susceptibility to impairment sometime in the future.                               
Baa  Bonds which are rated Baa are considered as medium grade obligations; i.e., they   
     are neither highly protected nor poorly secured. Interest payments and principal   
     security appear adequate for the present but certain protective elements may be    
     lacking or may be characteristically unreliable over any great length of time. Such
     bonds lack outstanding investment characteristics and in fact have speculative     
     characteristics as well.                                                           
     Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.              
Ba   Bonds which are rated Ba are judged to have speculative elements; their future     
     cannot be considered as well assured. Often the protection of interest and         
     principal payments may be very moderate, and therefore not well safeguarded during 
     both good and bad times in the future. Uncertainty of position characterizes bonds 
     in this class.                                                                     
B    Bonds which are rated B generally lack characteristics of the desirable investment.
     Assurance of interest and principal payments or of maintenance of other terms of   
     the contract over any long period of time may be small.                            
Caa  Bonds which are rated Caa are of poor standing. Such issues may be in default or   
     there may be present elements of danger with respect to principal or interest.     
Ca   Bonds which are rated Ca present obligations which are speculative in a high       
     degree. Such issues are often in default or have other marked shortcomings.        
C    Bonds which are rated C are the lowest rated class of bonds, and issues so rated   
     can be regarded as having extremely poor prospects of ever attaining any real      
     investment standing.                                                               

 RATING REFINEMENTS: Moody's may apply numerical modifiers, 1, 2, and 3 in
each generic rating classification from Aa through B in its municipal bond      
rating system. The modifier 1 indicates that the security ranks in the higher   
end of its generic rating category; the modifier 2 indicates a mid-range        
ranking; and a modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.                                                        

COMMERCIAL PAPER RATINGS

Moody's Commercial Paper ratings are opinions of the ability to repay   
punctually promissory obligations not having an original maturity in excess of  
nine months. The ratings apply to Municipal Commercial Paper as well as taxable 
Commercial Paper. Moody's employs the following three                           

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designations, all judged to be investment grade, to indicate the relative       
repayment capacity of rated issuers: Prime-1, Prime-2, Prime-3.                 

  Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 have a strong capacity for        
repayment of short-term promissory obligations; and Issuers rated Prime-3 have  
an acceptable capacity for repayment of short-term promissory obligations.      
Issuers rated Not Prime do not fall within any of the Prime rating catagories.  

STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")                             

BOND RATINGS

A Standard & Poor's bond rating is a current assessment of the          
creditworthiness of an obligor with respect to a specific obligation. This      
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.                                                                        

The ratings are based on current information furnished by the issuer or 
obtained by Standard & Poor's from other sources it considers reliable. The     
ratings are based, in varying degrees, on the following considerations: (1)     
likelihood of default-capacity and willingness of the obligor as to the timely  
payment of interest and repayment of principal in accordance with the terms of  
the obligation; (2) nature of and provisions of the obligation; and (3)         
protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.                                         

 Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings may  
be changed, suspended or withdrawn as a result of changes in, or unavailability 
of, such information, or for other reasons.                                     

                                                        [Enlarge/Download Table]

                                                                                          
AAA    Debt rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to 
       pay interest and repay principal is extremely strong.                              
AA     Debt rated "AA" has a very strong capacity to pay interest and repay principal and 
       differs from the highest-rated issues only in small degree.                        
A      Debt rated "A" has a strong capacity to pay interest and repay principal although  
       they are somewhat more susceptible to the adverse effects of changes in            
       circumstances and economic conditions than debt in higher-rated categories.        
BBB    Debt rated "BBB" is regarded as having an adequate capacity to pay interest and    
       repay principal. Whereas it normally exhibits adequate protection parameters,      
       adverse economic conditions or changing circumstances are more likely to lead to a 
       weakened capacity to pay interest and repay principal for debt in this category    
       than for debt in higher-rated categories.                                          
       Bonds rated AAA, AA, A and BBB are considered investment grade bonds.              
BB     Debt rated "BB" has less near-term vulnerability to default than other speculative 
       grade debt. However, it faces major ongoing uncertainties or exposure to adverse   
       business, financial or economic conditions which could lead to inadequate capacity 
       or willingness to pay interest and repay principal.                                
B      Debt rated "B" has a greater vulnerability to default but presently has the        
       capacity to meet interest payments and principal repayments. Adverse business,     
       financial or economic conditions would likely impair capacity or willingness to pay
       interest and repay principal.                                                      
CCC    Debt rated "CCC" has a current identifiable vulnerability to default, and is       
       dependent upon favorable business, financial and economic conditions to meet timely
       payments of interest and repayments of principal. In the event of adverse business,
       financial or economic conditions, it is not likely to have the capacity to pay     
       interest and repay principal.                                                      
CC     The rating "CC" is typically applied to debt subordinated to senior debt which is  
       assigned an actual or implied "CCC" rating.                                        

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C      The rating "C" is typically applied to debt subordinated to senior debt which is   
       assigned an actual or implied "CCC-" debt rating.                                  
CI     The rating "CI" is reserved for income bonds on which no interest is being paid.   
NR     Indicates that no rating has been requested, that there is insufficient information
       on which to base a rating or that Standard & Poor's does not rate a particular type
       of obligation as a matter of policy.                                               
       Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded as having predominantly    
       speculative characteristics with respect to capacity to pay interest and repay     
       principal. "BB" indicates the least degree of speculation and "C" the highest      
       degree of speculation. While such debt will likely have some quality and protective
       characteristics, these are outweighed by large uncertainties or major risk         
       exposures to adverse conditions.                                                   
       Plus (+) or minus (-): The rating from "AA" to "CCC" may be modified by the        
       addition of a plus or minus sign to show relative standing within the major ratings
       categories.                                                                        

COMMERCIAL PAPER RATINGS

  Standard and Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The commercial paper rating is not a recommendation to purchase or    
sell a security. The ratings are based upon current information furnished by the
issuer or obtained by Standard and Poor's from other sources it considers       
reliable. The ratings may be changed, suspended, or withdrawn as a result of    
changes in or unavailability of such information. Ratings are graded into group 
categories, ranging from "A" for the highest quality obligations to "D" for the 
lowest. Ratings are applicable to both taxable and tax-exempt commercial paper. 
The categories are as follows:                                                  

  Issues assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the designation
1, 2 and 3 to indicate the relative degree of safety.                           

                                                        [Enlarge/Download Table]

                                                                                     
A-1  indicates that the degree of safety regarding timely payment is very strong.    
A-2  indicates capacity for timely payment on issues with this designation is strong.
     However, the relative degree of safety is not as overwhelming as for issues     
     designated "A-1."                                                               
A-3  indicates a satisfactory capacity for timely payment. Obligations carrying this 
     designation are, however, somewhat more vulnerable to the adverse effects of    
     changes in circumstances than obligations carrying the higher designations.     

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                                                                 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)                                                      

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TABLE OF CONTENTS                                                               
-----------------------------------------------------------------------------   

                                                                [Download Table]


                                          
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

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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                              

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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                                        

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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.                                          

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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.                                                                    

                                                        [Enlarge/Download Table]

  NAME, AGE, POSITION WITH FUND AND ADDRESS          PRINCIPAL OCCUPATION DURING LAST FIVE YEARS               
--------------------------------------------  --------------------------------------------------------         
                                                                                                               
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.                              

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  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.                                    

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  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                                                                                            

------------                                                                    
* Denotes Trustees who are "interested persons" of the Fund, as defined in      
the Act.                                                                    

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                                                        [Enlarge/Download Table]

  NAME, AGE, POSITION WITH FUND AND ADDRESS         PRINCIPAL OCCUPATION DURING LAST FIVE YEARS        
--------------------------------------------  ------------------------------------------------------   
                                                                                                       
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                                                                                    

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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                 

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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               

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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   

                                                                [Download Table]

                                AGGREGATE   
                               COMPENSATION 
NAME OF INDEPENDENT TRUSTEE   FROM THE FUND 
---------------------------  ---------------
                                            
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    

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   

                                                        [Enlarge/Download Table]

                                                         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 
----------------------  -------------- ---------------  ---------------- ----------------  ---------------
                                                                                                          
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   

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                                               

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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  

                                                        [Enlarge/Download Table]

                                                                             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) 
---------------------------  --------------- ---------------  ------------ ------------
                                                                                       
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 

(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                                            

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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.                                                          

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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,                                                 

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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;                                                                

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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                     

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"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                                                                  

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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             

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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                                                                          

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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                                 

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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                              

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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.                                  

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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.                                                                

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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                                    

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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        
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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.                                                               

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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.                                                                          

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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            

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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                                                           

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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.                                                       

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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                      

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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                     

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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.          

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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:                                          

                                                        [Enlarge/Download Table]

                           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    
--------------                 -------------          -------------         -------------    
                                                                                             
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      

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,                                                                       

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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:                                          

                                                                [Download Table]

                         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     
----------------------  ---------------------- ---------------------- 
                                                                      
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     

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.                          

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("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:                  

                                                        [Enlarge/Download Table]

                                                                        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        
----------------------  ---------------------- -----------------------  -----------------------
                                                                                               
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         

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.                                                             

                                                        [Enlarge/Download Table]

                                                                       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    
---------------------  ---------------------- -----------------------  -----------------------
                                                                                              
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         

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                                     

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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.           

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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                                                               

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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                                                                 

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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.    

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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.                                                                      

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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               

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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                                                                          

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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                                                

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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.                                        

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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:                 

                                                        [Enlarge/Download Table]

                                                                                           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   
             ------              -------------    -------------     -------------       -------------    -------------   
                                                                                                                         
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       

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:         

                                                                [Download Table]

                                      TOTAL RETURN FROM      TOTAL RETURN FOR
                                 COMMENCEMENT OF OPERATIONS    FISCAL YEAR   
                                           THROUGH                ENDED      
           SERIES                       JULY 31, 1997         JULY 31, 1997  
-------------------------------  -------------------------- ---------------- 
                                                                             
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      

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                            

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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:                                                                       

                                                                [Download Table]

                                          INVESTMENT AT          
                                  COMMENCEMENT OF OPERATIONS OF  
                                 --------------------------------
           SERIES                 $10,000    $50,000   $100,000  
-------------------------------  --------- ---------  ---------- 
                                                                 
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  

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.                                    

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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.                                          

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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.                                    

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DEAN WITTER RETIREMENT SERIES - LIQUID ASSET                                    
PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                        [Enlarge/Download Table]

                                                                               ANNUALIZED                                  
 PRINCIPAL                                                                      YIELD ON                                   
 AMOUNT IN                                                                      DATE OF         MATURITY                   
 THOUSANDS                                                                      PURCHASE          DATE           VALUE     
---------------------------------------------------------------------------------------------------------------------------
                                                                                                                           
            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                                                                   

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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
                                                                                                 =====        =============

--------------                                                                  
(a)  Cost is the same for federal income tax purposes.                          

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER RETIREMENT SERIES - U.S. GOVERNMENT MONEY MARKET                    
PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                                [Download Table]

                                         ANNUALIZED                              
 PRINCIPAL                                YIELD ON                               
 AMOUNT IN                                DATE OF        MATURITY                
 THOUSANDS                                PURCHASE         DATE           VALUE  
---------------------------------------------------------------------------------
                                                                                 
            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
                                                          ======       ==========

--------------                                                                  
(a)  Cost is the same for federal income tax purposes.                          

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER RETIREMENT SERIES - U.S. GOVERNMENT SECURITIES                      
PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                                          
 AMOUNT IN                                                                    COUPON       MATURITY                 
 THOUSANDS                                                                     RATE          DATE           VALUE   
--------------------------------------------------------------------------------------------------------------------
                                                                                                                    
            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
                                                                                            =====       ============

--------------                                                                  
(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 

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DEAN WITTER RETIREMENT SERIES - INTERMEDIATE INCOME SECURITIES                  
PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                                    
 AMOUNT IN                                                                    COUPON   MATURITY               
 THOUSANDS                                                                     RATE      DATE        VALUE    
------------------------------------------------------------------------------------------------------------- 
                                                                                                              
            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                                                      

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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
                                                                                                  ------------

                                                        [Enlarge/Download Table]

                                                                                             
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
                                                                         ======== ===========

--------------                                                                  
(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 

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DEAN WITTER RETIREMENT SERIES - AMERICAN VALUE                                  
PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                        [Enlarge/Download Table]

 NUMBER OF                                                                                 
   SHARES                                                                         VALUE    
-------------------------------------------------------------------------------------------
                                                                                           
             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                                   

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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                                   

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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 
                                                                              -------------

                                                                [Download Table]

   PRINCIPAL                                                  
   AMOUNT IN                                                  
   THOUSANDS                                                  
--------------------------------------------------------------
                                                              
               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
                                         ======== ============

------------                                                                    
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  

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DEAN WITTER RETIREMENT SERIES - CAPITAL GROWTH                                  
PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                        [Enlarge/Download Table]

 NUMBER OF                                                                                
   SHARES                                                                         VALUE   
------------------------------------------------------------------------------------------
                                                                                          
             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                                  

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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  
                                                                              ------------

                                                                [Download Table]

                                                      
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
                                    =====   ==========

------------                                                                    
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.           

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PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                        [Enlarge/Download Table]

 NUMBER OF                                                                                  
   SHARES                                                                          VALUE    
--------------------------------------------------------------------------------------------
                                                                                            
             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  
                                                                              --------------

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PORTFOLIO OF INVESTMENTS July 31, 1997, continued                               

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                 
 AMOUNT IN                                                                                 
 THOUSANDS                                                                        VALUE    
-------------------------------------------------------------------------------------------
                                                                                           
             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  
                                                                              -------------

                                                                [Download Table]

                                                             
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 
                                    ========   ============= 

------------                                                                    
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.

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DEAN WITTER RETIREMENT SERIES - UTILITIES                                       
PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                        [Enlarge/Download Table]

 NUMBER OF                                                                               
   SHARES                                                                        VALUE   
-----------------------------------------------------------------------------------------
                                                                                         
             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
                                                                              -----------

                                                                [Download Table]

                                                       
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 
                                   =====   =========== 

--------------                                                                  
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.         

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PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                        [Enlarge/Download Table]

 NUMBER OF                                                                                 
   SHARES                                                                         VALUE    
-------------------------------------------------------------------------------------------
                                                                                           
             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                                    

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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                                   

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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                                   

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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                                   

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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                                   

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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                                    

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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                                   

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 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                                   

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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 
                                                                              -------------

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                             
 AMOUNT IN                                                                                             
 THOUSANDS                                                                                      VALUE  
-------------------------------------------------------------------------------------------------------
                                                                                                       
             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 
                                                                                   =====  ============ 

------------                                                                    
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 

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PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                        [Enlarge/Download Table]

 NUMBER OF                                                                                
   SHARES                                                                        VALUE    
----------------------------------------------------------------------------------------- 
                                                                                          
             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                                  

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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                                  

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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                                  

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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                                  

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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                                   

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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                                  

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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 
                                                                              ----------- 

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                               
AMOUNT IN                                                                                
THOUSANDS                                                                                
-----------                                                                              
                                                                                         
             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 
                                                                   ======== ============ 

SEE NOTES TO FINANCIAL STATEMENTS 

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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:                       

                                                                [Download Table]

                            IN                        UNREALIZED  
   CONTRACTS TO          EXCHANGE        DELIVERY   APPRECIATION/ 
      RECEIVE              FOR             DATE     (DEPRECIATION)
------------------ ------------------- ----------  ---------------
                                                                  
$          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)   
                                                       =======    

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY PORTFOLIO                         
SUMMARY OF INVESTMENTS July 31, 1997                                            

                                                                [Download Table]

                                                 PERCENT OF
INDUSTRY                             VALUE       NET ASSETS
-----------------------------------------------------------
                                                           
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%  
                                 ============= ============

                                                                [Download Table]

                                         PERCENT OF
TYPE OF INVESTMENT           VALUE       NET ASSETS
---------------------------------------------------
                                                   
Common Stocks ..........  $18,572,282       93.8%  
Short-Term Investments      1,399,546        7.1   
                          -----------      -----   
                          $19,971,828      100.9%  
                          ===========      =====   

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PORTFOLIO OF INVESTMENTS July 31, 1997                                          

                                                        [Enlarge/Download Table]

 NUMBER OF                                                                                 
   SHARES                                                                         VALUE    
-------------------------------------------------------------------------------------------
                                                                                           
             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                                   

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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 
                                                                              -------------

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                
 AMOUNT IN                                                                                
 THOUSANDS                                                                                
-----------                                                                               
                                                                                          
             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  
                                                                              ------------

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                 
 AMOUNT IN                                                                                 
 THOUSANDS                                                                        VALUE    
-------------------------------------------------------------------------------------------
                                                                                           
             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  

SEE NOTES TO FINANCIAL STATEMENTS 

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PORTFOLIO OF INVESTMENTS July 31, 1997, continued                               

                                                        [Enlarge/Download Table]

 PRINCIPAL                                                                                            
 AMOUNT IN                                                                                            
 THOUSANDS                                                                                   VALUE    
------------------------------------------------------------------------------------------------------
                                                                                                      
  $ 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  
                                                                               ========  =============

------------                                                                    
*       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 

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FINANCIAL STATEMENTS                                                            

STATEMENTS OF ASSETS AND LIABILITIES                                            
July 31, 1997                                                                   

                                                        [Enlarge/Download Table]

                                                                                                      INTERMEDIATE
                                                                    U.S. GOVERNMENT  U.S. GOVERNMENT     INCOME   
                                                     LIQUID ASSET    MONEY MARKET       SECURITIES     SECURITIES 
------------------------------------------------------------------------------------------------------------------
                                                                                                                  
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 
                                                      ===========     ==========      ===========      ========== 

                                       SEE NOTES TO FINANCIAL STATEMENTS

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   AMERICAN       CAPITAL       DIVIDEND                   VALUE-ADDED      GLOBAL                  
     VALUE        GROWTH         GROWTH       UTILITIES       MARKET        EQUITY       STRATEGIST 
-------------  ------------ --------------  ------------  ------------- -------------  -------------
                                                                                                    
 $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 
=============  ============ ==============  ============  ============= =============  =============

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DEAN WITTER RETIREMENT SERIES                                                   
FINANCIAL STATEMENTS, continued                                                 

STATEMENTS OF OPERATIONS                                                        
For the year ended July 31, 1997                                                

                                                        [Enlarge/Download Table]

                                                                                                      INTERMEDIATE
                                                                    U.S. GOVERNMENT  U.S. GOVERNMENT     INCOME   
                                                     LIQUID ASSET    MONEY MARKET      SECURITIES      SECURITIES 
------------------------------------------------------------------------------------------------------------------
                                                                                                                  
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  
                                                    ============== ===============  =============== ==============

--------------                                                                  
*      Net of $1,132, $10, $7,380, $972, $1,050, $18,695 and $63 foreign        
withholding tax, respectively.                                    

                                       SEE NOTES TO FINANCIAL STATEMENTS

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   AMERICAN       CAPITAL      DIVIDEND                   VALUE-ADDED     GLOBAL                 
     VALUE        GROWTH        GROWTH       UTILITIES      MARKET        EQUITY      STRATEGIST 
-------------  ------------ -------------  ------------ -------------  ------------ ------------ 
                                                                                                 
 $   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 
=============  ============ =============  ============ =============  ============ ============ 

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DEAN WITTER RETIREMENT SERIES                                                   
FINANCIAL STATEMENTS, continued                                                 

STATEMENTS OF CHANGES IN NET ASSETS                                             
For the year ended July 31,                                                     

                                                        [Enlarge/Download Table]

                                                                                                  U.S. GOVERNMENT            
                                                                LIQUID ASSET                        MONEY MARKET             
                                                       ------------------------------- --------------------------------------
                                                            1997            1996            1997                1996         
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                             
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)    
                                                        ============    =============   ============        ============     

                                       SEE NOTES TO FINANCIAL STATEMENTS

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       U.S. GOVERNMENT               INTERMEDIATE                                                                            
         SECURITIES                INCOME SECURITIES              AMERICAN VALUE                    CAPITAL GROWTH           
---------------------------- ---------------------------- ----------------------------- -------------------------------------
     1997           1996          1997           1996           1997           1996          1997               1996         
-------------  ------------- -------------  ------------- --------------  ------------- ------------  -----------------------
                                                                                                                             
 $   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      
=============  ============= =============  ============= ==============  ============= ============  =======================

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DEAN WITTER RETIREMENT SERIES                                                   
FINANCIAL STATEMENTS, continued                                                 

STATEMENTS OF CHANGES IN NET ASSSETS, continued                                 
For the year ended July 31,                                                     

                                                        [Enlarge/Download Table]

                                                              DIVIDEND GROWTH                 UTILITIES           
                                                       ----------------------------- -----------------------------
                                                            1997           1996           1997           1996     
-----------------------------------------------------  -------------- -------------  ------------- ---------------
                                                                                                                  
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 
                                                        ============    ===========   ===========     =========== 

                                       SEE NOTES TO FINANCIAL STATEMENTS

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      VALUE-ADDED MARKET              GLOBAL EQUITY                     STRATEGIST                 
----------------------------- ---------------------------- ----------------------------------------
      1997           1996          1997           1996          1997                  1996         
--------------  ------------- -------------  ------------- -------------  -------------------------
                                                                                                   
 $    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       
==============  ============= =============  ============= =============  =========================

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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:                             

                                                        [Enlarge/Download Table]

                                      COMMENCEMENT                               COMMENCEMENT      
                                     OF OPERATIONS                               OF OPERATIONS     
                                     -------------                               -------------     
                                                                                                   
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                                             

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.                      
------------------------------------------------------------------------------- 

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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                                    

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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                               

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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%.  

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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:                      

                                                        [Enlarge/Download Table]

                                   U.S. GOVERNMENT SECURITIES               OTHER             
                                 ------------------------------ ------------------------------
                                                     SALES/                                   
                                                  MATURITIES/                       SALES/    
                                    PURCHASES     PREPAYMENTS      PURCHASES      MATURITIES  
                                 -------------- --------------  -------------- -------------- 
                                                                                              
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 

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.                                                                        

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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:      

                                                                [Download Table]

                                     CAPITAL    DIVIDEND                GLOBAL 
                                      GROWTH     GROWTH    UTILITIES    EQUITY 
                                    --------- ----------  ----------- ---------
                                                                               
Payable for investments purchased    $ 4,319    $887,346    $200,025   $    -- 
                                    ========= ==========  =========== =========
Receivable for investments sold  ..  $38,982    $149,533    $ 42,821   $91,462 
                                    ========= ==========  =========== =========


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:                                                             

                                                                [Download Table]

 AMERICAN    CAPITAL    DIVIDEND                GLOBAL              
   VALUE      GROWTH     GROWTH    UTILITIES    EQUITY   STRATEGIST 
----------  --------- ----------  ----------- --------  ------------
                                                                    
  $25,735     $1,487    $43,558     $13,830     $9,201     $6,861   
==========  ========= ==========  =========== ========  ============

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:                            

                                                        [Enlarge/Download Table]

                                                  INTERMEDIATE                         
                U.S. GOVERNMENT  U.S. GOVERNMENT     INCOME        AMERICAN    CAPITAL 
 LIQUID ASSET     MONEY MARKET     SECURITIES      SECURITIES       VALUE       GROWTH 
--------------  --------------- ---------------  -------------- ------------  ---------
                                                                                       
      $120            $100           $1,250           $150           $800        $90   
==============  =============== ===============  ============== ============  =========

  DIVIDEND                         VALUE-ADDED       GLOBAL                            
   GROWTH          UTILITIES         MARKET          EQUITY      STRATEGIST            
--------------  --------------- ---------------  -------------- ------------           
   $280              $80             $140            $210           $500               
==============  =============== ===============  ============== ============           

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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:                          

                                                                [Download Table]

                  INTERMEDIATE          
U.S. GOVERNMENT      INCOME       GLOBAL
   SECURITIES      SECURITIES     EQUITY
---------------  -------------- --------
                                        
      $500           $57,800       $900 
===============  ============== ========

At July 31, 1997, the primary reason(s) for temporary book/tax differences      
were as follows:                                                                

                                                                [Download Table]

                                          TEMPORARY DIFFERENCES     
                                     -------------------------------
                                        POST-        CAPITAL LOSS   
                                       OCTOBER      DEFERRALS FROM  
                                        LOSSES        WASH SALES    
                                     ----------- ------------------ 
                                                                    
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         

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.                                                                 

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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:   

                                                                [Download Table]

                   ACCUMULATED     ACCUMULATED 
                  UNDISTRIBUTED   UNDISTRIBUTED
                 NET INVESTMENT   NET REALIZED 
                     INCOME        GAIN (LOSS) 
                 -------------- ---------------
                                               
Capital Growth       $ 5,965        $ (5,965)  
Global Equity  .     $23,695        $(23,695)  

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.   

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DEAN WITTER RETIREMENT SERIES                                                   
FINANCIAL HIGHLIGHTS                                                            

Selected ratios and per share data for a share of beneficial interest           
outstanding throughout each period:                                             

                                                        [Enlarge/Download Table]

             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 
----------  ----------- ------------  -------------- ------------  -------------- ---------------  ---------------
                                                                                                                  
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)   

------------                                                                    
*       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

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                                                        [Enlarge/Download Table]

                                          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 
-----------  ------------ ------------  ----------- -------------  ----------- -------------  ----------- ------------
                                                                                                                      
   $ 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  

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FINANCIAL HIGHLIGHTS, continued                                                 

Selected ratios and per share data for a share of beneficial interest           
outstanding throughout each period:                                             

                                                        [Enlarge/Download Table]

             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 
----------  ----------- -------------  -------------- ------------  -------------- ---------------  ---------------
                                                                                                                   
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)   

------------                                                                    
*       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

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                                                        [Enlarge/Download Table]

                                           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 
-----------  ------------- ------------  ----------- -------------  ---------- -------------  ----------- ------------
                                                                                                                      
   $ 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  

                                           105

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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:                     

                                                                [Download Table]

 AMERICAN    CAPITAL    DIVIDEND   VALUE-ADDED    GLOBAL              
   VALUE      GROWTH     GROWTH       MARKET      EQUITY   STRATEGIST 
----------  --------- ----------  ------------- --------  ------------
                                                                      
$0.31         $0.32      $0.47        $0.45       $0.05       $0.31   


  Additionally, the following percentages of the income paid qualified
for the dividends received deduction available to corporations:   

                                                                [Download Table]

 AMERICAN    CAPITAL    DIVIDEND                VALUE-ADDED   GLOBAL              
   VALUE      GROWTH     GROWTH    UTILITIES      MARKET      EQUITY    STRATEGIST
----------  --------- ----------  ----------- -------------  -------- ------------
                                                                                  
 5.58%         100%      99.92%      98.72%        74.37%      7.89%      19.47%  

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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.                                                                      

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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.                                                        

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DEAN WITTER INTERMEDIATE INCOME SECURITIES  

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. 11 to Registrant's Registration Statement on    
Form N-1A, dated October 28, 1997, which was filed electronically pursuant to   
Regulation S-T on October 24, 1997 ("Post-Effective Amendment No. 11") as an    
amendment to Registrant's Registration Statement on Form N-1A (File Nos.        
811-5654 and 33-24245) filed on October 24, 1997 (the "Registration             
Statement").                                                                    

ITEM 16. EXHIBITS                                                               

(1) (a)    Declaration of Trust dated August 31, 1988 ("Declaration of          
Trust") (incorporated herein by reference to Exhibit 1 of 
Registrant's initial Registration Statement)              

(b)    Amendment Establishing and Designating Additional Classes of     
      Shares to Declaration of Trust (incorporated herein by reference
to Exhibit 1 to Post-Effective Amendment No. 10)          

(2)     Amended and Restated By-Laws of Registrant                              

(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. 10)                   

(7) (a)    Distribution Agreement between Registrant and Dean Witter            
    Distributors Inc. (incorporated herein by reference to Exhibit
6(a) to Post-Effective Amendment No. 10)                  

(b)    Multiple Class Distribution Agreement between Registrant and Dean
    Witter Distributors, Inc. (incorporated herein by reference to
Exhibit 6(b) of Post-Effective Amendment No. 10)          

(c)    Form of Selected Dealer's Agreement (incorporated herein by      
    reference to Exhibit 6(b) to Post-Effective Amendment No. 7 to
        Registrant's Registration Statement ("Post-Effective Amendment No.
7"))                                                      

(8)     Not Applicable                                                          

(9) (a)    Custody Agreement dated September 20, 1991 (incorporated herein by   
reference to Exhibit 8 to Post-Effective Amendment No. 8) 

(b)    Amendment to the Custodian Agreement dated April 17, 1996        
      (incorporated herein by reference to Exhibit 8 to Post-Effective
Amendment No. 9)                                          

(c)    Amended and Restated Transfer Agency and Services Agreement      

(10)(a)    Amended and Restated Plan of Distribution pursuant to Rule 12b-1,    
      dated July 28, 1997 (incorporated herein by reference to Exhibit
15 to Post-Effective Amendment No. 10)                    

(b)    Dean Witter Funds Multiple Class Plan pursuant to rule 18f-3     
(incorporated herein by reference to Exhibit Other to     
Post-Effective Amendment No. 10)                          

(11)(a)    Opinion and consent of Gordon Altman Butowsky Weitzen Shalov &       
Wein                                                      

(b)    Opinion and consent of Lane Altman & Owens LLP                   

(12)    Opinion and consent of Gordon Altman Butowsky Weitzen Shalov & Wein     
regarding tax matters                                           

C-1               

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(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. 8)                 

(14)    Consent of Independent Accountants                                      

(15)    Not Applicable                                                          

(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 29, 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               

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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 INTERMEDIATE INCOME SECURITIES

      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.                                                                      

                                                                [Download Table]

             SIGNATURE                          TITLE                    DATE      
----------------------------------  ---------------------------- ------------------
                                                                                   
1. Principal Executive Officer                                                     
   /s/ Charles A. Fiumefreddo       Chief Executive Officer,                       
   ..............................   Trustee and Chairman         April 30, 1998    
   Charles A. Fiumefreddo                                                          

2. Principal Financial Officer                                                     
   /s/ Thomas F. Caloia             Treasurer and Principal                        
   ..............................   Accounting Officer           April 30, 1998    
   Thomas F. Caloia                                                                

3. Majority of Trustees                                                            
 /s/ Michael Bozic                                                                 
 ................................   Trustee                      April 30, 1998    
 Michael Bozic                                                                     

  /s/ Edwin J. Garn                                                                
 ................................   Trustee                      April 30, 1998    
 Edwin J. Garn                                                                     

  /s/ John R. Haire                                                                
 ................................   Trustee                      April 30, 1998    
 John R. Haire                                                                     

  /s/ Manuel H. Johnson                                                            
 ................................   Trustee                      April 30, 1998    
 Manuel H. Johnson                                                                 

  /s/ Michael E. Nugent                                                            
 ................................   Trustee                      April 30, 1998    
 Michael E. Nugent                                                                 

  /s/ John L. Schroeder                                                            
 ................................   Trustee                      April 30, 1998    
 John L. Schroeder                                                                 

  /s/ Philip J. Purcell                                                            
 ................................   Trustee                      April 30, 1998    
 Philip J. Purcell                                                                 

  /s/ Wayne E. Hedien                                                              
 ................................   Trustee                      April 30, 1998    
 Wayne E. Hedien                                                                   

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EXHIBIT INDEX   

                                                        [Enlarge/Download Table]

   EXHIBIT                                                                                  PAGE  
   NUMBER                                      EXHIBIT                                     NUMBER 
-----------  -------------------------------------------------------------------------- ----------
                                                                                                  
     (2)      Amended and Restated By-Laws of Registrant                                          

     (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 Lane Altman & Owens LLP                                  

    (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