Morgan Stanley Liquid Asset Fund Inc – ‘N-14AE’ on 5/8/98

As of:  Friday, 5/8/98   ·   Accession #:  950136-98-879   ·   File #:  333-52151

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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           413   2.59M 
 3: EX-99.B11(A)  Opinion and Consent of Gordon Altman Butowsky        1      9K 
                          Weitzen Shalov & Wein                                  
 4: EX-99.B11(B)  Opinion and Consent of Piper & Marbury               2     12K 
 5: EX-99.B12   Opinion and Consent of Gordon Altman Butowsky          3     20K 
                          Weitzen Shalov & Wein Regarding Tax                    
                          Matters                                                
 6: EX-99.B14   Consent of Independent Accountants                     1      9K 
 7: EX-99.B16   Powers of Attorney                                     4     15K 
 8: EX-99.B17   Form of Proxy                                          2      9K 
 2: EX-99.B9(C)  Amended and Restated Transfer Agency and Services    13     55K 
                          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-
=============================================================================== 
SECURITIES AND EXCHANGE COMMISSION  
WASHINGTON, D.C. 20549  

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

FORM N-14   

          REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933        [X]

                    PRE-EFFECTIVE AMENDMENT NO.                          [ ]

                    POST-EFFECTIVE AMENDMENT NO.                         [ ]

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

DEAN WITTER LIQUID ASSET FUND INC.  
(Exact Name of Registrant as Specified in Charter)  

TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048  
(Address of Principal Executive Offices)  

212-392-1600  
(Registrant's Telephone Number)   

BARRY FINK, ESQ.  
TWO WORLD TRADE CENTER  
NEW YORK, NEW YORK 10048  
(Name and Address of Agent for Service)   

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

COPY TO:  
STUART M. STRAUSS, ESQ.   
GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN  
114 WEST 47TH STREET  
NEW YORK, NEW YORK 10036  

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE ON THE THIRTIETH DAY      
AFTER THE DATE OF FILING, PURSUANT TO RULE 488.                                 

The Exhibit Index is located on page [   ]  

No filing fee is due because the Registrant has previously registered an        
indefinite number of shares pursuant to Section (a)(1) of Rule 24f-2 under      
the Investment Company Act of 1940, as amended. The Registrant filed the Rule   
24f-2 Notice, for its fiscal year ended August 31, 1997, with the Securities    
and Exchange Commission on October 27, 1997.                                    

Pursuant to Rule 429, this Registration Statement relates to shares             
previously registered by the Registrant on Form N-1A (Registration Nos.         
2-53856; 811-2575).                                                             
=============================================================================== 

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FORM N-14   
DEAN WITTER LIQUID ASSET FUND INC.  
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 Liquid Asset Series                     
            (b)          Available Information                                 
            (c)          *                                                     
            (d)          *                                                     
           7(a)          Introduction--Proxies                                 
            (b)          *                                                     
            (c)          Introduction; The Reorganization--Appraisal Rights    
           8(a)          The Reorganization                                    
            (b)          *                                                     
           9             *                                                     

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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 Registrant                                           
            (b)          *                                                                                 
            (c)          *                                                                                 
          13(a)          Additional Information about Liquid Asset Series                                  
            (b)          *                                                                                 
            (c)          *                                                                                 
            14           Registrant's Prospectus for the fiscal year ended August 31, 1997; Registrant's   
                         Semi-Annual Report for the six-month period ended February 28, 1998; Annual Report
                         for Liquid Asset Series for the fiscal year ended July 31, 1997; Semi-Annual      
                         Report for the six-month period ended January 31, 1998.                           


                                                                [Download Table]

  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   
LIQUID ASSET SERIES   
TWO WORLD TRADE CENTER  
NEW YORK, NEW YORK 10048  
(212) 392-1600  

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS   
TO BE HELD AUGUST 19, 1998  

TO SHAREHOLDERS OF THE LIQUID ASSET SERIES,                                     
A SERIES OF DEAN WITTER RETIREMENT SERIES:                                      

Notice is hereby given of a Special Meeting of the Shareholders of the    
Liquid Asset Series ("Liquid Asset"), one of eleven portfolios of Dean Witter   
Retirement Series ("Retirement Series"), to be held at the Career Development   
Room, 61st Floor, Two World Trade Center, New York, New York 10048, at 9:00     
A.M., New York time, on August 19, 1998, and any adjournments thereof (the      
"Meeting"), for the following purposes:                                         

1. To consider and vote upon an Agreement and Plan of Reorganization, 
 dated April 30, 1998 (the "Reorganization Agreement"), between Retirement
 Series, on behalf of Liquid Asset, and Dean Witter Liquid Asset Fund Inc.
 (the "Acquiring Fund"), pursuant to which substantially all of the assets
of Liquid Asset would be combined with those of the Acquiring Fund and  
shareholders of Liquid Asset would become shareholders of the Acquiring 
Fund receiving shares of the Acquiring Fund with a value equal to the   
value of their holdings in Liquid Asset (the "Reorganization"); and     

2. To act upon such other matters as may properly come before the     
Meeting.                                                                

The Reorganization is more fully described in the accompanying Proxy      
Statement and Prospectus and a copy of the Reorganization Agreement is          
attached as Exhibit A thereto. Shareholders of record at the close of           
business on June 2, 1998 are entitled to notice of, and to vote at, the         
Meeting. Please read the Proxy Statement and Prospectus carefully before        
telling us, through your proxy or in person, how you wish your shares to be     
voted. The Board of Trustees of Retirement Series recommends you vote in        
favor of the Reorganization. WE URGE YOU TO SIGN, DATE AND MAIL THE ENCLOSED    
PROXY PROMPTLY.                                                                 

                                      By Order of the Board of Trustees,

               BARRY FINK,
             Secretary

June   , 1998                                                                   

YOU CAN HELP AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP LETTERS   
TO ENSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY. IF YOU ARE         
UNABLE TO BE PRESENT IN PERSON, PLEASE FILL IN, SIGN AND RETURN THE ENCLOSED    
PROXY IN ORDER THAT THE NECESSARY QUORUM BE REPRESENTED AT THE MEETING. THE     
ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.           

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DEAN WITTER LIQUID ASSET FUND INC.  
TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048  
(212) 392-1600  

ACQUISITION OF THE ASSETS OF THE LIQUID ASSET SERIES,   
A SERIES OF DEAN WITTER RETIREMENT SERIES   

BY AND IN EXCHANGE FOR SHARES OF  
DEAN WITTER LIQUID ASSET FUND INC.  

This Proxy Statement and Prospectus is being furnished to shareholders of 
the Liquid Asset Series ("Liquid Asset"), one of eleven portfolios of Dean      
Witter Retirement Series ("Retirement Series"), in connection with an           
Agreement and Plan of Reorganization, dated April 30, 1998 (the                 
"Reorganization Agreement"), pursuant to which substantially all the assets     
of Liquid Asset will be combined with those of Dean Witter Liquid Asset Fund    
Inc. (the "Acquiring Fund") in exchange for shares of the Acquiring Fund. As    
a result of this transaction, shareholders of Liquid Asset will become          
shareholders of the Acquiring Fund and will receive shares of the Acquiring     
Fund with a value equal to the value of their holdings in Liquid Asset. The     
terms and conditions of this transaction are more fully described in this       
Proxy Statement and Prospectus and in the Reorganization Agreement between      
Retirement Series, on behalf of Liquid Asset, and the Acquiring Fund,           
attached hereto as Exhibit A. The address of Liquid Asset is that of the        
Acquiring Fund set forth above. This Proxy Statement also constitutes a         
Prospectus of the Acquiring Fund, which is dated June   , 1998, filed by the    
Acquiring Fund with the Securities and Exchange Commission (the "Commission")   
as part of its Registration Statement on Form N-14 (the "Registration           
Statement").                                                                    

The Acquiring Fund is an open-end diversified management investment       
company whose investment objectives are high current income, preservation of    
capital and liquidity. The Acquiring Fund seeks to achieve its objectives by    
investing in the following money market instruments: United States Government   
securities, obligations of U.S. regulated banks and savings and loan            
associations having assets of $1 billion or more, high grade commercial         
paper, certificates of deposit of $100,000 or less of U.S. regulated banks      
and savings institutions having total assets of less than $1 billion which      
are fully federally insured as to principal (the interest may not be insured)   
and high grade corporate obligations maturing in thirteen months or less.       

This Proxy Statement and Prospectus sets forth concisely information about
the Acquiring Fund that shareholders of Liquid Asset should know before         
voting on the Reorganization Agreement. A copy of the Prospectus for the        
Acquiring Fund, dated October 24, 1997, is attached as Exhibit B and is         
incorporated herein by reference. Also incorporated herein by reference is      
the Acquiring Fund's Semi-Annual Report for the six month period ended          
February 28, 1998. A Statement of Additional Information relating to the        
Reorganization, described in this Proxy Statement and Prospectus (the           
"Additional Statement"), dated June   , 1998, has been filed with the           
Commission and is also incorporated herein by reference. Also incorporated      
herein by reference are the Prospectus for Retirement Series dated October      
31, 1997, the Annual Report for Retirement Series for the fiscal year ended     
July 31, 1997 and the Semi-Annual Report for Retirement Series for the six      
months ended January 31, 1998. Such documents are available without charge by   
calling Nina Maceda at Dean Witter Trust Company at (800) 869-NEWS.             

Investors are advised to read and retain this Proxy Statement and Prospectus    
for future reference.                                                           

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND    
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE             
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED    
ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE       
CONTRARY IS A CRIMINAL OFFENSE.                                                 

This Proxy Statement and Prospectus is dated June   , 1998.   

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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 Liquid Asset and the Acquiring Fund ........................................... 7  
PRINCIPAL RISK FACTORS ....................................................................... 9  
THE REORGANIZATION ........................................................................... 9  
 The Proposal ................................................................................ 9  
 The Board's Consideration ................................................................... 9  
 The Reorganization Agreement ................................................................10  
 Tax Aspects of the Reorganization ...........................................................11  
 Description of Shares .......................................................................12  
 Capitalization Table (unaudited) ............................................................13  
 Appraisal Rights ............................................................................13  
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS ...............................13  
 Investment Objectives and Policies ..........................................................13  
 Investment Restrictions .....................................................................13  
ADDITIONAL INFORMATION ABOUT LIQUID ASSET AND THE ACQUIRING FUND .............................14  
 General .....................................................................................14  
 Financial Information .......................................................................14  
 Management ..................................................................................14  
 Description of Securities and Shareholder Inquiries .........................................14  
 Dividends, Distributions and Taxes ..........................................................14  
 Purchases, Repurchases and Redemptions ......................................................14  
FINANCIAL STATEMENTS AND EXPERTS .............................................................15  
LEGAL MATTERS ................................................................................15  
AVAILABLE INFORMATION ........................................................................15  
OTHER BUSINESS ...............................................................................15  
Exhibit A--Agreement and Plan of Reorganization, dated as of April 30, 1998, by and               
 between Dean Witter Retirement Series, on behalf of the Liquid Asset Series, and Dean            
 Witter Liquid Asset Fund Inc. ..............................................................A-1  
----------------------------------------------------------------------------------------  --------
Exhibit B--Prospectus of Dean Witter Liquid Asset Fund Inc., dated October 24, 1997..........B-1  
----------------------------------------------------------------------------------------  --------

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DEAN WITTER RETIREMENT SERIES   
LIQUID ASSET SERIES   
TWO WORLD TRADE CENTER  
NEW YORK, NEW YORK 10048  
(212) 392-1600  

PROXY STATEMENT AND PROSPECTUS  

SPECIAL MEETING OF SHAREHOLDERS   
TO BE HELD AUGUST 19, 1998  

INTRODUCTION  

GENERAL                                                                         

This Proxy Statement and Prospectus is being furnished to the shareholders
of the Liquid Asset Series ("Liquid Asset"), one of eleven portfolios of Dean   
Witter Retirement Series ("Retirement Series"), an open-end diversified         
no-load management investment company, in connection with the solicitation by   
the Board of Trustees of Retirement Series (the "Board") of proxies to be       
used at the Special Meeting of Shareholders of Liquid Asset to be held at the   
Career Development Room, 61st Floor, Two World Trade Center, New York, New      
York 10048 at 9:00 A.M., New York time, on August 19, 1998, and any             
adjournments thereof (the "Meeting"). It is expected that the mailing of this   
Proxy Statement and Prospectus will be made on or about June  , 1998.           

At the Meeting, Liquid Asset shareholders ("Shareholders") will consider  
and vote upon an Agreement and Plan of Reorganization, dated April 30, 1998     
(the "Reorganization Agreement"), between Retirement Series, on behalf of       
Liquid Asset, and Dean Witter Liquid Asset Fund Inc. (the "Acquiring Fund")     
pursuant to which substantially all of the assets of Liquid Asset will be       
combined with those of the Acquiring Fund in exchange for shares of the         
Acquiring Fund. As a result of this transaction, Shareholders will become       
shareholders of the Acquiring Fund and will receive shares of the Acquiring     
Fund equal to the value of their holdings in Liquid Asset on the date of such   
transaction (the "Reorganization"). The shares to be issued by the Acquiring    
Fund pursuant to the Reorganization will be issued at net asset value without   
a charge (the "Acquiring Fund Shares"). Further information relating to the     
Acquiring Fund is set forth herein and in the Acquiring Fund's current          
Prospectus, dated October 24, 1997 (the "Acquiring Fund's Prospectus"),         
attached to this Proxy Statement and Prospectus and incorporated herein by      
reference.                                                                      

The information concerning Liquid Asset contained herein has been supplied
by Retirement Series and the information concerning the Acquiring Fund          
contained herein has been supplied by the Acquiring Fund.                       

RECORD DATE; SHARE INFORMATION                                                  

The Board has fixed the close of business on June 2, 1998 as the record   
date (the "Record Date") for the determination of the Shareholders entitled     
to notice of, and to vote at, the Meeting. As of the Record Date, there were    
 shares of Liquid Asset issued and outstanding. Shareholders on the Record
Date are entitled to one vote per share on each matter submitted to a vote at   
the Meeting. A majority of the outstanding shares entitled to vote,             
represented in person or by proxy, will constitute a quorum at the Meeting.     

To the knowledge of the Board, as of the Record Date, [no person owned of 
record or beneficially 5% or more of the outstanding shares of Liquid Asset.    
As of the Record Date, the trustees and officers of Liquid Asset, as a group,   
owned less than 1% of the outstanding shares of Liquid Asset.]                  

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[Add 5% owners of Acquiring Fund] As of the Record Date, the directors and
officers of the Acquiring Fund, as a group, owned less than 1% of the           
outstanding shares of the Acquiring Fund.                                       

PROXIES                                                                         

The enclosed form of proxy, if properly executed and returned, will be    
voted in accordance with the choice specified thereon. The proxy will be        
voted in favor of the Reorganization Agreement unless a choice is indicated     
to vote against or to abstain from voting on the Reorganization Agreement.      
The Board knows of no business, other than that set forth in the Notice of      
Special Meeting of Shareholders, to be presented for consideration at the       
Meeting. However, the proxy confers discretionary authority upon the persons    
named therein to vote as they determine on other business, not currently        
contemplated, which may come before the Meeting. Abstentions and, if            
applicable, broker "non-votes" will not count as votes in favor of the          
Reorganization Agreement, and broker "non-votes" will not be deemed to be       
present at the meeting for purposes of determining whether the Reorganization   
Agreement has been approved. Broker "non-votes" are shares held in street       
name for which the broker indicates that instructions have not been received    
from the beneficial owners or other persons entitled to vote and for which      
the broker does not have discretionary voting authority. The proxy may be       
revoked at any time prior to the voting thereof by: (i) delivering written      
notice of revocation to the Secretary of Retirement Series at Two World Trade   
Center, New York, New York 10048; (ii) attending the Meeting and voting in      
person; or (iii) signing and returning a new proxy (if returned and received    
in time to be voted). Attendance at the Meeting will not in and of itself       
revoke a proxy.                                                                 

In the event that the necessary quorum to transact business or the vote   
required to approve or reject the Reorganization Agreement is not obtained at   
the Meeting, the persons named as proxies may propose one or more               
adjournments of the Meeting to permit further solicitation of proxies. Any      
such adjournment will require the affirmative vote of the holders of a          
majority of Liquid Asset's shares present in person or by proxy at the          
Meeting. The persons named as proxies will vote in favor of such adjournment    
those proxies which they are entitled to vote in favor of the Reorganization    
Agreement and will vote against any such adjournment those proxies required     
to be voted against the Reorganization Agreement.                               

EXPENSES OF SOLICITATION                                                        

All expenses of this solicitation, including the cost of preparing and    
mailing this Proxy Statement and Prospectus, will be borne by Dean Witter       
InterCapital Inc. ("InterCapital"). In addition to the solicitation of          
proxies by mail, proxies may be solicited by officers and regular employees     
or certain affiliates of Retirement Series, including InterCapital and/or       
Dean Witter Trust FSB ("DWTFSB"), without compensation other than regular       
compensation, personally or by mail, telephone, telegraph or otherwise.         
Brokerage houses, banks and other fiduciaries may be requested to forward       
soliciting material to the beneficial owners of shares and to obtain            
authorization for the execution of proxies.                                     

DWTFSB may call Shareholders to ask if they would be willing to have their
votes recorded by telephone. The telephone voting procedure is designed to      
authenticate Shareholders' identities, to allow Shareholders to authorize the   
voting of their shares in accordance with their instructions and to confirm     
that their instructions have been recorded properly. No recommendation will     
be made as to how a Shareholder should vote on the Reorganization Agreement     
other than to refer to the recommendation of the Board. Liquid Asset has been   
advised by counsel that these procedures are consistent with the requirements   
of applicable law. Shareholders voting by telephone will be asked for their     
social security number or other identifying information and will be given an    
opportunity to authorize proxies to vote their shares in accordance with        
their instructions. To ensure that the Shareholders' instructions have been     
recorded correctly they will receive a confirmation of their instructions in    
the mail. A special toll-free number will be available in case the              
information contained in the                                                    

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confirmation is incorrect. Although a Shareholder's vote may be taken by        
telephone, each Shareholder will receive a copy of this Proxy Statement and     
Prospectus and may vote by mail using the enclosed proxy card.                  

VOTE REQUIRED                                                                   

Approval of the Reorganization Agreement by the Shareholders requires the 
affirmative vote of a majority (i.e., more than 50%) of the outstanding         
shares of Liquid Asset represented in person or by proxy and entitled to vote   
at the Meeting, provided a quorum is present at the Meeting. If the             
Reorganization Agreement is not approved by Shareholders, Liquid Asset will     
continue in existence and the Board will consider alternative actions.          

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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 Liquid Asset, subject to stated liabilities, to the           
Acquiring Fund in exchange for the Acquiring Fund Shares. The aggregate net     
asset value of the Acquiring Fund Shares issued in the exchange will equal      
the aggregate value of the net assets of Liquid Asset received by the           
Acquiring Fund. On or after the closing date scheduled for the Reorganization   
(the "Closing Date"), Liquid Asset will distribute the Acquiring Fund Shares    
received by Liquid Asset to Shareholders as of the Valuation Date (as defined   
below under "The Reorganization Agreement") in complete liquidation of Liquid   
Asset. If all other portfolios of Retirement Series effect similar              
reorganizations or otherwise liquidate, Retirement Series will take all         
necessary steps to dissolve and deregister under the Investment Company Act     
of 1940, as amended (the "1940 Act"). As a result of the Reorganization, each   
Shareholder will receive that number of full and fractional Acquiring Fund      
Shares equal in value to such Shareholder's pro rata interest in the net        
assets transferred to the Acquiring Fund. Shareholders holding certificates     
representing their shares will not be required to surrender their               
certificates in connection with the Reorganization. However, such               
Shareholders will have to surrender such certificates in order to receive       
certificates representing the Acquiring Fund Shares or to redeem, transfer or   
exchange the Acquiring Fund Shares received. The Board has determined that      
the interests of Shareholders will not be diluted as a result of the            
Reorganization.                                                                 

FOR THE REASONS SET FORTH BELOW UNDER "THE REORGANIZATION--THE BOARD'S    
CONSIDERATION," THE BOARD, INCLUDING THE TRUSTEES WHO ARE NOT "INTERESTED       
PERSONS" OF LIQUID ASSET ("INDEPENDENT TRUSTEES"), AS THAT TERM IS DEFINED IN   
THE 1940 ACT, HAS CONCLUDED THAT THE REORGANIZATION IS IN THE BEST INTERESTS    
OF LIQUID ASSET AND ITS SHAREHOLDERS AND RECOMMENDS APPROVAL OF THE             
REORGANIZATION AGREEMENT.                                                       

FEE TABLE                                                                       

Liquid Asset and the Acquiring Fund each pay expenses for management of   
their assets and for other services. In addition, the Acquiring Fund pays for   
distribution of its shares. Those expenses are reflected in the net asset       
value per share of each such fund. The following table illustrates expenses     
and fees incurred during Liquid Asset's fiscal year ended July 31, 1997. The    
following table also illustrates expenses and fees incurred during the          
Acquiring Fund's fiscal year ended August 31, 1997. The table below also sets   
forth pro forma fees for the surviving combined fund (the Acquiring Fund)       
reflecting what the fee schedule would have been at August 31, 1997, if the     
Reorganization had been consummated twelve (12) months prior to that date.      
Further information on the fees and expenses applicable to the Acquiring Fund   
Shares is set forth herein and in the Acquiring Fund's Prospectus, attached     
hereto and incorporated herein by reference.                                    

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Shareholder Transaction Expenses                                                

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                                                                                           PRO FORMA  
                                                      LIQUID ASSET      ACQUIRING FUND      COMBINED  
                                                    ---------------- ------------------  -------------
                                                                                                      
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)          

                                                                [Download Table]

                                                               PRO FORMA 
                                LIQUID ASSET   ACQUIRING FUND   COMBINED 
                               -------------- --------------  -----------
                                                                         
Management Fees ..............      0.50%           0.27%         0.27%  
12b-1 Fees ...................      0.00%           0.10%         0.10%  
Other Expenses ...............      0.54%           0.25%         0.25 % 
Total Fund Operating                                                     
 Expenses.....................      1.04%(1)        0.62%         0.62 % 

------------                                                                    
(1)    Pursuant to an undertaking, InterCapital has agreed to assume all        
 expenses relating to the operations of Liquid Asset (except for any
   brokerage fees) and has agreed to waive the compensation provided for
     in its Management Agreement with respect to Liquid Asset until June 30,
     1998 to the extent that such expenses and compensation on an annualized
     basis exceed 1.00% of the daily net assets of Liquid Asset. Taking into
    account such waiver, Liquid Asset's total fund operating expenses were
     1.00%. After June 30, 1998, Liquid Asset, if it continues in operation,
will bear all fees and expenses. The actual expenses (before any  
waiver) of Liquid Asset for the period ended July 31, 1997 are set
forth in the table.                                               

Example                                                                         

To attempt to show the effect of these expenses on an investment over     
time, the hypotheticals shown below have been created. Assuming that an         
investor makes a $1,000 investment in either Liquid Asset or the Acquiring      
Fund or the new combined fund, that the annual return is 5% and that the        
operating expenses for each fund are the ones shown in the chart above; if      
the investment was redeemed at the end of each period shown below, the          
investor would incur the following expenses by the end of each period shown:    

                                                                [Download Table]

                     1 YEAR    3 YEARS   5 YEARS    10 YEARS
                    -------- ---------  --------- ----------
                                                            
Liquid Asset ......    $11       $33       $57        $127  
Acquiring Fund.....    $ 6       $20       $34        $ 77  
Pro Forma                                                   
 Combined..........    $ 6       $20       $34        $ 77  

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.                                                          

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TAX CONSEQUENCES OF THE REORGANIZATION                                          

As a condition to the Reorganization, Liquid Asset will receive an opinion
of Gordon Altman Butowsky Weitzen Shalov & Wein to the effect that the          
Reorganization will constitute a tax-free reorganization for federal income     
tax purposes, and that no gain or loss will be recognized by Liquid Asset or    
the shareholders of Liquid Asset for Federal income tax purposes as a result    
of the transactions included in the Reorganization. For further information     
about the tax consequences of the Reorganization, see "The                      
Reorganization--Tax Aspects of the Reorganization" below.                       

COMPARISON OF LIQUID ASSET AND THE ACQUIRING FUND                               

INVESTMENT OBJECTIVES AND POLICIES. Liquid Asset and the Acquiring Fund   
have identical investment objectives, which are high current income,            
preservation of capital and liquidity. Liquid Asset and the Acquiring Fund      
each seek to achieve their respective objectives by investing in the            
following money market instruments: United States Government securities,        
obligations of U.S. regulated banks and savings and loan associations having    
assets of $1 billion or more, high grade commercial paper, certificates of      
deposit of $100,000 or less of U.S. regulated banks and savings institutions    
having total assets of less than $1 billion which are fully federally insured   
as to principal (the interest may not be insured) and high grade corporate      
obligations maturing in thirteen months or less.                                

The investment policies of both funds are identical; additional           
information is provided under "Comparison of Investment Objectives, Policies    
and Restrictions" below.                                                        

The investment policies of both Liquid Asset and the Acquiring Fund are   
not fundamental and may be changed by their respective Boards of                
Trustees/Directors.                                                             

INVESTMENT MANAGEMENT AND DISTRIBUTION PLAN FEES. Liquid Asset and the    
Acquiring Fund obtain investment management services from InterCapital. With    
respect to Liquid Asset, the fund pays InterCapital monthly compensation        
calculated daily by applying the annual rate of 0.50% to the fund's net         
assets. With respect to the Acquiring Fund, the fund pays InterCapital          
monthly compensation calculated daily by applying the annual rate of: 0.50%     
of the daily net assets of the fund up to $500 million, scaled down at          
various asset levels to 0.248% on assets over $17.5 billion.                    

The Acquiring Fund has adopted a distribution plan (the "Plan") pursuant  
to Rule 12b-1 under the 1940 Act. Although pursuant to the Plan, the            
Acquiring Fund may pay to Dean Witter Distributors Inc. (the "Distributor") a   
fee, which is accrued daily and payable monthly, at the annual rate of up to    
0.15% of the Acquiring Fund's average daily net assets, the Board of            
Directors of the Acquiring Fund has limited the amount payable under the Plan   
to 0.10% of the Acquiring Fund's average daily net assets. Rule 12b-1 fees      
compensate the Distributor for the services provided and the expenses borne     
by the Distributor and others in distribution of the shares of the Acquiring    
Fund. By contrast, shares of Liquid Asset are not subject to a Rule 12b-1       
plan.                                                                           

OTHER SIGNIFICANT FEES. Both Liquid Asset and the Acquiring Fund pay      
additional fees in connection with their operations, including legal,           
auditing, transfer agent and custodial fees. See "Synopsis--Fee Table" above    
for the percentage of average net assets represented by such "Other             
Expenses."                                                                      

PURCHASES, EXCHANGES AND REDEMPTIONS. Liquid Asset and the Acquiring Fund 
continuously issue their shares to investors at a price equal to net asset      
value next determined after receipt of a purchase order and acceptance by       
DWTFSB in proper form and accompanied by payment in Federal Funds (i.e.,        
monies of member banks within the Federal Reserve System held on deposit at a   
Federal Reserve Bank) available to the respective fund for investment. Each     
of the funds utilize the amortized cost method in valuing their portfolio       
securities, which method involves valuing a security at its cost adjusted by    
a constant amortization to maturity                                             

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of any discount or premium, regardless of the impact of fluctuating interest    
rates on the market value of the instrument. The purpose of the method of       
calculation is to facilitate the maintenance of a constant net asset value      
per share of $1.00 although there can be no assurance that the $1.00 net        
asset value will be maintained. Shares of each fund commence earning income     
on the day following the date of their purchase.                                

Shares of Liquid Asset may be exchanged only for shares of the other      
portfolios of Retirement Series. Although shares of the Acquiring Fund may      
only be exchanged for shares of any other open-end investment company for       
which InterCapital serves as investment manager (collectively, the "Dean        
Witter Funds") if such Acquiring Fund shares were acquired in exchange for      
shares of another Dean Witter Fund, shares of Dean Witter Funds that are        
multiple class funds ("Dean Witter Multi-Class Funds"), or which are sold       
with either a front-end sales charge or a contingent deferred sales charge,     
may be exchanged for shares of the Acquiring Fund. In connection with the       
Reorganization, all shares of the Acquiring Fund issued to Liquid Asset         
Shareholders may be exchanged for Class D shares of any Dean Witter             
Multi-Class Fund. Both Liquid Asset and the Acquiring Fund provide telephone    
exchange privileges to their shareholders. For greater details relating to      
exchange privileges involving the Acquiring Fund, see the section entitled      
"Shareholder Services--Exchange Privilege" in the Acquiring Fund's              
Prospectus.                                                                     

Shareholders of Liquid Asset and the Acquiring Fund may redeem their      
shares for cash at any time at the net asset value per share next determined    
after the receipt of a redemption request meeting certain requirements, which   
are the same for both funds. The Acquiring Fund may, on sixty days' notice,     
redeem involuntarily, at net asset value, accounts (other than shares held in   
an Individual Retirement Account or custodial account under Section 403(b)(7)   
of the Internal Revenue Code) valued at less than $1,000 or such lesser         
amount as may be fixed by the fund's board; whereas, Liquid Asset does not      
involuntarily redeem shares.                                                    

DIVIDENDS. Both Liquid Asset and the Acquiring Fund declare dividends,    
payable on each day the New York Stock Exchange is open for business, of        
substantially all of their daily net income. Both funds pay all dividends       
from net investment income to shareholders of record as of the close of         
business the preceding business day. Both funds pay dividends from short-term   
capital gains, if any, to shareholders of record as of the close of business    
the preceding business day; such dividends, if any, are paid periodically.      
The amount of dividends for both funds may fluctuate from day to day and may    
be omitted on some days if net realized losses on portfolio securities exceed   
the respective fund's net investment income. The Acquiring Fund pays            
dividends from net long-term capital gains, if any, at least annually.          
Dividends and capital gains distributions of both Liquid Asset and the          
Acquiring Fund are automatically reinvested in additional shares at net asset   
value unless the shareholder elects to receive cash.                            

FORM OF ORGANIZATION. Liquid Asset is organized under the laws of the     
Commonwealth of Massachusetts whereas the Acquiring Fund is incorporated        
under the laws of Maryland. Both types of organizations allow the Board of      
Trustees/Directors to take certain action without obtaining shareholder         
approval. In addition, routine annual shareholder meetings are not required     
for either structure. For additional information about the Acquiring Fund's     
form of organization, see the section entitled "Additional Information" in      
the Acquiring Fund's Prospectus.                                                

SHAREHOLDER SERVICES.  The shareholder services provided by both funds are
similar. The material differences are as follows: Both funds provide for a      
Systematic Withdrawal Plan but for Liquid Asset it is only available to         
shareholders who own or purchase shares of the fund having a minimum value of   
$10,000; with respect to the Acquiring Fund, the requisite minimum value is     
$5,000. Shareholders of the Acquiring Fund may subscribe to EasyInvest|PS, an   
automatic purchase plan which provides for the automatic transfer of funds      
from a checking or savings account to DWTFSB for the purchase of fund shares;   
Liquid Asset does not offer this arrangement. The Acquiring Fund has a          
Targeted Dividends arrangement whereby, in states where it is legally           

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permissible, shareholders may elect to have all shares of the fund earned as    
a result of dividends paid in any given month redeemed as of the end of the     
month and invested in shares of other Dean Witter Funds, subject to certain     
conditions; Liquid Asset does not offer this arrangement. For additional        
information about the Acquiring Fund's shareholder services, see the section    
entitled "Shareholder Services" in the Acquiring Fund's Prospectus.             

PRINCIPAL RISK FACTORS  

The risks of each fund are similar. Each fund seeks to maintain a constant
net asset value per share of $1 but there is no assurance that the constant     
price will be maintained.                                                       

For a more complete discussion of the risks of each fund, see "Investment 
Objectives and Policies--General Investment Techniques and Risk                 
Considerations" in the Retirement Series Prospectus and "Investment             
Objectives and Policies" in the Acquiring Fund's Prospectus.                    

THE REORGANIZATION  

THE PROPOSAL                                                                    

The Board of Trustees of Retirement Series, including the Independent     
Trustees, having reviewed Liquid Asset's economic position, determined that     
the Reorganization is in the best interests of Liquid Asset and its             
Shareholders and that the interests of Shareholders will not be diluted as a    
result thereof, recommends approval of the Reorganization by Liquid Asset       
Shareholders.                                                                   

THE BOARD'S CONSIDERATION                                                       

At a meeting held on April 30, 1998, the Board, including all of the      
Independent Trustees, unanimously approved the Reorganization Agreement and     
determined to recommend that Shareholders of Liquid Asset approve the           
Reorganization Agreement. At a meeting on January 29, 1998, the Board made an   
extensive inquiry into a number of factors, particularly the comparative        
expenses to be incurred in the operations of Liquid Asset and the Acquiring     
Fund. The Board also considered other factors, including, but not limited to:   
the comparative investment performance and past growth in assets of Liquid      
Asset and the Acquiring Fund; the compatibility of the investment objectives,   
policies, restrictions and portfolios of Liquid Asset and the Acquiring Fund;   
the terms and conditions of the Reorganization which would affect the price     
of shares to be issued in the Reorganization; the tax-free nature of the        
Reorganization; and any direct or indirect costs to be incurred by Liquid       
Asset and the Acquiring Fund in connection with the Reorganization. At its      
meeting on April 30, 1998, the Board was informed and considered that there     
had been no material changes to the factors considered by it at the January     
29, 1998 meeting.                                                               

In recommending the Reorganization to Shareholders, the Board of          
Retirement Series considered that the Reorganization would have the following   
benefits for Shareholders:                                                      

1. Once the Reorganization is consummated, the expenses which would be    
borne by shareholders of the "combined fund" should be substantially lower on   
a percentage basis than the actual expenses per share of Liquid Asset.          
Furthermore, to the extent that the Reorganization would result in              
Shareholders becoming shareholders of a combined larger fund, further           
economies of scale could be achieved since various fixed expenses (e.g.,        
auditing and legal) can be spread over a larger number of shares. The Board     
noted that Liquid Asset's expense ratio, for its fiscal year ended July 31,     
1997, was 1.04% (absent the waiver of management fees and assumption of         
expenses), whereas the expense ratio for the Acquiring Fund was 0.62% (based    
on the fiscal year ended August 31, 1997).                                      

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2. Shareholders would have a continued participation in money market      
instruments through investment in the Acquiring Fund, which has identical       
investment objectives and identical investment policies and substantially       
similar investment restrictions to those of Liquid Asset.                       

3. Shareholders would have expanded exchange privileges. Rather than being
able to exchange their shares of Liquid Asset only among the various            
portfolios of Retirement Series, Shareholders will be permitted to exchange     
their shares of the Acquiring Fund for Class D shares of any other Dean         
Witter Fund and any Dean Witter money market fund for which the Dean Witter     
Funds exchange privilege is available (the exchange privilege is subject to     
termination or revision at any time.)                                           

4. The Reorganization will constitute a tax-free reorganization for       
federal income tax purposes, and no gain or loss will be recognized by Liquid   
Asset or its Shareholders for federal income tax purposes as a result of        
transactions included in the Reorganization.                                    

The Board of Directors of the Acquiring Fund, including a majority of such
Directors who are not "interested persons" of the Acquiring Fund, also          
determined that the Reorganization is in the best interests of the Acquiring    
Fund and its shareholders and that the interests of existing shareholders of    
the Acquiring Fund will not be diluted as a result thereof.                     

THE REORGANIZATION AGREEMENT                                                    

The terms and conditions under which the Reorganization would be          
consummated, as summarized below, are set forth in the Reorganization           
Agreement. This summary is qualified in its entirety by reference to the        
Reorganization Agreement, a copy of which is attached as Exhibit A to this      
Proxy Statement and Prospectus.                                                 

The Reorganization Agreement provides that (i) Liquid Asset will transfer 
all of its assets, including portfolio securities, cash, cash equivalents and   
receivables to the Acquiring Fund on the Closing Date in exchange for the       
assumption by the Acquiring Fund of Liquid Asset's stated liabilities,          
including all expenses, costs, charges and reserves, as reflected on an         
unaudited statement of assets and liabilities of Liquid Asset prepared by the   
Treasurer of Retirement Series as of the Valuation Date (as defined below) in   
accordance with generally accepted accounting principles consistently applied   
from the prior audited period, and the delivery of the Acquiring Fund Shares;   
(ii) such Acquiring Fund Shares would be distributed to the Shareholders of     
Liquid Asset on the Closing Date or as soon as practicable thereafter; (iii)    
Liquid Asset would be dissolved; and (iv) the outstanding shares of Liquid      
Asset would be canceled.                                                        

The number of Liquid Asset shares issued and outstanding and the number of
Acquiring Fund Shares to be delivered to Liquid Asset Shareholders, in each     
case, will be determined as of 4:00 p.m. New York City time on the third day    
that the New York Stock Exchange is open for business following the receipt     
of the requisite approval by the shareholders of Liquid Asset of the            
Reorganization Agreement or at such other time as Liquid Asset and the          
Acquiring Fund may agree (the "Valuation Date"), after the declaration and      
payment of any dividend on that date.                                           

On the Closing Date or as soon as practicable thereafter, Liquid Asset    
will distribute pro rata to its Shareholders of record as of the close of       
business on the Valuation Date, the Acquiring Fund Shares it receives. The      
Acquiring Fund will cause its transfer agent to credit and confirm an           
appropriate number of the Acquiring Fund Shares to each Shareholder.            
Certificates for the Acquiring Fund Shares will be issued upon written          
request of a Shareholder but only for whole shares, with fractional shares      
credited to the name of the Shareholder on the books of the Acquiring Fund.     
Such Shareholders who wish certificates representing their Acquiring Fund       
Shares must, after receipt of their confirmations, make a written request to    
the Acquiring Fund's transfer agent, Dean Witter Trust FSB, Harborside          
Financial Center, Jersey City, New Jersey 07311. Shareholders holding           
certificates representing their shares will not be required to surrender        
their certificates in                                                           

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connection with the Reorganization. However, such Shareholders will have to     
surrender such certificates (or provide indemnities reasonably acceptable to    
the Acquiring Fund in respect of lost certificates) in order to receive         
certificates representing the Acquiring Fund Shares or to redeem, transfer or   
exchange the Acquiring Fund Shares received.                                    

The Closing Date will be the Valuation Date. The consummation of the      
Reorganization is contingent upon the approval of the Reorganization by the     
shareholders of Liquid Asset and the receipt of the other opinions and          
certificates set forth in Sections 6, 7 and 8 of the Reorganization Agreement   
and the occurrence of the events described in those Sections, certain of        
which may be waived by Retirement Fund, on behalf of Liquid Asset or the        
Acquiring Fund. The Reorganization Agreement may be amended in any mutually     
agreeable manner, except that no amendment may be made subsequent to the        
Meeting which would detrimentally affect the value of the shares of the         
Acquiring Fund to be distributed. InterCapital will bear all of the expenses    
associated with the Reorganization. Management estimates that such expenses     
associated with the Reorganization will not exceed $   .                        

The Reorganization Agreement may be terminated and the Reorganization     
abandoned at any time, before or after approval by Shareholders, by mutual      
consent of Retirement Series, on behalf of Liquid Asset, and the Acquiring      
Fund. In addition, either party may terminate the Reorganization Agreement      
upon the occurrence of a material breach of the Reorganization Agreement by     
the other party or if, by December 31, 1998, any condition set forth in the     
Reorganization Agreement has not been fulfilled or waived by the party          
entitled to its benefits. If all other portfolios of Retirement Series effect   
similar reorganizations or otherwise liquidate, Retirement Series will take     
all necessary steps to effect its dissolution and its deregistration under      
the 1940 Act.                                                                   

The effect of the Reorganization is that Shareholders who vote their      
shares in favor of the Reorganization Agreement are electing to sell their      
shares of Liquid Asset (at net asset value on the Valuation Date) and           
reinvest the proceeds in the Acquiring Fund Shares at net asset value and       
without recognition of taxable gain or loss for federal income tax purposes.    
See "Tax Aspects of the Reorganization" below. As noted in "Tax Aspects of      
the Reorganization" below, if Liquid Asset recognizes net gain from the sale    
of securities prior to the Closing Date, such gain, to the extent not offset    
by capital loss carryovers, will be distributed to Shareholders prior to the    
Closing Date.                                                                   

Shareholders will continue to be able to redeem their shares of Liquid    
Asset at net asset value next determined after receipt of the redemption        
request meeting certain requirements until the close of business on the         
business day next preceding the Closing Date. Redemption requests received by   
Liquid Asset thereafter will be treated as requests for redemption of shares    
of the Acquiring Fund.                                                          

TAX ASPECTS OF THE REORGANIZATION                                               

At least one but not more than 20 business days prior to the Valuation    
Date, Liquid Asset will declare and pay a dividend or dividends which,          
together with all previous such dividends, will have the effect of              
distributing to Shareholders all of Liquid Asset's investment company taxable   
income for all periods since inception of Liquid Asset through and including    
the Valuation Date (computed without regard to any dividends paid deduction),   
and all of Liquid Asset's net capital gain, if any, realized in such periods    
(after reduction for any capital loss carryforward).                            

The Reorganization is intended to qualify for Federal income tax purposes 
as a tax-free reorganization under Section 368(a)(1)(C) of the Internal         
Revenue Code of 1986, as amended (the "Code"). Liquid Asset and the Acquiring   
Fund have represented that, to their best knowledge, there is no plan or        
intention by Shareholders to redeem, sell, exchange or otherwise dispose of a   
number of the Acquiring Fund Shares received in the transaction that would      
reduce Shareholders' ownership of the Acquiring Fund Shares to a                

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number of shares having a value, as of the Closing Date, of less than 50% of    
the value of all of the formerly outstanding Liquid Asset shares as of the      
same date. Liquid Asset and the Acquiring Fund have each further represented    
that, as of the Closing Date, Liquid Asset and the Acquiring Fund will          
qualify as regulated investment companies.                                      

As a condition to the Reorganization, Liquid Asset and the Acquiring Fund 
will receive an opinion of Gordon Altman Butowsky Weitzen Shalov & Wein that,   
based on certain assumptions, facts, the terms of the Reorganization            
Agreement and additional representations set forth in the Reorganization        
Agreement or provided by Liquid Asset and the Acquiring Fund:                   

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

2. No gain or loss will be recognized by the Acquiring Fund upon the      
receipt of the assets of Liquid Asset solely in exchange for the Acquiring      
Fund Shares and the assumption by the Acquiring Fund of the stated              
liabilities of Liquid Asset;                                                    

3. No gain or loss will be recognized by Liquid Asset upon the transfer of
the assets of Liquid Asset to the Acquiring Fund in exchange for the            
Acquiring Fund Shares and the assumption by the Acquiring Fund of the stated    
liabilities or upon the distribution of the Acquiring Fund Shares to            
Shareholders in exchange for their Liquid Asset shares;                         

4. No gain or loss will be recognized by Shareholders upon the exchange of
the shares of Liquid Asset for the Acquiring Fund Shares;                       

5. The aggregate tax basis for the Acquiring Fund Shares received by each 
of the Shareholders pursuant to the reorganization will be the same as the      
aggregate tax basis of the shares in Liquid Asset held by each such             
Shareholder immediately prior to the reorganization;                            

6. The holding period of the Acquiring Fund Shares to be received by each 
Shareholder will include the period during which the shares in Liquid Asset     
surrendered in exchange therefor were held (provided such shares in Liquid      
Asset were held as capital assets on the date of the Reorganization);           

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

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

SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE EFFECT, IF   
ANY, OF THE PROPOSED TRANSACTION IN LIGHT OF THEIR INDIVIDUAL CIRCUMSTANCES.    
BECAUSE THE FOREGOING DISCUSSION ONLY RELATES TO THE FEDERAL INCOME TAX         
CONSEQUENCES OF THE PROPOSED TRANSACTION, SHAREHOLDERS SHOULD ALSO CONSULT      
THEIR TAX ADVISORS AS TO STATE AND LOCAL TAX CONSEQUENCES, IF ANY, OF THE       
PROPOSED TRANSACTION.                                                           

DESCRIPTION OF SHARES                                                           

Shares of the Acquiring Fund to be issued pursuant to the Reorganization  
Agreement will, when issued, be fully paid and non-assessable by the            
Acquiring Fund and transferable without restrictions and will have no           
preemptive rights.                                                              

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CAPITALIZATION TABLE (UNAUDITED)                                                

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

                                                                [Download Table]

                                                            NET ASSET 
                                                SHARES        VALUE   
                              NET ASSETS     OUTSTANDING    PER SHARE 
                           --------------- --------------  -----------
                                                                      
Liquid Asset.............. $    18,291,541      18,291,541    $1.00   
Acquiring Fund............ $14,124,586,211  14,124,586,211    $1.00   
Combined Fund (pro                                                    
 forma)................... $14,142,877,752  14,142,877,752    $1.00   


APPRAISAL RIGHTS                                                                

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

COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS  

INVESTMENT OBJECTIVES AND POLICIES                                              

Liquid Asset and the Acquiring Fund have identical investment objectives, 
which are high current income, preservation of capital and liquidity. Liquid    
Asset and the Acquiring Fund seeks to achieve their objectives by investing     
in the following money market instruments: United States Government             
securities, obligations of U.S. regulated banks and savings and loan            
associations having assets of $1 billion or more, high grade commercial         
paper, certificates of deposit of $100,000 or less of U.S. regulated banks      
and savings institutions having total assets of less than $1 billion which      
are fully federally insured as to principal (the interest may not be insured)   
and high grade corporate obligations maturing in thirteen months or less.       

The investment policies of both Liquid Asset and the Acquiring Fund, which
are identical, are not fundamental and may be changed by their respective       
Boards. For a more complete discussion of each fund's policies see              
"Investment Objectives and Policies" in each fund's respective Prospectus and   
"Investment Practices and Policies" in each fund's respective Statement of      
Additional Information.                                                         

INVESTMENT RESTRICTIONS                                                         

The investment restrictions adopted by Liquid Asset and the Acquiring Fund
as fundamental are substantially similar and are summarized under the caption   
"Investment Restrictions" in their respective Prospectuses and Statements of    
Additional Information. A fundamental investment restriction cannot be          
changed without the vote of a majority of the outstanding voting securities     
of a fund, as defined in the 1940 Act. The material differences are set forth   
herein. The Acquiring Fund has a fundamental restriction that it may not        
purchase more than 10% of the outstanding voting securities of any one          
issuer, whereas Liquid Asset is subject to a similar limitation with respect    
to only 75% of its total assets. The Acquiring Fund may not purchase            
securities of any one issuer, except securities issued by U.S. Government       
agencies or instrumentalities, having a record, together with predecessors,     
of less than three years' continuous operation, if, immediately after such      
purchase, more than 5% of the fund's total assets taken at market value would   
be invested in such securities, whereas Liquid Asset is not subject to such     
restriction. Liquid Asset may not make loans to others, except through the      
purchase of debt obligations and repurchase agreements and loans of portfolio   
securities in excess of 10% of the value of the fund's total assets,            
including maintaining collateral from the borrower equal at all times to the    
current market value of the securities loaned, whereas the Acquiring Fund is    
not subject to such restriction.                                                

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The Acquiring Fund reserves the right to seek to achieve its investment   
objectives by investing all of its investable assets in a diversified,          
open-end management investment company having the same investment objectives    
and policies and substantially the same investment restrictions as those        
applicable to the Acquiring Fund; Liquid Asset does not have this investment    
flexibility.                                                                    

Finally, the Acquiring Fund has a fundamental restriction that it may not 
invest in securities of any issuer if, to the knowledge of such fund, any       
officer, or director of the fund or of InterCapital, owns more than 1/2 of 1%   
of the outstanding securities of such issuer, and such officers and directors   
who own more than 1/2 of 1% own in the aggregate more than 5% of the            
outstanding securities of such issuer; whereas, Liquid Asset is subject to      
such limitation on a non-fundamental basis.                                     

ADDITIONAL INFORMATION ABOUT LIQUID ASSET   
AND THE ACQUIRING FUND  

GENERAL                                                                         

For a discussion of the organization and operation of the Acquiring Fund  
and Liquid Asset, see "The Fund and its Management," "Investment Objectives     
and Policies," "Investment Restrictions" and "Prospectus Summary" in, and the   
cover page of, their respective Prospectuses.                                   

FINANCIAL INFORMATION                                                           

For certain financial information about the Acquiring Fund and Liquid     
Asset, see "Financial Highlights" in their respective Prospectuses and          
"Performance Information" in the Prospectus of Liquid Asset and "Dividends,     
Distributions and Taxes--Current and Effective Yield" in the prospectus of      
the Acquiring Fund.                                                             

MANAGEMENT                                                                      

For information about the Acquiring Fund's and Liquid Asset's Board of    
Directors/Trustees, the Investment Manager and the Distributor, see "The Fund   
and its Management" and "Investment Objectives and Policies" in, and the back   
cover of, their respective Prospectuses.                                        

DESCRIPTION OF SECURITIES AND SHAREHOLDER INQUIRIES                             

For a description of the nature and most significant attributes of shares 
of Liquid Asset and the Acquiring Fund, and information regarding shareholder   
inquiries, see "Additional Information" in their respective Prospectuses.       

DIVIDENDS, DISTRIBUTIONS AND TAXES                                              

For a discussion of the Acquiring Fund's and Liquid Asset's policies with 
respect to dividends, distributions and taxes, see "Dividends, Distributions    
and Taxes" in their respective Prospectuses as well as the discussion herein    
under "Synopsis--Purchases, Exchanges and Redemptions."                         

PURCHASES, REPURCHASES AND REDEMPTIONS                                          

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

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FINANCIAL STATEMENTS AND EXPERTS  

The financial statements of the Acquiring Fund and Retirement Series as of
August 31, 1997 and July 31, 1997, respectively, which are incorporated by      
reference in the Statement of Additional Information relating to the            
Registration Statement on Form N-14 of which this Proxy Statement and           
Prospectus forms a part, have been audited by Price Waterhouse LLP,             
independent accountants, for the periods indicated in its respective reports    
thereon. Such financial statements have been incorporated by reference in       
reliance upon such reports given upon the authority of Price Waterhouse LLP     
as experts in accounting and auditing.                                          

LEGAL MATTERS   

Certain legal matters concerning the issuance of shares of the Acquiring  
Fund will be passed upon by Gordon Altman Butowsky Weitzen Shalov & Wein, New   
York, New York. Such firm will rely on Piper & Marbury LLP as to matters of     
Maryland law.                                                                   

AVAILABLE INFORMATION   

Additional information about Liquid Asset and the Acquiring Fund is       
available, as applicable, in the following documents which are incorporated     
herein by reference: (i) the Acquiring Fund's Prospectus dated October 24,      
1997, attached to this Proxy Statement and Prospectus, which Prospectus forms   
a part of Post-Effective Amendment No. 34 to the Acquiring Fund's               
Registration Statement on Form N-1A (File Nos. 2-53856; 811-2575); (ii) the     
Acquiring Fund's Semi-Annual Report for the six month period ended February     
28, 1998; (iii) the Prospectus for Retirement Series dated October 31, 1997,    
which Prospectus forms a part of Post-Effective Amendment No. 6 to the          
Registration Statement for Retirement Series on Form N-1A (File Nos.            
33-48172; 811-6682); and (iv) the Annual Report for Retirement Series for the   
fiscal year ended July 31, 1997 and its Semi-Annual Report for the six months   
ended January 31, 1998. The foregoing documents may be obtained without charge  
by calling Nina Maceda at Dean Witter Trust Company at (800) 869-NEWS.          

Retirement Series and the Acquiring Fund are subject to the informational 
requirements of the Securities Exchange Act of 1934, as amended, and in         
accordance therewith, file reports and other information with the Commission.   
Proxy material, reports and other information about Liquid Asset and the        
Acquiring Fund which are of public record can be inspected and copied at        
public reference facilities maintained by the Commission at Room 1204,          
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and certain     
of its regional offices, and copies of such materials can be obtained at        
prescribed rates from the Public Reference Branch, Office of Consumer Affairs   
and Information Services, Securities and Exchange Commission, Washington,       
D.C. 20549.                                                                     

OTHER BUSINESS  

Management of the Retirement Series knows of no business other than the   
matters specified above which will be presented at the Meeting. Since matters   
not known at the time of the solicitation may come before the Meeting, the      
proxy as solicited confers discretionary authority with respect to such         
matters as properly come before the Meeting, including any adjournment or       
adjournments thereof, and it is the intention of the persons named as           
attorneys-in-fact in the proxy to vote this proxy in accordance with their      
judgment on such matters.                                                       

                                          By Order of the Board of
                           Trustees,
                             Barry Fink,
                           Secretary

June  , 1998                                                                    

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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 LIQUID ASSET FUND INC., a   
Maryland Corporation (the "Acquiring Fund") and DEAN WITTER RETIREMENT          
SERIES, a Massachusetts business trust ("Retirement Series"), on behalf of      
the Liquid Asset Series ("Liquid Asset").                                       

This Agreement is intended to be and is adopted as a "plan of             
reorganization" within the meaning of Treas. Reg. 1.368-2(g), for a             
reorganization under Section 368(a) (1) of the Internal Revenue Code of 1986,   
as amended (the "Code"). The reorganization ("Reorganization") will consist     
of the transfer to the Acquiring Fund of substantially all of the assets of     
Liquid Asset in exchange for the assumption by the Acquiring Fund of all        
stated liabilities of Liquid Asset and the issuance by the Acquiring Fund of    
shares of common stock (the "Acquiring Fund Shares"), to be distributed,        
after the Closing Date hereinafter referred to, to the shareholders of Liquid   
Asset in liquidation of Liquid Asset as provided herein, all upon the terms     
and conditions hereinafter set forth in this Agreement.                         

In consideration of the premises and of the covenants and agreements      
hereinafter set forth, the parties hereto covenant and agree as follows:        

1. THE REORGANIZATION AND LIQUIDATION OF LIQUID ASSET                           

1.1 Subject to the terms and conditions herein set forth and on the basis 
of the representations and warranties contained herein, Retirement Series       
agrees to assign, deliver and otherwise transfer the Liquid Asset Assets (as    
defined in paragraph 1.2) to the Acquiring Fund and the Acquiring Fund agrees   
in exchange therefor to assume all of Liquid Asset's stated liabilities on      
the Closing Date as set forth in paragraph 1.3(a) and to deliver to Liquid      
Asset the number of the Acquiring Fund Shares, including fractional Acquiring   
Fund Shares, equal to the number of Liquid Asset shares issued and              
outstanding on the Valuation Date (as defined in paragraph 2.1). Such           
transactions shall take place at the closing provided for in paragraph 3.1      
("Closing").                                                                    

1.2 (a) The "Liquid Asset Assets" shall consist of all property, including
without limitation, all cash, cash equivalents, securities and dividend and     
interest receivables owned by Liquid Asset, and any deferred or prepaid         
expenses shown as an asset on Liquid Asset's books on the Valuation Date.       

(b) On or prior to the Valuation Date, Retirement Series will provide the 
Acquiring Fund with a list of all of Liquid Asset's assets to be assigned,      
delivered and otherwise transferred to the Acquiring Fund and of the stated     
liabilities to be assumed by the Acquiring Fund pursuant to this Agreement.     
Liquid Asset reserves the right to sell any of the securities on such list      
but will not, without the prior approval of the Acquiring Fund, acquire any     
additional securities other than securities of the type in which the            
Acquiring Fund is permitted to invest and in amounts agreed to in writing by    
the Acquiring Fund. The Acquiring Fund will, within a reasonable time prior     
to the Valuation Date, furnish Liquid Asset with a statement of the Acquiring   
Fund's investment objectives, policies and restrictions and a list of the       
securities, if any, on the list referred to in the first sentence of this       
paragraph that do not conform to the Acquiring Fund's investment objective,     
policies and restrictions. In the event that Liquid Asset holds any             
investments that the Acquiring Fund is not permitted to hold, Liquid Asset      
will dispose of such securities on or prior to the Valuation Date. In           
addition, if it is determined that the portfolios of Liquid Asset and the       
Acquiring Fund, when aggregated, would contain investments exceeding certain    
percentage limitations imposed upon the Acquiring Fund with respect to such     
investments, Liquid Asset, if requested by the Acquiring Fund will, on or       
prior to the Valuation Date, dispose of and/or reinvest a sufficient amount     
of such investments as may be necessary to avoid violating such limitations     
as of the Closing Date (as defined in paragraph 3.1).                           

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1.3 Liquid Asset will endeavor to discharge all of its liabilities and    
obligations on or prior to the Valuation Date. The Acquiring Fund will assume   
all stated liabilities, which includes, without limitation, all expenses,       
costs, charges and reserves reflected on an unaudited Statement of Assets and   
Liabilities of Liquid Asset prepared by the Treasurer of Liquid Asset as of     
the Valuation Date in accordance with generally accepted accounting             
principles consistently applied from the prior audited period.                  

1.4 In order for Liquid Asset to comply with Section 852(a)(1) of the Code
and to avoid having any investment company taxable income or net capital gain   
(as defined in Sections 852(b)(2) and 1222(11) of the Code, respectively) (to   
the extent there is any) in the short taxable year ending with its              
dissolution, Liquid Asset will on or before the Valuation Date (a) declare a    
dividend in an amount large enough so that it will have declared dividends of   
all of its investment company taxable income and net capital gain, if any,      
for such taxable year (determined without regard to any deduction for           
dividends paid) and (b) distribute such dividend.                               

1.5 On the Closing Date or as soon as practicable thereafter, Liquid Asset
will distribute the Acquiring Fund Shares received by Liquid Asset pursuant     
to paragraph 1.1 pro rata to its shareholders of record determined as of the    
close of business on the Valuation Date ("Liquid Asset Shareholders"). Such     
distribution will be accomplished by an instruction, signed by the Secretary    
of Retirement Series, to transfer the Acquiring Fund Shares then credited to    
Liquid Asset's account on the books of the Acquiring Fund to open accounts on   
the books of the Acquiring Fund in the names of the Liquid Asset Shareholders   
and representing the respective pro rata number of the Acquiring Fund Shares    
due such Liquid Asset Shareholders. All issued and outstanding shares of        
Liquid Asset simultaneously will be canceled on Liquid Asset's books;           
however, share certificates representing interests in Liquid Asset will         
represent a number of the Acquiring Fund Shares after the Closing Date as       
determined in accordance with paragraph 2.3. The Acquiring Fund will issue      
certificates representing the Acquiring Fund Shares in connection with such     
exchange only upon the written request of a Liquid Asset Shareholder.           

1.6 Ownership of the Acquiring Fund Shares will be shown on the books of  
the Acquiring Fund's transfer agent. The Acquiring Fund Shares will be issued   
in the manner described in the Acquiring Fund's current Prospectus and          
Statement of Additional Information.                                            

1.7 Any transfer taxes payable upon issuance of the Acquiring Fund Shares 
in a name other than the registered holder of the Acquiring Fund Shares on      
Liquid Asset's books as of the close of business on the Valuation Date shall,   
as a condition of such issuance and transfer, be paid by the person to whom     
the Acquiring Fund Shares are to be issued and transferred.                     

1.8 Any reporting responsibility of Retirement Series, on behalf of Liquid
Assets, is and shall remain the responsibility of Retirement Series up to and   
including the date on which Retirement Series is dissolved and deregistered     
pursuant to paragraph 1.9.                                                      

1.9 Retirement Series shall be dissolved as a Massachusetts business trust
and deregistered as an investment company under the Investment Company Act of   
1940, as amended ("1940 Act"), promptly following the making of all             
distributions pursuant to paragraph 1.5 and the reorganization or liquidation   
of each of its portfolios.                                                      

1.10 Copies of all books and records maintained on behalf of Liquid Asset 
in connection with its obligations under the 1940 Act, the Code, state blue     
sky laws or otherwise in connection with this Agreement will promptly after     
the Closing be delivered to officers of the Acquiring Fund or their designee    
and the Acquiring Fund or its designee shall comply with applicable record      
retention requirements to which Liquid Asset is subject under the 1940 Act.     

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2. VALUATION                                                                    

2.1 The number of Liquid Asset shares issued and outstanding and the      
number of Acquiring Fund Shares (including fractional shares, if any) to be     
issued hereunder shall, in each case be computed as of 4:00 p.m. New York       
City time on the third day that the New York Stock Exchange is open for         
business following the receipt of the requisite approval by shareholders of     
Liquid Asset of this Agreement or at such time on such earlier or later date    
after such approval as may be mutually agreed upon in writing (such time and    
date being hereinafter called the "Valuation Date"), after the declaration of   
any payment of any dividend on that date.                                       

3. CLOSING AND CLOSING DATE                                                     

3.1 The Closing shall take place on the Valuation Date (the "Closing      
Date"). The Closing shall be held as of 9:00 a.m. Eastern time, or at such      
other time as the parties may agree. The Closing shall be held in a location    
mutually agreeable to the parties hereto. All acts taking place at the          
Closing shall be deemed to take place simultaneously as of 9:00 a.m. Eastern    
time on the Closing Date unless otherwise provided.                             

3.2 Portfolio securities held by Liquid Asset and represented by a        
certificate or other written instrument shall be presented by it or on its      
behalf to The Bank of New York (the "Custodian"), as custodian for the          
Acquiring Fund, for examination no later than five business days preceding      
the Valuation Date. Such portfolio securities (together with any cash or        
other assets) shall be delivered by Liquid Asset to the Custodian for the       
account of the Acquiring Fund on or before the Closing Date in conformity       
with applicable custody provisions under the 1940 Act and duly endorsed in      
proper form for transfer in such condition as to constitute good delivery       
thereof in accordance with the custom of brokers. The portfolio securities      
shall be accompanied by all necessary federal and state stock transfer stamps   
or a check for the appropriate purchase price of such stamps. Portfolio         
securities and instruments deposited with a securities depository (as defined   
in Rule 17f-4 under the 1940 Act) shall be delivered on or before the Closing   
Date by book-entry in accordance with customary practices of such depository    
and the Custodian. The cash delivered shall be in the form of a Federal Funds   
wire, payable to the order of "The Bank of New York, Custodian for Dean         
Witter Liquid Asset Fund Inc."                                                  

3.3 In the event that on the Valuation Date, (a) the New York Stock       
Exchange shall be closed to trading or trading thereon shall be restricted or   
(b) trading or the reporting of trading on such Exchange or elsewhere shall     
be disrupted so that, in the judgment of both the Acquiring Fund and Liquid     
Asset, accurate appraisal of the value of the net assets of the Acquiring       
Fund or the Liquid Asset Assets is impracticable, the Valuation Date shall be   
postponed until the first business day after the day when trading shall have    
been fully resumed without restriction or disruption and reporting shall have   
been restored.                                                                  

3.4 If requested, Retirement Series shall deliver to the Acquiring Fund or
its designee (a) at the Closing, a list, certified by its Secretary, of the     
names, addresses and taxpayer identification numbers of the Liquid Asset        
Shareholders and the number and percentage ownership of outstanding Liquid      
Asset shares owned by each such Liquid Asset Shareholder, all as of the         
Valuation Date, and (b) as soon as practicable after the Closing, all           
original documentation (including Internal Revenue Service forms,               
certificates, certifications and correspondence) relating to the Liquid Asset   
Shareholders' taxpayer identification numbers and their liability for or        
exemption from back-up withholding. The Acquiring Fund shall issue and          
deliver to such Secretary a confirmation evidencing delivery of the Acquiring   
Fund Shares to be credited on the Closing Date to Liquid Asset or provide       
evidence satisfactory to Liquid Asset that such Acquiring Fund Shares have      
been credited to Liquid Asset's account on the books of the Acquiring Fund.     
At the Closing, each party shall deliver to the other such bills of sale,       
checks, assignments, share certificates, if any, receipts or other documents    
as such other party or its counsel may reasonably request.                      

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4. COVENANTS OF THE ACQUIRING FUND AND LIQUID ASSET                             

4.1 Except as otherwise expressly provided herein with respect to Liquid  
Asset, the Acquiring Fund and Liquid Asset each will operate its business in    
the ordinary course between the date hereof and the Closing Date, it being      
understood that such ordinary course of business will include customary         
dividends and other distributions.                                              

4.2 The Acquiring Fund will prepare and file with the Securities and      
Exchange Commission ("Commission") a registration statement on Form N-14        
under the Securities Act of 1933, as amended ("1933 Act"), relating to the      
Acquiring Fund Shares ("Registration Statement"). Retirement Series will        
provide the Acquiring Fund with the Proxy Materials as described in paragraph   
4.3 below, for inclusion in the Registration Statement. Liquid Asset will       
further provide the Acquiring Fund with such other information and documents    
relating to Liquid Asset as are reasonably necessary for the preparation of     
the Registration Statement.                                                     

4.3 Retirement Series will call a meeting of the Liquid Asset shareholders
to consider and act upon this Agreement and to take all other action            
necessary to obtain approval of the transactions contemplated herein.           
Retirement Series will prepare the notice of meeting, form of proxy and proxy   
statement (collectively, "Proxy Materials") to be used in connection with       
such meeting; provided that the Acquiring Fund will furnish Retirement Series   
with its currently effective prospectus for inclusion in the Proxy Materials    
and with such other information relating to the Acquiring Fund as is            
reasonably necessary for the preparation of the Proxy Materials.                

4.4 Retirement Series will assist the Acquiring Fund in obtaining such    
information as the Acquiring Fund reasonably requests concerning the            
beneficial ownership of Liquid Asset shares.                                    

4.5 Subject to the provisions of this Agreement, the Acquiring Fund and   
Retirement Series, on behalf of Liquid Asset, will each take, or cause to be    
taken, all action, and do or cause to be done, all things reasonably            
necessary, proper or advisable to consummate and make effective the             
transactions contemplated by this Agreement.                                    

4.6 Retirement Series shall furnish or cause to be furnished to the       
Acquiring Fund within 30 days after the Closing Date a statement of Liquid      
Asset's assets and liabilities as of the Closing Date, which statement shall    
be certified by the Treasurer of Retirement Series and shall be in accordance   
with generally accepted accounting principles consistently applied. As          
promptly as practicable, but in any case within 60 days after the Closing       
Date, Retirement Series shall furnish the Acquiring Fund, in such form as is    
reasonably satisfactory to the Acquiring Fund, a statement certified by the     
Treasurer of Retirement Series of Liquid Asset's earnings and profits for       
federal income tax purposes that will be carried over to the Acquiring Fund     
pursuant to Section 381 of the Code.                                            

4.7 As soon after the Closing Date as is reasonably practicable,          
Retirement Series (a) shall prepare and file all federal and other tax          
returns and reports on behalf of Liquid Asset required by law to be filed       
with respect to all periods ending on or before the Closing Date but not        
theretofore filed and (b) shall pay all federal and other taxes shown as due    
thereon and/or all federal and other taxes that were unpaid as of the Closing   
Date, including without limitation, all taxes for which the provision for       
payment was made as of the Closing Date (as represented in paragraph 5.2(k)).   

4.8 The Acquiring Fund agrees to use all reasonable efforts to obtain the 
approvals and authorizations required by the 1933 Act and the 1940 Act and to   
make such filings required by the state Blue Sky and securities laws as it      
may deem appropriate in order to continue its operations after the Closing      
Date.                                                                           

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5. REPRESENTATIONS AND WARRANTIES                                               

5.1 The Acquiring Fund represents and warrants to Retirement Series, on   
behalf of Liquid Asset, as follows:                                             

(a) The Acquiring Fund is a validly existing Maryland corporation with
full power to carry on its business as presently conducted;             

(b) The Acquiring Fund is a duly registered, open-end, management     
investment company, and its registration with the Commission as an      
investment company under the 1940 Act and the registration of its shares
under the 1933 Act are in full force and effect;                        

 (c) All of the issued and outstanding shares of the Acquiring Fund have
been offered and sold in compliance in all material respects with       
 applicable registration requirements of the 1933 Act and state securities
 laws. Shares of the Acquiring Fund are registered in all jurisdictions in
which they are required to be registered under state securities laws and
other laws, and said registrations, including any periodic reports or   
supplemental filings, are complete and current, all fees required to be 
paid have been paid, and the Acquiring Fund is not subject to any stop  
  order and is fully qualified to sell its shares in each state in which its
shares have been registered;                                            

   (d) The current Prospectus and Statement of Additional Information of the
Acquiring Fund conform in all material respects to the applicable       
requirements of the 1933 Act and the 1940 Act and the regulations       
thereunder and do not include any untrue statement of a material fact or
  omit to state any material fact required to be stated therein or necessary
 to make the statements therein, in light of the circumstances under which
they were made, not misleading;                                         

(e) The Acquiring Fund is not in, and the execution, delivery and     
 performance of this Agreement will not result in a, material violation of
  any provision of the Acquiring Fund's Articles of Incorporation or By-Laws
or of any agreement, indenture, instrument, contract, lease or other    
undertaking to which the Acquiring Fund is a party or by which it is    
bound;                                                                  

(f) No litigation or administrative proceeding or investigation of or 
before any court or governmental body is presently pending or, to its   
 knowledge, threatened against the Acquiring Fund or any of its properties
or assets which, if adversely determined, would materially and adversely
affect its financial condition or the conduct of its business; and the  
Acquiring Fund knows of no facts that might form the basis for the      
institution of such proceedings and is not a party to or subject to the 
provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects, or is reasonably likely to 
  materially and adversely effect, its business or its ability to consummate
the transactions herein contemplated;                                   

(g) The Statement of Assets and Liabilities, Statement of Operations, 
Statement of Changes in Net Assets and Financial Highlights as of August
 31, 1997, and for the year then ended, of the Acquiring Fund certified by
Price Waterhouse LLP (copies of which have been furnished to Liquid     
Asset), fairly present, in all material respects, the Acquiring Fund's  
 financial condition as of such date in accordance with generally accepted
 accounting principles, and its results of such operations, changes in its
net assets and financial highlights for such period, and as of such date
there were no known liabilities of the Acquiring Fund (contingent or    
  otherwise) not disclosed therein that would be required in accordance with
generally accepted accounting principles to be disclosed therein;       

(h) All issued and outstanding Acquiring Fund Shares are, and at the  
 Closing Date will be, duly and validly issued and outstanding, fully paid
and nonassessable with no personal liability attaching to the           

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ownership thereof, except as set forth under the caption "Additional    
Information" in the Acquiring Fund's current Prospectus incorporated by 
 reference in the Registration Statement. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or   
purchase any of its shares;                                             

 (i) The execution, delivery and performance of this Agreement have been
  duly authorized by all necessary action on the part of the Acquiring Fund,
and this Agreement constitutes a valid and binding obligation of the    
Acquiring Fund enforceable in accordance with its terms, subject as to  
enforcement, to bankruptcy, insolvency, reorganization, moratorium and  
  other laws relating to or affecting creditors rights and to general equity
principles. No other consents, authorizations or approvals are necessary
in connection with the Acquiring Fund's performance of this Agreement;  

(j) The Acquiring Fund Shares to be issued and delivered to Retirement
 Series, for the account of the Liquid Asset Shareholders, pursuant to the
  terms of this Agreement will at the Closing Date have been duly authorized
and, when so issued and delivered, will be duly and validly issued      
Acquiring Fund Shares, and will be fully paid and non-assessable with no
  personal liability attaching to the ownership thereof, except as set forth
  under the caption "Additional Information" in the Acquiring Fund's current
Prospectus incorporated by reference in the Registration Statement;     

(k) All material Federal and other tax returns and reports of the     
Acquiring Fund required by law to be filed on or before the Closing Date
 have been filed and are correct, and all Federal and other taxes shown as
due or required to be shown as due on said returns and reports have been
paid or provision has been made for the payment thereof, and to the best
  of the Acquiring Fund's knowledge, no such return is currently under audit
and no assessment has been asserted with respect to any such return;    

   (l) For each taxable year since its inception, the Acquiring Fund has met
the requirements of Subchapter M of the Code for qualification and      
  treatment as a "regulated investment company" and neither the execution or
delivery of nor the performance of its obligations under this Agreement 
 will adversely affect, and no other events are reasonably likely to occur
 which will adversely affect the ability of the Acquiring Fund to continue
to meet the requirements of Subchapter M of the Code;                   

  (m) Since August 31, 1997 there has been no change by the Acquiring Fund
 in accounting methods, principles, or practices, including those required
by generally accepted accounting principles;                            

(n) The information furnished or to be furnished by the Acquiring Fund
for use in registration statements, proxy materials and other documents 
which may be necessary in connection with the transactions contemplated 
hereby shall be accurate and complete in all material respects and shall
  comply in all material respects with Federal securities and other laws and
regulations applicable thereto; and                                     

(o) The Proxy Materials to be included in the Registration Statement  
  (only insofar as they relate to the Acquiring Fund) will, on the effective
date of the Registration Statement and on the Closing Date, not contain 
any untrue statement of a material fact or omit to state a material fact
  required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which such statements were made, not
materially misleading.                                                  

5.2 Retirement Series, on behalf of Liquid Asset, represents and warrants 
to the Acquiring Fund as follows:                                               

  (a) Retirement Series is a validly existing Massachusetts business trust
with full power to carry on its business as presently conducted;        

(b) Retirement Series is a duly registered, open-end, management      
investment company, and its registration with the Commission as an      
investment company under the 1940 Act and the registration of its shares
under the 1933 Act are in full force and effect;                        

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(c) All of the issued and outstanding shares of beneficial interest of
Liquid Asset have been offered and sold in compliance in all material   
  respects with applicable requirements of the 1933 Act and state securities
 laws. Shares of Liquid Asset are registered in all jurisdictions in which
they are required to be registered and said registrations, including any
periodic reports or supplemental filings, are complete and current, all 
fees required to be paid have been paid, and Retirement Series is not   
subject to any stop order and is fully qualified to sell its shares in  
each state in which its shares have been registered;                    

(d) The current Prospectus and Statement of Additional Information of 
Retirement Series conform in all material respects to the applicable    
requirements of the 1933 Act and the 1940 Act and the regulations       
thereunder and do not include any untrue statement of a material fact or
  omit to state any material fact required to be stated therein or necessary
 to make the statements therein, in light of the circumstances under which
they were made, not misleading;                                         

   (e) Retirement Series is not, and the execution, delivery and performance
of this Agreement will not result, in a material violation of any       
provision of the Declaration of Trust of Retirement Series or By-Laws of
Retirement Series or of any agreement, indenture, instrument, contract, 
lease or other undertaking to which Retirement Series is a party or by  
which it is bound;                                                      

(f) No litigation or administrative proceeding or investigation of or 
before any court or governmental body is presently pending or, to its   
knowledge, threatened against Retirement Series or any of its properties
or assets which, if adversely determined, would materially and adversely
affect its financial condition or the conduct of its business; and      
Retirement Series knows of no facts that might form the basis for the   
institution of such proceedings and is not a party to or subject to the 
provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects, or is reasonably likely to 
  materially and adversely effect, its business or its ability to consummate
the transactions herein contemplated;                                   

(g) The Statement of Assets and Liabilities, Statement of Operations, 
 Statement of Changes in Net Assets and Financial Highlights of Retirement
  Series as of July 31, 1997 and for the year then ended, certified by Price
Waterhouse LLP (copies of which have been or will be furnished to the   
Acquiring Fund) fairly present, in all material respects, Liquid Asset's
financial condition as of such date, and its results of operations,     
changes in its net assets and financial highlights for such period in   
accordance with generally accepted accounting principles, and as of such
date there were no known liabilities of Liquid Asset (contingent or     
  otherwise) not disclosed therein that would be required in accordance with
generally accepted accounting principles to be disclosed therein;       

(h) Retirement Series has no material contracts or other commitments  
(other than this Agreement) that will be terminated with liability to it
prior to the Closing Date;                                              

(i) All issued and outstanding shares of Liquid Asset are, and at the 
 Closing Date will be, duly and validly issued and outstanding, fully paid
and nonassessable with no personal liability attaching to the ownership 
  thereof, except as set forth under the caption "Additional Information" in
Liquid Asset's current Prospectus incorporated by reference in the      
Registration Statement. Liquid Asset does not have outstanding any      
 options, warrants or other rights to subscribe for or purchase any of its
shares, nor is there outstanding any security convertible to any of its 
shares. All such shares will, at the time of Closing, be held by the    
  persons and in the amounts set forth in the list of shareholders submitted
to the Acquiring Fund pursuant to paragraph 3.4;                        

 (j) The execution, delivery and performance of this Agreement will have
 been duly authorized prior to the Closing Date by all necessary action on
the part of Retirement Series, and subject to the approval              

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of Liquid Asset's shareholders, this Agreement constitutes a valid and  
binding obligation of Retirement Series, on behalf of Liquid Asset,     
enforceable in accordance with its terms, subject as to enforcement to  
  bankruptcy, insolvency, reorganization, moratorium and other laws relating
to or affecting creditors rights and to general equity principles. No   
other consents, authorizations or approvals are necessary in connection 
 with the performance of this Agreement by Retirement Series, on behalf of
Liquid Asset;                                                           

  (k) All material federal and other tax returns and reports of Retirement
Series required by law to be filed on or before the Closing Date shall  
have been filed and are correct and all Federal and other taxes shown as
due or required to be shown as due on said returns and reports have been
paid or provision has been made for the payment thereof, and to the best
knowledge of Retirement Series, no such return is currently under audit 
and no assessment has been asserted with respect to any such return;    

 (l) For each taxable year since its inception, Liquid Asset has met all
the requirements of Subchapter M of the Code for qualification and      
  treatment as a "regulated investment company" and neither the execution or
delivery of nor the performance of its obligations under this Agreement 
 will adversely affect, and no other events are reasonably likely to occur
which will adversely affect the ability of Liquid Asset to continue to  
meet the requirements of Subchapter M of the Code;                      

   (m) At the Closing Date, Retirement Series will have good and valid title
to the Liquid Asset Assets, subject to no liens (other than the         
obligation, if any, to pay the purchase price of portfolio securities   
purchased by Liquid Asset which have not settled prior to the Closing   
  Date), security interests or other encumbrances, and full right, power and
  authority to assign, deliver and otherwise transfer such assets hereunder,
and upon delivery and payment for such assets, the Acquiring Fund will  
acquire good and marketable title thereto, subject to no restrictions on
  the full transfer thereof, including any restrictions as might arise under
the 1933 Act;                                                           

 (n) On the effective date of the Registration Statement, at the time of
the meeting of Liquid Asset's shareholders and on the Closing Date, the 
Proxy Materials (exclusive of the currently effective Acquiring Fund's  
Prospectus contained therein) will (i) comply in all material respects  
 with the provisions of the 1933 Act, the Securities Exchange Act of 1934,
as amended ("1934 Act") and the 1940 Act and the regulations thereunder 
and (ii) not contain any untrue statement of a material fact or omit to 
state a material fact required to be stated therein or necessary to make
 the statements therein not misleading. Any other information furnished by
Retirement Series for use in the Registration Statement or in any other 
manner that may be necessary in connection with the transactions        
  contemplated hereby shall be accurate and complete and shall comply in all
material respects with applicable federal securities and other laws and 
regulations thereunder;                                                 

  (o) Liquid Asset will, on or prior to the Valuation Date, declare one or
 more dividends or other distributions to shareholders that, together with
  all previous dividends and other distributions to shareholders, shall have
the effect of distributing to the shareholders all of its investment    
  company taxable income and net capital gain, if any, through the Valuation
Date (computed without regard to any deduction for dividends paid);     

(p) Retirement Series has maintained or has caused to be maintained on
its behalf all books and accounts as required of a registered investment
 company in compliance with the requirements of Section 31 of the 1940 Act
and the Rules thereunder; and                                           

  (q) Liquid Asset is not acquiring the Acquiring Fund Shares to be issued
  hereunder for the purpose of making any distribution thereof other than in
accordance with the terms of this Agreement.                            

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6. CONDITIONS PRECEDENT TO OBLIGATIONS OF LIQUID ASSET                          

The obligations of Retirement Series to consummate the transactions       
provided for herein shall be subject, at its election, to the performance by    
the Acquiring Fund of all the obligations to be performed by it hereunder on    
or before the Closing Date and, in addition thereto, the following              
conditions:                                                                     

6.1 All representations and warranties of the Acquiring Fund contained in 
this Agreement shall be true and correct in all material respects as of the     
date hereof and, except as they may be affected by the transactions             
contemplated by this Agreement, as of the Closing Date with the same force      
and effect as if made on and as of the Closing Date;                            

6.2 The Acquiring Fund shall have delivered to Liquid Asset a certificate 
of its President and Treasurer, in a form reasonably satisfactory to            
Retirement Series and dated as of the Closing Date, to the effect that the      
representations and warranties of the Acquiring Fund made in this Agreement     
are true and correct at and as of the Closing Date, except as they may be       
affected by the transactions contemplated by this Agreement, and as to such     
other matters as Retirement Series shall reasonably request;                    

6.3 Liquid Asset shall have received a favorable opinion from Gordon      
Altman Butowsky Weitzen Shalov & Wein, counsel to the Acquiring Fund, dated     
as of the Closing Date, to the effect that:                                     

(a) The Acquiring Fund is a validly existing Maryland corporation, and
 has the power to own all of its properties and assets and to carry on its
business as presently conducted (Maryland counsel may be relied upon in 
delivering such opinion); (b) the Acquiring Fund is a duly registered,  
open-end, management investment company, and its registration with the  
Commission as an investment company under the 1940 Act is in full force 
and effect; (c) this Agreement has been duly authorized, executed and   
delivered by the Acquiring Fund and, assuming that the Registration     
Statement complies with the 1933 Act, the 1934 Act and the 1940 Act and 
regulations thereunder and assuming due authorization, execution and    
delivery of this Agreement by Liquid Asset, is a valid and binding      
  obligation of the Acquiring Fund enforceable against the Acquiring Fund in
accordance with its terms, subject as to enforcement, to bankruptcy,    
insolvency, reorganization, moratorium and other laws relating to or    
affecting creditors rights and to general equity principles; (d) the    
Acquiring Fund Shares to be issued to Liquid Asset Shareholders as      
  provided by this Agreement are duly authorized and upon such delivery will
be validly issued and outstanding and fully paid and non-assessable     
(except as set forth under the caption "Additional Information" in the  
  Acquiring Fund's Prospectus), and no shareholder of the Acquiring Fund has
any preemptive rights to subscription or purchase in respect thereof    
 (Maryland counsel may be relied upon in delivering such opinion); (e) the
 execution and delivery of this Agreement did not, and the consummation of
the transactions contemplated hereby will not, violate the Acquiring    
Fund's Articles of Incorporation or By-Laws; and (f) to the knowledge of
  such counsel, no consent, approval, authorization or order of any court or
governmental authority of the United States or any state is required for
the consummation by the Acquiring Fund of the transactions contemplated 
  herein, except such as have been obtained under the 1933 Act, the 1934 Act
 and the 1940 Act and such as may be required under state securities laws;
and                                                                     

6.4 As of the Closing Date, there shall have been no material change in   
the investment objective, policies and restrictions nor any increase in the     
investment management fees or annual fees payable pursuant to the Acquiring     
Fund's 12b-1 plan of distribution from those described in the Acquiring         
Fund's Prospectus and Statement of Additional Information dated October 24,     
1997.                                                                           

7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND                    

The obligations of the Acquiring Fund to complete the transactions        
provided for herein shall be subject, at its election, to the performance by    
Retirement Series of all the obligations to be performed by it hereunder on     
or before the Closing Date and, in addition thereto, the following              
conditions:                                                                     

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7.1 All representations and warranties of Retirement Series contained in  
this Agreement shall be true and correct in all material respects as of the     
date hereof and, except as they may be affected by the transactions             
contemplated by this Agreement, as of the Closing Date with the same force      
and effect as if made on and as of the Closing Date;                            

7.2 Retirement Series shall have delivered to the Acquiring Fund at the   
Closing a certificate of its President and its Treasurer, in form and           
substance satisfactory to the Acquiring Fund and dated as of the Closing        
Date, to the effect that the representations and warranties of Retirement       
Series made in this Agreement are true and correct at and as of the Closing     
Date, except as they may be affected by the transactions contemplated by this   
Agreement, and as to such other matters as the Acquiring Fund shall             
reasonably request;                                                             

7.3 Retirement Series shall have delivered to the Acquiring Fund a        
statement of the Liquid Asset Assets and its liabilities, together with a       
list of Liquid Asset's portfolio securities and other assets showing the        
respective adjusted bases and holding periods thereof for income tax            
purposes, as of the Closing Date, certified by the Treasurer of Retirement      
Series;                                                                         

7.4 Retirement Series shall have delivered to the Acquiring Fund within   
three business days after the Closing a letter from Price Waterhouse LLP        
dated as of the Closing Date stating that (a) such firm has performed a         
limited review of the federal and state income tax returns of Retirement        
Series for each of the last three taxable years and, based on such limited      
review, nothing came to their attention that caused them to believe that such   
returns did not properly reflect, in all material respects, the federal and     
state income tax liabilities of Liquid Asset for the periods covered thereby,   
(b) for the period from July 31, 1997 to and including the Closing Date, such   
firm has performed a limited review (based on unaudited financial data) to      
ascertain the amount of applicable federal, state and local taxes and has       
determined that same either have been paid or reserves have been established    
for payment of such taxes, and, based on such limited review, nothing came to   
their attention that caused them to believe that the taxes paid or reserves     
set aside for payment of such taxes were not adequate in all material           
respects for the satisfaction of all federal, state and local tax liabilities   
for the period from July 31, 1997 to and including the Closing Date and (c)     
based on such limited reviews, nothing came to their attention that caused      
them to believe that Liquid Asset would not qualify as a regulated investment   
company for federal income tax purposes for any such year or period;            

7.5 The Acquiring Fund shall have received at the Closing a favorable     
opinion from Gordon Altman Butowsky Weitzen Shalov & Wein, counsel to           
Retirement Series, dated as of the Closing Date to the effect that:             

  (a) Retirement Series is a validly existing Massachusetts business trust
 and has the power to own all of its properties and assets and to carry on
its business as presently conducted (Massachusetts counsel may be relied
upon in delivering such opinion); (b) Retirement Series is a duly       
registered, open-end, management investment company under the 1940 Act, 
and its registration with the Commission as an investment company under 
  the 1940 Act is in full force and effect; (c) this Agreement has been duly
  authorized, executed and delivered by Retirement Series and, assuming that
the Registration Statement complies with the 1933 Act, the 1934 Act and 
the 1940 Act and the regulations thereunder and assuming due            
authorization, execution and delivery of this Agreement by the Acquiring
Fund, is a valid and binding obligation of Retirement Series enforceable
against Retirement Series in accordance with its terms, subject as to   
enforcement, to bankruptcy, insolvency, reorganization, moratorium and  
  other laws relating to or affecting creditors rights and to general equity
 principles; (d) the execution and delivery of this Agreement did not, and
  the consummation of the transactions contemplated hereby will not, violate
the Declaration of Trust or By-Laws of Retirement Series; and (e) to the
  knowledge of such counsel, no consent, approval, authorization or order of
any court or governmental authority of the United States or any state is
required                                                                

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  for the consummation by Retirement Series of the transactions contemplated
  herein, except such as have been obtained under the 1933 Act, the 1934 Act
 and the 1940 Act and such as may be required under state securities laws;
and                                                                     

7.6 On the Closing Date, the Liquid Asset Assets shall include no assets  
that the Acquiring Fund, by reason of limitations of the fund's Articles of     
Incorporation or otherwise, may not properly acquire.                           

8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND        
LIQUID ASSET                                                              

The obligations of Retirement Series and the Acquiring Fund hereunder are 
each subject to the further conditions that on or before the Closing Date:      

8.1 This Agreement and the transactions contemplated herein shall have    
been approved by the requisite vote of the holders of the outstanding shares    
of Liquid Asset in accordance with the provisions of the Declaration of Trust   
of Retirement Series, and certified copies of the resolutions evidencing such   
approval shall have been delivered to the Acquiring Fund;                       

8.2 On the Closing Date, no action, suit or other proceeding shall be     
pending before any court or governmental agency in which it is sought to        
restrain or prohibit, or obtain damages or other relief in connection with,     
this Agreement or the transactions contemplated herein;                         

8.3 All consents of other parties and all other consents, orders and      
permits of federal, state and local regulatory authorities (including those     
of the Commission and of state Blue Sky and securities authorities, including   
"no-action" positions of and exemptive orders from such federal and state       
authorities) deemed necessary by the Acquiring Fund or Retirement Series to     
permit consummation, in all material respects, of the transactions              
contemplated herein shall have been obtained, except where failure to obtain    
any such consent, order or permit would not involve risk of a material          
adverse effect on the assets or properties of the Acquiring Fund or Liquid      
Asset;                                                                          

8.4 The Registration Statement shall have become effective under the 1933 
Act, no stop orders suspending the effectiveness thereof shall have been        
issued and, to the best knowledge of the parties hereto, no investigation or    
proceeding for that purpose shall have been instituted or be pending,           
threatened or contemplated under the 1933 Act;                                  

8.5 Liquid Asset shall have declared and paid a dividend or dividends     
and/or other distribution or distributions that, together with all previous     
such dividends or distributions, shall have the effect of distributing to the   
Liquid Asset Shareholders all of Liquid Asset's investment company taxable      
income (computed without regard to any deduction for dividends paid) and all    
of its net capital gain (after reduction for any capital loss carry-forward     
and computed without regard to any deduction for dividends paid) for all        
taxable years ending on or before the Closing Date; and                         

8.6 The parties shall have received a favorable opinion of the law firm of
Gordon Altman Butowsky Weitzen Shalov & Wein (based on such representations     
as such law firm shall reasonably request), addressed to the Acquiring Fund     
and Liquid Asset, which opinion may be relied upon by the shareholders of       
Liquid Asset, substantially to the effect that, for federal income tax          
purposes:                                                                       

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

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

  (c) No gain or loss will be recognized by Liquid Asset upon the transfer
of the assets of Liquid Asset to the Acquiring Fund in exchange for the 
Acquiring Fund Shares and the assumption by the Acquiring Fund of the   
stated liabilities or upon the distribution of the Acquiring Fund Shares
to the Liquid Asset Shareholders in exchange for their Liquid Asset     
shares;                                                                 

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

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

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

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

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

Notwithstanding anything herein to the contrary, neither the Acquiring    
Fund nor Liquid Asset may waive the conditions set forth in this paragraph      
8.6.                                                                            

9. FEES AND EXPENSES                                                            

9.1 (a) Dean Witter InterCapital Inc. ("InterCapital"), the investment    
manager to both Liquid Asset and the Acquiring Fund, shall bear all expenses    
incurred in connection with the carrying out of the provisions of this          
Agreement, including legal, accounting, Commission registration fees and Blue   
Sky expenses, printing, filing and portfolio transfer taxes (if any) incurred   
in connection with the consummation of the transactions contemplated herein.    

(b) In the event the transactions contemplated herein are not consummated 
by reason of the Acquiring Fund's or Liquid Asset's being either unwilling or   
unable to go forward, the funds' only respective obligations hereunder shall    
be to reimburse InterCapital for all reasonable out-of-pocket fees and          
expenses incurred by InterCapital in connection with those transactions.        

10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES                                    

10.1 This Agreement constitutes the entire agreement between the parties. 

10.2 The representations, warranties and covenants contained in this      
Agreement or in any document delivered pursuant hereto or in connection         
herewith shall survive the consummation of the transactions contemplated        
herein, except that the representations, warranties and covenants of            
Retirement Series hereunder shall not survive the dissolution and complete      
liquidation of Liquid Asset in accordance with Section 1.9.                     

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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  
Liquid Asset, and the Acquiring Fund;                                   

(b) by either the Acquiring Fund or Retirement Series, on behalf of   
  Liquid Asset, by notice to the other, without liability to the terminating
party on account of such termination (providing the termination party is
not otherwise in material default or breach of this Agreement) if the   
Closing shall not have occurred on or before December 31, 1998; or      

(c) by either the Acquiring Fund or Retirement Series, on behalf of   
Liquid Asset, in writing without liability to the terminating party on  
account of such termination (provided the terminating party is not      
otherwise in material default or breach of this Agreement), if (i) the  
other party shall fail to perform in any material respect its agreements
  contained herein required to be performed on or prior to the Closing Date,
(ii) the other party materially breaches any of its representations,    
warranties or covenants contained herein, (iii) the Liquid Asset        
  shareholders fail to approve this Agreement at any meeting called for such
purpose at which a quorum was present or (iv) any other condition herein
 expressed to be precedent to the obligations of the terminating party has
 not been met and it reasonably appears that it will not or cannot be met.

11.2 (a) Termination of this Agreement pursuant to paragraphs 11.1 (a) or 
(b) shall terminate all obligations of the parties hereunder and there shall    
be no liability for damages on the part of the Acquiring Fund or Retirement     
Series or the trustees or officers of the Acquiring Fund or Retirement          
Series, to any other party or its trustees or officers.                         

(b) Termination of this Agreement pursuant to paragraph 11.1 (c) shall    
terminate all obligations of the parties hereunder and there shall be no        
liability for damages on the part of the Acquiring Fund or Retirement Series    
or the directors or officers of the Acquiring Fund or Retirement Series,        
except that any party in breach of this Agreement shall, upon demand,           
reimburse InterCapital for all reasonable out-of-pocket fees and expenses       
incurred in connection with the transactions contemplated by this Agreement,    
including legal, accounting and filing fees.                                    

12. AMENDMENTS                                                                  

This Agreement may be amended, modified or supplemented in such manner as 
may be mutually agreed upon in writing by the parties; provided, however,       
that following the meeting of Liquid Asset's shareholders called by             
Retirement Series pursuant to paragraph 4.3, no such amendment may have the     
effect of changing the provisions for determining the number of the Acquiring   
Fund Shares to be issued to the Liquid Asset Shareholders under this            
Agreement to the detriment of such Liquid Asset Shareholders without their      
further approval.                                                               

13. MISCELLANEOUS                                                               

13.1 The article and paragraph headings contained in this Agreement are   
for reference purposes only and shall not affect in any way the meaning or      
interpretation of this Agreement.                                               

13.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.                                              

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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 Retirement        
Series shall be personally liable hereunder. The execution and delivery of      
this Agreement have been authorized by the trustees of Retirement Series and    
signed by authorized officers of Retirement Series acting as such, and          
neither such authorization by such trustees nor such execution and delivery     
by such officers shall be deemed to have been made by any of them               
individually or to impose any liability on any of them personally.              

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement  
to be executed by a duly authorized officer.                                    

                                      DEAN WITTER LIQUID ASSET FUND INC.
                                  By: /s/ Charles A. Fiumefreddo
                                            ..............................
                                        Name: Charles A. Fiumefreddo
                           Title: Chairman

                                  DEAN WITTER RETIREMENT SERIES,
                                    on behalf of Liquid Asset Series
                      By: /s/ Barry Fink
                                            ..............................
                            Name: Barry Fink
                                 Title: Vice President

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                                                                 Exhibit B
PROSPECTUS                                        
OCTOBER 24, 1997                                  

           Dean Witter Liquid Asset Fund Inc. (the "Fund") is a no-load,
open-end diversified management investment company investing in the following   
money market instruments: United States Government securities, obligations of   
U.S. regulated banks and savings and loan associations having assets of $1      
billion or more, high grade commercial paper, certificates of deposit of        
$100,000 or less of U.S. regulated banks and savings institutions having total  
assets of less than $1 billion which are fully federally insured as to principal
(the interest may not be insured) and high grade corporate obligations maturing 
in thirteen months or less. The Fund has a 12b-1 Plan (see below). The          
investment objectives of the Fund are high current income, preservation of      
capital and liquidity (see "Investment Objectives and Policies").               

            AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO        
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.                           

              In accordance with a Plan of Distribution pursuant to Rule 12b-1
under the Investment Company Act of 1940 with Dean Witter Distributors Inc., the
Fund is authorized to reimburse for specific expenses incurred in promoting the 
distribution of the Fund's shares. Reimbursement may in no event exceed an      
amount equal to payments at the annual rate of 0.15% of the average daily net   
assets of the Fund.                                                             

             This Prospectus sets forth concisely the information you should
know before investing in the Fund. It should be read and retained for future    
reference. Additional information about the Fund is contained in the Statement  
of Additional Information, dated October 24, 1997, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon    
request of the Fund at its address or at one of its telephone numbers listed on 
this cover page. The Statement of Additional Information is incorporated herein 
by reference.                                                                   

Minimum initial investment ......  $5,000                                       
Minimum additional investment....  $ 100                                        

Dean Witter                                                                     
Liquid Asset Fund Inc.                                                          
Two World Trade Center                                                          
New York, New York 10048                                                        
TABLE OF CONTENTS 

Prospectus Summary/2                                                            
Summary of Fund Expenses/3                                                      
Financial Highlights/3                                                          
The Fund and its Management/4                                                   
Investment Objectives and Policies/4                                            
Investment Restrictions/6                                                       
Purchase of Fund Shares/7                                                       
Shareholder Services/9                                                          
Redemption of Fund Shares/12                                                    
Dividends, Distributions and Taxes/14                                           
Additional Information/15                                                       
Report of Independent Accountants/18                                            
Financial Statements -- August 31, 1997/23                                      

For information about the Fund, including information on opening an account,
registration of shares, and other information relating to a specific account,   
call:                                                                           

- 800-869-NEWS (toll-free) or                                               

- 212-392-2550                                                              

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT   
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.          

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND    
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS    
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.           

Dean Witter Distributors Inc.           
Distributor                             

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PROSPECTUS SUMMARY                                                              

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The Fund         An open-end diversified management investment company          
investing in money market instruments.        

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Shares Offered   Common Stock (see page 15).                                    

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

Purchase         Investments may be made:                                       
of Shares        - By wire                                                      
- By mail                                     
- By EasyInvest-SM-                           
            - Through Dean Witter Reynolds Inc. account executives and
other Selected Broker-Dealers.                
           Purchases are at net asset value, without a sales charge.
             Minimum initial investment: $5,000. Subsequent investments:
            $100 or more (by wire or by mail), $1,000 or more (through
        account executives) or $100 to $5,000 (by EasyInvest).
               Orders for purchase of shares are effective on day of receipt
           of payment in Federal Funds if payment is received by the
            Fund's transfer agent before 12:00 noon New York time (see
page 7).                                      

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

Investment       High current income, preservation of capital and liquidity     
Objectives       (see page 4).                                                  

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

Authorized       Money market instruments (see page 4):                         
Investments      - United States Government securities                          
           - Obligations of U.S. regulated banks having assets of $1
billion or more                       
- High grade commercial paper                 
                - High grade corporate obligations maturing in thirteen months
or less                               
            - Certificates of deposit of savings banks and savings and
               loan associations having assets of $1 billion or more
        - Certificates of deposit of $100,000 or less, of U.S.
                regulated banks and savings institutions, having total
                   assets of less than $1 billion, which are fully federally
                   insured as to principal. The interest may not be insured.
                - Repurchase agreements and reverse repurchase agreements (see
pages 5 and 6).                       

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

Investment       Dean Witter InterCapital Inc., the Investment Manager of the   
Manager          Fund, and its wholly-owned subsidiary, Dean Witter Services    
       Company Inc., serve in various investment management,
           advisory, management and administrative capacities to 102
          investment companies and other portfolios with assets of
    approximately $102.3 billion at September 30, 1997
(see page 4).                                 

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

Management       Monthly fee at an annual rate of 0.50% of average daily net    
Fee              assets up to $500 million, scaled down at various levels of    
   net assets to 0.248% on assets over $17.5 billion
(see page 4).                                 

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

Distributor      Dean Witter Distributors Inc. (the "Distributor") sells shares 
         of the Fund through Dean Witter Reynolds Inc. and other
     Selected Broker-Dealers pursuant to selected dealer
             agreements. Other than the reimbursement to the Distributor
               pursuant to the Rule 12b-1 Distribution Plan, the Distributor
    receives no distribution fees (see pages 7 and 9).

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

Plan of          The Fund is authorized to reimburse specific expenses incurred 
Distribution     in promoting the distribution of the Fund's shares pursuant to 
              a Plan of Distribution with the Distributor pursuant to Rule
               12b-1 under the Investment Company Act of 1940. Reimbursement
           may in no event exceed an amount equal to payments at the
              annual rate of 0.15 of 1% of average daily net assets of the
Fund (see page 9).                            

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

Dividends        Declared and automatically reinvested daily in additional      
                shares; cash payments of dividends available monthly (see page
14).                                          

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

Reports          Individual periodic account statements; annual and semi-annual 
Fund financial statements.                    

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

Redemption       Shares are redeemable at net asset value without any charge    
(see page 12):                                
of Shares        - By check                                                     
             - By telephone or wire instructions, with proceeds wired or
mailed to a predesignated bank account.   
- By mail                                     
            A shareholder's account is subject to possible involuntary
           redemption if its value falls below $1,000 (see page 14).

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

Risks            The Fund's investments are limited to U.S. Government          
              securities, high grade corporate obligations and obligations
                of banks and savings and loan associations having assets of $1
             billion or more and certificates of deposit which are fully
                federally insured as to principal; consequently, the portfolio
               securities of the Fund are subject to minimal risk of loss of
                income and principal. However, the investor is directed to the
               discussion of "Repurchase Agreements" and "Reverse Repurchase
              Agreements" (see page 5) concerning any risk associated with
      such portfolio securities and management techniques.

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

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

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SUMMARY OF FUND EXPENSES                                                        
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   The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are for the   
fiscal year ended August 31, 1997.                                              

SHAREHOLDER TRANSACTION EXPENSES                                                
----------------------------------------------------------------------          
Maximum Sales Charge Imposed on Purchases.............................   None   
Maximum Sales Charge Imposed on Reinvested Dividends..................   None   
Deferred Sales Charge.................................................   None   
Redemption Fees.......................................................   None   
Exchange Fee..........................................................   None   
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)          
----------------------------------------------------------------------          
Management Fees.......................................................  0.27%   
12b-1 Fees............................................................  0.10%   
Other Expenses........................................................  0.25%   
Total Fund Operating Expenses.........................................  0.62%   

                                                        [Enlarge/Download Table]

EXAMPLE                                                       1 year  3 years  5 years  10 years
------------------------------------------------------------  ------  -------  -------  --------
                                                                                                
You would pay the following expenses on a $1,000 investment,                                    
 assuming (1) 5% annual return and (2) redemption at the end                                    
 of each time period:.......................................    $6      $20      $34      $77   

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR  
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR   
LESS THAN THOSE SHOWN.                                                          

The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or   
indirectly. For a more complete description of these costs and expenses, see    
"The Fund and its Management," "Purchase of Fund Shares" and "Shareholder       
Services."                                                                      
FINANCIAL HIGHLIGHTS                                                            
--------------------------------------------------------------------------------

The following ratios and per share data for a share of capital stock    
outstanding throughout each year have been audited by Price Waterhouse LLP,     
independent accountants. The financial highlights should be read in conjunction 
with the financial statements, notes thereto and the unqualified report of      
independent accountants which are contained in this Prospectus commencing on    
page 18.                                                                        

                                                        [Enlarge/Download Table]

                                                              FOR THE YEAR ENDED AUGUST 31,                                 
                               -------------------------------------------------------------------------------------------- 
                                 1997     1996     1995     1994      1993      1992      1991     1990     1989     1988   
                               --------  -------  -------  -------  --------  --------  --------  -------  -------  ------- 
                                                                                                                            
PER SHARE OPERATING                                                                                                         
 PERFORMANCE:                                                                                                               
Net asset value, beginning of                                                                                               
 period.......................    $1.00    $1.00    $1.00    $1.00     $1.00     $1.00     $1.00    $1.00    $1.00    $1.00 
                               --------  -------  -------  -------  --------  --------  --------  -------  -------  ------- 
Net investment income.........    0.050    0.050    0.053    0.030     0.027     0.040     0.064    0.079    0.086    0.068 
Less dividends from net                                                                                                     
 investment income............   (0.050)  (0.050)  (0.053)  (0.030)   (0.027)   (0.040)   (0.064)  (0.079)  (0.086)  (0.068)
                               --------  -------  -------  -------  --------  --------  --------  -------  -------  ------- 
Net asset value, end of                                                                                                     
 period.......................    $1.00    $1.00    $1.00    $1.00     $1.00     $1.00     $1.00    $1.00    $1.00    $1.00 
                               --------  -------  -------  -------  --------  --------  --------  -------  -------  ------- 
                               --------  -------  -------  -------  --------  --------  --------  -------  -------  ------- 
TOTAL INVESTMENT RETURN+......     5.13%    5.15%    5.41%    3.07%     2.72%     4.10%     6.61%    8.27%    8.96%    7.01%
RATIOS TO AVERAGE NET ASSETS:                                                                                               
Expenses......................     0.62%    0.63%    0.65%    0.70%     0.69%     0.67%     0.62%    0.56%    0.56%    0.61%
Net investment income.........     5.01%    5.02%    5.28%    3.02%     2.67%     4.03%     6.41%    7.91%    8.66%    6.77%
SUPPLEMENTAL DATA:                                                                                                          
Net assets, end of period, in                                                                                               
 millions.....................  $13,166  $11,389  $10,359   $8,492    $7,959    $9,214   $10,811  $11,902  $10,734   $8,056 

------------                                                                    
+ Calculated based on the net asset value as of the last business day of the    
period.                                                                         

SEE NOTES TO FINANCIAL STATEMENTS 

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THE FUND AND ITS MANAGEMENT                                                     

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  Dean Witter Liquid Asset Fund Inc. (the "Fund") is an open-end diversified
management investment company incorporated in Maryland on September 3, 1974.    

   Dean Witter InterCapital Inc. ("InterCapital" or the "Investment Manager"),
whose address is Two World Trade Center, New York, New York 10048, is the Fund's
Investment Manager. The Investment Manager, which was incorporated in July,     
1992, is a wholly-owned subsidiary of Morgan Stanley, Dean Witter, Discover &   
Co., a preeminent global financial services firm that maintains leading market  
positions in each of its three primary businesses--securities, asset management 
and credit services.                                                            

  InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and          
administrative capacities to 102 investment companies, thirty of which are      
listed on the New York Stock Exchange, with combined assets of approximately    
$98.6 billion as of September 30, 1997. The Investment Manager also manages and 
advises portfolios of pension plans, other institutions and individuals which   
aggregated approximately $3.7 billion at such date.                             

The Fund has retained the Investment Manager to provide administrative  
services, manage its business affairs and manage the investment of the Fund's   
assets, including the placing of orders for the purchase and sale of portfolio  
securities. InterCapital has retained Dean Witter Services Company Inc. to      
provide the aforementioned administrative services to the Fund. The Fund's Board
of Directors reviews the various services provided by or under the direction of 
the Investment Manager to ensure that the Fund's general investment policies and
programs are being properly carried out and that administrative services are    
being provided to the Fund in a satisfactory manner.                            

  As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the   
Investment Manager monthly compensation calculated daily at an annual rate of   
0.50% of the daily net assets of the Fund up to $500 million, scaled down at    
various asset levels to 0.248% on assets over $17.5 billion. For the fiscal year
ended August 31, 1997, the Fund accrued total compensation to the Investment    
Manager amounting to 0.27% of the Fund's average daily net assets and the Fund's
total expenses amounted to 0.62% of the Fund's average daily net assets.        

INVESTMENT OBJECTIVES AND POLICIES                                              
--------------------------------------------------------------------------------

   The investment objectives of the Fund are high current income, preservation
of capital and liquidity. The investment objectives may not be changed without  
approval of the Fund's shareholders. The Fund seeks to achieve its objectives by
investing in the following money market instruments:                            

    U.S. GOVERNMENT SECURITIES. Obligations issued or guaranteed as to principal
and interest by the United States or its agencies (such as the Export-Import    
Bank of the United States, Federal Housing Administration, and Government       
National Mortgage Association) or its instrumentalities (such as the Federal    
Home Loan Bank, Federal Intermediate Credit Banks and Federal Land Bank),       
including Treasury bills, notes and bonds;                                      

BANK OBLIGATIONS. Obligations (including certificates of deposit and    
bankers' acceptances) of banks subject to regulation by the U.S. Government and 
having total assets of $1 billion or more, and instruments secured by such      
obligations, not including obligations of foreign branches of domestic banks;   

OBLIGATIONS OF SAVINGS INSTITUTIONS. Certificates of deposit of savings 
banks and savings and loan associations, having total assets of $1 billion or   
more;                                                                           

   FULLY INSURED CERTIFICATES OF DEPOSIT. Certificates of deposit of banks and
savings institutions having total assets of less than $1 billion, if the        
principal amount of the obligation is federally insured by the Bank Insurance   
Fund or the Savings Association Insurance Fund (each of which is administered by
the Federal Deposit Insurance Corporation), limited to $100,000 principal amount
per certificate and                                                             

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to 10% or less of the Fund's total assets in all such obligations and in all    
illiquid assets, in the aggregate;                                              

  COMMERCIAL PAPER AND CORPORATE OBLIGATIONS. Commercial paper and corporate
debt obligations maturing in thirteen months or less which are rated in one of  
the two highest rating categories for short-term debt obligations or, if not    
rated, have been issued by issuers which have another short-term debt obligation
that is comparable in priority and security to such non-rated securities and is 
so rated, by at least two nationally recognized statistical rating organizations
("NRSROs") (or one NRSRO if the instrument was rated by only one such           
organization) or which, if unrated, are of comparable quality as determined in  
accordance with procedures established by the Board of Directors. The NRSROs    
currently rating instruments of the type the Fund may purchase are Moody's      
Investors Service, Inc., Standard & Poor's Corporation, Duff and Phelps, Inc.,  
Fitch Investors Service, Inc., IBCA Limited and IBCA Inc., and Thomson          
Bankwatch, Inc. Their rating criteria are described in the Appendix to the      
Fund's Statement of Additional Information.                                     

The foregoing rating limitations apply at the time of acquisition of a  
security. Any subsequent change in any rating by a rating service will not      
require elimination of any security from the Fund's portfolio. However, in      
accordance with procedures adopted by the Fund's Board of Directors pursuant to 
federal securities regulations governing money market funds, if the Investment  
Manager becomes aware that a portfolio security has received a new rating from  
an NRSRO that is below the second highest rating, then, unless the security is  
disposed of within five days, the Investment Manager will perform a             
creditworthiness analysis of any such downgraded securities, which analysis will
be reported to the Directors who will, in turn, determine whether the securities
continue to present minimal credit risks to the Fund.                           

The ratings assigned by the NRSROs represent their opinions as to the   
quality of the securities they undertake to rate. It should be emphasized,      
however, that the ratings are general and not absolute standards of quality.    

Subject to the foregoing requirements, the Fund may invest in commercial
paper which has been issued pursuant to the "private placement" exemption       
afforded by Section 4(2) of the Securities Act of 1933 (the "Securities Act")   
and which may be sold to other institutional investors pursuant to Rule 144A    
under the Securities Act. Management considers such legally restricted but      
readily marketable commercial paper to be liquid. However, pursuant to          
procedures approved by the Board of Directors of the Fund, if a particular      
investment in such commercial paper is determined to be illiquid, that          
investment will be included within the 10% limitation on illiquid investments   
(see "Investment Restrictions"). If at any time the Fund's investments in       
illiquid securities exceed 10% of the Fund's total assets, the Fund will attempt
to dispose of illiquid securities in an orderly fashion to reduce the Fund's    
holdings in such securities to less than 10% of its total assets.               

   REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which
may be viewed as a type of secured lending by the Fund, and which typically     
involve the acquisition by the Fund of debt securities from a selling financial 
institution such as a bank, savings and loan association or broker-dealer. The  
agreement provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security ("collateral") at a        
specified price and at a fixed time in the future. The Fund will accrue interest
from the institution until the time when the repurchase is to occur. Although   
such date is deemed by the Fund to be the maturity date of a repurchase         
agreement, the maturities of securities subject to repurchase agreements are not
subject to any limits and may exceed thirteen months. While repurchase          
agreements involve certain risks not associated with direct investments in debt 
securities, the Fund follows procedures designed to minimize such risks. These  
procedures include effecting repurchase transactions only with large, well      
capitalized and well established financial institutions and specifying the      
required value of the collateral underlying the agreement.                      

REVERSE REPURCHASE AGREEMENTS. The Fund may also use reverse repurchase 
agreements as part of its investment strategy. Reverse repurchase agreements    
involve sales by the Fund of portfolio assets concurrently with an agreement by 
the Fund to repurchase the same assets at a later date at a fixed price.        

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VARIABLE RATE AND FLOATING RATE OBLIGATIONS. Certain of the types of    
investments described above may be variable rate or floating rate obligations.  
The interest rates payable on variable rate or floating rate obligations are not
fixed and may fluctuate based upon changes in market rates. The interest rate   
payable on a variable rate obligation may be adjusted at predesignated periodic 
intervals and on a floating rate obligation whenever there is a change in the   
market rate of interest on which the interest rate payable is based.            

Although the Fund will generally not seek profits through short-term    
trading, it may dispose of any portfolio security prior to its maturity if, on  
the basis of a revised credit evaluation of the issuer or other circumstances or
considerations, it believes such disposition advisable.                         

The Fund is expected to have a high portfolio turnover due to the short 
maturities of securities purchased, but this should not affect income or net    
asset value as brokerage commissions are not normally charged on the purchase or
sale of money market instruments.                                               

The Fund will attempt to balance its objectives of high income, capital 
preservation and liquidity by investing in securities of varying maturities and 
risks. The Fund will not, however, invest in securities that mature in more than
thirteen months from the date of purchase (see "Purchase of Fund Shares --      
Determination of Net Asset Value"). The amounts invested in obligations of      
various maturities of thirteen months or less will depend on management's       
evaluation of the risks involved. Longer-term issues, while generally paying    
higher interest rates, are subject, as a result of general changes in interest  
rates, to greater fluctuations in value than shorter-term issues. Thus, when    
rates on new debt securities increase, the value of outstanding securities may  
decline, and vice versa. Such changes may also occur, but to a lesser degree,   
with short-term issues. These changes, if realized, may cause fluctuations in   
the amount of daily dividends and, in extreme cases, could cause the net asset  
value per share to decline (see "Purchase of Fund Shares--Determination of Net  
Asset Value"). Longer-term issues also increase the risk that the issuer may be 
unable to pay an installment of interest or principal at maturity. Also, in the 
event of unusually large redemption demands, such securities may have to be sold
at a loss prior to maturity, or the Fund might have to borrow money and incur   
interest expense. Either occurrence would adversely impact the amount of daily  
dividend and could result in a decline in the daily net asset value per share.  
The Fund will attempt to minimize these risks by investing in longer-term       
securities when it appears to management that interest rates on such securities 
are not likely to increase substantially during the period of expected holding, 
and then only in securities of high quality which are readily marketable.       
However, there can be no assurance that the Fund will be successful in achieving
this or its other objectives.                                                   

   The foregoing investment policies are not fundamental and may be changed by
the Board of Directors without shareholder vote.                                

   BROKERAGE ALLOCATION. Brokerage commissions are not normally charged on the
purchase or sale of money market instruments, but such transactions may involve 
transaction costs in the form of spreads between bid and asked prices. Pursuant 
to an order of the Securities and Exchange Commission, the Fund may effect      
principal transactions in certain money market instruments with Dean Witter     
Reynolds Inc. ("DWR"), a broker-dealer affiliate of InterCapital. In addition,  
the Fund may incur brokerage commissions on transactions conducted through DWR  
and other broker-dealer affiliates of InterCapital.                             

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

The investment restrictions listed below are among the restrictions that
have been adopted by the Fund as fundamental policies. Under the Investment     
Company Act of 1940, as amended (the "Act"), a fundamental policy may not be    
changed without the vote of a majority of the outstanding voting securities of  
the Fund, as defined in the Act. For purposes of the following limitations: (i) 
all percentage limitations apply immediately after a purchase or initial        
investment, and (ii) any subsequent change in any applicable percentage         
resulting from market fluctuations or other changes in total or net assets does 
not require elimination of any security from the portfolio.                     

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The Fund may not:                                                       

  1.  Borrow money, except from banks for temporary or emergency purposes or
to meet redemption requests which might otherwise require the untimely          
disposition of securities, and not for investment or leveraging, provided that  
borrowing in the aggregate may not exceed 10% of the value of the Fund's total  
assets (including the amount borrowed) at the time of such borrowing; or        
mortgage, pledge or hypothecate any assets except in connection with any such   
borrowing and in amounts not in excess of 10% of the value of the Fund's total  
assets at the time of such borrowing.                                           

   2.  Purchase securities of any issuer, except for securities issued by U.S.
Government agencies or instrumentalities, having a record, together with        
predecessors, of less than three years' continuous operation, if, immediately   
after such purchase, more than 5% of the Fund's total assets taken at market    
value would be invested in such securities.                                     

   3.  With respect to 75% of its total assets, purchase any securities, other
than obligations of the U.S. Government, or its agencies or instrumentalities,  
if, immediately after such purchase, more than 5% of the value of the Fund's    
total assets would be invested in securities of any one issuer. (However, as a  
non-fundamental policy, the Fund will not invest more than 10% of its total     
assets in the securities of any one issuer. Futhermore, pursuant to current     
regulatory requirements, the Fund may only invest more than 5% of its total     
assets in the securities of a single issuer (and only with respect to one issuer
at a time) for a period of not more than three business days and only if the    
securities have received the highest quality rating by at least two NRSROs.)    

   4.  Purchase any securities, other than obligations of the U.S. Government,
or its agencies or instrumentalities, if, immediately after such purchase, more 
than 10% of the outstanding securities of one issuer would be owned by the Fund 
(for this purpose all indebtedness of an issuer shall be deemed a single class  
of security).                                                                   

   5.  Purchase any securities, other than obligations of banks or of the U.S.
Government, or its agencies or instrumentalities, if, immediately after such    
purchase, more than 25% of the value of the Fund's total assets would be        
invested in the securities of issuers in the same industry; however, there is no
limitation as to investments in bank obligations or in obligations issued or    
guaranteed by the U.S. Government or its agencies or instrumentalities.         

6.  Invest more than 10% of its total assets in illiquid securities,    
including repurchase agreements which have a maturity of longer than seven days.
For purposes of this restriction, securities eligible for sale pursuant to Rule 
144A under the Securities Act are not considered illiquid if they are determined
to be liquid under procedures adopted by the Fund's Board of Directors.         

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

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

The Fund offers its shares for sale to the public on a continuous basis,
without a sales charge. Pursuant to a Distribution Agreement between the Fund   
and Dean Witter Distributors Inc. (the "Distributor"), an affiliate of the      
Investment Manager, shares of the Fund are distributed by the Distributor and   
offered by DWR and other dealers who have entered into selected dealer          
agreements with the Distributor ("Selected Broker-Dealers"). The principal      
executive office of the Distributor is located at Two World Trade Center, New   
York, New York 10048. The offering price of the shares will be at their net     
asset value next determined (see "Determination of Net Asset Value" below) after
receipt of a purchase order and acceptance by the Fund's transfer agent, Dean   
Witter Trust FSB (the "Transfer Agent"), in proper form and accompanied by      
payment in Federal Funds (i.e., monies of member banks within the Federal       
Reserve System held on deposit at a Federal Reserve Bank) available to the Fund 
for investment. Shares commence earning income on the day following the date of 
their purchase. Stock certificates will not be issued unless requested in       
writing by the shareholder.                                                     

To initiate purchase by mail or wire, a completed Investment Application
(contained in the Prospectus) must be sent to the Transfer Agent at             

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P.O. Box 1040, Jersey City, NJ 07303. Checks should be made payable to Dean     
Witter Liquid Asset Fund Inc. and sent to Dean Witter Trust FSB at the above    
address. Purchases by wire must be preceded by a call to the Transfer Agent     
advising it of the purchase (see Investment Application or the front cover of   
this Prospectus for the telephone number) and must be wired to The Bank of New  
York, for credit to account of Dean Witter Trust FSB, Harborside Financial      
Center, Plaza Two, Jersey City, New Jersey, Account No. 8900188413. Wire        
purchase instructions must include the name of the Fund and the shareholder's   
account number. Purchases made by check are normally effective within two       
business days for checks drawn on Federal Reserve System member banks, and      
longer for most other checks. Wire purchases received by the Transfer Agent     
prior to 12:00 noon, New York time, are normally effective that day and wire    
purchases received after 12:00 noon, New York time, are normally effective the  
next business day. Initial investments must be at least $5,000, although the    
Fund, at its discretion, may accept initial investments of smaller amounts, not 
less than $1,000. The minimum initial investment under an Individual Retirement 
Account or Qualified Retirement Plan for which the Transfer Agent acts as       
custodian or trustee is $1,000. The minimum initial purchase in the case of an  
"Education IRA" is $500, if the Distributor has reason to believe that          
additional investments will increase the investment in the account to $1,000    
within three years. Subsequent investments must be $100 or more and may be made 
through the Transfer Agent. In case of investments pursuant to (i) Systematic   
Payroll Deduction Plans (including Individual Retirement Plans), (ii) the       
InterCapital mutual fund asset allocation program and (iii) fee-based programs  
approved by the Distributor, pursuant to which participants pay an asset based  
fee for services in the nature of investment advisory or administrative         
services, the Fund, in its discretion, may accept investments without regard to 
any minimum amounts which would otherwise be required, provided, in the case of 
Systematic Payroll Deduction Plans, that the Distributor has reason to believe  
that additional investments will increase the investment in all accounts under  
such Plans to at least $5,000. The Fund and the Distributor reserve the right to
reject any purchase order.                                                      

 Sales personnel of a Selected Broker-Dealer are compensated for shares of
the Fund sold by them by the Distributor or any of its affiliates and/or the    
Selected Broker-Dealer. In addition, some sales personnel of the Selected       
Broker-Dealer will receive various types of non-cash compensation as special    
sales incentives, including trips, educational and/or business seminars and     
merchandise.                                                                    

 Orders for the purchase of Fund shares placed by customers through DWR or
another Selected Broker-Dealer with payment in clearing house funds will be     
transmitted to the Fund with payment in Federal Funds on the business day       
following the day the order is placed by the customer with DWR or another       
Selected Broker-Dealer. Investors desiring same day effectiveness should wire   
Federal Funds directly to the Transfer Agent. An order procedure exists pursuant
to which customers of DWR or other Selected Broker-Dealers can, upon request:   
(a) have the proceeds from the sale of listed securities invested in shares of  
the Fund on the day following the day the customer receives such proceeds in his
or her DWR or other Selected Broker-Dealer securities account; and (b) pay for  
the purchase of certain listed securities by automatic liquidation of Fund      
shares owned by the customer. In addition, there is an automatic purchase       
procedure whereby consenting DWR or other Selected Broker-Dealer customers who  
are shareholders of the Fund will have free credit cash balances in their DWR or
other Selected Broker-Dealer securities accounts as of the close of business    
(4:00 p.m., New York time) on the last business day of each week (where such    
balances do not exceed $5,000) automatically invested in shares of the Fund the 
next following business day. Investors with free cash credit balances (i.e.,    
immediately available funds) in securities accounts at DWR or other Selected    
Broker-Dealers will not have any of such funds invested in the Fund until the   
business day after the customer places an order with DWR or other Selected      
Broker-Dealer to purchase shares of the Fund and will not receive the daily     
dividend which would have been received had such funds been invested in the Fund
on the day the order was placed with DWR or other Selected Broker-Dealer.       
Accordingly, DWR or other Selected Broker-Dealers may have the use of such free 
credit balances during such period.                                             

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PLAN OF DISTRIBUTION                                                            

In accordance with a Plan of Distribution between the Fund and the      
Distributor pursuant to Rule 12b-1 under the Act, certain services and          
activities in connection with the distribution of the Fund's shares are         
reimbursable expenses. The principal activities and services which may be       
provided by the Distributor, DWR, its affiliates and other Selected             
Broker-Dealers under the Plan include: (1) compensation to, and expenses of,    
DWR's and other Selected Broker-Dealers' account executives and other employees 
including overhead and telephone expenses; (2) sales incentives and bonuses to  
sales representatives and to marketing personnel in connection with promoting   
sales of the Fund's shares; (3) expenses incurred in connection with promoting  
sales of the Fund's shares; (4) preparing and distributing sales literature; and
(5) providing advertising and promotional activities, including direct mail     
solicitation and television, radio, newspaper, magazine and other media         
advertisements. Reimbursements for these services will be made in monthly       
payments by the Fund, which will in no event exceed an amount equal to a payment
at the annual rate of 0.15 of 1% of the Fund's average daily net assets. For the
fiscal year ended August 31, 1997, the fee paid was accrued at the annual rate  
of 0.10 of 1% of the Fund's average daily net assets. Expenses incurred pursuant
to the Plan in any fiscal year will not be reimbursed by the Fund through       
payments accrued in any subsequent fiscal year.                                 

DETERMINATION OF NET ASSET VALUE                                                

    The net asset value per share of the Fund is determined as of 4:00 p.m., New
York time (or, on days when the New York Stock Exchange closes prior to 4:00    
p.m., at such earlier time), on each day that the New York Stock Exchange is    
open by taking the value of all assets of the Fund, subtracting its liabilities 
and dividing by the number of shares outstanding. The net asset value per share 
will not be determined on Good Friday and on such other federal and non-federal 
holidays as are observed by the New York Stock Exchange.                        

The Fund utilizes the amortized cost method in valuing its portfolio    
securities, which method involves valuing a security at its cost adjusted by a  
constant amortization to maturity of any discount or premium, regardless of the 
impact of fluctuating interest rates on the market value of the instrument. The 
purpose of this method of calculation is to facilitate the maintenance of a     
constant net asset value per share of $1.00 although there can be no assurance  
that the $1.00 net asset value will be maintained.                              

SHAREHOLDER SERVICES                                                            
--------------------------------------------------------------------------------

 SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan is available for
shareholders who own or purchase shares of the Fund having a minimum value of at
least $5,000. The plan provides for monthly or quarterly (March, June,          
September, December) checks in any dollar amount, not less than $25, or in any  
whole percentage of the account balance, on an annualized basis. The shares will
be redeemed at their net asset value determined, at the shareholder's option, on
the tenth or twenty-fifth day (or next business day) of the relevant month or   
quarter and normally a check for the proceeds will be mailed by the Transfer    
Agent, or amounts credited to a shareholders' DWR or other Selected Broker-     
Dealer brokerage account, within five days after the date of the redemption. A  
shareholder wishing to make this election should do so on the Investment        
Application. The withdrawal plan may be terminated at any time by the Fund.     

   TARGETED DIVIDENDS. In states where it is legally permissible, shareholders
may elect to have all shares of the Fund earned as a result of dividends paid in
any given month redeemed as of the end of the month and invested in shares of   
any other open-end investment company for which InterCapital serves as          
investment manager (collectively, with the Fund, the "Dean Witter Funds"), other
than Dean Witter Liquid Asset Fund Inc., at the net asset value per share of the
selected Dean Witter Fund determined as of the last business day of the month,  
without the imposition of any applicable front-end sales charge or without the  
imposition of any applicable contingent deferred sales charge upon ultimate     
redemption. All such shares invested will begin to earn dividends, if any, in   
the selected Dean Witter Fund on the first business day of the succeeding month.
Shareholders of the Fund must be shareholders of the selected Class of the Dean 

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Witter Fund targeted to receive investments from dividends at the time they     
enter the Targeted Dividends program. Investors should review the prospectus of 
the targeted Dean Witter Fund before entering the program.                      

EASYINVEST-SM-. Shareholders may subscribe to EasyInvest, an automatic  
purchase plan which provides for any amount from $100 to $5,000 to be           
transferred automatically from a checking or savings account, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of   
the Fund. Shares purchased through EasyInvest will be added to the shareholder's
existing account at the net asset value calculated the same business day the    
transfer of funds is effected.                                                  

Shareholders should contact their DWR or other Selected Broker-Dealer   
account executive or the Transfer Agent for further information about any of the
above services.                                                                 

 TAX SHELTERED RETIREMENT PLANS. Retirement plans are available for use by
the self-employed, Individual Retirement Accounts and Custodial Accounts under  
Section 403(b)(7) of the Internal Revenue Code. Adoption of such plans should be
on advice of legal counsel or tax adviser.                                      

 For further information regarding plan administration, custodial fees and
other details, investors should contact their DWR or other Selected Broker-     
Dealer account executive or the Transfer Agent.                                 

 SYSTEMATIC PAYROLL DEDUCTION PLAN. There is also available to employers a
Systematic Payroll Deduction Plan by which their employees may invest in the    
Fund. For further information, investors should contact their DWR or other      
Selected Broker-Dealer account executive or the Transfer Agent.                 

EXCHANGE PRIVILEGE                                                              

An "Exchange Privilege," that is, the privilege of exchanging shares of 
certain Dean Witter Funds for shares of the Fund, exists whereby shares of Dean 
Witter Funds that are multiple class funds ("Dean Witter Multi-Class Funds") and
Dean Witter Funds that are not multiple class funds but which are sold with     
either a front-end (at time of purchase) sales charge ("FSC funds") or a        
contingent deferred (at time of redemption) sales charge ("CDSC funds") may be  
exchanged for shares of the Fund, Dean Witter U.S. Government Money Market      
Trust, Dean Witter Tax-Free Daily Income Trust, Dean Witter California Tax-Free 
Daily Income Trust and Dean Witter New York Municipal Money Market Trust (which 
five funds are hereinafter called "money market funds"), and for shares of Dean 
Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal Trust,
Dean Witter Short-Term Bond Fund and Dean Witter Intermediate Term U.S. Treasury
Trust (which nine Funds, including the Fund, are referred to herein as the      
"Exchange Funds"). Shares of the Exchange Funds received in an exchange for     
shares of a Dean Witter Multi-Class Fund may be redeemed and exchanged only for 
shares of the corresponding Class of a Dean Witter Multi-Class Fund or for      
shares of one of the other Exchange Funds, provided that shares of the Exchange 
Funds received in an exchange for Class A shares of a Dean Witter Multi-Class   
Fund may also be redeemed and exchanged for shares of a FSC fund, and shares of 
the Exchange Funds received in an exchange for Class B shares of a Dean Witter  
Multi-Class Fund may also be redeemed and exchanged for shares of a CDSC fund.  
In addition, shares of the Exchange Funds received in an exchange for shares of 
a FSC fund may be redeemed and exchanged for Class A shares of a Dean Witter    
Multi-Class Fund or for shares of one of the other Exchange Funds, and shares of
the Exchange Funds received in an exchange for shares of a CDSC fund may be     
redeemed and exchanged for Class B shares of a Dean Witter Multi-Class Fund or  
for shares of one of the other Exchange Funds.                                  

 An exchange to an Exchange Fund that is not a money market fund is on the
basis of the next calculated net asset value per share of each fund after the   
exchange order is received. When exchanging into a money market fund, shares of 
the Multi-Class Fund, the FSC fund, the CDSC fund or the Exchange Fund are      
redeemed at their next calculated net asset value exchanged for shares of the   
money market fund at their net asset value determined the following business    
day. Ultimately, any applicable contingent deferred sales charge ("CDSC") will  
have to be paid upon redemption of shares originally purchased from a CDSC fund 
or a Class of a Dean Witter Multi-Class Fund that imposes a CDSC. (If shares of 
an Exchange Fund received in exchange for shares originally                     

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purchased from a CDSC fund or Class B of a Dean Witter Multi-Class Fund are     
exchanged for shares of another CDSC fund or a Dean Witter Multi-Class Fund     
having a different CDSC schedule than that of the CDSC fund or the Dean Witter  
Multi-Class Fund from which the Exchange Fund shares were acquired, the shares  
will be subject to the higher CDSC schedule.) During the period of time the     
shares originally purchased from a CDSC fund or from a Class of a Dean Witter   
Multi-Class Fund that imposes a CDSC remain in the Exchange Fund, the holding   
period (for the purpose of determining the rate of CDSC) is frozen. If those    
shares are subsequently re-exchanged for shares of a CDSC fund or a Dean Witter 
Multi-Class Fund, the holding period previously frozen when the first exchange  
was made resumes on the last day of the month in which shares of a CDSC fund or 
shares of a Dean Witter Multi-Class Fund are reacquired. Thus, the CDSC is based
upon the time (calculated as described above) the shareholder was invested in   
shares of a CDSC fund or in shares of a Dean Witter Multi-Class Fund. In the    
case of exchanges of Class A shares of a Dean Witter Multi-Class Fund which are 
subject to a CDSC, the holding period also includes the time (calculated as     
described above) the shareholder was invested in shares of a FSC fund. In the   
case of shares exchanged into an Exchange Fund on or after April 23, 1990, upon 
a redemption of shares which results in a CDSC being imposed, a credit (not to  
exceed the amount of the CDSC) will be given in an amount equal to the Exchange 
Fund 12b-1 distribution fees, if any, incurred on or after that date which are  
attributable to those shares (see "Purchase of Fund Shares -- Plan of           
Distribution" in the respective Exchange Funds Prospectuses for a description of
Exchange Fund distribution fees). Exchanges may be made after the shares of the 
fund acquired by purchase (not by exchange or dividend reinvestment) have been  
held for thirty days. There is no waiting period for exchanges of shares        
acquired by exchange or dividend reinvestment.                                  

  Exchange Privilege accounts may also be maintained for shareholders of the
money market funds who acquired their shares in exchange for shares of various  
TCW/DW Funds, a group of funds distributed by the Distributor for which TCW     
Funds Management, Inc. serves as Adviser, under the terms and conditions        
described in the Prospectus and Statement of Additional Information of each     
TCW/DW Fund.                                                                    

  ADDITIONAL INFORMATION REGARDING EXCHANGES. Purchases and exchanges should
be made for investment purposes only. A pattern of frequent exchanges may be    
deemed by management to be abusive and contrary to the best interests of the    
Fund's other shareholders and, at management's discretion, may be limited by the
Fund's refusal to accept additional purchases and/or exchanges from the         
investor. Although the Fund does not have any specific definition of what       
constitutes a pattern of frequent exchanges, and will consider all relevant     
factors in determining whether a particular situation is abusive and contrary to
the best interests of the Fund and its other shareholders, investors should be  
aware that the Fund and each of the other Funds may in their discretion limit or
otherwise restrict the number of times this Exchange Privilege may be exercised 
by any investor. Any such restriction will be made by the Fund on a prospective 
basis only, upon notice to the shareholder not later than ten days following    
such shareholder's most recent exchange.                                        

   The Exchange Privilege may be terminated or revised at any time by the Fund
and/or any of such Funds for which shares of the Fund may be exchanged, upon    
such notice as may be required by applicable regulatory agencies (presently     
sixty days' prior written notice for termination or material revision), provided
that six months' prior written notice of termination will be given to the       
shareholders who hold shares of the Exchange Funds or TCW/DW North American     
Government Income Trust pursuant to the Exchange Privilege, and provided further
that the Exchange Privilege may be terminated or materially revised without     
notice under certain unusual circumstances described in the Statement of        
Additional Information. Shareholders maintaining margin accounts with DWR are   
referred to their account executive regarding restrictions on exchanges of      
shares of the Fund pledged in their margin account.                             

  The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain one and read it carefully before   
investing. Exchanges are subject to the minimum investment requirement of each  
Class of shares and any other conditions imposed by each                        

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fund. In the case of any shareholder holding a share certificate or             
certificates, no exchanges may be made until all applicable share certificates  
have been received by the Transfer Agent and deposited in the shareholder's     
account. An exchange will be treated for federal income tax purposes the same as
a repurchase or redemption of shares, on which the shareholder may realize a    
capital gain or loss. However, the ability to deduct capital losses on an       
exchange may be limited in situations where there is an exchange of shares      
within ninety days after the shares are purchased. The Exchange Privilege is    
only available in states where an exchange may legally be made.                 

    If DWR or another Selected Broker-Dealer is the current dealer of record and
its account numbers are part of the account information, shareholders may       
initiate an exchange of shares of the Fund for shares of any of the above Funds 
pursuant to this Exchange Privilege by contacting their account executive (no   
Exchange Privilege Authorization Form is required). Other shareholders (and     
those shareholders who are clients of DWR or another Selected Broker-Dealer but 
who wish to make exchanges directly by writing or telephoning the Transfer      
Agent) must complete and forward to the Transfer Agent an Exchange Privilege    
Authorization Form, copies of which may be obtained from the Transfer Agent, to 
initiate an exchange. If the Authorization Form is used, exchanges may be made  
in writing or by contacting the Transfer Agent at (800) 869-NEWS (toll-free).   

The Fund will employ reasonable procedures to confirm that exchange     
instructions communicated over the telephone are genuine. Such procedures may   
include requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number and DWR or other    
Selected Broker-Dealer account number (if any). Telephone instructions may also 
be recorded. If such procedures are not employed, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions.                          

    Telephone exchange instructions will be accepted if received by the Transfer
Agent between 9:00 a.m. and 4:00 p.m., New York time, on any day the New York   
Stock Exchange is open. Any shareholder wishing to make an exchange who has     
previously filed an Exchange Privilege Authorization Form and who is unable to  
reach the Fund by telephone should contact his or her DWR or other Selected     
Broker-Dealer account executive, if appropriate, or make a written exchange     
request. Shareholders are advised that during periods of drastic economic or    
market changes it is possible that the telephone exchange procedures may be     
difficult to implement, although this has not been the experience of the Dean   
Witter Funds in the past.                                                       

Shareholders should contact their DWR or other Selected Broker-Dealer   
account executive or the Transfer Agent for further information about the       
Exchange Privilege.                                                             

REDEMPTION OF FUND SHARES                                                       
--------------------------------------------------------------------------------

    A shareholder may withdraw all or any of his or her investments at any time,
without penalty or charge, by redeeming shares through the Transfer Agent at the
net asset value per share next determined (see "Purchase of Fund                
Shares--Determination of Net Asset Value") after the receipt of a redemption    
request meeting the applicable requirements as follows (all of which are subject
to the General Redemption Requirements set forth below):                        

1.  BY CHECK                                                                    

The Transfer Agent will supply blank checks to any shareholder who has  
requested them on an Investment Application. The shareholder may make checks    
payable to the order of anyone in any amount not less than $500 (checks written 
in amounts under $500 will not be honored by the Transfer Agent). Shareholders  
must sign checks exactly as their shares are registered. If the account is a    
joint account, the check may contain one signature unless the joint owners have 
specifically specified on an Investment Application that all owners are required
to sign checks. Only shareholders having accounts in which no stock certificates
have been issued will be permitted to redeem shares by check.                   

Shares will be redeemed at their net asset value next determined (see   
"Purchase of Fund Shares -- Determination of Net Asset Value") after receipt by 

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the Transfer Agent of a check which does not exceed the value of the account.   
Payment of the proceeds of a check will normally be made on the next business   
day after receipt by the Transfer Agent of the check in proper form. Shares     
purchased by check (including a certified or bank cashier's check) are not      
normally available to cover redemption checks until fifteen days after receipt  
of the check used for investment by the Transfer Agent. The Transfer Agent will 
not honor a check in an amount exceeding the value of the account at the time   
the check is presented for payment.                                             

2. BY TELEPHONE OR WIRE INSTRUCTIONS WITH                                       
PAYMENT TO PREDESIGNATED BANK ACCOUNT                                     

   A shareholder may redeem shares by telephoning or sending wire instructions
to the Transfer Agent. Payment will be made by the Transfer Agent to the        
shareholder's bank account at any commercial bank designated by the shareholder 
in an Investment Application, by wire if the amount is $1,000 or more and the   
shareholder so requests, and otherwise by mail. Normally, the Transfer Agent    
will transmit payment the next business day following receipt of a request for  
redemption in proper form. Only shareholders having accounts in which no stock  
certificates have been issued will be permitted to redeem shares by wire        
instructions.                                                                   

 DWR and any other participating Selected Broker-Dealers have informed the
Distributor and the Fund that, on behalf of and as agent for their customers who
are shareholders of the Fund, they will transmit to the Fund requests for       
redemption of shares owned by their customers. In such cases, the Transfer Agent
will wire proceeds of redemptions to DWR's or another Selected Broker-Dealer's  
bank account for credit to the shareholders' accounts the following business    
day. DWR and other participating Selected Broker-Dealers have also informed the 
Distributor and the Fund that they do not charge for this service.              

Redemption instructions must include the shareholder's name and account 
number and be wired or called to the Transfer Agent:                            

-- 800-869-NEWS (toll-free)                                             
-- Telex No. 125076                                                     

3.  BY MAIL                                                                     

A shareholder may redeem shares by sending a letter to Dean Witter Trust
FSB, P.O. Box 983, Jersey City, NJ 07303, requesting redemption and surrendering
stock certificates if any have been issued.                                     

Redemption proceeds will be mailed to the shareholder at his or her     
registered address or mailed or wired to his or her predesignated bank account, 
as he or she may request. Proceeds of redemption may also be sent to some other 
person, as requested by the shareholder.                                        

GENERAL REDEMPTION REQUIREMENTS                                                 

Written requests for redemption must be signed by the registered        
shareholder(s). If the proceeds are to be paid to anyone other than the         
registered shareholder(s) or sent to any address other than the shareholder's   
registered address or predesignated bank account, signatures must be guaranteed 
by an eligible guarantor acceptable to the Transfer Agent (shareholders should  
contact the Transfer Agent for a determination as to whether a particular       
institution is such an eligible guarantor), except in the case of redemption by 
check. Additional documentation may be required where shares are held by a      
corporation, partnership, trustee or executor. With regard to shares of the Fund
acquired pursuant to the Exchange Privilege, any applicable CDSC will be imposed
upon the redemption of such shares (see "Purchase of Fund Shares--Exchange      
Privilege").                                                                    

    If shares to be redeemed are represented by a stock certificate, the request
for redemption must be accompanied by the stock certificate and a stock         
assignment form signed by the registered shareholder(s) exactly as the account  
is registered. Shareholders are advised, for their own protection, to send the  
stock certificate and assignment form in separate envelopes (if they are being  
mailed and not hand delivered) to the Transfer Agent. Signatures must be        
guaranteed by an eligible guarantor acceptable to the Transfer Agent (see       
above). Additional documentation may be required where shares are held by a     
corporation, partnership, trustee or executor.                                  

 All requests for redemption should be sent to Dean Witter Trust FSB, P.O.
Box 983, Jersey City, NJ 07303.                                                 

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   Generally, the Fund will attempt to make payment for all redemptions within
one business day, and in no event later than seven days after receipt of such   
redemption request in proper form. However, if the shares being redeemed were   
purchased by check (including a certified or bank cashier's check), payment may 
be delayed for the minimum time needed to verify that the check used for        
investment has been honored (not more than fifteen days from the time of        
investment of the check by the Transfer Agent). In addition, the Fund may       
postpone redemptions at certain times when normal trading is not taking place   
on the New York Stock Exchange.                                                 

  The Fund reserves the right, on sixty days' notice, to redeem at net asset
value the shares of any shareholder (other than shares held in an Individual    
Retirement Account or custodial account under Section 403(b)(7) of the Internal 
Revenue Code) whose shares due to redemptions by the shareholder have a value   
of less than $1,000, or such lesser amount as may be fixed by the Board of      
Directors.                                                                      

AUTOMATIC REDEMPTION PROCEDURE                                                  

 The Distributor has instituted an automatic redemption procedure which it
may utilize to satisfy amounts due by the shareholder maintaining a brokerage   
account with DWR or another Selected Broker-Dealer as a result of purchases of  
securities or other transactions in the shareholder's brokerage account. Under  
this procedure, unless the shareholder elects not to participate by so notifying
DWR or other Selected Broker-Dealer, the shareholder's DWR or other Selected    
Broker-Dealer brokerage account will be scanned each business day prior to the  
close of business (4:00 p.m., New York time). After application of any cash     
balances in the account, a sufficient number of Fund shares may be redeemed at  
the close of business to satisfy any amounts for which the shareholder is       
obligated to make payment to DWR or another Selected Broker-Dealer. Redemptions 
will be effected on the business day preceding the date the shareholder is      
obligated to make such payment, and DWR or other Selected Broker-Dealer will    
receive the redemption proceeds on the day following the redemption date.       
Shareholders will receive all dividends declared and reinvested through the date
of redemption.                                                                  

EASYINVEST-SM---AUTOMATIC REDEMPTION                                            

Shareholders may invest in shares of certain other Dean Witter Funds by 
subscribing to EasyInvest, an automatic purchase plan which provides for the    
automatic investment of any amount from $100 to $5,000 in shares of the         
specified fund. Under EasyInvest, a shareholder may direct that a sufficient    
number of shares of the Fund be automatically redeemed and the proceeds         
transferred automatically to the Dean Witter Funds' Transfer Agent, on a        
semi-monthly, monthly or quarterly basis, for investment in shares of the       
specified fund. Redemptions will be effected on the business day preceding the  
investment date and the Transfer Agent will receive the proceeds for investment 
on the day following the redemption date.                                       

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

 DIVIDENDS AND DISTRIBUTIONS. The Fund declares dividends, payable on each
day the New York Stock Exchange is open for business, of all of its daily net   
investment income to shareholders of record as of the close of business the     
preceding business day. Dividends from net short-term capital gains, if any,    
will be paid periodically. The amount of dividend may fluctuate from day to day 
and may be omitted on some days if net realized losses on portfolio securities  
exceed the Fund's net investment income. Dividends from net long-term capital   
gains, if any, will be paid at least annually. Dividends are declared and       
automatically reinvested daily in additional full and fractional shares of the  
Fund (rounded to the last 1/100 of a share) at the net asset value per share at 
the close of business on that day. Any dividends declared in the last quarter of
any calendar year which are paid in the following year prior to February 1 will 
be deemed received by the shareholder in the prior year.                        

Shareholders may instruct the Transfer Agent (in writing) to have their 
dividends paid out monthly in cash. For such shareholders the shares            
rein-                                                                           

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vested and credited to their account during the month will be redeemed as of the
close of business on the monthly payment date (which will be no later than the  
last business day of the month) and the proceeds will be paid to them by check. 
Shareholders who have requested to receive dividends in cash will normally      
receive their monthly dividend check during the first ten days of the following 
month.                                                                          

   Stock certificates for dividends or distributions will not be issued unless
a shareholder requests in writing that a certificate be issued for a specific   
number of shares.                                                               

TAXES. Because the Fund intends to distribute all of its net investment 
income and net capital gains, if any, to shareholders and intends to otherwise  
comply with all of the provisions of Subchapter M of the Internal Revenue Code  
to continue to qualify as a regulated investment company, it is not expected    
that the Fund will be required to pay any federal income tax.                   

  Distributions of net investment income and realized net short-term capital
gains, if any, are taxable to shareholders who are required to pay taxes on     
their income as ordinary income, whether such distributions are taken in cash or
reinvested in additional shares. Distributions of realized net long-term capital
gains, if any, are taxable as long-term capital gains, regardless of how long   
the shareholder has held the Fund shares. No portion of such distributions will 
be eligible for the federal dividends received deduction for corporations.      

The Fund advises its shareholders annually as to the federal income tax 
status of distributions paid during each calendar year. To avoid being subject  
to a 31% federal withholding tax on taxable dividends, capital gains            
distributions and proceeds of redemptions, shareholders' taxpayer identification
numbers must be furnished and certified as to accuracy.                         

   Shareholders are urged to consult their own tax advisers regarding specific
questions as to federal, state or local taxes.                                  

CURRENT AND EFFECTIVE YIELD                                                     

From time to time the Fund advertises its "yield" and "effective yield."
Both yield figures are based on historical earnings and are not intended to     
indicate future performance. The "yield" of the Fund refers to the income       
generated by an investment in the Fund over a given period (which period will be
stated in the advertisement). This income is then annualized. The "effective    
yield" for a seven-day period is calculated similarly but, when annualized, the 
income earned by an investment in the Fund is assumed to be reinvested each week
within a 365-day period. The "effective yield" will be slightly higher than the 
"yield" because of the compounding effect of this assumed reinvestment. The     
Fund's current yield for the seven days ended August 31, 1997 was 5.13%. The    
effective annual yield on 5.13% is 5.26%, assuming daily compounding. The Fund  
may also advertise the growth of hypothetical investments of $10,000, $50,000   
and $100,000 in shares of the Fund.                                             

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

    VOTING RIGHTS. All shares of the Fund are of common stock of $0.01 par value
and are equal as to earnings, assets and voting privileges. There are no        
conversion, pre-emptive or other subscription rights. In the event of           
liquidation, each share of common stock of the Fund is entitled to its portion  
of all of the Fund's assets after all debts and expenses have been paid. The    
shares do not have cumulative voting rights.                                    

   Under ordinary circumstances, the Fund is not required, nor does it intend,
to hold Annual Meetings of Stockholders. The Directors may call Special Meetings
of Stockholders for action by stockholder vote as may be required by the Act or 
the Fund's By-Laws.                                                             

CODE OF ETHICS. Directors, officers and employees of InterCapital, Dean 
Witter Services Company Inc. and the Distributor are subject to a strict Code of
Ethics adopted by those companies. The Code of Ethics is intended to ensure that
the interests of shareholders and other clients are placed ahead of any personal
interest, that no undue personal benefit is obtained from a person's employment 
activities and that actual and potential conflicts of interest are avoided. To  
achieve these goals and comply with regulatory requirements, the Code of Ethics 
re-                                                                             

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quires, among other things, that personal securities transactions by employees  
of the companies be subject to an advance clearance process to monitor that no  
Dean Witter Fund is engaged at the same time in a purchase or sale of the same  
security. The Code of Ethics bans the purchase of securities in an initial      
public offering, and also prohibits engaging in futures and options transactions
and profiting on short-term trading (that is, a purchase within sixty days of a 
sale or a sale within sixty days of a purchase) of a security. In addition,     
investment personnel may not purchase or sell a security for their personal     
account within thirty days before or after any transaction in any Dean Witter   
Fund managed by them. Any violations of the Code of Ethics are subject to       
sanctions, including reprimand, demotion or suspension or termination of        
employment. The Code of Ethics comports with regulatory requirements and the    
recommendations in the 1994 report by the Investment Company Institute Advisory 
Group on Personal Investing.                                                    

    MASTER/FEEDER CONVERSION. The Fund reserves the right to seek to achieve its
investment objectives by investing all of its investable assets in a            
diversified, open-end management investment company having the same investment  
objectives and policies and substantially the same investment restrictions as   
those applicable to the Fund.                                                   

  STOCKHOLDER INQUIRIES. All inquiries regarding the Fund should be directed
to the Fund at one of the telephone numbers or at the address set forth on the  
front cover of this Prospectus.                                                 

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DEAN WITTER LIQUID ASSET FUND                                                   
RESULTS OF SPECIAL MEETING (UNAUDITED)                                          

On May 21, 1997, a special meeting of the shareholders of Dean Witter Liquid    
Asset Fund was held for the purpose of voting on four separate matters, the     
results of which are as follows:                                                

1)  APPROVAL OF A NEW INVESTMENT MANAGEMENT AGREEMENT BETWEEN THE FUND AND DEAN 
 WITTER INTERCAPITAL INC., IN CONNECTION WITH THE MERGER OF MORGAN STANLEY
GROUP INC. WITH DEAN WITTER, DISCOVER & CO.                             

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

For.....................................             5,707,224,869              
Against.................................               230,463,004              
Abstain.................................               576,088,920              

2)  ELECTION OF DIRECTORS:                                                      

Michael Bozic                                                                   
For.....................................  6,069,403,987                         
Withheld................................   444,372,806                          
Charles A. Fiumefreddo                                                          
For.....................................  6,071,535,672                         
Withheld................................   442,241,121                          
Edwin J. Garn                                                                   
For.....................................  6,070,468,933                         
Withheld................................   443,307,860                          
John R. Haire                                                                   
For.....................................  6,059,487,018                         
Withheld................................   454,289,775                          
Wayne E. Hedien                                                                 
For.....................................  6,058,648,449                         
Withheld................................   455,128,344                          
Dr. Manuel H. Johnson                                                           
For.....................................  6,076,349,660                         
Withheld................................   437,427,133                          
Michael E. Nugent                                                               
For.....................................  6,081,000,478                         
Withheld................................   432,776,315                          
Philip J. Purcell                                                               
For.....................................  6,084,129,623                         
Withheld................................   429,647,170                          
John L. Schroeder                                                               
For.....................................  6,080,688,824                         
Withheld................................   433,087,969                          

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

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

For.....................................             5,401,391,020              
Against.................................               396,344,363              
Abstain.................................               716,041,410              

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

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

For.....................................             5,918,835,379              
Against.................................               141,111,125              
Abstain.................................               453,830,289              

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DEAN WITTER LIQUID ASSET FUND INC.                                              
REPORT OF INDEPENDENT ACCOUNTANTS                                               

TO THE SHAREHOLDERS AND BOARD                                                   
OF DIRECTORS OF DEAN WITTER LIQUID ASSET FUND INC.                              

In our opinion, the accompanying statement of assets and liabilities, including 
the portfolio of investments, and the related statements of operations and of   
changes in net assets and the financial highlights (appearing on page 3 of this 
Prospectus) present fairly, in all material respects, the financial position of 
Dean Witter Liquid Asset Fund Inc. (the "Fund") at August 31, 1997, the results 
of its operations for the year then ended, the changes in its net assets for    
each of the two years in the period then ended and the financial highlights for 
each of the ten years in the period then ended, in conformity with generally    
accepted accounting principles. These financial statements and financial        
highlights (hereafter referred to as "financial statements") are the            
responsibility of the Fund's management; our responsibility is to express an    
opinion on these financial statements based on our audits. We conducted our     
audits of these financial statements in accordance with generally accepted      
auditing standards which require that we plan and perform the audit to obtain   
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements, assessing the          
accounting principles used and significant estimates made by management, and    
evaluating the overall financial statement presentation. We believe that our    
audits, which included confirmation of securities at August 31, 1997 by         
correspondence with the custodian, provide a reasonable basis for the opinion   
expressed above.                                                                

PRICE WATERHOUSE LLP                                                            
1177 AVENUE OF THE AMERICAS                                                     
NEW YORK, NEW YORK 10036                                                        
OCTOBER 7, 1997                                                                 

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DEAN WITTER LIQUID ASSET FUND INC.                                              
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997                                        

                                                        [Enlarge/Download Table]

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

                  COMMERCIAL PAPER (81.0%)                                                              
                  AUTOMOTIVE - FINANCE (9.7%)                                                           
                                                                                                        
  $    285,000    Chrysler Financial Corp.                                                              
                    09/02/97 -12/30/97..............................   5.56 - 5.67%    $    282,942,706 
       363,000    Ford Motor Credit Co.                                                                 
                    10/29/97 - 01/08/98.............................   5.57 - 5.87          358,352,248 
       647,000    General Motors Acceptance Corp.                                                       
                    09/08/97 - 02/18/98.............................   5.55 - 6.03          639,014,104 
                                                                                       ---------------- 
                                                                                          1,280,309,058 
                                                                                       ---------------- 
                  BANK HOLDING COMPANIES (8.0%)                                                         
        75,000    BankAmerica Corp.                                                                     
                    12/29/97 - 01/26/98.............................   6.01 - 6.02           73,345,392 
       445,000    Bankers Trust New York Corp.                                                          
                    11/12/97 - 01/30/98.............................   5.70 - 5.79          435,966,318 
       150,000    Chase Manhattan Corp. 10/08/97....................       5.54             149,109,500 
        80,000    Corestates Capital Corp.                                                              
                    09/30/97 - 10/15/97.............................   5.63 - 5.67           79,547,525 
        45,000    Morgan (J.P.) & Co., Inc.                                                             
                    09/25/97........................................       5.64              44,819,300 
        80,000    PNC Funding Corp. 09/17/97 - 10/09/97.............   5.58 - 5.59           79,677,083 
       150,000    Republic New York Corp.                                                               
                    11/25/97 - 02/06/98.............................   5.57 - 5.64          146,901,069 
        40,000    SunTrust Banks, Inc. 10/28/97.....................       5.63              39,637,478 
                                                                                       ---------------- 
                                                                                          1,049,003,665 
                                                                                       ---------------- 
                  BANKS - COMMERCIAL (32.7%)                                                            
       450,000    Abbey National North America Corp.                                                    
                    09/25/97 - 01/23/98.............................   5.64 - 5.85          446,152,794 
       520,000    ABN-AMRO North America Finance Inc.                                                   
                    09/12/97 - 12/18/97.............................   5.59 - 5.91          514,232,775 
       145,000    ANZ (Delaware) Inc.                                                                   
                    09/12/97 - 12/23/97.............................   5.57 - 5.79          143,157,674 
       185,000    Barclays U.S. Funding Corp.                                                           
                    09/04/97 - 10/03/97.............................   5.56 - 5.75          184,189,875 
       530,000    Canadian Imperial Holdings Inc. 10/06/97 -                                            
                    10/27/97........................................   5.59 - 5.68          525,926,842 
       585,000    Deutsche Bank Financial Inc.                                                          
                    09/05/97 - 02/23/98.............................   5.57 - 5.68          574,413,481 
        50,000    Dresdner U.S. Finance Inc. 02/13/98...............       5.85              48,694,153 
       300,000    Internationale Nederlanden (U.S.) Funding Corp.                                       
                    09/02/97 - 11/10/97.............................   5.53 - 5.92          297,928,924 
        25,000    KfW International Finance Inc. 10/20/97...........       5.54              24,805,562 
       195,000    National Australia Funding (DE) Inc.                                                  
                    10/01/97 - 12/17/97.............................   5.59 - 5.85          192,443,606 
       425,000    Societe Generale N.A., Inc.                                                           
                    09/08/97 - 02/05/98.............................   5.58 - 5.69          419,001,174 

                       SEE NOTES TO FINANCIAL STATEMENTS                                                

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DEAN WITTER LIQUID ASSET FUND INC.                                                                      
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997, CONTINUED                                                     

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

  $    555,000    Toronto-Dominion Holdings USA Inc.                                                    
                    09/25/97 - 02/26/98.............................   5.61 - 5.78%    $    545,206,124 
       395,000    Westpac Capital Corp.                                                                 
                    09/17/97 - 12/08/97.............................   5.63 - 5.83          391,854,183 
                                                                                       ---------------- 
                                                                                          4,308,007,167 
                                                                                       ---------------- 
                  BROKERAGE (1.8%)                                                                      
       235,000    Goldman Sachs Group L.P.                                                              
                    09/02/97 - 09/11/97.............................   5.69 - 5.71          234,667,900 
                                                                                       ---------------- 
                  CHEMICALS (0.7%)                                                                      
       100,000    Du Pont (E.I.) De Nemours & Co. 12/03/97..........       5.68              98,538,055 
                                                                                       ---------------- 
                  FINANCE - COMMERCIAL (2.7%)                                                           
       360,000    CIT Group Holdings, Inc.                                                              
                    09/18/97 - 12/23/97.............................   5.56 - 5.63          355,622,925 
                                                                                       ---------------- 
                  FINANCE - CONSUMER (10.0%)                                                            
       428,000    American Express Credit Corp. 10/21/97 -                                              
                    12/26/97........................................   5.59 - 5.66          421,862,700 
        75,000    American General Finance Corp. 11/20/97 -                                             
                    11/24/97........................................   5.58 - 5.61           74,027,472 
       200,000    Avco Financial Services Inc.                                                          
                    09/05/97 - 11/14/97.............................   5.58 - 5.69          198,570,036 
       290,000    Beneficial Corp.                                                                      
                    09/23/97 - 11/14/97.............................   5.57 - 5.65          287,359,456 
        40,000    Commercial Credit Co. 11/03/97....................       5.57              39,602,778 
       220,000    Household Finance Corp.                                                               
                    09/26/97 - 12/29/97.............................   5.53 - 5.67          217,039,800 
        75,000    Norwest Financial, Inc.                                                               
                    12/04/97 - 12/12/97.............................   5.61 - 5.66           73,852,000 
                                                                                       ---------------- 
                                                                                          1,312,314,242 
                                                                                       ---------------- 
                  FINANCE - CORPORATE (3.3%)                                                            
       440,000    Ciesco, L.P.                                                                          
                    09/26/97 - 12/11/97.............................   5.55 - 5.62          435,497,306 
                                                                                       ---------------- 
                  FINANCE - DIVERSIFIED (6.5%)                                                          
       263,000    Associates Corp. of                                                                   
                    North America                                                                       
                    09/09/97 - 12/29/97.............................   5.53 - 5.66          260,867,226 
       605,000    General Electric Capital Corp. 09/15/97 -                                             
                    04/02/98........................................   5.58 - 5.94          597,632,490 
                                                                                       ---------------- 
                                                                                            858,499,716 
                                                                                       ---------------- 
                  FINANCE - ENERGY (0.4%)                                                               
        50,000    Chevron Oil Finance Co. 09/09/97..................       5.56              49,922,917 
                                                                                       ---------------- 
                  FINANCE - EQUIPMENT (0.8%)                                                            
       105,000    Deere (John) Capital Corp.                                                            
                    10/30/97 - 12/29/97.............................   5.61 - 5.89          103,676,883 
                                                                                       ---------------- 

                       SEE NOTES TO FINANCIAL STATEMENTS                                                

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DEAN WITTER LIQUID ASSET FUND INC.                                                                      
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997, CONTINUED                                                     

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

                  HOUSEHOLD PRODUCTS (0.2%)                                                             
  $     30,000    Procter & Gamble Co. 12/19/97.....................      5.60%        $     29,492,175 
                                                                                       ---------------- 
                  INDUSTRIALS (0.6%)                                                                    
        75,000    Caterpillar Financial Services Corp. 10/03/97 -                                       
                    10/22/97........................................   5.89 - 5.90           74,436,550 
                                                                                       ---------------- 
                  OFFICE EQUIPMENT (2.0%)                                                               
       270,000    IBM Credit Corp.                                                                      
                    09/22/97 - 12/19/97.............................   5.58 - 5.63          267,091,075 
                                                                                       ---------------- 
                  RETAIL (1.0%)                                                                         
       135,000    Sears Roebuck Acceptance Corp. 11/07/97 -                                             
                    12/24/97........................................   5.57 - 5.62          133,141,972 
                                                                                       ---------------- 
                  TELEPHONE (0.3%)                                                                      
        35,000    Ameritech Corp. 12/04/97..........................       5.59              34,488,067 
                                                                                       ---------------- 
                  TELECOMMUNICATIONS(0.1%)                                                              
        10,000    GTE Funding Inc. 09/05/97.........................       5.55               9,990,800 
                                                                                       ---------------- 
                  UTILITIES - FINANCE (0.2%)                                                            
        20,000    National Rural Utilities Cooperative Finance Corp.                                    
                    09/04/97........................................       5.63              19,984,556 
                                                                                       ---------------- 

                  TOTAL COMMERCIAL PAPER                                                                
                  (AMORTIZED COST $10,654,685,029)..................................     10,654,685,029 
                                                                                       ---------------- 

                  CERTIFICATES OF DEPOSIT (9.9%)                                                        
       170,000    Bankers Trust Co.                                                                     
                    12/30/97 - 12/31/97.............................       5.75             170,000,000 
       435,000    Chase Manhattan Bank (USA) 09/04/97 - 02/09/98....   5.59 - 5.75          435,000,000 
       115,000    Mellon Bank, N.A.                                                                     
                    09/02/97 - 11/05/97.............................   5.75 - 5.88          115,000,000 
       100,000    SunTrust Bank, Atlanta                                                                
                    09/29/97 - 10/07/97.............................   5.63 - 5.84          100,000,000 
       485,000    Union Bank of California, N.A. 09/09/97 -                                             
                    02/04/98........................................   5.59 - 5.75          485,000,000 
                                                                                       ---------------- 

                  TOTAL CERTIFICATES OF DEPOSIT                                                         
                  (AMORTIZED COST $1,305,000,000)...................................      1,305,000,000 
                                                                                       ---------------- 

                  SHORT-TERM BANK NOTES (5.5%)                                                          
       195,000    BankBoston, N.A.                                                                      
                    09/17/97 - 11/04/97.............................   5.57 - 5.69          195,000,000 
       265,000    F.C.C. National Bank                                                                  
                    09/12/97 - 12/29/97.............................   5.69 - 5.89          265,000,000 
       100,000    First Union National Bank 10/14/97................       5.80             100,000,000 
       120,000    La Salle National Bank                                                                
                    09/03/97 - 10/31/97.............................   5.56 - 5.77          120,000,000 

                       SEE NOTES TO FINANCIAL STATEMENTS                                                

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DEAN WITTER LIQUID ASSET FUND INC.                                                                      
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997, CONTINUED                                                     

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

  $     50,000    NationsBank, N.A. 09/30/97........................      5.63%        $     50,000,000 
                                                                                       ---------------- 

                  TOTAL SHORT-TERM BANK NOTES                                                           
                  (AMORTIZED COST $730,000,000).....................................        730,000,000 
                                                                                       ---------------- 

                  U.S. GOVERNMENT & AGENCY OBLIGATIONS (3.3%)                                           
        73,000    Federal Farm Credit Bank                                                              
                    11/12/97 - 07/23/98.............................   5.57 - 5.67           70,995,636 
        75,000    Federal Home Loan Banks                                                               
                    06/19/98 - 08/14/98.............................   5.67 - 5.75           71,290,153 
       130,000    Federal National Mortgage Association 05/27/98 -                                      
                    06/22/98........................................   5.67 - 5.75          124,357,583 
       175,000    U.S. Treasury Bills 02/05/98 - 05/28/98...........   5.52 - 5.96          168,822,180 
                                                                                       ---------------- 

                  TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS                                            
                  (AMORTIZED COST $435,465,552).....................................        435,465,552 
                                                                                       ---------------- 

                  BANKERS' ACCEPTANCES (0.9%)                                                           
        50,000    Bank of America NT & SA                                                               
                    09/19/97........................................       5.76              49,844,444 
        41,000    Corestates Bank, N.A.                                                                 
                    09/05/97 - 09/23/97.............................   5.54 - 5.76           40,905,626 
        30,000    Wachovia Bank, N.A. 07/24/98......................       5.83              28,493,933 
                                                                                       ---------------- 

                  TOTAL BANKERS' ACCEPTANCES                                                            
                  (AMORTIZED COST $119,244,003).....................................        119,244,003 
                                                                                       ---------------- 

                  REPURCHASE AGREEMENT (0.1%)                                                           
         8,203    The Bank of New York due 09/02/97 (dated 08/29/97;                                    
                    proceeds $8,207,956) (IDENTIFIED COST                                               
                    $8,203,171) (a).................................       5.25               8,203,171 
                                                                                       ---------------- 

TOTAL INVESTMENTS                                                                                       
(AMORTIZED COST $13,252,597,755) (B)................................       100.7%        13,252,597,755 

LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS......................        (0.7)           (86,687,590)
                                                                          -------      ---------------- 

NET ASSETS..........................................................       100.0%      $ 13,165,910,165 
                                                                          =======      ================ 

---------------------                                                           
(a)  Collateralized by $8,585,475 U.S. Treasury Bill 0.00% due 02/26/98 valued  
at $8,367,234.                                                        
(b)  Cost is the same for federal income tax purposes.                          

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER LIQUID ASSET FUND INC.                                              
FINANCIAL STATEMENTS                                                            

STATEMENT OF ASSETS AND LIABILITIES                                             
AUGUST 31, 1997                                                                 

ASSETS:                                                                         
Investments in securities, at value                                             
(amortized cost $13,252,597,755)..........................  $ 13,252,597,755
Cash........................................................            90,000  
Receivable for:                                                                 
  Interest................................................        28,253,677
  Capital stock sold......................................           664,291
Prepaid expenses and other assets...........................           237,118  
                                                            ----------------

   TOTAL ASSETS...........................................    13,281,842,841
                                                            ----------------

LIABILITIES:                                                                    
Payable for:                                                                    
  Capital stock repurchased...............................       111,214,413
  Investment management fee...............................         2,840,713
  Plan of distribution fee................................         1,042,929
Accrued expenses and other payables.........................           834,621  
                                                            ----------------

   TOTAL LIABILITIES......................................       115,932,676
                                                            ----------------

   NET ASSETS.............................................  $ 13,165,910,165
                                                            ----------------
                                                            ----------------

COMPOSITION OF NET ASSETS:                                                      
Paid-in-capital.............................................  $ 13,165,224,818  
Accumulated undistributed net investment income.............           685,347  
                                                            ----------------

   NET ASSETS.............................................  $ 13,165,910,165
                                                            ================

NET ASSET VALUE PER SHARE,                                                      
13,165,896,012 SHARES OUTSTANDING (25,000,000,000 SHARES                    
AUTHORIZED OF $.01 PAR VALUE).............................                  
                                                                       $1.00
                                                            ================

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER LIQUID ASSET FUND INC.                                              
FINANCIAL STATEMENTS, CONTINUED                                                 

STATEMENT OF OPERATIONS                                                         
FOR THE YEAR ENDED AUGUST 31, 1997                                              

NET INVESTMENT INCOME:                                                          

INTEREST INCOME.............................................  $ 690,250,758     
                                                         -------------

EXPENSES                                                                        
Investment management fee...................................     33,616,072     
Transfer agent fees and expenses............................     27,678,745     
Plan of distribution fee....................................     11,872,496     
Registration fees...........................................      1,358,503     
Shareholder reports and notices.............................        713,197     
Custodian fees..............................................        342,424     
Professional fees...........................................         76,411     
Directors' fees and expenses................................         15,786     
Other.......................................................         87,323     
                                                         -------------

TOTAL EXPENSES.........................................     75,760,957
                                                         -------------

NET INVESTMENT INCOME AND NET INCREASE......................  $ 614,489,801     
                                                         =============

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER LIQUID ASSET FUND INC.                                              
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.......................................  $   614,489,801   $   556,631,606 
Dividends from net investment income........................     (614,493,201)     (556,625,540)
Net increase from capital stock transactions................    1,776,444,915     1,029,986,565 
                                                              ---------------   --------------- 

     NET INCREASE...........................................    1,776,441,515     1,029,992,631 

NET ASSETS:                                                                                     
Beginning of period.........................................   11,389,468,650    10,359,476,019 
                                                              ---------------   --------------- 

     END OF PERIOD                                                                              
    (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF                                           
    $685,347 AND $688,747, RESPECTIVELY)....................  $13,165,910,165   $11,389,468,650 
                                                              ===============   =============== 

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER LIQUID ASSET FUND INC.                                              
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997                                   

1. ORGANIZATION AND ACCOUNTING POLICIES                                         

Dean Witter Liquid Asset Fund Inc. (the "Fund") is registered under the         
Investment Company Act of 1940, as amended (the "Act"), as a diversified,       
open-end management investment company. The Fund's investment objectives are    
high current income, preservation of capital and liquidity. The Fund was        
incorporated in Maryland on September 3, 1974 and commenced operations on       
September 22, 1975.                                                             

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

The following is a summary of significant accounting policies:                  

A. VALUATION OF INVESTMENTS -- Portfolio securities are valued at amortized     
cost, which approximates market value.                                          

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

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

D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions as of the close of each business day.                             

2. INVESTMENT MANAGEMENT AGREEMENT                                              

Pursuant to an Investment Management Agreement with Dean Witter InterCapital    
Inc. (the "Investment Manager"), the Fund pays the Investment Manager a         
management fee, accrued daily and payable monthly, by applying the following    
annual rates to the net assets of the Fund determined as of the close of each   
business day: 0.50% to the portion of the daily net assets not exceeding $500   
million; 0.425% to the portion of the daily net assets exceeding $500 million   
but not exceeding $750 million; 0.375% to the portion of the daily net assets   
exceeding $750 million but not exceeding $1 billion; 0.35% to the portion of the
daily net assets exceeding $1 billion but not exceeding                         

26

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DEAN WITTER LIQUID ASSET FUND INC.                                              
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997, CONTINUED                        

$1.35 billion; 0.325% to the portion of the daily net assets exceeding $1.35    
billion but not exceeding $1.75 billion; 0.30% to the portion of the daily net  
assets exceeding $1.75 billion but not exceeding $2.15 billion; 0.275% to the   
portion of the daily net assets exceeding $2.15 billion but not exceeding $2.5  
billion; 0.25% to the portion of the daily net assets exceeding $2.5 billion but
not exceeding $15 billion; 0.249% to the portion of the daily net assets        
exceeding $15 billion but not exceeding $17.5 billion; and 0.248% to the portion
of the daily net assets exceeding $17.5 billion.                                

Under the terms of the Agreement, the Investment Manager maintains certain of   
the Fund's books and records and furnishes, at its own expense, office space,   
facilities, equipment, clerical, bookkeeping and certain legal services and pays
the salaries of all personnel, including officers of the Fund who are employees 
of the Investment Manager. The Investment Manager also bears the cost of        
telephone services, heat, light, power and other utilities provided to the Fund.

3. PLAN OF DISTRIBUTION                                                         

Dean Witter Distributors Inc. (the "Distributor"), an affiliate of the          
Investment Manager, is the distributor of the Fund's shares and, in accordance  
with a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act,  
finances certain expenses in connection therewith.                              

Under the Plan, the Distributor bears the expense of all promotional and        
distribution related activities on behalf of the Fund, except for expenses that 
the Directors determine to reimburse, as described below. The following         
activities and services may be provided by the Distributor, Dean Witter Reynolds
Inc. ("DWR"), an affiliate of the Investment Manager and Distributor, its       
affiliates and other selected broker-dealers under the Plan: (1) compensation   
to, and expenses of, DWR's and other selected broker-dealers' account executives
and other employees, including overhead and telephone expenses; (2) sales       
incentives and bonuses to sales representatives and to marketing personnel in   
connection with promoting sales of the Fund's shares; (3) expenses incurred in  
connection with promoting sales of the Fund's shares; (4) preparation, printing 
and distributing sales literature; and (5) providing advertising and promotional
activities, including direct mail solicitation and television, radio, newspaper,
magazine and other media advertisements.                                        

The Fund is authorized to reimburse the Distributor for specific expenses the   
Distributor incurs or plans to incur in promoting the distribution of the Fund's
shares. The amount of each monthly reimbursement payment may in no event exceed 
an amount equal to a payment at the annual rate of 0.15% of the Fund's average  
daily net assets during the month. Expenses incurred by the Distributor         

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DEAN WITTER LIQUID ASSET FUND INC.                                              
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997, CONTINUED                        

pursuant to the Plan in any fiscal year will not be reimbursed by the Fund      
through payments accrued                                                        
in any subsequent fiscal year. For the year ended August 31, 1997, the          
distribution fee was accrued at the annual rate of 0.10%.                       

4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES                       

The cost of purchases and proceeds from sales/maturities of portfolio securities
for the year ended August 31, 1997 aggregated $41,929,348,009 and               
$40,711,109,361, respectively.                                                  

Dean Witter Trust FSB, an affiliate of the Investment Manager and Distributor,  
is the Fund's transfer agent. At August 31, 1997, the Fund had transfer agent   
fees and expenses payable of approximately $150,000.                            

The Fund has an unfunded noncontributory defined benefit pension plan covering  
all independent Directors of the Fund who will have served as independent       
Directors for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years  
of service. Aggregate pension costs for the year ended August 31, 1997 included 
in Directors' fees and expenses in the Statement of Operations amounted to      
$2,192. At August 31, 1997, the Fund had an accrued pension liability of $48,330
which is included in accrued expenses in the Statement of Assets and            
Liabilities.                                                                    

5. CAPITAL STOCK                                                                

Transactions in capital stock, at $1.00 per share, were as follows:             

                                                        [Enlarge/Download Table]

                                                                   FOR THE YEAR      FOR THE YEAR   
                                                                       ENDED             ENDED      
                                                                  AUGUST 31, 1997   AUGUST 31, 1996 
                                                                  ---------------   --------------- 
                                                                                                    
Shares sold......................................................  35,926,788,140    31,284,601,651 
Shares issued in reinvestment of dividends.......................     612,893,395       554,968,386 
                                                                  ---------------   --------------- 
                                                                   36,539,681,535    31,839,570,037 
Shares repurchased............................................... (34,763,236,620)  (30,809,583,472)
                                                                  ---------------   --------------- 
Net increase.....................................................   1,776,444,915     1,029,986,565 
                                                                  ===============   =============== 

6. FINANCIAL HIGHLIGHTS                                                         

See the "Financial Highlights" table on page 3 of this Prospectus.              

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THE DEAN WITTER FAMILY OF FUNDS 

                                                        [Enlarge/Download Table]

                                                                                                  
MONEY MARKET FUNDS                                  FIXED-INCOME FUNDS                            
Dean Witter Liquid Asset Fund Inc.                  Dean Witter High Yield Securities Inc.        
Dean Witter Tax-Free Daily Income Trust             Dean Witter Tax-Exempt Securities Trust       
Dean Witter New York Municipal Money Market Trust   Dean Witter U.S. Government Securities Trust  
Dean Witter California Tax-Free Daily Income Trust  Dean Witter California Tax-Free Income Fund   
Dean Witter U.S. Government Money Market Trust      Dean Witter New York Tax-Free Income Fund     
EQUITY FUNDS                                        Dean Witter Convertible Securities Trust      
Dean Witter American Value Fund                     Dean Witter Federal Securities Trust          
Dean Witter Natural Resource Development            Dean Witter World Wide Income Trust           
 Securities Inc.                                    Dean Witter Intermediate Income Securities    
Dean Witter Dividend Growth Securities Inc.         Dean Witter Global Short-Term Income Fund Inc.
Dean Witter Developing Growth Securities Trust      Dean Witter Multi-State Municipal Series Trust
Dean Witter World Wide Investment Trust             Dean Witter Short-Term U.S. Treasury Trust    
Dean Witter Value-Added Market Series               Dean Witter Diversified Income Trust          
Dean Witter Utilities Fund                          Dean Witter Limited Term Municipal Trust      
Dean Witter Precious Metals and Minerals Trust      Dean Witter Short-Term Bond Fund              
Dean Witter Capital Growth Securities               Dean Witter High Income Securities            
Dean Witter European Growth Fund Inc.               Dean Witter National Municipal Trust          
Dean Witter Pacific Growth Fund Inc.                Dean Witter Balanced Income Fund              
Dean Witter Health Sciences Trust                   Dean Witter Hawaii Municipal Trust            
Dean Witter Global Dividend Growth Securities       Dean Witter Intermediate Term U.S. Treasury   
Dean Witter Global Utilities Fund                    Trust                                        
Dean Witter International SmallCap Fund             DEAN WITTER RETIREMENT SERIES                 
Dean Witter Mid-Cap Growth Fund                     Liquid Asset Series                           
Dean Witter Balanced Growth Fund                    U.S. Government Money Market Series           
Dean Witter Capital Appreciation Fund               U.S. Government Securities Series             
Dean Witter Information Fund                        Intermediate Income Securities Series         
Dean Witter Special Value Fund                      American Value Series                         
Dean Witter Financial Services Trust                Capital Growth Series                         
Dean Witter Market Leader Trust                     Dividend Growth Series                        
Dean Witter S&P 500 Index Fund                      Strategist Series                             
Dean Witter Fund of Funds                           Utilities Series                              
ASSET ALLOCATION FUNDS                              Value-Added Market Series                     
Dean Witter Strategist Fund                         Global Equity Series                          
Dean Witter Global Asset Allocation Fund                                                          
ACTIVE ASSETS ACCOUNT PROGRAM                                                                     
Active Assets Money Trust                                                                         
Active Assets Tax-Free Trust                                                                      
Active Assets Government Securities Trust                                                         
Active Assets California Tax-Free Trust                                                           

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                                                                      Prospectus
                                                                October 24, 1997

REMOVE APPLICATION CAREFULLY                                                    

                                                           -------------------
                                              160 --
                                                           -------------------
                                                           for office use only

                                                           DEAN WITTER
                                                      LIQUID
                                                     ASSET
                                                               FUND     [LOGO]
APPLICATION                                                                     
DEAN WITTER LIQUID ASSET FUND INC.                                              
Send to: Dean Witter Trust FSB (the "Transfer Agent"), P.O. Box 1040, Jersey    
City, NJ 07303                                                                  

                                                        [Enlarge/Download Table]

                                                                                                                                    
INSTRUCTIONS        For assistance in completing this application, telephone Dean Witter Trust FSB at (800) 869-NEWS (toll-free).   
TO REGISTER                                                                                                                         
SHARES               1.                                                                                                             
(please print)         ---------------------------------------------------------------------------------------------------------    
                                      First Name                                    Last Name                                       
-As joint tenants,                                                                                                                  
 use line 1 & 2      2.                                                                                                             
                       ---------------------------------------------------------------------------------------------------------    
                                      First Name                                    Last Name                                       
                       (Joint tenants with rights of survivorship unless otherwise specified)                                       
                                                                                         ------------------------------             
                                                                                         Social Security Number                     
-As custodian                                                                                                                       
 for a minor,        3.                                                                                                             
  use lines 1 & 3                                                                                                                   
                       ---------------------------------------------------------------------------------------------------------    
                                                                          Minor's Name                                              

                       Under the                                          Uniform Gifts to Minors Act                               
                                 ----------------------------------------                                                           

                                                                                         ------------------------------             
                                                                                         Minor's Social Security Number             
                       State of Residence of Minor                                                                                  
-In the name of a                                                                                                                   
 corporation,        4.                                                                                                             
 trust,                ---------------------------------------------------------------------------------------------------------    
 partnership                                                                                                                        
 or other                             Name of Corporation, Trust (including trustee name(s)) or Other Organization                  
 institutional                                                                                                                      
 investors, use                                                                                                                     
 line 4                                                                                                                             
                       If Trust, Date of Trust Instrument:                                                                          
                                                          ------------------------------------------------------------              

                                                                                         ------------------------------             
                                                                                           Tax Identification Number                
ADDRESS                                                                                                                             
                       ---------------------------------------------------------------------------------------------------------    
                       City                  State                  Zip Code                                                        

TO PURCHASE           [ ] CHECK (enclosed) $                        (Make Payable to Dean Witter Liquid Asset Fund Inc.)            
SHARES:                                     -----------------------                                                                 
Minimum Initial       [ ] WIRE*  On                                            MF*                                                  
Investment:                         --------------------------------              --------------------------------                  
$5,000                                       (Date)                            (Control number this transaction)                    

                      --------------------------------------------------------------------------                                    
                      Name of Bank                                       Branch                                                     

                      --------------------------------------------------------------------------                                    
                      Address                                                                                                       

                      --------------------------------------------------------------------------                                    
                      Telephone Number                                                                                              

                      * For an initial investment made by wiring funds, obtain a control number by calling: (800) 869-NEWS          
                      (toll-free).                                                                                                  

                      Your bank should wire to:                                                                                     

                      Bank of New York for credit to account of Dean Witter Trust FSB                                               

                      Account Number: 8900188413                                                                                    

                      Re: Dean Witter Liquid Asset Fund Inc.                                                                        

                      Account Of:                                                                                                   
                                 ----------------------------------------------------------------------------                       
                                        (Investor's Account as Registered at the Transfer Agent)                                    

                      Control or Account Number:                                                                                    
                                                ------------------------------------------------------------                        
                                                                  (Assigned by Telephone)                                           

                               OPTIONAL SERVICES                                                                                    

            NOTE: If you are a current shareholder of Dean Witter                                                                   
            Liquid Asset Fund Inc., please indicate your fund                                                                       
            account number here.                                                                                                    
            [1][6][0] -                                                                                                             

DIVIDENDS             All dividends will be reinvested daily in additional shares, unless the following option is                   
                      selected:                                                                                                     
                      [ ] Pay income dividends by check at the end of each month.                                                   

WRITE YOUR OWN        [ ] Send an initial supply of checks.                                                                         
CHECK                 FOR JOINT ACCOUNTS:                                                                                           
                      [ ] Check this box if all owners are required to sign checks.                                                 

SYSTEMATIC            [ ] Systematic Withdrawal Plan ($25 minimum)                                                                  
WITHDRAWAL            $                      [ ] Monthly or [ ] Quarterly                                                           
PLAN                  [ ] 10th    or [ ] 25th of Month/Quarter                                                                      
Minimum               [ ] Pay shareholder(s) at address of record.                                                                  
Account Value:        [ ] Pay to the following: (If this payment option is selected a signature guarantee is required)              
$5,000                                                                                                                              

                      ------------------------------------------------------------                                                  
                      Name                                                                                                          

                      ------------------------------------------------------------                                                  
                      Address                                                                                                       

                      ------------------------------------------------------------                                                  
                      City                 State                 Zip Code                                                           

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                       [ ]  Dean Witter Trust FSB is hereby authorized to honor telephonic or other instructions, without           
PAYMENT TO                  signature guarantee, from any person for the redemption of any or all shares of Dean Witter Liquid Asset
PREDESIGNATED               Fund Inc. held in my (our) account provided that proceeds are transmitted only to the following bank    
BANK ACCOUNT                account. (Absent its own negligence, neither Dean Witter Liquid Asset Fund Inc. nor Dean Witter Trust   
                            FSB shall be liable for any redemption caused by unauthorized instruction(s)):                          

Bank Account must be   ----------------------------------------       --------------------------------                              
in same name as        NAME & BANK ACCOUNT NUMBER                       BANK'S ROUTING TRANSMIT CODE                                
shares                                                                        (ASK YOUR BANK)                                       
are registered                                                                                                                      
Minimum Amount:        ----------------------------------------                                                                     
$1,000                 NAME OF BANK                                                                                                 

                       ----------------------------------------                                                                     
                       ADDRESS OF BANK                                                                                              

                       (        )                                                                                                   
                       ----------------------------------------                                                                     
                       TELEPHONE NUMBER OF BANK                                                                                     

                                                 SIGNATURE AUTHORIZATION

                                                        [Enlarge/Download Table]

                                                                                                                                 
I. FOR ALL ACCOUNTS    NOTE: RETAIN A COPY OF THIS DOCUMENT FOR YOUR RECORDS. ANY MODIFICATION OF THE INFORMATION BELOW WILL     
                       REQUIRE AN AMENDMENT TO THIS FORM. THIS DOCUMENT IS IN FULL FORCE AND EFFECT UNTIL ANOTHER DULY EXECUTED  
                       FORM IS RECEIVED BY THE TRANSFER AGENT.                                                                   

                       The Transfer Agent is hereby authorized to act as agent for the registered owner of shares of Dean Witter 
                       Liquid Asset Fund Inc. (the "Fund") in effecting redemptions of shares and is authorized to recognize the 
                       signature(s) below in payment of funds resulting from such redemptions on behalf of the registered owners 
                       of such shares. The Transfer Agent shall be liable only for its own negligence and not for default or     
                       negligence of its correspondents or for losses in transit. The Fund shall not be liable for any default or
                       negligence of the Transfer Agent.                                                                         

                       I (we) certify to my (our) legal capacity, or the capacity of the investor named above, to invest in and  
                       redeem shares of, and I (we) acknowledge receipt of a current prospectus of, Dean Witter Liquid Asset Fund
                       Inc. and I(we) further certify my (our) authority to sign and act for and on behalf of the investor.      

                       Under penalties of perjury, I certify (1) that the number shown on this form is my correct taxpayer       
                       identification number and (2) that I am not subject to backup withholding either because I have not been  
                       notified that I am subject to backup withholding as a result of a failure to report all interest or       
                       dividends, or the Internal Revenue Service has notified me that I am no longer subject to backup          
                       withholding. (Note: You must cross out item (2) above if you have been notified by IRS that you are       
                       currently subject to backup withholding because of underreporting interest or dividends on your tax       
                       return.)                                                                                                  

                       Check Applicable Box:                                                                                     

                       [ ] I am a United States Citizen.                     [ ] I am not a United States Citizen.               

                                         SIGNATURE(S) (IF JOINT TENANTS, ALL MUST SIGN)                                          

Name(s) must be                                                                                                                  
signed exactly the                                                                                                               
same as shown on                                                                                                                 
lines 1 to 4 on the                                                                                                              
reverse side of this                                                                                                             
application                                                                                                                      

                      SIGNED THIS                                  DAY OF                                                        
                                  --------------------------------                                                               
                                                              , 19  .                                                            
                      ---------------------------------------     --                                                             
In addition complete                                                                                                             
Section A or B below                                                                                                             
                                FOR CORPORATIONS, TRUSTS, PARTNERSHIPS AND OTHER ORGANIZATIONS                                   

                      The following named persons are currently officers/trustees/general partners/other                         
                      authorized signatories of the Registered Owner, and any of them ("Authorized                               
                      Person(s)") is/are currently authorized under the applicable governing document to                         
                      act with full power to sell, assign or transfer securities of the Fund for the                             
                      Registered Owner and to execute and deliver any instrument necessary to effectuate                         
                      the authority hereby conferred:                                                                            

                                     NAME/TITLE                                SIGNATURE                                         

                      SIGNED THIS                                  DAY OF                                                        
                                  --------------------------------                                                               

                                                              , 19  .                                                            
                      ---------------------------------------     --                                                             

                      The Transfer Agent may, without inquiry, act only upon the instruction of ANY                              
                      PERSON(S) purporting to be (an) Authorized Person(s) as named in the Certification                         
                      Form last received by the Transfer Agent. The Transfer Agent and the Fund shall                            
                      not be liable for any claims, expenses (including legal fees) or losses resulting                          
                      from the Transfer Agent having acted upon any instruction reasonably believed                              
                      genuine.                                                                                                   

                      *INSERT A NUMBER. UNLESS OTHERWISE INDICATED, THE TRANSFER AGENT MAY HONOR                                 
                      INSTRUCTIONS OF ANY ONE OF THE PERSONS NAMED ABOVE.                                                        

SECTION (A)           NOTE: EITHER A SIGNATURE GUARANTEE OR CORPORATE SEAL IS REQUIRED.                                          
CORPORATIONS AND                                                                                                                 
INCORPORATED                                                                                                                     
ASSOCIATIONS ONLY.    I, -------------------------------------------------, Secretary of the                                     
SIGN ABOVE AND        Registered Owner, do hereby certify that at a meeting on ----------------- at                              
COMPLETE THIS         which a quorum was present throughout, the Board of Directors of the                                       
SECTION               corporation/the officers of the association duly adopted a resolution, which is                            
                      in full force and effect and in accordance with the Registered Owner's charter                             
                      and by-laws, which resolution did the following: (1) empowered the above-named                             
                      Authorized Person(s) to effect securities transactions for the Registered Owner                            
                      on the terms described above; (2) authorized the Secretary to certify, from time                           
                      to time, the names and titles of the officers of the Registered Owner and to                               
                      notify the Transfer Agent when changes in office occur; and (3) authorized the                             
                      Secretary to certify that such a resolution has been duly adopted and will                                 
                      remain in full force and effect until the Transfer Agent receives a duly                                   
                      executed amendment to the Certification Form.                                                              

SIGNATURE             Witness my hand on behalf of the corporation/association this                day                           
GUARANTEED**          of                , 19  .                                                                                  
(or Corporate Seal)                                                                                                              

                      --------------------------------------------------------------------------------                           
                                                        Secretary**                                                              
                      The undersigned officer (other than the Secretary) hereby certifies that the                               
                      foregoing instrument has been signed by the Secretary of the corporation/                                  
                      association.                                                                                               
SIGNATURE                                                                                                                        
GUARANTEED**          --------------------------------------------------------------------------------                           
(or Corporate Seal)         Certifying Officer of the Corporation or Incorporated Association**                                  

SECTION (B)           NOTE: A SIGNATURE GUARANTEE IS REQUIRED.                                                                   
ALL OTHER                                                                                                                        
INSTITUTIONAL                                                                                                                    
INVESTORS                                                                                                                        

SIGNATURE                        ----------------------------------------------------------                                      
GUARANTEED**                                             Certifying                                                              
                                          Trustee(s)/General Partner(s)/Other(s)**                                               

SIGN ABOVE AND                   ----------------------------------------------------------                                      
COMPLETE THIS                                            Certifying                                                              
SECTION                                   Trustee(s)/General Partner(s)/Other(s)**                                               

                      Signed this                                                                                                
                      --------------------------------------------------------------------------------                           

                      day of                                                                                                     
                      --------------------------------------------------------------------------------,                          
                      19 ------------------------                                                                                
                      --------------------------------------------------------------------------------                           
                      **SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR                                                 

DEALER                Above signature(s) guaranteed. Prospectus has been delivered by undersigned to                             
(if any)              above-named applicant(s).                                                                                  
Completion by dealer                                                                                                             
only                                                                                                                             
                      ----------------------------------------  ----------------------------------------                         
                      Firm Name                                 Office Number-Account Number at                                  
                                                                Dealer--A/E Number                                               

                      ----------------------------------------  ----------------------------------------                         
                      Address                                   Account Executive's Last Name                                    

                      ----------------------------------------  ----------------------------------------                         
                      City, State, Zip Code                     Branch Office                                                    

(Registered Trademark) 1997 Dean Witter Distributors Inc.                                                                        

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Dean Witter                                                                     
Liquid Asset Fund Inc.                                                          
Two World Trade Center                                                          
New York, New York 10048                                                        

BOARD OF DIRECTORS                                                              

Michael Bozic                                                                   
Charles A. Fiumefreddo                                                          
Edwin J. Garn                                                                   
John R. Haire                                                                   
Wayne E. Hedien                                                                 
Dr. Manuel H. Johnson                                                           
Michael E. Nugent                                                               
Philip J. Purcell                                                               
John L. Schroeder                                                               

OFFICERS                                                                        

Charles A. Fiumefreddo                                                          
Chairman and Chief Executive Officer                                            

Barry Fink                                                                      
Vice President, Secretary and                                                   
General Counsel                                                                 

Jonathan R. Page                                                                
Vice President                                                                  

Thomas F. Caloia                                                                
Treasurer                                                                       

CUSTODIAN                                                                       

The Bank of New York                                                            
90 Washington Street                                                            
New York, New York 10286                                                        

TRANSFER AGENT AND                                                              
DIVIDEND DISBURSING AGENT                                                       

Dean Witter Trust FSB                                                           
Harborside Financial Center                                                     
Plaza Two                                                                       
Jersey City, New Jersey 07311                                                   

INDEPENDENT ACCOUNTANTS                                                         

Price Waterhouse LLP                                                            
1177 Avenue of the Americas                                                     
New York, New York 10036                                                        

INVESTMENT MANAGER                                                              

Dean Witter InterCapital Inc.                                                   

Dean Witter                                                                     
Liquid Asset Fund                                                               

                                    PROSPECTUS
                                          OCTOBER 24, 1997

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DEAN WITTER LIQUID ASSET FUND INC.                                              
TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048                                
LETTER TO THE SHAREHOLDERS FEBRUARY 28, 1998                                    

DEAR SHAREHOLDER:                                                               

We are pleased to present the semiannual letter to shareholders of Dean Witter  
Liquid Asset Fund for the six-month period ended February 28, 1998.             

As of the close of the period under review, the Fund had net assets totaling    
$13.7 billion. For the six-month period under review, the Fund's annualized net 
investment income was 5.17 percent. The Fund's 30-day annualized yield for      
February was 5.22 percent.                                                      

A STABLE INTEREST-RATE ENVIRONMENT                                              

After rising by about 25 basis points late in the first quarter of 1997,        
money-market yields held remarkably stable during the remainder of 1997 and     
through the first two months of 1998. The target rate for federal funds has     
remained steady at 5.50 percent from March 25, 1997, through February 28, 1998. 
Overall economic conditions in the United States continue to be very good,      
while inflation has remained quite moderate. Unemployment rates remain close to 
the lows of the past 25 years.                                                  

Aided by favorable demographic trends, cash flows into financial assets were    
robust in 1997 and early 1998. Money-market mutual funds are no exception, as   
total assets in all such portfolios surpassed $1 trillion for the first time    
early in August 1997.                                                           

PORTFOLIO COMPOSITION AND STRUCTURE                                             

On February 28, 1998, approximately 81 percent of the Fund's portfolio was      
invested in high-quality commercial paper, 7 percent in certificates of deposit 
and bankers' acceptances of financially strong commercial banks, 6 percent in   
the bank notes of such institutions and 6 percent in federal agency and U.S.    
Treasury obligations. At the end of February, approximately 89 percent of the   
Fund's holdings were due to mature in less than four months. Therefore, we      
believe the Fund is well positioned for stability of principal with a high      
degree of liquidity.                                                            

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DEAN WITTER LIQUID ASSET FUND INC.                                              
LETTER TO THE SHAREHOLDERS FEBRUARY 28, 1998, CONTINUED                         

We continue to operate the Fund in a straightforward, conservative style        
without structured notes or derivatives that could fluctuate excessively with   
changing interest rates. In addition, the Fund has avoided making any direct    
investments in Asian financial institutions, because of their relatively slim   
levels of capital strength. As a result the Fund's exposure to credit-rating    
downgrades, which some other money market funds have experienced recently, has  
been limited.                                                                   

LOOKING AHEAD                                                                   

At this time we anticipate a slight moderation in the pace of economic activity 
during 1998, with no major adverse surprises in the rate of inflation. We do    
not expect investment yields available to the Fund during the months            
immediately ahead to differ dramatically from those available during the fiscal 
period just ended.                                                              

As always, the Fund serves as a useful investment for liquidity, preservation   
of capital and a yield that reflects prevailing money market conditions.        

We appreciate your ongoing support of Dean Witter Liquid Asset Fund and look    
forward to continuing to serve your investment needs and objectives.            

Very truly yours,                                                               

/s/ Charles A. Fiumefreddo                                                      

CHARLES A. FIUMEFREDDO                                                          
CHAIRMAN OF THE BOARD                                                           

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DEAN WITTER LIQUID ASSET FUND INC.                                              
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1998 (UNAUDITED)                          

                                                        [Enlarge/Download Table]

                                                                    ANNUALIZED                                    
PRINCIPAL                                                            YIELD ON                                     
AMOUNT IN                                                            DATE OF        MATURITY                      
THOUSANDS                                                            PURCHASE         DATE              VALUE     
------------------------------------------------------------------------------------------------------------------
                                                                                                                  
           COMMERCIAL PAPER (81.2%)                                                                               
           AUTOMOTIVE - FINANCE (11.2%)                                                                           
$495,000   Chrysler Financial Corp................................  5.52-5.86%  03/25/98-06/15/98  $   491,307,938
 410,000   Ford Motor Credit Co...................................  5.53-5.81   03/09/98-05/04/98      407,593,736
 649,000   General Motors Acceptance Corp.........................  5.51-5.85   03/06/98-08/31/98      640,388,153
                                                                                                   ---------------
                                                                                                     1,539,289,827
                                                                                                   ---------------
           BANK HOLDING COMPANIES (13.6%)                                                                         
 100,000   Bank of New York Co., Inc..............................     5.56         04/13/98            99,330,222
 100,000   BankAmerica Corp.......................................     5.51         06/30/98            98,173,389
 585,000   Bankers Trust New York Corp............................  5.52-5.88   04/29/98-07/08/98      575,935,482
 670,000   Morgan (J.P.) & Co., Inc...............................  5.50-5.81   04/06/98-07/16/98      663,527,061
  90,000   NationsBank Corp.......................................     5.54         08/28/98            87,561,025
 230,000   PNC Funding Corp.......................................  5.56-5.85   04/06/98-04/22/98      228,534,620
 110,000   SunTrust Banks, Inc....................................  5.71-5.81   03/09/98-04/14/98      109,445,250
                                                                                                   ---------------
                                                                                                     1,862,507,049
                                                                                                   ---------------
           BANKS - COMMERCIAL (31.0%)                                                                             
 300,000   Abbey National North America Corp......................  5.53-5.76   05/04/98-08/24/98      294,014,000
 200,000   ABN-AMRO North America Finance Inc.....................  5.51-5.78   03/26/98-07/09/98      198,402,903
 710,000   Barclays U.S. Funding Corp.............................  5.52-5.81   03/10/98-05/08/98      704,500,583
 535,000   Canadian Imperial Holdings Inc.........................  5.52-5.81   03/09/98-05/06/98      531,555,836
 405,000   Deutsche Bank Financial Inc............................  5.49-5.79   03/05/98-04/28/98      403,617,006
 200,000   Dresdner U.S. Finance Inc..............................  5.70-5.81   03/12/98-04/13/98      199,118,222
 395,000   Internationale Nederlanden (U.S.) Funding Corp.........  5.59-5.82   04/15/98-07/10/98      390,505,676
 330,000   National Australia Funding (DE) Inc....................  5.48-5.77   03/11/98-04/28/98      328,252,044
 520,000   Societe Generale N.A., Inc.............................  5.53-5.82   03/16/98-06/01/98      517,225,739
 340,000   Toronto-Dominion Holdings U.S.A. Inc...................  5.53-5.83   04/14/98-06/17/98      336,225,322
 100,000   UnionBanCal Commercial Funding Corp....................     5.56         05/11/98            98,904,000
 240,000   Westpac Capital Corp...................................  5.75-5.79   03/25/98-04/20/98      238,848,459
                                                                                                   ---------------
                                                                                                     4,241,169,790
                                                                                                   ---------------
           BROKERAGE (0.8%)                                                                                       
 110,000   Goldman Sachs Group L.P................................  5.51-5.53   04/27/98-04/29/98      109,024,283
                                                                                                   ---------------
           FINANCE - COMMERCIAL (1.7%)                                                                            
 240,000   CIT Group Holdings, Inc................................  5.52-5.64   03/27/98-05/11/98      238,404,842
                                                                                                   ---------------
           FINANCE - CONSUMER (8.0%)                                                                              
 190,000   American Express Credit Corp...........................  5.51-5.52   03/30/98-04/03/98      189,041,000
  40,000   American General Finance Corp..........................     5.49         04/27/98            39,651,356
 234,000   Avco Financial Services Inc............................  5.52-5.82   03/18/98-06/17/98      231,710,410
 390,000   Beneficial Corp........................................  5.51-5.81   03/20/98-05/20/98      386,158,858
 105,000   Commercial Credit Co...................................  5.50-5.52   04/20/98-04/22/98      104,171,439
  90,000   Household Finance Corp.................................     5.52         03/06/98            89,917,650
  60,000   Norwest Financial Inc..................................     5.58         03/27/98            59,750,250
                                                                                                   ---------------
                                                                                                     1,100,400,963
                                                                                                   ---------------
           FINANCE - CORPORATE (3.6%)                                                                             
 500,000   Ciesco, L.P............................................  5.50-5.79   03/13/98-05/07/98      497,475,119
                                                                                                   ---------------

                       SEE NOTES TO FINANCIAL STATEMENTS                                                          

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DEAN WITTER LIQUID ASSET FUND INC.                                                                                
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1998 (UNAUDITED) CONTINUED                                                  

                                                                    ANNUALIZED                                    
PRINCIPAL                                                            YIELD ON                                     
AMOUNT IN                                                            DATE OF        MATURITY                      
THOUSANDS                                                            PURCHASE         DATE              VALUE     
------------------------------------------------------------------------------------------------------------------
           FINANCE - DIVERSIFIED (6.5%)                                                                           
$240,000   Associates Corp. of North America......................  5.53-5.81%  03/17/98-05/27/98  $   237,297,565
 662,000   General Electric Capital Corp..........................  5.48-5.84   03/02/98-09/08/98      654,184,256
                                                                                                   ---------------
                                                                                                       891,481,821
                                                                                                   ---------------
           FOODS & BEVERAGES (0.5%)                                                                               
  25,000   Coca-Cola Co...........................................     5.48         04/14/98            24,831,250
  50,000   Sara Lee Corp..........................................     5.59         03/06/98            49,953,500
                                                                                                   ---------------
                                                                                                        74,784,750
                                                                                                   ---------------
           HOUSEHOLD PRODUCTS (0.4%)                                                                              
  50,000   Procter & Gamble Co....................................     5.70         04/17/98            49,629,333
                                                                                                   ---------------
           INSURANCE (0.8%)                                                                                       
  35,000   American General Corp..................................     5.49         04/24/98            34,710,715
  75,000   MetLife Funding Inc....................................  5.76-5.81   03/04/98-03/05/98       74,946,736
                                                                                                   ---------------
                                                                                                       109,657,451
                                                                                                   ---------------
           INDUSTRIALS (0.2%)                                                                                     
  27,000   Emerson Electric Co....................................     5.62         03/02/98            26,991,570
                                                                                                   ---------------
           OFFICE EQUIPMENT (1.5%)                                                                                
 200,000   IBM Credit Corp........................................  5.50-5.69   03/06/98-03/11/98      199,739,861
                                                                                                   ---------------
           RETAIL (1.4%)                                                                                          
 190,000   Sears Roebuck Acceptance Corp..........................  5.53-5.83   03/09/98-03/23/98      189,444,269
                                                                                                   ---------------

           TOTAL COMMERCIAL PAPER                                                                                 
           (AMORTIZED COST $11,130,000,928)......................................................   11,130,000,928
                                                                                                   ---------------

           SHORT-TERM BANK NOTES (6.5%)                                                                           
 250,000   F.C.C. National Bank...................................  5.77-5.81   03/24/98-04/14/98      250,000,000
 100,000   BankBoston, N.A........................................     5.82         05/29/98           100,000,000
  45,000   La Salle National Bank.................................     5.72         04/20/98            45,000,000
 150,000   Wachovia Bank, N.A.....................................     5.51         04/22/98           150,000,000
 350,000   NationsBank, N.A.......................................  5.58-5.62   03/04/98-04/23/98      350,000,000
                                                                                                   ---------------

           TOTAL SHORT-TERM BANK NOTES                                                                            
           (AMORTIZED COST $895,000,000).........................................................      895,000,000
                                                                                                   ---------------

                       SEE NOTES TO FINANCIAL STATEMENTS                                                          

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DEAN WITTER LIQUID ASSET FUND INC.                                                                                
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1998 (UNAUDITED) CONTINUED                                                  

                                                                    ANNUALIZED                                    
PRINCIPAL                                                            YIELD ON                                     
AMOUNT IN                                                            DATE OF        MATURITY                      
THOUSANDS                                                            PURCHASE         DATE              VALUE     
------------------------------------------------------------------------------------------------------------------
           U.S. GOVERNMENT & AGENCY OBLIGATIONS (6.4%)                                                            
$302,000   Federal Farm Credit Bank...............................  5.60-5.76%  06/30/98-12/18/98  $   291,915,748
 160,000   Federal Home Loan Banks................................  5.66-5.75   06/19/98-12/04/98      155,236,271
  40,000   Federal Home Loan Mortgage Corp........................     5.74         10/30/98            38,527,867
 255,000   Federal National Mortgage Assoc........................  5.64-5.75   03/30/98-09/02/98      250,638,650
 145,000   U.S. Treasury Bills....................................  5.87-5.96   04/02/98-05/28/98      143,608,954
                                                                                                   ---------------

           TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS                                                             
           (AMORTIZED COST $879,927,490).........................................................      879,927,490
                                                                                                   ---------------

           CERTIFICATES OF DEPOSIT (5.9%)                                                                         
  70,000   Chase Manhattan Bank (USA).............................     5.75         03/02/98            70,000,000
 100,000   First Tennessee Bank N.A...............................     5.50         04/30/98           100,000,000
 100,000   Fleet National Bank....................................     5.53         05/14/98           100,000,000
 200,000   Mellon Bank, N.A.......................................  5.69-5.76   03/31/98-04/01/98      200,000,000
 345,000   Union Bank of California, N.A..........................  5.56-5.82   04/07/98-05/21/98      345,000,000
                                                                                                   ---------------

           TOTAL CERTIFICATES OF DEPOSIT                                                                          
           (AMORTIZED COST $815,000,000).........................................................      815,000,000
                                                                                                   ---------------

           BANKERS' ACCEPTANCES (0.8%)                                                                            
  50,000   Bank of America NT & SA................................     5.70         04/21/98            49,599,167
  25,000   SunTrust Bank, Atlanta.................................     5.57         03/09/98            24,965,500
  30,000   Wachovia Bank, N.A.....................................     5.83         07/24/98            29,329,616
                                                                                                   ---------------

           TOTAL BANKERS' ACCEPTANCES                                                                             
           (AMORTIZED COST $103,894,283).........................................................      103,894,283
                                                                                                   ---------------

           REPURCHASE AGREEMENT (0.1%)                                                                            
  12,596   The Bank of New York (dated 02/27/98; proceeds                                                         
             $12,601,622) (a) (IDENTIFIED COST $12,595,915).......     5.44         03/02/98            12,595,915
                                                                                                   ---------------

TOTAL INVESTMENTS                                                                                                 
(AMORTIZED COST $13,836,418,616) (b)...................................................  100.9 %   13,836,418,616 

LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS.........................................   (0.9)      (128,166,985)
                                                                                         ------  ---------------- 

NET ASSETS.............................................................................  100.0 % $ 13,708,251,631 
                                                                                         ------  ---------------- 
                                                                                         ------  ---------------- 

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

(a)   Collateralized by $8,720,550 Federal Farm Credit Bank 0.00% due 02/01/01
  valued at $8,720,550 and by $4,097,804 U.S. Treasury Bill 5.875% due
01/31/99 valued at $4,127,283.                                    
(b)   Cost is the same for federal income tax purposes.                       

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER LIQUID ASSET FUND INC.                                              
FINANCIAL STATEMENTS                                                            

STATEMENT OF ASSETS AND LIABILITIES                                             
FEBRUARY 28, 1998 (UNAUDITED)                                                   

                                                        [Enlarge/Download Table]

                                                                                                            
ASSETS:                                                                                                     
Investments in securities, at value                                                                         
  (amortized cost $13,836,418,616).........................................................  $13,836,418,616
Cash.......................................................................................           90,001
Receivable for:                                                                                             
    Interest...............................................................................       19,530,475
    Capital stock sold.....................................................................          133,622
Prepaid expenses and other assets..........................................................          899,215
                                                                                             ---------------

     TOTAL ASSETS..........................................................................   13,857,071,929
                                                                                             ---------------

LIABILITIES:                                                                                                
Payable for:                                                                                                
    Capital stock repurchased..............................................................      144,405,950
    Investment management fee..............................................................        2,894,783
    Plan of distribution fee...............................................................        1,067,776
Accrued expenses and other payables........................................................          451,789
                                                                                             ---------------

     TOTAL LIABILITIES.....................................................................      148,820,298
                                                                                             ---------------
     NET ASSETS............................................................................  $13,708,251,631
                                                                                             ---------------
                                                                                             ---------------

COMPOSITION OF NET ASSETS:                                                                                  
Paid-in-capital............................................................................  $13,707,561,843
Accumulated undistributed net investment income............................................          689,788
                                                                                             ---------------

     NET ASSETS............................................................................  $13,708,251,631
                                                                                             ---------------
                                                                                             ---------------

NET ASSET VALUE PER SHARE,                                                                                  
  13,708,233,037 SHARES OUTSTANDING (25,000,000,000 SHARES AUTHORIZED OF $.01 PAR VALUE)...            $1.00
                                                                                             ---------------
                                                                                             ---------------

STATEMENT OF OPERATIONS                                                                                     
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1998 (UNAUDITED)                                                      

NET INVESTMENT INCOME:                                                                                      

INTEREST INCOME...............................................................................  $385,570,361
                                                                                                ------------

EXPENSES                                                                                                    
Investment management fee.....................................................................    18,169,662
Transfer agent fees and expenses..............................................................    14,937,187
Plan of distribution fee......................................................................     6,222,267
Registration fees.............................................................................       502,643
Shareholder reports and notices...............................................................       327,424
Custodian fees................................................................................       180,539
Professional fees.............................................................................        37,866
Directors' fees and expenses..................................................................         9,643
Other.........................................................................................        49,752
                                                                                                ------------

     TOTAL EXPENSES...........................................................................    40,436,983
                                                                                                ------------

NET INVESTMENT INCOME AND NET INCREASE........................................................  $345,133,378
                                                                                                ------------
                                                                                                ------------

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER LIQUID ASSET FUND INC.                                              
FINANCIAL STATEMENTS, CONTINUED                                                 

STATEMENT OF CHANGES IN NET ASSETS                                              

                                                        [Enlarge/Download Table]

                                                                             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 and net increase..................................  $     345,133,378  $   614,489,801 
Dividends from net investment income....................................       (345,128,937)    (614,493,201)
Net increase from capital stock transactions............................        542,337,025    1,776,444,915 
                                                                          -----------------  --------------- 

     NET INCREASE.......................................................        542,341,466    1,776,441,515 

NET ASSETS:                                                                                                  
Beginning of period.....................................................     13,165,910,165   11,389,468,650 
                                                                          -----------------  --------------- 

     END OF PERIOD                                                                                           
    (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $689,788 AND                                           
    $685,347, RESPECTIVELY).............................................  $  13,708,251,631  $13,165,910,165 
                                                                          -----------------  --------------- 
                                                                          -----------------  --------------- 

SEE NOTES TO FINANCIAL STATEMENTS 

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DEAN WITTER LIQUID ASSET FUND INC.                                              
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1998 (UNAUDITED)                     

1. ORGANIZATION AND ACCOUNTING POLICIES                                         

Dean Witter Liquid Asset Fund Inc. (the "Fund") is registered under the         
Investment Company Act of 1940, as amended (the "Act"), as a diversified,       
open-end management investment company. The Fund's investment objectives are    
high current income, preservation of capital and liquidity. The Fund was        
incorporated in Maryland on September 3, 1974 and commenced operations on       
September 22, 1975.                                                             

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

The following is a summary of significant accounting policies:                  

A. VALUATION OF INVESTMENTS --  Portfolio securities are valued at amortized    
cost, which approximates market value.                                          

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

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

D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS --  The Fund records dividends   
and distributions as of the close of each business day.                         

2. INVESTMENT MANAGEMENT AGREEMENT                                              

Pursuant to an Investment Management Agreement with Dean Witter InterCapital    
Inc. (the "Investment Manager"), the Fund pays the Investment Manager a         
management fee, accrued daily and payable monthly, by applying the following    
annual rates to the net assets of the Fund determined as of the close of each   
business day: 0.50% to the portion of the daily net assets not exceeding $500   
million; 0.425% to the portion of the daily net assets exceeding $500 million   
but not exceeding $750 million; 0.375% to the portion of the daily net assets   
exceeding $750 million but not exceeding $1 billion; 0.35% to the portion of    
the daily net assets exceeding $1 billion but not exceeding $1.35 billion;      
0.325% to the portion of the daily net assets exceeding $1.35 billion but not   
exceeding                                                                       

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DEAN WITTER LIQUID ASSET FUND INC.                                              
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1998 (UNAUDITED) CONTINUED           

$1.75 billion; 0.30% to the portion of the daily net assets exceeding $1.75     
billion but not exceeding $2.15 billion; 0.275% to the portion of the daily net 
assets exceeding $2.15 billion but not exceeding $2.5 billion; 0.25% to the     
portion of the daily net assets exceeding $2.5 billion but not exceeding $15    
billion; 0.249% to the portion of the daily net assets exceeding $15 billion    
but not exceeding $17.5 billion; and 0.248% to the portion of the daily net     
assets exceeding $17.5 billion.                                                 

Under the terms of the Agreement, the Investment Manager maintains certain of   
the Fund's books and records and furnishes, at its own expense, office space,   
facilities, equipment, clerical, bookkeeping and certain legal services and     
pays the salaries of all personnel, including officers of the Fund who are      
employees of the Investment Manager. The Investment Manager also bears the cost 
of telephone services, heat, light, power and other utilities provided to the   
Fund.                                                                           

3. PLAN OF DISTRIBUTION                                                         

Dean Witter Distributors Inc. (the "Distributor"), an affiliate of the          
Investment Manager, is the distributor of the Fund's shares and, in accordance  
with a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act,  
finances certain expenses in connection therewith.                              

Under the Plan, the Distributor bears the expense of all promotional and        
distribution related activities on behalf of the Fund, except for expenses that 
the Directors determine to reimburse, as described below. The following         
activities and services may be provided by the Distributor, Dean Witter         
Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and Distributor,  
its affiliates and other selected broker-dealers under the Plan: (1)            
compensation to, and expenses of, DWR's and other selected broker-dealers'      
account executives and other employees, including overhead and telephone        
expenses; (2) sales incentives and bonuses to sales representatives and to      
marketing personnel in connection with promoting sales of the Fund's shares;    
(3) expenses incurred in connection with promoting sales of the Fund's shares;  
(4) preparation, printing and distributing sales literature; and (5) providing  
advertising and promotional activities, including direct mail solicitation and  
television, radio, newspaper, magazine and other media advertisements.          

The Fund is authorized to reimburse the Distributor for specific expenses the   
Distributor incurs or plans to incur in promoting the distribution of the       
Fund's shares. The amount of each monthly reimbursement payment may in no event 
exceed an amount equal to a payment at the annual rate of 0.15% of the Fund's   
average daily net assets during the month. Expenses incurred by the Distributor 
pursuant to the Plan in any fiscal year will not be reimbursed by the Fund      
through payments accrued in any subsequent fiscal year. For the six months      
ended February 28, 1998, the distribution fee was accrued at the annual rate of 
0.09%.                                                                          

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DEAN WITTER LIQUID ASSET FUND INC.                                              
NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1998 (UNAUDITED) CONTINUED           

4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES                       

The cost of purchases and proceeds from sales/maturities of portfolio           
securities for the six months ended February 28, 1998 aggregated                
$23,721,389,575 and $23,477,540,496, respectively.                              

Dean Witter Trust FSB, an affiliate of the Investment Manager and Distributor,  
is the Fund's transfer agent.                                                   

The Fund has an unfunded noncontributory defined benefit pension plan covering  
all independent Directors of the Fund who will have served as independent       
Directors for at least five years at the time of retirement. Benefits under     
this plan are based on years of service and compensation during the last five   
years of service. Aggregate pension costs for the six months ended February 28, 
1998 included in Directors' fees and expenses in the Statement of Operations    
amounted to $1,833. At February 28, 1998, the Fund had an accrued pension       
liability of $48,531 which is included in accrued expenses in the Statement of  
Assets and Liabilities.                                                         

5. CAPITAL STOCK                                                                

Transactions in capital stock, at $1.00 per share, were as follows:             

                                                        [Enlarge/Download Table]

                                                                      FOR THE SIX         FOR THE YEAR   
                                                                     MONTHS ENDED            ENDED       
                                                                   FEBRUARY 28, 1998    AUGUST 31, 1997  
                                                                  -------------------   ---------------- 
                                                                      (UNAUDITED)                        
                                                                                                         
Shares sold......................................................      19,901,696,910     35,926,788,140 
Shares issued in reinvestment of dividends.......................         344,280,116        612,893,395 
                                                                  -------------------   ---------------- 
                                                                       20,245,977,026     36,539,681,535 
Shares repurchased...............................................     (19,703,640,001)   (34,763,236,620)
                                                                  -------------------   ---------------- 
Net increase.....................................................         542,337,025      1,776,444,915 
                                                                  -------------------   ---------------- 
                                                                  -------------------   ---------------- 

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DEAN WITTER LIQUID ASSET FUND INC.                                              
FINANCIAL HIGHLIGHTS                                                            

Selected ratios and per share data for a share of capital stock outstanding     
throughout each period:                                                         

                                                        [Enlarge/Download Table]

                                     FOR THE                                                         
                                    SIX MONTHS                                                       
                                      ENDED                                                          
                                     FEBRUARY               FOR THE YEAR ENDED AUGUST 31,            
                                     28, 1998   -----------------------------------------------------
                                    (UNAUDITED)   1997       1996       1995       1994       1993   
-----------------------------------------------------------------------------------------------------
                                                                                                     
PER SHARE OPERATING PERFORMANCE:                                                                     

Net asset value, beginning of                                                                        
 period............................ $    1.00   $   1.00   $   1.00   $   1.00   $   1.00   $   1.00 
                                    ----------  ---------  ---------  ---------  ---------  ---------

Net investment income..............     0.026      0.050      0.050      0.053      0.030      0.027 
Less dividends from net investment                                                                   
 income............................    (0.026)    (0.050)    (0.050)    (0.053)    (0.030)    (0.027)
                                    ----------  ---------  ---------  ---------  ---------  ---------

Net asset value, end of period..... $    1.00   $   1.00   $   1.00   $   1.00   $   1.00   $   1.00 
                                    ----------  ---------  ---------  ---------  ---------  ---------
                                    ----------  ---------  ---------  ---------  ---------  ---------

TOTAL INVESTMENT RETURN+...........      2.61%(1)     5.13%     5.15%     5.41%      3.07%      2.72%

RATIOS TO AVERAGE NET ASSETS:                                                                        
Expenses...........................      0.61%(2)     0.62%     0.63%     0.65%      0.70%      0.69%

Net investment income..............      5.17%(2)     5.01%     5.02%     5.28%      3.02%      2.67%

SUPPLEMENTAL DATA:                                                                                   
Net assets, end of period, in                                                                        
 millions..........................    $13,708    $13,166    $11,389    $10,359     $8,492     $7,959

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

+   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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BOARD OF DIRECTORS                                                              
---------------------------------------------                                   
Michael Bozic                                                                   
Charles A. Fiumefreddo                                                          
Edwin J. Garn                                                                   
John R. Haire                                                                   
Wayne E. Hedien                                                                 
Dr. Manuel H. Johnson                                                           
Michael E. Nugent                                                               
Philip J. Purcell                                                               
John L. Schroeder                                                               

OFFICERS                                                                        
---------------------------------------------                                   
Charles A. Fiumefreddo                                                          
CHAIRMAN AND CHIEF EXECUTIVE OFFICER                                            
Barry Fink                                                                      
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL                                   
Jonathan R. Page                                                                
VICE PRESIDENT                                                                  
Thomas F. Caloia                                                                
TREASURER                                                                       

TRANSFER AGENT                                                                  
---------------------------------------------                                   
Dean Witter Trust FSB                                                           
Harborside Financial Center - Plaza Two                                         
Jersey City, New Jersey 07311                                                   

INDEPENDENT ACCOUNTANTS                                                         
---------------------------------------------                                   
Price Waterhouse LLP                                                            
1177 Avenue of the Americas                                                     
New York, New York 10036                                                        

INVESTMENT MANAGER                                                              
---------------------------------------------                                   
Dean Witter InterCapital Inc.                                                   
Two World Trade Center                                                          
New York, New York 10048                                                        

The financial statements included herein have been taken from the records of    
the Fund without examination by the independent accountants and accordingly     
they do not express an opinion thereon.                                         

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

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

DEAN WITTER                                                                     
LIQUID ASSET FUND                                                               

[GRAPHIC]                                                                       

SEMIANNUAL REPORT                                                               
FEBRUARY 28, 1998                                                               

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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.                                                                     

                                       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                                                                                   

                                       4                                                                          

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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).                      

5 

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

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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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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DEAN WITTER RETIREMENT SERIES - AMERICAN VALUE                                             
PORTFOLIO OF INVESTMENTS July 31, 1997, continued                                          

 NUMBER OF                                                                                 
   SHARES                                                                         VALUE    
-------------------------------------------------------------------------------------------
    3,000    Procter & Gamble Co.  ...........................................  $  456,375 
    7,000    Sunbeam Corporation  ............................................     273,875 
                                                                              -------------
                                                                                 2,458,168 
                                                                              -------------
             Consumer Business Services (1.4%)                                             
    8,000    AccuStaff, Inc.*  ...............................................     218,000 
    7,400    Browning-Ferris Industries, Inc.  ...............................     273,800 
    5,000    Corrections Corp. of America*  ..................................     221,562 
    2,000    Service Corp. International .....................................      68,000 
                                                                              -------------
                                                                                   781,362 
                                                                              -------------
             Consumer Products (2.6%)                                                      
    5,000    CVS Corp. .......................................................     284,375 
    4,000    Philips Electronics NV (Netherlands)  ...........................     327,250 
    3,500    Philips Electronics NV (Netherlands)  ...........................     283,962 
    1,900    Sony Corp. (Japan)  .............................................     189,134 
    3,100    Sony Corp. (ADR)(Japan)  ........................................     315,619 
                                                                              -------------
                                                                                 1,400,340 
                                                                              -------------
             Drugs (4.0%)                                                                  
    5,000    Dura Pharmaceuticals, Inc.*  ....................................     194,062 
    4,500    Lilly (Eli) & Co.  ..............................................     508,500 
    5,000    Medicis Pharmaceutical Corp. (Class A)*  ........................     225,000 
      280    Novartis (Switzerland) ..........................................     449,742 
    4,400    Pfizer, Inc.  ...................................................     262,350 
    3,600    Warner-Lambert Co.  .............................................     502,875 
                                                                              -------------
                                                                                 2,142,529 
                                                                              -------------
             Energy (5.9%)                                                                 
    9,000    Baker Hughes, Inc. ..............................................     396,563 
    8,000    Cooper Cameron Corp.*  ..........................................     469,000 
    2,500    Diamond Offshore Drilling, Inc. .................................     233,125 
    5,000    EVI, Inc.*  .....................................................     244,375 
    8,000    Falcon Drilling Company, Inc.*  .................................     231,000 
   12,000    Halliburton Co.  ................................................     552,000 
    5,000    Halter Marine Group, Inc.*  .....................................     153,125 
    8,200    Schlumberger, Ltd.  .............................................     626,275 
    4,000    Smith International, Inc.*  .....................................     286,750 
                                                                              -------------
                                                                                 3,192,213 
                                                                              -------------
             Financial-Miscellaneous (7.1%)                                                
      400    Advanta Corp. (Class A)  ........................................      14,400 
    7,000    American Express Co. ............................................     586,250 
   15,000    Hambrecht & Quist Group*  .......................................     447,188 
             Kansas City Southern                                                          
    2,000    Industries, Inc.  ...............................................     150,750 
    4,000    Legg Mason, Inc.  ...............................................  $  245,750 
   16,000    Lehman Brothers Holdings, Inc. ..................................     797,000 
    8,000    Merrill Lynch & Co., Inc. .......................................     563,500 
    8,000    Paine Webber Group, Inc. ........................................     320,000 
    1,000    Price (T.) Rowe Associates, Inc. ................................      54,250 
   10,000    Providian Financial Corp.*  .....................................     391,875 
    4,500    Salomon, Inc.  ..................................................     285,469 
                                                                              -------------
                                                                                 3,856,432 
                                                                              -------------
             Healthcare Products & Services (2.9%)                                         
    7,000    HBO & Co.  ......................................................     540,750 
   16,000    Health Management Associates, Inc. (Class A)*  ..................     511,000 
   20,000    Healthsouth Corp.*  .............................................     530,000 
                                                                              -------------
                                                                                 1,581,750 
                                                                              -------------
             Insurance (2.3%)                                                              
    3,000    Hartford Financial Services Group, Inc.  ........................     261,375 
             Marsh & McLennan                                                              
    7,000    Companies, Inc.  ................................................     542,063 
    5,000    Nationwide Financial Services, Inc. (Class A)  ..................     151,250 
    4,000    Travelers Group, Inc. ...........................................     287,750 
                                                                              -------------
                                                                                 1,242,438 
                                                                              -------------
             Internet (3.0%)                                                               
   10,000    America Online, Inc.*  ..........................................     675,000 
   10,000    E*TRADE Group, Inc.*  ...........................................     305,000 
   10,000    Sterling Commerce, Inc.*  .......................................     376,875 
    5,000    Yahoo! Inc.*  ...................................................     281,250 
                                                                              -------------
                                                                                 1,638,125 
                                                                              -------------
             Media Group (4.1%)                                                            
    6,600    Clear Channel Communications, Inc.*  ............................     410,850 
             Evergreen Media Corp.                                                         
    8,000    (Class A)*  .....................................................     367,000 
   10,000    Jacor Communications, Inc.*  ....................................     428,750 
   13,200    Outdoor Systems, Inc.*  .........................................     343,200 
    2,000    Univision Communications, Inc. (Class A)*  ......................      86,000 
   25,000    Westinghouse Electric Corp. .....................................     601,563 
                                                                              -------------
                                                                                 2,237,363 
                                                                              -------------
             Medical Supplies (2.4%)                                                       
    6,000    Boston Scientific Corp.*  .......................................     430,500 
    5,500    Guidant Corp.  ..................................................     501,875 
    4,000    Medtronic, Inc.  ................................................     349,000 
                                                                              -------------
                                                                                 1,281,375 
                                                                              -------------

                       SEE NOTES TO FINANCIAL STATEMENTS                                   

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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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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.

SEE NOTES TO FINANCIAL STATEMENTS 

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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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DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET                              
PORTFOLIO OF INVESTMENTS July 31, 1997                                          

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 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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 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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 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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DEAN WITTER RETIREMENT SERIES - GLOBAL EQUITY                                   
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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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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   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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                                                        [Enlarge/Download Table]

      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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                                                        [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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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)                           

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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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PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED                 

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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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PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED)                           

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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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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
                                                                                                     -----------

SEE NOTES TO FINANCIAL STATEMENTS 

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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)                           

                                                        [Enlarge/Download Table]


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
                                                                                                      ----------

SEE NOTES TO FINANCIAL STATEMENTS 

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

                                                        [Enlarge/Download Table]

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

SEE NOTES TO FINANCIAL STATEMENTS 

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PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (UNAUDITED) CONTINUED                 

                                                        [Enlarge/Download Table]

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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                                                                [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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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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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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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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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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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.                                                 

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 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  

SEE NOTES TO FINANCIAL STATEMENTS 

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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                                                                                
                                 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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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
                                                                                                     -----------

SEE NOTES TO FINANCIAL STATEMENTS 

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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
                                                                                                     -----------

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

SEE NOTES TO FINANCIAL STATEMENTS 

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

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

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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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FINANCIAL STATEMENTS, CONTINUED                                                 

STATEMENTS OF OPERATIONS                                                        

                                                        [Enlarge/Download Table]


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)                           

                                                        [Enlarge/Download Table]


                                 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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STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED                                  

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                                         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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STATEMENTS OF CHANGES IN NET ASSETS                                             

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                                   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 LIQUID ASSET FUND INC.  
PART B  
STATEMENT OF ADDITIONAL INFORMATION   

This Statement of Additional Information relates to the shares of Liquid  
Asset Fund Inc. (the "Acquiring Fund") to be issued pursuant to an Agreement    
and Plan of Reorganization, dated April 30, 1998, between the Acquiring Fund    
and Dean Witter Liquid Asset Series ("Liquid Asset"), one of eleven             
portfolios of Dean Witter Retirement Series ("Retirement Series"), in           
connection with the acquisition by the Acquiring Fund of substantially all of   
the assets, subject to stated liabilities, of Liquid Asset. This Statement of   
Additional Information does not constitute a prospectus. This Statement of      
Additional Information does not include all information that a shareholder      
should consider before voting on the proposals contained in the Proxy           
Statement and Prospectus, and, therefore, should be read in conjunction with    
the related Proxy Statement and Prospectus, dated June   , 1998. A copy of      
the Proxy Statement and Prospectus may be obtained without charge by mailing    
a written request to the Acquiring Fund at Two World Trade Center, New York,    
New York 10048 or by calling Nina Maceda at Dean Witter Trust Company at        
(800) 869-NEWS (Toll Free). Please retain this document for future reference.   

The date of this Statement of Additional Information is June   , 1998.    

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TABLE OF CONTENTS   

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                                                   PAGE
                                                       
INTRODUCTION ...................................    B-3
ADDITIONAL INFORMATION ABOUT 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 Liquid Asset shareholders in connection with the               
solicitation of proxies by the Board of Trustees of Liquid Asset to be voted    
at the Special Meeting of Shareholders of Liquid Asset to be held on August     
19, 1998. This Statement of Additional Information incorporates by reference    
the Statement of Additional Information of the Acquiring Fund dated October     
24, 1997 and the Statement of Additional Information of Retirement Series       
dated October 31, 1997.                                                         

ADDITIONAL INFORMATION ABOUT THE ACQUIRING FUND   

INVESTMENT OBJECTIVES AND POLICIES                                              

For additional information about the Acquiring Fund's investment          
objectives and policies, see "Investment Practices and Policies" and            
"Investment Restrictions" in the Acquiring Fund's Statement of Additional       
Information.                                                                    

MANAGEMENT                                                                      

For additional information about the Board of Directors, officers and     
management personnel of the Acquiring Fund, see "The Fund and Its Management"   
and "Directors and Officers" in the Acquiring Fund's Statement of Additional    
Information.                                                                    

INVESTMENT ADVISORY AND OTHER SERVICES                                          

For additional information about the Acquiring Fund's investment manager, 
see "The Fund and Its Management" in the Acquiring Fund's Statement of          
Additional Information. For additional information about the Acquiring Fund's   
independent auditors, see "Independent Accountants" in the Acquiring Fund's     
Statement of Additional Information. For additional information about other     
services provided to the Acquiring Fund see "Custodian and Transfer Agent"      
and "Shareholder Services" in the Acquiring Fund's Statement of Additional      
Information.                                                                    

PORTFOLIO TRANSACTIONS AND BROKERAGE                                            

For additional information about brokerage allocation practices, see      
"Portfolio Transactions and Brokerage" in the Acquiring Fund's Statement of     
Additional Information.                                                         

DESCRIPTION OF FUND SHARES                                                      

For additional information about the voting rights and other              
characteristics of the shares of the Acquiring Fund, see "Description of        
Common Stock" in the Acquiring Fund's Statement of Additional Information.      

PURCHASE, REDEMPTION AND PRICING OF SHARES                                      

For additional information about the purchase and redemption of the       
Acquiring Fund's shares and the determination of net asset value, see           
"Purchase of Fund Shares," "Redemptions and Repurchases," "Financial            
Statements" and "Shareholder Services" in the Acquiring Fund's Statement of     
Additional Information.                                                         

DIVIDENDS, DISTRIBUTIONS AND TAX STATUS                                         

For additional information about the Acquiring Fund's policies regarding  
dividends and distributions and tax matters affecting the Acquiring Fund and    
its shareholders, see "Dividends, Distributions and Taxes" and "Financial       
Statements" in the Acquiring Fund's Statement of Additional Information.        

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DISTRIBUTION OF SHARES                                                          

For additional information about the Acquiring Fund's distributor and the 
distribution agreement between the Acquiring Fund and its distributor, see      
"Purchase of Fund Shares" in the Acquiring Fund's Statement of Additional       
Information.                                                                    

PERFORMANCE DATA                                                                

For additional information about the Acquiring Fund's performance data,   
see "Dividends, Distributions and Taxes--Information on Computation of Yield"   
in the Acquiring Fund's Statement of Additional Information.                    

FINANCIAL STATEMENTS  

The Acquiring Fund's most recent audited financial statements are set     
forth in its Prospectus, dated October 24, 1997, which is attached to and is    
incorporated by reference in, the Proxy Statement and Prospectus. Liquid        
Asset's most recent audited financial statements are set forth in the Annual    
Report for Retirement Series for the fiscal year ended July 31, 1997, which     
is incorporated by reference to the Proxy Statement and Prospectus and Liquid   
Asset's updated, unaudited financial statements are set forth in its            
Semi-Annual Report for the six-month period ended January 31, 1998.             

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STATEMENT OF ADDITIONAL INFORMATION       DEAN WITTER                           
OCTOBER 24, 1997                          LIQUID ASSET FUND INC.                

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

  Dean Witter Liquid Asset Fund Inc. (the "Fund") is an open-end diversified
management investment company whose investment objectives are high current      
income, preservation of capital and liquidity. The Fund seeks to achieve its    
objectives by investing in the following money market instruments: United       
States Government securities, obligations of U.S. regulated banks and savings   
and loan associations having assets of $1 billion or more, high grade           
commercial paper, Certificates of Deposit of $100,000 or less of U.S. regulated 
banks and savings institutions having total assets of less than $1 billion      
which are fully insured as to principal by the Federal Deposit Insurance        
Corporation (the interest may not be insured) and high grade corporate          
obligations maturing in thirteen months or less. (See "Investment Practices and 
Policies.")                                                                     

The Fund is authorized to reimburse for specific expenses incurred in   
promoting the distribution of the Fund's shares pursuant to a Plan of           
Distribution with Dean Witter Distributors Inc. pursuant to Rule 12b-1 under    
the Investment Company Act of 1940. Reimbursement may in no event exceed an     
amount equal to payments at the annual rate of 0.15% of the average daily net   
assets of the Fund.                                                             

 A Prospectus of the Fund dated October 24, 1997, which provides the basic
information you should know before investing in the Fund, may be obtained       
without charge by request of the Fund at its address or at one of the telephone 
numbers listed below or from the Fund's Distributor, Dean Witter Distributors   
Inc., from Dean Witter Reynolds Inc. at any of its branch offices or from any   
Selected Broker-Dealer. This Statement of Additional Information is not a       
Prospectus. It contains information in addition to and more detailed than that  
set forth in the Prospectus. It is intended to provide additional information   
regarding the activities and operations of the Fund, and should be read in      
conjunction with the Prospectus.                                                

Dean Witter                                                                     
Liquid Asset Fund Inc.                                                          
Two World Trade Center                                                          
New York, New York 10048                                                        

212-392-2550 or                                                                 
800-869-NEWS (toll-free)                                                        

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

The Fund and its Management...........................................     3    
Directors and Officers................................................     6    
Investment Practices and Policies.....................................    12    
Investment Restrictions...............................................    14    
Portfolio Transactions and Brokerage..................................    15    
Purchase of Fund Shares...............................................    17    
Redemption of Fund Shares.............................................    25    
Dividends, Distributions and Taxes....................................    26    
Description of Common Stock...........................................    27    
Custodian and Transfer Agent..........................................    27    
Independent Accountants...............................................    28    
Reports to Shareholders...............................................    28    
Legal Counsel.........................................................    28    
Experts...............................................................    28    
Registration Statement................................................    28    
Financial Statements..................................................    28    
Appendix/Ratings......................................................    29    

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

THE FUND                                                                        

The Fund was incorporated under Maryland law on September 3, 1974, under
the name Standard & Poor's/InterCapital Cash Management Fund, Inc. Its name was 
changed to Standard & Poor's/InterCapital Liquid Asset Fund, Inc. on May 13,    
1975; changed to InterCapital Liquid Asset Fund Inc. on September 1, 1977;      
changed to Dean Witter/Sears Liquid Asset Fund Inc. on March 21, 1983; and      
changed to its present name, Dean Witter Liquid Asset Fund Inc., on June 30,    
1993.                                                                           

As of August 31, 1997 no shareholder was known to own beneficially or of
record as much as 5% of the outstanding shares of the Fund. The percentage      
ownership of shares of the Fund changes from time to time depending on          
purchases and redemptions by shareholders and the total number of shares        
outstanding.                                                                    

THE INVESTMENT MANAGER                                                          

   Dean Witter InterCapital Inc. (the "Investment Manager" or "InterCapital"),
a Delaware corporation, whose address is Two World Trade Center, New York, New  
York 10048, is the Fund's Investment Manager. InterCapital is a wholly-owned    
subsidiary of Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD"), a Delaware 
corporation. In an internal reorganization which took place in January, 1993,   
InterCapital assumed the investment advisory, administrative and management     
activities previously performed by the InterCapital Division of Dean Witter     
Reynolds Inc. ("DWR"), a broker-dealer affiliate of InterCapital. (As           
hereinafter used in this Statement of Additional Information, the terms         
"InterCapital" and "Investment Manager" refer to DWR's InterCapital Division    
prior to the internal reorganization and to Dean Witter InterCapital Inc.       
thereafter.) The daily management of the Fund and research relating to the      
Fund's portfolio are conducted by or under the direction of officers of the     
Fund and of the Investment Manager, subject to review by the Fund's Board of    
Directors. In addition, Directors of the Fund provide guidance on economic      
factors and interest rate trends. Information as to these Directors and         
officers is contained under the caption "Directors and Officers."               

InterCapital is also the investment manager or investment adviser of the
following investment companies: Active Assets Money Trust, Active Assets        
Tax-Free Trust, Active Assets California Tax-Free Trust, Active Assets          
Government Securities Trust, InterCapital Income Securities Inc., InterCapital  
Insured Municipal Bond Trust, InterCapital Insured Municipal Trust,             
InterCapital Insured Municipal Income Trust, InterCapital Insured Municipal     
Securities, InterCapital California Insured Municipal Income Trust,             
InterCapital Insured California Municipal Securities, InterCapital Quality      
Municipal Investment Trust, InterCapital Quality Municipal Income Trust,        
InterCapital Quality Municipal Securities, InterCapital California Quality      
Municipal Securities, InterCapital New York Quality Municipal Securities, High  
Income Advantage Trust, High Income Advantage Trust II, High Income Advantage   
Trust III, Dean Witter Government Income Trust, Dean Witter High Yield          
Securities Inc., Dean Witter Tax-Free Daily Income Trust, Dean Witter           
Tax-Exempt Securities Trust, Dean Witter Dividend Growth Securities Inc., Dean  
Witter Natural Resource Development Securities Inc., Dean Witter American Value 
Fund, Dean Witter Developing Growth Securities Trust, Dean Witter U.S.          
Government Money Market Trust, Dean Witter Variable Investment Series, Dean     
Witter World Wide Investment Trust, Dean Witter Select Municipal Reinvestment   
Fund, Dean Witter U.S. Government Securities Trust, Dean Witter World Wide      
Income Trust, Dean Witter California Tax-Free Income Fund, Dean Witter New York 
Tax-Free Income Fund, Dean Witter Convertible Securities Trust, Dean Witter     
Federal Securities Trust, Dean Witter Value-Added Market Series, Dean Witter    
Utilities Fund, Dean Witter California Tax-Free Daily Income Trust, Dean Witter 
Strategist Fund, Dean Witter Intermediate Income Securites, Dean Witter Capital 
Growth Securities, Dean Witter Precious Metals and Minerals Trust, Dean Witter  
New York Municipal Money Market Trust, Dean Witter European Growth Fund Inc.,   
Dean Witter Global Short-Term Income Fund Inc., Dean Witter Pacific Growth Fund 
Inc., Dean Witter Multi-State Municipal Series Trust, Dean Witter Short-Term    
U.S. Treasury Trust, Dean Witter Diversified Income Trust, Dean Witter Health   
Sciences Trust, Dean Witter Retirement Series, Dean Witter Global Dividend      
Growth Securities, Dean Witter Limited Term Municipal Trust, Dean Witter        
Short-Term Bond Fund, Dean Witter Global Utilities Fund, Dean Witter High       

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Income Securities, Dean Witter National Municipal Trust, Dean Witter            
International SmallCap Fund, Dean Witter Mid-Cap Growth Fund, Dean Witter       
Select Dimensions Investment Series, Dean Witter Balanced Growth Fund, Dean     
Witter Balanced Income Fund, Dean Witter Hawaii Municipal Trust, Dean Witter    
Capital Appreciation Fund, Dean Witter Intermediate Term U.S. Treasury Trust,   
Dean Witter Information Fund, Dean Witter Japan Fund, Dean Witter Income        
Builder Fund, Dean Witter Special Value Fund, Dean Witter Financial Services    
Trust, Dean Witter Market Leader Trust, Dean Witter S&P 500 Index Fund, Dean    
Witter Fund of Funds, Municipal Income Trust, Municipal Income Trust II,        
Municipal Income Trust III, Municipal Income Opportunities Trust, Municipal     
Income Opportunities Trust II, Municipal Income Opportunities Trust III,        
Municipal Premium Income Trust and Prime Income Trust. The foregoing investment 
companies, together with the Fund, are collectively referred to as the Dean     
Witter Funds.                                                                   

In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned 
subsidiary of InterCapital, serves as manager for the following investment      
companies for which TCW Funds Management, Inc. is the investment adviser:       
TCW/DW Core Equity Trust, TCW/DW North American Government Income Trust, TCW/DW 
Latin American Growth Fund, TCW/DW Income and Growth Fund, TCW/DW Small Cap     
Growth Fund, TCW/DW Balanced Fund, TCW/DW Total Return Trust, TCW/DW Mid-Cap    
Equity Trust, TCW/DW Global Telecom Trust, TCW/DW Strategic Income Trust,       
TCW/DW Emerging Markets Opportunities Trust, TCW/DW Term Trust 2000, TCW/DW     
Term Trust 2002 and TCW/DW Term Trust 2003 (the "TCW/DW Funds"). InterCapital   
also serves as: (i) administrator of The BlackRock Strategic Term Trust Inc., a 
closed-end investment company; and (ii) sub-administrator of MassMutual         
Participation Investors and Templeton Global Governments Income Trust,          
closed-end investment companies.                                                

 Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage the  
investment of the Fund's assets, including the placing of orders for the        
purchase and sale of portfolio securities. The Investment Manager obtains and   
evaluates such information and advice relating to the economy, securities       
markets, and specific securities as it considers necessary or useful to         
continuously manage the assets of the Fund in a manner consistent with its      
investment objectives and policies.                                             

Under the terms of the Agreement, in addition to managing the Fund's    
investments, the Investment Manager maintains certain of the Fund's books and   
records and furnishes, at its expense, such office space, facilities,           
equipment, clerical help, bookkeeping and certain legal services as the Fund    
may reasonably require in the conduct of its business, including the services   
of personnel in connection with the pricing of the Fund's shares and the        
preparation of prospectuses, proxy statements and reports required to be filed  
with federal and state securities commissions (except insofar as the            
participation or assistance of independent accountants and attorneys is, in the 
opinion of the Investment Manager, necessary or desirable). In addition, the    
Investment Manager pays the salaries of all personnel, including officers of    
the Fund who are employees of the Investment Manager. The Investment Manager    
also bears the cost of telephone service, heat, light, power and other          
utilities provided to the Fund, and the cost of printing (in excess of costs    
borne by the Fund) and distributing prospectuses and supplements thereto of the 
Fund used for sales purposes.                                                   

Effective December 31, 1993, pursuant to a Services Agreement between   
InterCapital and DWSC, DWSC began to provide the administrative services to the 
Fund which were previously performed directly by InterCapital. On April 17,     
1995, DWSC was reorganized in the State of Delaware, necessitating the entry    
into a new Services Agreement by InterCapital and DWSC on that date. The        
foregoing internal reorganizations did not result in any change in the nature   
or scope of the administrative services being provided to the Fund or any of    
the fees being paid by the Fund for the overall services being performed under  
the terms of the Agreement.                                                     

    Expenses not expressly assumed by the Investment Manager under the Agreement
or by the Distributor of the Fund's shares, Dean Witter Distributors Inc.       
("Distributors" or the "Distributor"), (see                                     

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"Purchase of Fund Shares") will be paid by the Fund. The expenses borne by the  
Fund include, but are not limited to: the distribution fee under the Plan       
pursuant to Rule 12b-1 (see "Purchase of Fund Shares"); charges and expenses of 
any registrar, custodian, stock transfer and dividend disbursing agent;         
brokerage commissions; taxes; engraving and printing of stock certificates;     
registration costs of the Fund and its shares under federal and state           
securities laws; the cost and expense of printing, including typesetting, and   
distributing prospectuses of the Fund and supplements thereto to the Fund's     
shareholders; all expenses of shareholders' and directors' meetings and of      
preparing, printing, including typesetting, and mailing of proxy statements and 
reports to shareholders and prospective shareholders; fees and travel expenses  
of Directors or members of any advisory board or committee who are not          
employees of the Investment Manager or any corporate affiliate of the           
Investment Manager; all expenses incident to any dividend, distribution,        
withdrawal or redemption options; fees and expenses of legal counsel including  
counsel to the Directors who are not interested persons of the Fund or of the   
Investment Manager (not including compensation or expenses of attorneys who are 
employees of the Investment Manager) and independent accountants in connection  
with any matter relating to the Fund; membership dues of industry associations; 
interest on Fund borrowings; postage; insurance premiums on property or         
personnel (including officers and Directors) of the Fund which inure to its     
benefit; extraordinary expenses (including, but not limited to, legal claims    
and liabilities and litigation costs and any indemnification relating thereto); 
and all other costs of the Fund's operation.                                    

  As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the   
Investment Manager monthly compensation calculated daily by applying the        
following annual rates to the net assets of the Fund determined as of the close 
of each business day: 0.50% of the portion of the daily net assets not          
exceeding $500 million; 0.425% of the portion of the daily net assets exceeding 
$500 million but not exceeding $750 million; 0.375% of the portion of the daily 
net assets exceeding $750 million but not exceeding $1 billion; 0.35% of the    
portion of the daily net assets exceeding $1 billion but not exceeding $1.35    
billion; 0.325% of the portion of the daily net assets exceeding $1.35 billion  
but not exceeding $1.75 billion; 0.30% of the portion of the daily net assets   
exceeding $1.75 billion but not exceeding $2.15 billion; 0.275% of the portion  
of the daily net assets exceeding $2.15 billion but not exceeding $2.5 billion; 
0.25% of the portion of the daily net assets exceeding $2.5 billion but not     
exceeding $15 billion; 0.249% of the portion of daily net assets exceeding $15  
billion but not exceeding $17.5 billion; and 0.248% of the portion of the daily 
net assets exceeding $17.5 billion. Total compensation paid to the Investment   
Manager for the Fund's fiscal years ended August 31, 1995, 1996 and 1997        
amounted to $26,483,251, $30,669,867 and $33,616,072, respectively.             

The Agreement provides that in the absence of willful misfeasance, bad  
faith, gross negligence or reckless disregard of its obligations thereunder,    
the Investment Manager is not liable to the Fund or any of its investors for    
any act or omission by the Investment Manager or for any losses sustained by    
the Fund or its investors. The Agreement in no way restricts the Investment     
Manager from acting as investment manager or adviser to others.                 

  The Agreement was initially approved by the Directors on February 21, 1997
and by the shareholders of the Fund at a Special Meeting of Shareholders held   
on May 21, 1997. The Agreement is substantially identical to a prior investment 
management agreement which was initially approved by the Directors on October   
30, 1992 and by the shareholders of the Fund at a Special Meeting of            
Shareholders held on January 12, 1993. The Agreement took effect on May 31,     
1997 upon the consummation of the merger of Dean Witter, Discover & Co. with    
Morgan Stanley Group Inc. The Agreement may be terminated at any time, without  
penalty, on thirty days' notice by the Directors of the Fund, by the holders of 
a majority, as defined in the Investment Company Act of 1940, as amended (the   
"Act"), of the outstanding shares of the Fund, or by the Investment Manager.    
The Agreement will automatically terminate in the event of its assignment (as   
defined in the Act).                                                            

Under its terms, the Agreement has an initial term ending April 30, 1999
and will continue in effect from year to year thereafter, provided continuance  
of the Agreement is approved at least annually by the vote of the holders of a  
majority, as defined in the Act, of the outstanding shares of the Fund, or by   
the                                                                             

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Directors of the Fund; provided that in either event such continuance is        
approved annually by the vote of a majority of the Directors of the Fund who    
are not parties to the Agreement or "interested persons" (as defined in the     
Act) of any such party (the "Independent Directors"), which vote must be cast   
in person at a meeting called for the purpose of voting on such approval.       

 The Fund has acknowledged that the name "Dean Witter" is a property right
of DWR. The Fund has agreed that DWR or its parent company may use, or at any   
time permit others to use, the name "Dean Witter." The Fund has also agreed     
that in the event the Agreement is terminated, or if the affiliation between    
InterCapital and its parent company is terminated, the Fund will eliminate the  
name "Dean Witter" from its name if DWR or its parent company shall so request. 

DIRECTORS AND OFFICERS                                                          
--------------------------------------------------------------------------------

  The Directors and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with     
InterCapital and with the 85 Dean Witter Funds and the 14 TCW/DW Funds are      
shown below.                                                                    

                                                        [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       
Director                                       Corporation (since November, 1995); Director or Trustee of the 
c/o Levitz Furniture Corporation               Dean Witter Funds; formerly President and Chief Executive      
6111 Broken Sound Parkway, N.W.                Officer of Hills Department Stores (May, 1991-July, 1995);     
Boca Raton, Florida                            formerly variously Chairman, Chief Executive Officer, President
                                               and Chief Operating Officer (1987-1991) of the Sears           
                                               Merchandise Group of Sears, Roebuck and Co.; Director of       
                                               Eaglemark Financial Services Inc., the United Negro College    
                                               Fund and Weirton Steel Corporation.                            

Charles A. Fiumefreddo* (64)                   Chairman and Chief Executive Officer and Director of In-       
Chairman of the Board,                         terCapital, DWSC and Distributors; Executive Vice President and
President and Chief Executive                  Director of DWR; Chairman, Director or Trustee, President and  
Officer and Director                           Chief Executive Officer of the Dean Witter Funds; Chairman,    
Two World Trade Center                         Chief Executive Officer and Trustee of the TCW/DW Funds;       
New York, New York                             Chairman and Director of Dean Witter Trust FSB ("DWT");        
                                               Director and/or officer of various MSDWD subsidiaries; formerly
                                               Executive Vice President and Director of Dean Witter, Discover 
                                               & Co. (until February, 1993).                                  

Edwin J. Garn (65)                             Director or Trustee of the Dean Witter Funds; formerly United  
Director                                       States Senator (R-Utah) (1974-1992) and Chairman, Senate       
c/o Huntsman Corporation                       Banking Committee (1980-1986); formerly Mayor of Salt Lake     
500 Huntsman Way                               City, Utah (1971-1974); formerly Astronaut, Space Shuttle      
Salt Lake City, Utah                           Discovery (April 12-19, 1985); Vice Chairman, Huntsman         
                                               Corporation (since January, 1993); Director of Franklin Quest  
                                               (time management systems) and John Alden Financial Corp.       
                                               (health insurance); Member of the board of various civic and   
                                               charitable organizations.                                      

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        NAME, AGE, POSITION WITH FUND                                                                         
                 AND ADDRESS                             PRINCIPAL OCCUPATION DURING LAST FIVE YEARS          
---------------------------------------------  ---------------------------------------------------------------
John R. Haire (72)                             Chairman of the Audit Committee and Chairman of the Committee  
Director                                       of the Independent Directors or Trustees and Director or       
Two World Trade Center                         Trustee of the Dean Witter Funds; Chairman of the Audit        
New York, New York                             Committee and Chairman of the Committee of the Independent     
                                               Trustees and Trustee of the TCW/DW Funds; formerly President,  
                                               Council for Aid to Education (1978-1989) and Chairman and Chief
                                               Executive Officer of Anchor Corporation, an Investment Adviser 
                                               (1964-1978); Director of Washington National Corporation       
                                               (insurance).                                                   

Wayne E. Hedien (63)                           Retired; Director or Trustee of the Dean Witter Funds; Director
Director                                       of the PMI Group, Inc. (private mortgage insurance); Trustee   
c/o Gordon Altman Butowsky                     and Vice Chairman of The Field Museum of Natural History;      
 Weitzen Shalov & Wein                         formerly associated with the Allstate Companies (1966-1994),   
Counsel to the Independent Trustees            most recently as Chairman of The Allstate Corporation (March,  
114 West 47th Street                           1993-December, 1994) and Chairman and Chief Executive Officer  
New York, New York                             of its wholly-owned subsidiary, Allstate Insurance Company     
                                               (July, 1989-December, 1994); director of various other business
                                               and charitable organizations.                                  

Dr. Manuel H. Johnson (48)                     Senior Partner, Johnson Smick International, Inc., a con-      
Director                                       sulting firm; Co-Chairman and a founder of the Group of Seven  
c/o Johnson Smick International, Inc.          Council (G7C), an international economic commission; Director  
1133 Connecticut Avenue, N.W.                  or Trustee of the Dean Witter Funds; Trustee of the TCW/DW     
Washington, DC                                 Funds; Director of NASDAQ (since June, 1995); Director of      
                                               Greenwich Capital Markets, Inc. (broker-dealer); Trustee of the
                                               Financial Accounting Foundation (oversight organization for the
                                               Financial Accounting Standards Board); formerly Vice Chairman  
                                               of the Board of Governors of the Federal Reserve System        
                                               (1986-1990) and Assistant Secretary of the U.S. Treasury       
                                               (1982-1986).                                                   

Michael E. Nugent (61)                         General Partner, Triumph Capital, L.P., a private investment   
Director                                       partnership; Director or Trustee of the Dean Witter Funds;     
c/o Triumph Capital, L.P.                      Trustee of the TCW/DW Funds; formerly Vice President, Bankers  
237 Park Avenue                                Trust Company and BT Capital Corporation (1984-1988); Director 
New York, New York                             of various business organizations.                             

Philip J. Purcell* (54)                        Chairman of the Board of Directors and Chief Executive Officer 
Director                                       of MSDWD, DWR and Novus Credit Services Inc.; Director of      
1585 Broadway                                  InterCapital, DWSC and Distributors; Director or Trustee of the
New York, New York                             Dean Witter Funds; Director and/or officer of various MSDWD    
                                               subsidiaries.                                                  

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        NAME, AGE, POSITION WITH FUND                                                                         
                 AND ADDRESS                             PRINCIPAL OCCUPATION DURING LAST FIVE YEARS          
---------------------------------------------  ---------------------------------------------------------------
John L. Schroeder (67)                         Retired; Director or Trustee of the Dean Witter Funds; Trustee 
Director                                       of the TCW/DW Funds; Director of Citizens Utilities Company;   
c/o Gordon Altman Butowsky                     formerly Executive Vice President and Chief Investment Officer 
 Weitzen Shalov & Wein                         of the Home Insurance Company (August, 1991-September, 1995).  
Counsel to the Independent Directors                                                                          
114 West 47th Street                                                                                          
New York, New York                                                                                            

Barry Fink (42)                                Senior Vice President (since March, 1997) and Secretary and    
Vice President,                                General Counsel (since February, 1997) of InterCapital and     
Secretary and General Counsel                  DWSC; Senior Vice President (since March, 1997) and Assistant  
Two World Trade Center                         Secretary and Assistant General Counsel (since February, 1997) 
New York, New York                             of Distributors; Assistant Secretary of DWR (since August,     
                                               1996); Vice President, Secretary and General Counsel of the    
                                               Dean Witter Funds and the TCW/DW Funds (since February, 1997); 
                                               previously First Vice President (June, 1993-February, 1997),   
                                               Vice President (until June, 1993) and Assistant Secretary and  
                                               Assistant General Counsel of InterCapital and DWSC and         
                                               Assistant Secretary of the Dean Witter Funds and TCW/DW Funds. 

Jonathan R. Page (51)                          Senior Vice President of InterCapital; Vice President of       
Vice President                                 various Dean Witter Funds.                                     
Two World Trade Center                                                                                        
New York, New York                                                                                            

Thomas F. Caloia (51)                          First Vice President and Assistant Treasurer of InterCapital   
Treasurer                                      and DWSC; Treasurer of the Dean Witter Funds and the TCW/DW    
Two World Trade Center                         Funds.                                                         
New York, New York                                                                                            
Two World Trade Center                         Funds.                                                         
New York, New York                                                                                            

------------------------                                                        
*Denotes Directors who are "Interested persons," as defined in the Act.         

In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWT and     
Director of DWT, Mitchell M. Merin, President and Chief Strategic Officer of    
InterCapital and DWSC, Executive Vice President of Distributors and DWT, and    
Director of DWT, Executive Vice President, Chief Administrative Officer and     
Director of DWR, and Director of SPS Transaction Services, Inc. and various     
other MSDWD subsidiaries, Joseph J. McAlinden, Executive Vice President and     
Chief Investment Officer of InterCapital and Director of DWT, Robert S.         
Giambrone, Senior Vice President of InterCapital, DWSC, Distributors and DWT    
and Director of DWT, and Peter M. Avelar and James F. Willison, Senior Vice     
Presidents of InterCapital, are Vice Presidents of the Fund, and Marilyn K.     
Cranney, First Vice President and Assistant General Counsel of InterCapital and 
DWSC, LouAnne D. McInnis, Carsten Otto and Ruth Rossi, Vice Presidents and      
Assistant General Counsels of InterCapital and DWSC, and Frank Bruttomesso and  
Todd Lebo, staff attorneys with InterCapital, are Assistant Secretaries of the  
Fund.                                                                           

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THE BOARD OF DIRECTORS, THE INDEPENDENT DIRECTORS, AND THE COMMITTEES           

The Board of Directors consists of nine (9) directors. These same       
individuals also serve as directors or trustees for all of the Dean Witter      
Funds, and are referred to in this section as Directors. As of the date of this 
Statement of Additional Information, there are a total of 85 Dean Witter Funds, 
comprised of 128 portfolios. As of September 30, 1997, the Dean Witter Funds    
had total net assets of approximately $98.6 billion and more than six million   
shareholders.                                                                   

 Seven Directors (77% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own    
any stock or other securities issued by InterCapital's parent company, DWDC.    
These are the "disinterested" or "independent" Directors. The other two         
Directors (the "management Directors") are affiliated with InterCapital. Four   
of the seven independent Directors are also Independent Trustees of the TCW/DW  
Funds.                                                                          

Law and regulation establish both general guidelines and specific duties
for the Independent Directors. The Dean Witter Funds seek as Independent        
Directors individuals of distinction and experience in business and finance,    
government service or academia; these are people whose advice and counsel are   
in demand by others and for whom there is often competition. To accept a        
position on the Funds' Boards, such individuals may reject other attractive     
assignments because the Funds make substantial demands on their time. Indeed,   
by serving on the Funds' Boards, certain Directors who would otherwise be       
qualified and in demand to serve on bank boards would be prohibited by law from 
doing so.                                                                       

All of the Independent Directors serve as members of the Audit Committee
and the Committee of the Independent Directors. Three of them also serve as     
members of the Derivatives Committee. During the calendar year ended December   
31, 1996, the three Committees held a combined total of sixteen meetings. The   
Committees hold some meetings at InterCapital's offices and some outside        
InterCapital. Management Directors or officers do not attend these meetings     
unless they are invited for purposes of furnishing information or making a      
report.                                                                         

  The Committee of the Independent Directors is charged with recommending to
the full Board approval of management, advisory and administration contracts,   
Rule 12b-1 plans and distribution and underwriting agreements; continually      
reviewing Fund performance; checking on the pricing of portfolio securities,    
brokerage commissions, transfer agent costs and performance, and trading among  
Funds in the same complex; and approving fidelity bond and related insurance    
coverage and allocations, as well as other matters that arise from time to      
time. The Independent Directors are required to select and nominate individuals 
to fill any Independent Director vacancy on the Board of any Fund that has a    
Rule 12b-1 plan of distribution. Most of the Dean Witter Funds have such a      
plan.                                                                           

The Audit Committee is charged with recommending to the full Board the  
engagement or discharge of the Fund's independent accountants; directing        
investigations into matters within the scope of the independent accountants'    
duties, including the power to retain outside specialists; reviewing with the   
independent accountants the audit plan and results of the auditing engagement;  
approving professional services provided by the independent accountants and     
other accounting firms prior to the performance of such services; reviewing the 
independence of the independent accountants; considering the range of audit and 
non-audit fees; reviewing the adequacy of the Fund's system of internal         
controls; and preparing and submitting Committee meeting minutes to the full    
Board.                                                                          

Finally, the Board of each Fund has formed a Derivatives Committee to   
establish parameters for and oversee the activities of the Fund with respect to 
derivative investments, if any, made by the Fund.                               

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DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT DIRECTORS AND AUDIT COMMITTEE

The Chairman of the Committee of the Independent Directors and the Audit
Committee maintains an office at the Funds' headquarters in New York. He is     
responsible for keeping abreast of regulatory and industry developments and the 
Funds' operations and management. He screens and/or prepares written materials  
and identifies critical issues for the Independent Directors to consider,       
develops agendas for Committee meetings, determines the type and amount of      
information that the Committees will need to form a judgment on various issues, 
and arranges to have that information furnished to Committee members. He also   
arranges for the services of independent experts and consults with them in      
advance of meetings to help refine reports and to focus on critical issues.     
Members of the Committees believe that the person who serves as Chairman of     
both Committees and guides their efforts is pivotal to the effective            
functioning of the Committees.                                                  

 The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Directors and    
with the Funds' independent auditors. He arranges for a series of special       
meetings involving the annual review of investment advisory, management and     
other operating contracts of the Funds and, on behalf of the Committees,        
conducts negotiations with the Investment Manager and other service providers.  
In effect, the Chairman of the Committees serves as a combination of chief      
executive and support staff of the Independent Directors.                       

The Chairman of the Committee of the Independent Directors and the Audit
Committee is not employed by any other organization and devotes his time        
primarily to the services he performs as Committee Chairman and Independent     
Director of the Dean Witter Funds and as an Independent Director and, since     
July 1, 1996, as Chairman of the Committee of the Independent Directors and the 
Audit Committee of the TCW/DW Funds. The current Committee Chairman has had     
more than 35 years experience as a senior executive in the investment company   
industry.                                                                       

ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT DIRECTORS FOR ALL DEAN     
WITTER FUNDS                                                                    

   The Independent Directors and the Funds' management believe that having the
same Independent Directors for each of the Dean Witter Funds avoids the         
duplication of effort that would arise from having different groups of          
individuals serving as Independent Directors for each of the Funds or even of   
sub-groups of Funds. They believe that having the same individuals serve as     
Independent Directors of all the Funds tends to increase their knowledge and    
expertise regarding matters which affect the Fund complex generally and         
enhances their ability to negotiate on behalf of each Fund with the Fund's      
service providers. This arrangement also precludes the possibility of separate  
groups of Independent Directors arriving at conflicting decisions regarding     
operations and management of the Funds and avoids the cost and confusion that   
would likely ensue. Finally, having the same Independent Directors serve on all 
Fund Boards enhances the ability of each Fund to obtain, at modest cost to each 
separate Fund, the services of Independent Directors, and a Chairman of their   
Committees, of the caliber, experience and business acumen of the individuals   
who serve as Independent Directors of the Dean Witter Funds.                    

COMPENSATION OF INDEPENDENT DIRECTORS                                           

  The Fund pays each Independent Director an annual fee of $1,000 plus a per
meeting fee of $50 for meetings of the Board of Trustees or committees of the   
Board of Directors attended by the Director (the Fund pays the Chairman of the  
Audit Committee an annual fee of $750 and pays the Chairman of the Committee of 
the Independent Directors an additional annual fee of $1,200). If a Board       
meeting and a Committee meeting, or more than one Committee meeting, take place 
on a single day, the Directors are paid a single meeting fee by the Fund. The   
Fund also reimburses such Directors for travel and other out-of-pocket expenses 
incurred by them in connection with attending such meetings. Directors and      
officers of the Fund who are or have been employed by the Investment Manager or 
an affiliated company receive no compensation or expense reimbursement from the 
Fund.                                                                           

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The following table illustrates the compensation paid to the Fund's     
Independent Directors by the Fund for the fiscal year ended August 31, 1997.    

FUND COMPENSATION 

                                                                [Download Table]

                                                                   AGGREGATE   
                                                                 COMPENSATION  
NAME OF INDEPENDENT DIRECTOR                                     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 Directors for the calendar year ended December 31, 1996 for         
services to the 82 Dean Witter Funds and, in the case of Messrs. Haire,         
Johnson, Nugent and Schroeder, the 14 TCW/DW Funds that were in operation at    
December 31, 1996. With respect to Messrs. Haire, Johnson, Nugent and           
Schroeder, the TCW/DW Funds are included solely because of a limited exchange   
privilege between those Funds and five Dean Witter Money Market Funds. Mr.      
Hedien's term as Director of the Dean Witter Funds commenced on September 1,    
1997.                                                                           

CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS 

                                                        [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 DIRECTOR              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 Director who retires after serving for at least five years (or   
such lesser period as may be determined by the Board) as an Independent         
Director or Trustee of any Dean Witter Fund that has adopted the retirement     
program (each such Fund referred to as an "Adopting Fund" and each such         
Director referred to as an "Eligible Director") is entitled to retirement       
payments upon reaching the eligible retirement age (normally, after attaining   
age 72). Annual payments are based upon length of service. Currently, upon      
retirement, each Eligible Director is entitled to receive from the Adopting     
Fund, commencing as of his or her retirement date and continuing for the        
remainder of his or her life, an annual retirement benefit (the "Regular        
Benefit") equal to 25.0% of his or her Eligible Compensation plus 0.4166666% of 
such Eligible Compensation for each full month of service as an Independent     
Director or Trustee of any Adopting Fund in excess of five years up to a        
maximum of 50.0% after ten years of service. The foregoing percentages may be   
changed by the Board.(1) "Eligible Compensation" is one-fifth of the total      
compensation earned by such Eligible Director for service to the Adopting Fund  
in the five year period prior to the date of the Eligible Director's            
retirement. Benefits under the retirement program are not secured or funded by  
the Adopting Funds.                                                             

------------------------                                                        
(1) An Eligible Director may elect alternate payments of his or her retirement  
  benefits based upon the combined life expectancy of such Eligible Director
 and his or her spouse on the date of such Eligible Director's retirement.
   The amount estimated to be payable under this method, through the remainder
   of the later of the lives of such Eligible Director and spouse, will be the
actuarial equivalent of the Regular Benefit. In addition, the Eligible  
   Director may elect that the surviving spouse's periodic payment of benefits
will be equal to either 50% or 100% of the previous periodic amount, an 
 election that, respectively, increases or decreases the previous periodic
 amount so that the resulting payments will be the actuarial equivalent of
the Regular Benefit.                                                    

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The following table illustrates the retirement benefits accrued to the  
Fund's Independent Directors by the Fund for the fiscal year ended August 31,   
1997 and by the 57 Dean Witter Funds (including the Fund) as of December 31,    
1996, and the estimated retirement benefits for the Fund's Independent          
Directors, to commence upon their retirement, from the Fund as of August 31,    
1997 and from the 57 Dean Witter Funds as of December 31, 1996.                 

RETIREMENT BENEFITS FROM THE FUND AND ALL DEAN WITTER FUNDS 

                                                        [Enlarge/Download Table]

                                 FOR ALL ADOPTING FUNDS                                                  
                                -------------------------                                                
                                ESTIMATED                          RETIREMENT                            
                                 CREDITED                           BENEFITS           ESTIMATED ANNUAL  
                                  YEARS                            ACCRUED AS              BENEFITS      
                                OF SERVICE     ESTIMATED            EXPENSES          UPON RETIREMENT(2) 
                                    AT         PERCENTAGE    ----------------------  --------------------
                                RETIREMENT         OF                       BY ALL     FROM      FROM ALL
                                 (MAXIMUM       ELIGIBLE      BY THE       ADOPTING    THE       ADOPTING
NAME OF INDEPENDENT DIRECTOR       10)         COMPENSATION    FUND         FUNDS      FUND       FUNDS  
------------------------------  ----------     ----------    ---------     --------  --------    --------
                                                                                                         
Michael Bozic.................        10           50.0%     $     346     $ 20,147  $    875    $ 51,325
Edwin J. Garn.................        10           50.0            489       27,772       875      51,325
John R. Haire.................        10           50.0           (679)(3)   46,952     2,211     129,550
Dr. Manuel H. Johnson.........        10           50.0            207       10,926       875      51,325
Michael E. Nugent.............        10           50.0            349       19,217       875      51,325
John L. Schroeder.............         8           41.7            663       38,700       729      42,771

------------------------                                                        
(2) Based on current levels of compensation. Amount of annual benefits also     
varies depending on the Director's elections described in Footnote (1)  
above.                                                                  
(3) This number reflects the effect of the extension of Mr. Haire's term as     
Director until June 1, 1998.                                            

 As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's         
officers and Directors as a group was less than 1 percent of the Fund's shares  
of beneficial interest outstanding.                                             

INVESTMENT PRACTICES AND POLICIES                                               
--------------------------------------------------------------------------------

REPURCHASE AGREEMENTS. As discussed in the Prospectus, when cash may be 
available to the Fund for only a few days, it may be invested by the Fund in    
repurchase agreements until such time as it may otherwise be invested or used   
for payments of obligations of the Fund. These agreements, which may be viewed  
as a type of secured lending by the Fund, typically involve the acquisition by  
the Fund of debt securities from a selling financial institution such as a      
bank, savings and loan association or broker-dealer. The agreement provides     
that the Fund will sell back to the institution, and that the institution will  
repurchase, the underlying security ("collateral"), which is held by the Fund's 
custodian bank, at a specified price and at a fixed time in the future, usually 
not more than seven days from the date of purchase. The Fund will receive       
interest from the institution until the time when the repurchase is to occur.   
Although such date is deemed by the Fund to be the maturity date of a           
repurchase agreement, the maturities of securities subject to repurchase        
agreements are not subject to any limits and may exceed thirteen months. While  
repurchase agreements involve certain risks not associated with direct          
investments in debt securities, the Fund follows procedures designed to         
minimize such risks. These procedures include effecting repurchase transactions 
only with large, well-capitalized and well-established financial institutions,  
whose financial conditions will be continually monitored. In addition, the      
value of the collateral underlying the repurchase agreement will always be at   
least equal to the resale price, which consists of the purchase price paid to   
the seller of the securities plus the accrued resale premium which is defined   
as the amount specified in the repurchase agreement or the daily amortization   
of the difference between the purchase price and the resale price specified in  
the repurchase agreement. Such collateral will consist entirely of securities   
that are direct obligations of, or that are fully guaranteed as to principal    
and interest by, the United States or any agency thereof, and/or certificates   
of deposit, bankers' acceptances which are eligible for acceptance by a Federal 
Reserve Bank, and, if the seller is a bank, mortgage related securities (as     
such term is defined in section 3(a)(41) of the Securities Exchange Act of      
1934) that at the time the repurchase agreement is entered into are rated in    
the highest rating category                                                     

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by the "Requisite NRSROs" (see "Purchase of Fund Shares--Determination of Net   
Asset Value"). Additionally, the collateral must qualify the repurchase         
agreement for preferential treatment under the Federal Deposit Insurance Act of 
the Federal Bankruptcy Code. In the event of a default or bankruptcy by a       
selling financial institution, the Fund will seek to liquidate such collateral. 
However, the exercising of the Fund's right to liquidate such collateral could  
involve certain costs or delays and, to the extent that proceeds from any sale  
upon a default of the obligation to repurchase were less than the repurchase    
price, the Fund could suffer a loss. It is the current policy of the Fund not   
to invest in repurchase agreements that do not mature within seven days if any  
such investment, together with any other illiquid assets held by the Fund,      
amounts to more than 10% of its total assets. The Fund's investments in         
repurchase agreements may at times be substantial when, in the view of the      
Investment Manager, liquidity or other considerations warrant.                  

   REVERSE REPURCHASE AGREEMENTS. As discussed in the Prospectus, the Fund may
also use reverse repurchase agreements as part of its investment strategy.      
Reverse repurchase agreements involve sales by the Fund to repurchase the same  
assets at a later date at a fixed price. Generally, the effect of such a        
transaction is that the Fund can recover all or most of the cash invested in    
the portfolio securities involved during the term of the reverse repurchase     
agreement, while it will be able to keep the interest income associated with    
those portfolio securities. Such transactions are only advantageous if the      
interest cost to the Fund of the reverse repurchase transaction is less than    
the cost of obtaining the cash otherwise. Opportunities to achieve this         
advantage may not always be available, and the Fund intends to use the reverse  
repurchase technique only when it will be to its advantage to do so. The Fund   
will establish a segregated account with its custodian bank in which it will    
maintain liquid portfolio securities equal in value to its obligations in       
respect of reverse repurchase agreements. Reverse repurchase agreements are     
considered borrowings by the Fund and for purposes other than meeting           
redemptions may not exceed 5% of the Fund's total assets.                       

  PRIVATE PLACEMENTS. As discussed in the Prospectus, the Fund may invest in
commercial paper issued in reliance on the so-called "private placement"        
exemption from registration afforded by Section 4(2) of the Securities Act of   
1933 (the "Securities Act") and which may be sold to other institutional        
investors pursuant to Rule 144A under the Securities Act. The adoption by the   
Securities and Exchange Commission of Rule 144A, which permits the resale of    
certain restricted securities to institutional investors, had the effect of     
broadening and increasing the liquidity of the institutional trading market for 
securities subject to restrictions on resale to the general public. Section     
4(2) commercial paper sold pursuant to Rule 144A is restricted in that it can   
be resold only to qualified institutional investors. However, since             
institutions constitute virtually the entire market for such commercial paper,  
the market for such Section 4(2) commercial paper is, in reality, as liquid as  
that for other commercial paper. While the Fund generally holds to maturity     
commercial paper in its portfolio, the advent of Rule 144A has greatly          
simplified the ability to sell Section 4(2) commercial paper to other           
institutional investors. Under procedures adopted by the Board of Directors of  
the Fund, the Fund may purchase Section 4(2) commercial paper without being     
subject to the 10% limitation on illiquid investments (see "Investment          
Restrictions" in the Prospectus) and will be able to utilize Rule 144A to sell  
that paper to other institutional investors. The procedures require that the    
Investment Manager consider the following factors in determining that any       
restricted security eligible for sale pursuant to Rule 144A be considered       
liquid: (1) the frequency of trades and quotes for the security, (2) the number 
of dealers willing to purchase or sell the security and the number of other     
potential purchasers, (3) dealer undertakings to make a market in the security, 
and (4) the nature of the security and the nature of the market place trades    
(i.e., the time needed to dispose of the security, the method of soliciting     
offers and the mechanics of transfer). The Investment Manager will report to    
the Board on a quarterly basis on all restricted securities held by the Fund    
with regard to their ongoing liquidity. In the event any Section 4(2)           
commercial paper or other restricted security held by the Fund is determined to 
be illiquid by the Board and the Investment Manager, that investment would be   
included as an illiquid security subject to the 10% limitation on illiquid      
investments referred to above.                                                  

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   LENDING OF PORTFOLIO SECURITIES. Subject to Investment Restriction 2 below,
the Fund may lend portfolio securities to brokers, dealers and financial        
institutions provided that cash equal to at least 100% of the market value of   
the securities loaned is deposited by the borrower with the Fund and is         
maintained each business day in a segregated account pursuant to applicable     
regulations. The creditworthiness of firms to which the Fund lends its          
portfolio securities is monitored on an ongoing basis. While such securities    
are on loan, the borrower will pay the Fund any income accruing thereon, and    
the Fund may invest the cash collateral in portfolio securities, thereby        
earning additional income. The Fund will not lend its portfolio securities if   
such loans are not permitted by the laws or regulations of any state in which   
its shares are qualified for sale and will not lend more than 10% of the value  
of its total assets. Loans would be subject to termination by the Fund in the   
normal settlement time, currently five business days after notice, or by the    
borrower on one day's notice. Borrowed securities must be returned when the     
loan is terminated. Any gain or loss in the market price of the borrowed        
securities which occurs during the term of the loan inures to the Fund and its  
shareholders. The Fund may pay reasonable finders, borrowers, administrative,   
and custodial fees in connection with a loan. During its fiscal year ended      
August 31, 1997, the Fund did not lend any of its portfolio securities, and it  
has no intention of doing so in the foreseeable future.                         

VARIABLE AND FLOATING RATE OBLIGATIONS. As stated in the Prospectus, the
Fund may invest in variable and floating rate obligations. The interest rate    
payable on a variable rate obligation is adjusted at predesignated periodic     
intervals and, on floating rate obligations, whenever there is a change in the  
market rate of interest on which the interest rate payable is based. Other      
features may include the right whereby the Fund may demand prepayment of the    
principal amount of the obligation prior to its stated maturity (a "demand      
feature") and the right of the issuer to prepay the principal amount prior to   
maturity. The principal benefit of a variable rate obligation is that the       
interest rate adjustment minimizes changes in the market value of the           
obligation. As a result, the purchase of variable rate and floating rate        
obligations should enhance the ability of the Fund to maintain a stable net     
asset value per share (see "How Net Asset Value is Determined") and to sell     
obligations prior to maturity at a price approximating the full principal       
amount of the obligations. The principal benefit to the Fund of purchasing      
obligations with a demand feature is that liquidity, and the ability of the     
Fund to obtain repayment of the full principal amount of an obligation prior to 
maturity, is enhanced. The payment of principal and interest by issuers of      
certain obligations purchased by the Fund may be guaranteed by letters of       
credit or other credit facilities offered by banks or other financial           
institutions. Such guarantees will be considered in determining whether an      
obligation meets the Fund's investment quality requirements.                    

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

In addition to the investment restrictions enumerated in the Prospectus,
the Fund has adopted certain investment restrictions listed below as            
fundamental policies which cannot be changed without the approval of the        
holders of a "majority" of the outstanding shares of the Fund, as defined in    
the Act. Majority is defined in the Act as the lesser of (a) sixty-seven        
percent or more of the shares present at a meeting of shareholders, if the      
holders of more than fifty percent of the outstanding shares of the Fund are    
present or represented by proxy, or (b) more than fifty percent of the          
outstanding shares of the Fund.                                                 

These restrictions provide that the Fund may not:                       

1. Purchase any common stocks or other equity securities;     

  2. Make loans to others, except through the purchase of the debt
obligations and repurchase agreements referred to under "Investment     
 Practices and Policies" above and "Investment Objectives and Policies" in
 the Prospectus; and loans of portfolio securities in excess of 10% of the
value of the Fund's total assets, made in accordance with guidelines    
established by the Fund's Board of Directors, including maintaining     
   collateral from the borrower equal at all times to the current market value
of the securities loaned;                                               

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 3. Purchase or sell real estate; however, the Fund may purchase
marketable securities issued by companies which invest in real estate or
interests therein;                                                      

4. Purchase securities on margin or sell short;               

         5. Purchase or sell commodities or commodity futures contracts, or oil,
gas or mineral exploration or development programs;                     

6. Underwrite securities of other issuers;                    

7. Purchase warrants, or write, purchase or sell puts, calls, 
straddles, spreads, or combinations thereof;                            

        8. Participate on a joint or joint and several basis in any securities
trading account;                                                        

9. Purchase the securities of any other investment company;   

   10. Purchase securities of any issuer for the purpose of exercising
control or management; and                                              

     11. Purchase or retain the securities of any issuer if any officer or
director of the Fund is an officer or director of such issuer and owns  
 beneficially more than 1/2 of 1% of the securities of such issuer and all
of the officers and directors of the Fund and its Investment Manager    
together own more than 5% of the securities of such issuer.             

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

 If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in percentage resulting from a change in values of   
portfolio securities or amount of total or net assets will not be considered a  
violation of any of the foregoing restrictions.                                 

PORTFOLIO TRANSACTIONS AND BROKERAGE                                            
--------------------------------------------------------------------------------

Subject to the general supervision by the Board of Directors, the       
Investment Manager is responsible for decisions to buy and sell securities for  
the Fund and arranges for the execution of portfolio security transactions on   
behalf of the Fund. Purchases of portfolio securities are made from dealers,    
underwriters and issuers; sales, if any, prior to maturity, are made to dealers 
and issuers. The Fund does not normally incur any brokerage commission expense  
on such transactions. Money market instruments are generally traded on a "net"  
basis with dealers acting as principal for their own accounts without a stated  
commission, although the price of the security usually includes a profit to the 
dealer. Securities purchased in underwritten offerings include a fixed amount   
of compensation to the underwriter, generally referred to as the underwriter's  
concession or discount. When securities are purchased or sold directly from or  
to an issuer, no commissions or discounts are paid. During the Fund's fiscal    
years ended August 31, 1995, 1996 and 1997, the Fund did not pay any            
underwriter's discounts on principal transactions or brokerage commissions on   
agency transactions.                                                            

 The Investment Manager currently serves as investment manager to a number
of clients, including other investment companies, and may in the future act as  
investment manager or adviser to others. It is the practice of the Investment   
Manager to cause purchase and sale transactions to be allocated among the Fund  
and others whose assets it manages in such manner as it deems equitable. In     
making such allocations among the Fund and other client accounts, the various   
factors may be considered, including the respective investment objectives, the  
relative size of portfolio holdings of the same or comparable securities, the   
availability of cash for investment, the size of investment commitments         
generally held and the opinions of the persons responsible for managing the     
portfolios of the Fund and other client accounts. In the case of certain        
initial and secondary public offerings, the Investment Manager may utilize a    
pro rata allocation process based on the size of the Dean Witter Funds involved 
and the number of shares available from the public offering.                    

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   The policy of the Fund, regarding purchases and sales of securities for its
portfolio, is that primary consideration be given to obtaining the most         
favorable prices and efficient execution of transactions. In seeking to         
implement the Fund's policies, the Investment Manager effects transactions with 
those brokers and dealers who the Investment Manager believes provide the most  
favorable prices and are capable of providing efficient executions. If the      
Investment Manager believes such price and executions are obtainable from more  
than one broker or dealer, it may give consideration to placing portfolio       
transactions with those brokers and dealers who also furnish research and other 
services to the Fund or the Investment Manager. Such services may include, but  
are not limited to, any one or more of the following: information as to the     
availability of securities for purchase or sale; statistical or factual         
information or opinions pertaining to investment; wire services; and appraisals 
or evaluations of portfolio securities.                                         

The information and services received by the Investment Manager from    
brokers and dealers may be of benefit to the Investment Manager in the          
management of accounts of some of its other clients and may not, in every case, 
benefit the Fund directly. While the receipt of such information and services   
is useful in varying degrees and would generally reduce the amount of research  
or services otherwise performed by the Investment Manager and thereby reduce    
its expenses, it is of indeterminable value and the Fund did not reduce the     
management fee it pays to the Investment Manager by any amount that may be      
attributable to the value of such services.                                     

Pursuant to an order of the Securities and Exchange Commission, the Fund
may effect principal transactions in certain money market instruments with DWR. 
The Fund will limit its transactions with DWR to U.S. Government and Government 
Agency Securities, Bank Money Instruments (i.e. Certificates of Deposit and     
Banker's Acceptances) and Commercial Paper. Such transactions will be effected  
with DWR only when the price available from DWR is better than that available   
from other dealers. During its fiscal years ended August 31, 1995, 1996 and     
1997, the Fund did not effect any principal transactions with DWR.              

Consistent with the policy described above, brokerage transactions in   
securities listed on exchanges or admitted to unlisted trading privileges may   
be effected through DWR and other brokers and dealers that are affiliates of    
the Investment Manager. In order for an affiliated broker or dealer to effect   
portfolio transactions for the Fund, the commissions, fees or other             
remuneration received by the affiliated broker or dealer must be reasonable and 
fair compared to the commissions, fees or other remuneration paid to other      
brokers in connection with comparable transactions involving similar securities 
being purchased or sold on an exchange during a comparable period of time. This 
standard would allow the affiliated broker or dealer to receive no more than    
the remuneration which would be expected to be received by an unaffiliated      
broker in a commensurate arm's-length transaction. Furthermore, the Directors   
of the Fund, including a majority of the Directors who are not "interested"     
Directors (as defined in the Act), have adopted procedures which are reasonably 
designed to provide that any commissions, fees or other remuneration paid to    
DWR are consistent with the foregoing standard. The Fund did not pay any        
brokerage commissions or underwriting discounts to an affiliated broker or      
dealer or any other broker-dealer during the fiscal years ended August 31,      
1995, 1996 and 1997.                                                            

Portfolio turnover rate is defined as the lesser of the value of the    
securities purchased or securities sold, excluding all securities whose         
maturities at time of acquisition were one year or less, divided by the average 
monthly value of such securities owned during the year. Based on this           
definition, it is anticipated that the Fund's policy of investing in securities 
with remaining maturities of thirteen months or less will not result in a       
quantifiable portfolio turnover rate. However, because of the short-term nature 
of the Fund's portfolio securities, it is anticipated that the number of        
purchases and sales or maturities of such securities will be substantial.       
Nevertheless, as brokerage commissions are not normally charged on purchases    
and sales of such securities, the large number of these transactions does not   
have an adverse effect upon the net yield and net asset value of the shares of  
the Fund.                                                                       

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

  As discussed in the Prospectus, the Fund offers its shares for sale to the
public on a continuous basis, without a sales charge. Pursuant to a             
Distribution Agreement between the Fund and Dean Witter Distributors Inc. (the  
"Distributor"), an affiliate of the Investment Manager and a wholly-owned       
subsidiary of MSDWD, shares of the Fund are distributed by the Distributor and  
through certain selected broker-dealers which have entered into selected dealer 
agreements with the Distributor ("Selected Broker-Dealers") at an offering      
price equal to the net asset value per share next determined following receipt  
of an effective purchase order (accompanied by Federal Funds). Dealers in the   
securities markets in which the Fund will invest usually require immediate      
payment in Federal Funds. Since the payment by a Fund shareholder for his or    
her other shares cannot be invested until it is converted into and available to 
the Fund in Federal Funds, the Fund requires such payments to be so available   
before a share purchase order can be considered effective. All checks submitted 
for payment are accepted subject to collection at full face value in United     
States funds and must be drawn in United States dollars in a United States      
bank.                                                                           

 The Board of Directors of the Fund, including a majority of the Directors
who are not and were not at the time of their vote "interested persons" (as     
defined in the Act) of either party to the Distribution Agreement (the          
"Independent Directors"), approved, at its meeting held on April 24, 1997, the  
current Distribution Agreement appointing the Distributor as exclusive          
distributor of the Fund's shares and providing for the Distributor to bear      
distribution expenses not borne by the Fund. By its terms, the Distribution     
Agreement has an initial term ending April 30, 1998 and will continue in effect 
from year to year thereafter if approved by the Directors. The current          
Distribution Agreement took effect on May 31, 1997 upon the consummation of the 
merger of Dean Witter, Discover & Co. with Morgan Stanley Group Inc. and is     
substantially identical to the Fund's prior Distribution Agreement except for   
its dates of effectiveness and termination.                                     

  SHAREHOLDER INVESTMENT ACCOUNT. Upon the purchase of shares of the Fund, a
Shareholder Investment Account is opened for the investor on the books of the   
Fund, maintained by the Fund's Transfer Agent, Dean Witter Trust FSB (the       
"Transfer Agent"). This is an open account in which shares owned by the         
investor are credited by the Transfer Agent in lieu of issuance of a stock      
certificate. If a stock certificate is desired, it must be requested in writing 
for each transaction. Certificates are issued only for full shares and may be   
redeposited in the account at any time. There is no charge to the investor for  
issuance of a certificate. Whenever a shareholder instituted transaction takes  
place in the Shareholder Investment Account directly through the Transfer       
Agent, the shareholder will be mailed a written confirmation of the             
transaction.                                                                    

DIRECT INVESTMENTS THROUGH TRANSFER AGENT. A shareholder may make       
additional investments in Fund shares at any time through the Shareholder       
Investment Account by sending a check payable to Dean Witter Liquid Asset Fund  
Inc. in any amount, not less than $100, directly to the Transfer Agent. The     
shares so purchased will be credited to the Shareholder Investment Account.     

ACCOUNT STATEMENTS. All purchases of Fund shares will be credited to the
shareholder in a Shareholder Investment Account maintained for the shareholder  
by the Transfer Agent in full and fractional shares of the Fund (rounded to the 
nearest 1/100 of a share, with the exception of purchases made through          
reinvestment of dividends, which are rounded to the last 1/100 of a share). A   
confirmation will be mailed to the shareholder after each shareholder           
instituted purchase or redemption transaction effected through the Transfer     
Agent. A quarterly statement of the account is sent to all shareholders. Share  
certificates will not be issued unless requested in writing by the shareholder. 
No certificates will be issued for fractional shares or to shareholders who     
have elected the checking account, predesignated bank account or systematic     
withdrawal plan methods of withdrawing cash from their accounts.                

The Fund reserves the right to reject any order for the purchase of its 
shares. In addition, the offering of shares of the Fund may be suspended at any 
time and resumed at any time thereafter.                                        

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EXCHANGE PRIVILEGE                                                              

 As discussed in the Prospectus under the caption "Exchange Privilege," an
Exchange Privilege exists whereby investors who have purchased shares of any of 
the Dean Witter Funds that are multiple class funds ("Dean Witter Multi-Class   
Funds") and Dean Witter Funds sold with either a front-end sales charge ("FSC   
funds") or a contingent deferred sales charge ("CDSC funds") will be permitted, 
after the shares of the fund acquired by purchase (not by exchange or dividend  
reinvestment) have been held for thirty days, to redeem all or part of their    
shares in that fund, have the proceeds invested in shares of the Fund, Dean     
Witter Tax-Free Daily Income Trust, Dean Witter California Tax-Free Daily       
Income Trust, Dean Witter New York Municipal Money Market Trust or Dean Witter  
U.S. Government Money Market Trust (these five funds are hereinafter called     
"money market funds"), or Dean Witter Short-Term U.S. Treasury Trust, Dean      
Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund or Dean   
Witter Intermediate Term U.S. Treasury Trust (these nine funds, including the   
Fund, are referred to herein as the "Exchange Funds"). There is no waiting      
period for exchanges of shares acquired by exchange or dividend reinvestment.   
Shares of the Exchange Funds received in an exchange for shares of a Dean       
Witter Multi-Class Fund may be redeemed and exchanged only for shares of the    
corresponding Class of a Dean Witter Multi-Class Fund or for shares of one of   
the other Exchange Funds, provided that shares of the Exchange Funds received   
in an exchange for Class A shares of a Dean Witter Multi-Class Fund may also be 
redeemed and exchanged for shares of a FSC fund, and shares of the Exchange     
Funds received in an exchange for Class B shares of a Dean Witter Multi-Class   
Fund may also be redeemed and exchanged for shares of a CDSC fund. In addition, 
shares of the Exchange Funds received in an exchange for shares of a FSC fund   
may be redeemed and exchanged for Class A shares of a Dean Witter Multi-Class   
Fund or for shares of one of the other Exchange Funds, and shares of the        
Exchange Funds received in an exchange for shares of a CDSC fund may be         
redeemed and exchanged for Class B shares of a Dean Witter Multi-Class Fund or  
for shares of one of the other Exchange Funds. Ultimately, any applicable       
contingent deferred sales charge ("CDSC") will have to be paid upon redemption  
of shares originally purchased from a CDSC fund or a Class of a Dean Witter     
Multi-Class Fund that imposes a CDSC. An exchange will be treated for federal   
income tax purposes the same as a repurchase or redemption of shares, on which  
the shareholder may realize a capital gain or loss.                             

Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the        
present account, unless the Transfer Agent receives written notification to the 
contrary. For telephone exchanges, the exact registration of the existing       
account and the account number must be provided.                                

Any shares held in certificate form cannot be exchanged but must be     
forwarded to the Transfer Agent and deposited into the shareholder's account    
before being eligible for exchange. (Certificates mailed in for deposit should  
not be endorsed.)                                                               

When shares of a Dean Witter Multi-Class Fund or any CDSC fund are      
exchanged for shares of any Exchange Fund, the exchange is executed at no       
charge to the shareholder, without the imposition of the CDSC at the time of    
the exchange. During the period of time the shareholder remains in the Exchange 
Fund (calculated from the last day of the month in which the Exchange Fund      
shares were acquired), the holding period or "year since purchase payment made" 
is frozen. When shares are redeemed out of the Exchange Fund, they will be      
subject to a CDSC which would be based upon the period of time the shareholder  
held shares in a Dean Witter Multi-Class Fund or in a CDSC fund. However, in    
the case of shares of a CDSC fund exchanged into an Exchange Fund on or after   
April 23, 1990, upon redemption of shares which results in a CDSC being         
imposed, a credit (not to exceed the amount of the CDSC) will be given in an    
amount equal to the 12b-1 distribution fees incurred on or after that date      
which are attributable to those shares. Shareholders acquiring shares of an     
Exchange Fund pursuant to this exchange privilege may exchange those shares     
back into a Dean Witter Multi-Class Fund or a CDSC fund from the Exchange Fund, 
with no CDSC being imposed on such exchange. The holding period previously      
frozen when shares were first exchanged for shares of the Exchange Fund resumes 
on the last day of the month in which shares of a Dean Witter Multi-Class Fund  
or of a CDSC fund are                                                           

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reacquired. Thus, a CDSC is imposed only upon an ultimate redemption, based     
upon the time (calculated as described above) the shareholder was invested in a 
Dean Witter Multi-Class Fund or in a CDSC fund. In the case of exchanges of     
Class A shares of a Dean Witter Multi-Class Fund which are subject to a CDSC,   
the holding period also includes the time (calculated as described above) the   
shareholder was invested in a FSC fund.                                         

 When shares initially purchased in a Dean Witter Multi-Class Fund or in a
CDSC fund are exchanged for shares of a Dean Witter Multi-Class Fund, shares of 
a CDSC Fund, shares of a FSC Fund, or shares of an Exchange Fund, the date of   
purchase of the shares of the fund exchanged into, for purposes of the CDSC     
upon redemption, will be the last day of the month in which the shares being    
exchanged were originally purchased. In allocating the purchase payments        
between funds for purposes of the CDSC, the amount which represents the current 
net asset value of shares at the time of the exchange which were (i) purchased  
more than one, three or six years (depending on the CDSC schedule applicable to 
the shares) prior to the exchange, (ii) originally acquired through             
reinvestment of dividends or distributions and (iii) acquired in exchange for   
shares of FSC funds, or for shares of other Dean Witter Funds for which shares  
of FSC funds have been exchanged (all such shares called "Free Shares"), will   
be exchanged first. After an exchange, all dividends earned on shares in the    
Exchange Fund will be considered Free Shares. If the exchanged amount exceeds   
the value of such Free Shares, an exchange is made, on a block-by-block basis,  
of non-Free Shares held for the longest period of time (except that if shares   
held for identical periods of time but subject to different CDSC schedules are  
held in the same Exchange Privilege Account, the shares of that block that are  
subject to a lower CDSC rate will be exchanged prior to the shares of that      
block that are subject to a higher CDSC rate). Shares equal to any appreciation 
in the value of non-Free Shares exchanged will be treated as Free Shares, and   
the amount of the purchase payments for the non-Free Shares of the fund         
exchanged into will be equal to the lesser of (a) the purchase payments for, or 
(b) the current net asset value of, the exchanged non-Free Shares. If an        
exchange between funds would result in exchange of only part of a particular    
block of non-Free Shares, then shares equal to any appreciation in the value of 
the block (up to the amount of the exchange) will be treated as Free Shares and 
exchanged first, and the purchase payment for that block will be allocated on a 
pro rata basis between the non-Free Shares of that block to be retained and the 
non-Free Shares to be exchanged. The prorated amount of such purchase payment   
attributable to the retained non-Free Shares will remain as the purchase        
payment for such shares, and the amount of purchase payment for the exchanged   
non-Free Shares will be equal to the lesser of (a) the prorated amount of the   
purchase payment for, or (b) the current net asset value of, those exchanged    
non-Free Shares. Based upon the procedures described in the Dean Witter         
Multi-Class Fund Prospectus under the caption "Purchase of Fund Shares" and in  
the CDSC fund Prospectus under the caption "Contingent Deferred Sales Charge,"  
any applicable CDSC will be imposed upon the ultimate redemption of shares of   
any fund, regardless of the number of exchanges since those shares were         
originally purchased.                                                           

  Exchange Privilege accounts may also be maintained for shareholders of the
money market funds who acquired their shares in exchange for shares of various  
TCW/DW Funds, a group of funds distributed by the Distributor for which TCW     
Funds Management, Inc. serves as Adviser, under the terms and conditions        
described in the Prospectus and Statement of Additional Information of each     
TCW/DW Fund.                                                                    

With respect to the redemption or repurchase of shares of the Fund, the 
application of proceeds to the purchase of new shares in the Fund or any other  
of the funds and the general administration of the Exchange Privilege, the      
Transfer Agent acts as agent for the Distributor and for the shareholder's      
Selected Broker-Dealer, if any, in the performance of such functions. With      
respect to exchanges, redemptions or repurchases, the Transfer Agent shall be   
liable for its own negligence and not for the default or negligence of its      
correspondents or for losses in transit. The Fund shall not be liable for any   
default or negligence of the Transfer Agent, the Distributor or any Selected    
Broker-Dealer.                                                                  

The Distributor and any Selected Broker-Dealer have authorized and      
appointed the Transfer Agent to act as their agent in connection with the       
application of proceeds of any redemption of Fund shares to                     

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the purchase of the shares of any other fund and the general administration of  
the Exchange Privilege. No commission or discounts will be paid to the          
Distributor or any Selected Broker-Dealer for any transactions pursuant to this 
Exchange Privilege.                                                             

   Shares of the Fund acquired pursuant to the Exchange Privilege will be held
by the Fund's transfer agent in an Exchange Privilege account distinct from any 
account of the same shareholder who may have acquired shares of the Fund        
directly. A shareholder of the Fund will not be permitted to make additional    
investments in such Exchange Privilege account, except through the exchange of  
additional shares of the fund in which the shareholder had initially invested,  
and the proceeds of any shares redeemed from such Exchange Privilege account    
may not thereafter be placed back into that Exchange Privilege account, except  
by utilizing the Reinstatement Privilege (see "Redemptions and                  
Repurchases--Reinstatement Privilege" in the Dean Witter Multi-Class Fund, CDSC 
fund, or FSC fund Prospectus). If such a shareholder desires to make any        
additional investments in the Fund, a separate account will be maintained for   
receipt of such investments. The Fund will have additional costs for account    
maintenance if a shareholder has more than one account with the Fund.           

The Fund also maintains Exchange Privilege Accounts for shareholders who
acquired their shares of the Fund pursuant to exchange privileges offered by    
other investment companies with which the Investment Manager is not affiliated. 
The Fund also expects to make available such exchange privilege accounts to     
other investment companies that may hereafter be managed by the Investment      
Manager.                                                                        

 Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment for the        
Exchange Privilege account of each Class is $10,000 for Dean Witter Short-Term  
U.S. Treasury Trust, although that fund may, in its discretion, accept initial  
purchases of as low as $5,000, and $5,000 for the Fund, Dean Witter Tax-Free    
Daily Income Trust, Dean Witter California Tax-Free Daily Income Trust, and     
Dean Witter New York Municipal Money Market Trust, although those funds may, at 
their discretion, accept initial investments of as low as $1,000. The minimum   
initial investment for the Exchange Privilege account of each Class is $5,000   
for Dean Witter Special Value Fund. The minimum initial investment for the      
Exchange Privilege account of each Class of all other Funds for which the       
Exchange Privilege is available is $1,000.) Upon exchange into an Exchange      
Fund, the shares of that fund will be held in a special Exchange Privilege      
account separately from accounts of those shareholders who have acquired their  
shares directly from that fund. As a result, certain services normally          
available to shareholders of those funds, including the check writing feature,  
will not be available for funds held in that account.                           

The Fund and each of the other Funds may limit the number of times this 
Exchange Privilege may be exercised by any investor within a specified period   
of time. Also, the Exchange Privilege may be terminated or revised at any time  
by any of the Dean Witter Funds, upon such notice as may be required by         
applicable regulatory agencies (presently sixty days' prior written notice for  
termination or material revision), provided that six months' prior written      
notice of termination will be given to the shareholders who hold shares of      
Exchange Funds or TCW/DW North American Government Income Trust pursuant to     
this Exchange Privilege, and provided further that the Exchange Privilege may   
be terminated or materially revised at times (a) when the New York Stock        
Exchange is closed for other than customary weekends and holidays, (b) when     
trading on that Exchange is restricted, (c) when an emergency exists as a       
result of which disposal by the Fund of securities owned by it is not           
reasonably practicable or it is not reasonably practicable for the Fund fairly  
to determine the value of its net assets, (d) during any other period when the  
Securities and Exchange Commission by order so permits (provided that           
applicable rules and regulations of the Securities and Exchange Commission      
shall govern as to whether the conditions prescribed in (b) or (c) exist), or   
(e) if the Fund would be unable to invest amounts effectively in accordance     
with its investment objective(s), policies and restrictions.                    

For further information regarding the Exchange Privilege, shareholders  
should contact their DWR or other Selected Broker-Dealer account executive or   
the Transfer Agent.                                                             

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PLAN OF DISTRIBUTION                                                            

As discussed in the Prospectus, the Fund has entered into a Plan of     
Distribution pursuant to Rule 12b-1 under the Act with the Distributor whereby  
the expenses of certain activities in connection with the distribution of       
shares of the Fund are reimbursed. The Plan was initially approved by the Board 
of Directors on January 18, 1983 and by the Fund's shareholders on March 18,    
1983. The vote of the Board of Directors included a majority of the Directors   
who are not and were not at the time of their vote interested persons of the    
Fund (as defined in the Act) and who have and had at the time of their vote no  
direct or indirect financial interest in the operation of the Plan (the         
"Independent 12b-1 Directors"), cast in person at a meeting called for the      
purpose of voting on such Plan.                                                 

The Plan provides that the Distributor will bear the expense of all     
promotional and distribution related activities on behalf of the Fund,          
including personal services to shareholders and maintenance of shareholder      
accounts, except for expenses that the Directors determine to reimburse, as     
described below. The Distributor, DWR, its affiliates and any other Selected    
Broker-Dealer may be reimbursed for the following expenses and services under   
the Plan: (1) compensation to and expenses of account executives and other      
employees of the Distributor, DWR, its affiliates and other Selected            
Broker-Dealers, including overhead and telephone expenses; (2) sales incentives 
and bonuses to sales representatives and to marketing personnel in connection   
with promoting sales of the Fund's shares; (3) expenses incurred in connection  
with promoting sales of the Fund's shares; (4) preparing and distributing sales 
literature; and (5) providing advertising and promotional activities, including 
direct mail solicitation and television, radio, newspaper, magazine and other   
media advertisements.                                                           

The Fund is authorized to reimburse specific expenses incurred or to be 
incurred in promoting the distribution of the Fund's shares. Reimbursement is   
made through payments at the end of each month. The amount of each monthly      
payment may in no event exceed an amount equal to a payment at the annual rate  
of 0.15 of 1% of the Fund's average daily net assets during the month. No       
interest or other financing charges, if any, incurred on any distribution       
expense incurred pursuant to the Plan will be reimbursable under the Plan. In   
the case of all expenses other than expenses representing a residual to account 
executives, such amounts shall be determined at the beginning of each calendar  
quarter by the Directors, including a majority of the Independent 12b-1         
Directors. Expenses representing a residual to account executives may be        
reimbursed without prior determination. In the event that the Distributor       
proposes that monies shall be reimbursed for other than such expenses, then in  
making quarterly determinations of the amounts that may be expended by the      
Fund, the Distributor will provide and the Directors will review a quarterly    
budget of projected incremental distribution expenses to be incurred on behalf  
of the Fund, together with a report explaining the purposes and anticipated     
benefits of incurring such expenses. The Directors will determine which         
particular expenses, and the portions thereof, that may be borne by the Fund,   
and in making such a determination shall consider the scope of the              
Distributor's commitment to promoting the distribution of the Fund's shares.    

The Distributor has informed the Fund that the entire amount of the fees
payable by the Fund each year pursuant to the Plan is characterized as a        
"service fee" under the Rules of the Association of the National Association of 
Securities Dealers (of which the Distributor is a member). Such fee is a        
payment made for personal service and/or maintenance of shareholder accounts.   

At their meeting held on October 30, 1992, the Directors of the Fund,   
including all of the Independent 12b-1 Directors, approved certain amendments   
to the Plan which took effect in January, 1993 and were designed to reflect the 
fact that upon an internal reorganization, the share distribution activities    
theretofore performed by the Fund or for the Fund by DWR were assumed by the    
Distributor and DWR's sales activities are now performed pursuant to the terms  
of a selected dealer agreement between the Distributor and DWR. The amendments  
provide that payments under the Plan will be made to the Distributor rather     
than to the Investment Manager as before the amendment, and that the            
Distributor in turn is authorized to make payments to DWR, its affiliates or    
other Selected Broker-Dealers (or direct that the Fund pay such entities        
directly). The Distributor is also authorized to retain part of such fee as     

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compensation for its own distribution-related expenses. At their meeting held   
on July 23, 1997, the Directors of the Fund, including all of the Independent   
12b-1 Directors, approved amendments to the Plan to change the provisions       
regarding quarterly budgets.                                                    

 DWR's account executives are credited with an annual residual commission,
currently a residual of up to 0.10% of the current value of the respective      
accounts for which they are the account executives of record. The residual is a 
charge which reflects residual commissions paid by DWR to its account           
executives and expenses of DWR associated with the sale and promotion of Fund   
shares and the servicing of shareholders' accounts, including the expenses of   
operating branch offices in connection with the servicing of shareholders'      
accounts, which expenses include lease costs, the salaries and employee         
benefits of operations and sales support personnel, utility costs,              
communications costs and the costs of stationery and supplies and other         
expenses relating to branch office servicing of shareholder accounts.           

 The Fund accrued $11,872,496 to the Distributor pursuant to the Plan, for
the fiscal year ended August 31, 1997. This is 0.10 of 1% of the Fund's average 
daily net assets for its fiscal year ended August 31, 1997. Based upon the      
total amounts spent by the Distributor during the period, it is estimated that  
the amount paid by the Fund for distribution was spent in approximately the     
following ways: (i) advertising -- $-0-; (ii) printing and mailing prospectuses 
to other than current shareholders -- $-0-; (iii) compensation to underwriters  
-- $-0-; (iv) compensation to dealers -- $-0-; (v) compensation to sales        
personnel -- $-0-; and (vi) other, which includes payments to DWR for expenses  
substantially all of which relate to compensation of sales personnel and        
associated overhead expenses -- $11,872,496.                                    

   Under the Plan, the Distributor uses its best efforts in rendering services
to the Fund, but in the absence of willful misfeasance, bad faith, gross        
negligence or reckless disregard of its obligations, the Distributor is not     
liable to the Fund or any of its shareholders for any error of judgment or      
mistake of law or for any act or omission or for any losses sustained by the    
Fund or its shareholders.                                                       

Under the Plan, the Distributor provides the Fund, for review by the    
Directors, and the Directors review, promptly after the end of each calendar    
quarter, a written report regarding the incremental distribution expenses       
incurred by the Distributor on behalf of the Fund during such calendar quarter, 
which report includes: (1) an itemization of the types of expenses and the      
purposes therefor; (2) the amounts of such expenses; and (3) a description of   
the benefits derived by the Fund. In the Directors' quarterly review of the     
Plan they considered its continued appropriateness and the level of             
compensation provided therein.                                                  

The Plan will continue from year to year, provided such continuance is  
approved annually by a vote of the Directors, including a majority of the       
Independent 12b-1 Directors. The most recent continuance of the Plan for one    
year, until April 30, 1998, was approved by the Board of Directors, including a 
majority of the Independent 12b-1 Directors, at their meeting held on April 24, 
1997. Any amendment to increase materially the maximum amount authorized to be  
spent under the Plan must be approved by the shareholders of the Fund, and all  
material amendments to the Plan must be approved by the Directors in the manner 
described above. The Plan may be terminated at any time, without payment of any 
penalty, by vote of a majority of the Independent 12b-1 Directors or by a vote  
of the holders of a majority of the outstanding voting securities of the Fund   
(as defined in the Act) on not more than thirty days' written notice to any     
other party to the Plan. So long as the Plan is in effect, the selection or     
nomination of the Independent 12b-1 Directors is committed to the discretion of 
the Independent 12b-1 Directors.                                                

   No interested person of the Fund nor any Director of the Fund who is not an
interested person of the Fund, as defined in the Act, had any direct or         
indirect financial interest in the operation of the Plan except to the extent   
that the Distributor, InterCapital, DWSC, DWR or certain of their employees may 
be deemed to have such an interest as a result of benefits derived from the     
successful operation of the Plan or as a result of receiving a portion of the   
amounts expended thereunder by the Fund.                                        

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DETERMINATION OF NET ASSET VALUE                                                

As discussed in the Prospectus, the net asset value of the Fund is      
determined as of 4:00 p.m., New York time (or, on days when the New York Stock  
Exchange closes prior to 4:00 p.m., at such earlier time), on each day that the 
New York Stock Exchange is open. The New York Stock Exchange currently observes 
the following holidays: New Year's Day; Reverend Dr. Martin Luther King, Jr.    
Day; Presidents' Day; Good Friday; Memorial Day; Independence Day; Labor Day;   
Thanksgiving Day; and Christmas Day.                                            

The Fund utilizes the amortized cost method in valuing its portfolio    
securities for purposes of determining the net asset value of shares of the     
Fund. The Fund utilizes the amortized cost method in valuing its portfolio      
securities even though the portfolio securities may increase or decrease in     
market value, generally, in connection with changes in interest rates. The      
amortized cost method of valuation involves valuing a security at its cost at   
the time of purchase adjusted by a constant amortization to maturity of any     
discount or premium, regardless of the impact of fluctuating interest rates on  
the market value of the instrument. While this method provides certainty in     
valuation, it may result in periods during which value, as determined by        
amortized cost, is higher or lower than the price the Fund would receive if it  
sold the instrument. During such periods, the yield to investors in the Fund    
may differ somewhat from that obtained in a similar company which uses mark to  
market values for all its portfolio securities. For example, if the use of      
amortized cost resulted in a lower (higher) aggregate portfolio value on a      
particular day, a prospective investor in the Fund would be able to obtain a    
somewhat higher (lower) yield than would result from investment in such a       
similar company and existing investors would receive less (more) investment     
income. The purpose of this method of calculation is to facilitate the          
maintenance of a constant net asset value per share of $1.00.                   

The Fund's use of the amortized cost method to value its portfolio      
securities and the maintenance of the per share net asset value of $1.00 is     
permitted by Rule 2a-7 of the Act (the "Rule") and is conditioned on its        
compliance with various conditions contained in the Rule including: (a) the     
Fund's Board of Directors is obligated, as a particular responsibility within   
the overall duty of care owed to the Fund's shareholders, to establish          
procedures reasonably designed, taking into account current market conditions   
and the Fund's investment objectives, to stabilize the net asset value per      
share as computed for the purpose of distribution and redemption at $1.00 per   
share; (b) the procedures include (i) calculation, at such intervals as the     
Directors determine are appropriate and as are reasonable in light of current   
market conditions, of the deviation, if any, between net asset value per share  
using amortized cost to value portfolio securities and net asset value per      
share based upon available market quotations with respect to such portfolio     
securities; (ii) periodic review by the Directors of the amount of deviation as 
well as methods used to calculate it; and (iii) maintenance of written records  
of the procedures and the Directors' considerations made pursuant to them and   
any actions taken upon such consideration; (c) the Board of Directors will      
consider what steps should be taken, if any, in the event of a difference of    
more than 1/2 of 1% between the two methods of valuation; and (d) the Board of  
Directors should take such action as it deems appropriate (such as shortening   
the average portfolio maturity, realizing gains or losses or withholding        
dividends) to eliminate or reduce to the extent reasonably practicable material 
dilution or other unfair results to investors or existing shareholders which    
might arise from differences between the two methods of valuation.              

Generally, for purposes of the procedures adopted under the Rule, the   
maturity of a portfolio instrument is deemed to be the period remaining         
(calculated from the trade date or such other date on which the Fund's interest 
in the instrument is subject to market action) until the date noted on the face 
of the instrument as the date on which the principal amount must be paid, or in 
the case of an instrument called for redemption, the date on which the          
redemption payment must be made.                                                

   A variable rate obligation that is subject to a demand feature is deemed to
have a maturity equal to the longer of the period remaining until the next      
readjustment of the interest rate or the period remaining                       

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until the principal amount can be recovered through demand. A floating rate     
instrument that is subject to a demand feature is deemed to have a maturity     
equal to the period remaining until the principal amount can be recovered       
through demand.                                                                 

 A "NRSRO" is a nationally recognized statistical rating organization. The
term "Requisite NRSROs" means (i) any two NRSROs that have issued a rating with 
respect to a security or class of debt obligations of an issuer, or (ii) if     
only one NRSRO has issued a rating with respect to such security or issuer at   
the time a fund purchases or rolls over the security, that NRSRO.               

An Eligible Security is generally defined in the Rule to mean (i) a     
security with a remaining maturity of 397 calendar days or less that has        
received a short-term rating (or that has been issued by an issuer that has     
received a short-term rating with respect to a class of debt obligations, or    
any debt obligation within that class, that is comparable in priority and       
security with the security) by the Requisite NRSROs in one of the two highest   
short-term rating categories (within which there may be sub-categories or       
gradations indicating relative standing); or (ii) a security; (A) that at the   
time of issuance had a remaining maturity of more than 397 calendar days but    
that has a remaining maturity of 397 calendar days or less; and (B) whose       
issuer has received from the Requisite NRSROs a rating with respect to a class  
of debt obligations (or any debt obligation within that class) that is now      
comparable in priority and security with the security, in one of the two        
highest short-term rating categories (within which there may be sub-categories  
or gradations indicating relative standing); or (iii) an unrated security that  
is of comparable quality to a security meeting the requirements of (i) or (ii)  
above, as determined by the money market fund's board of directors.             

  As permitted by the Rule, the Board has delegated to the Fund's Investment
Manager, subject to the Board's oversight pursuant to guidelines and procedures 
adopted by the Board, the authority to determine which securities present       
minimal credit risks and which unrated securities are comparable in quality to  
rated securities.                                                               

Also, as required by the Rule, the Fund will limit its investments in   
securities, other than Government Securities, so that, at the time of purchase: 
(a) except as further limited in (b) below with regard to certain securities,   
no more than 5% of its total assets will be invested in the securities of any   
one issuer; and (b) with respect to Eligible Securities that have received a    
rating in less than the highest category by any one of the NRSROs whose ratings 
are used to qualify the security as an Eligible Security, or determined to be   
of comparable quality: (i) no more than 5% in the aggregate of the Fund's total 
assets in all such securities, and (ii) no more than the greater of 1% of total 
assets, or $1 million, in the securities of any one issuer.                     

   The presence of a line of credit or other credit facility offered by a bank
or other financial institution which guarantees the payment obligation of the   
issuer, in the event of a default in the payment of principal or interest of an 
obligation, may be taken into account in determining whether an investment is   
an Eligible Security, provided that the guarantee itself is an Eligible         
Security.                                                                       

The Rule further requires that the Fund limit its investments to U.S.   
dollar-denominated instruments which the Directors determine present minimal    
credit risks and which are Eligible Securities. The Rule also requires the Fund 
to maintain a dollar-weighted average portfolio maturity (not more than 90      
days) appropriate to its objective of maintaining a stable net asset value of   
$1.00 per share and precludes the purchase of any instrument with a remaining   
maturity of more than 397 days. Should the disposition of a portfolio security  
result in a dollar-weighted average portfolio maturity of more than 90 days,    
the Fund will invest its available cash in such a manner as to reduce such      
maturity to 90 days or less as soon as is reasonably practicable.               

If the Board of Directors determines that it is no longer in the best   
interests of the Fund and its shareholders to maintain a stable price of $1.00  
per share or if the Board believes that maintaining such price no longer        
reflects a market-based net asset value per share, the Board has the right to   
change from an amortized cost basis of valuation to valuation based on market   
quotations. The Fund will notify shareholders of any such change.               

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REDEMPTION OF FUND SHARES                                                       
--------------------------------------------------------------------------------

   As discussed in the Prospectus, shares of the Fund may be redeemed at their
net asset value at any time. When a redemption is made by check and a check is  
presented to the Transfer Agent for payment, the Transfer Agent will redeem a   
sufficient number of full and fractional shares in the shareholder's account to 
cover the amount of the check. This enables the shareholder to continue earning 
daily income dividends until the check has cleared.                             

   A check drawn by a shareholder against his or her other account in the Fund
constitutes a request for redemption of a number of shares sufficient to        
provide proceeds equal to the amount of the check. Payment of the proceeds of a 
check will normally be made on the next business day after receipt by the       
Transfer Agent of the check in proper form. If a check is presented for payment 
to the Transfer Agent by a shareholder or payee in person, the Transfer Agent   
will make payment by means of a check drawn on the Fund's account or, in the    
case of a shareholder payee, to the shareholder's predesignated bank account,   
but will not make payment in cash.                                              

  The Fund reserves the right to suspend redemptions or postpone the date of
payment: (1) for any periods during which the New York Stock Exchange is closed 
(other than for customary weekend and holiday closings), (2) when trading on    
that Exchange is restricted or an emergency exists, as determined by the        
Securities and Exchange Commission, so that disposal of the Fund's investments  
or determination of the Fund's net asset value is not reasonably practicable,   
or (3) for such other periods as the Commission by order may permit for the     
protection of the Fund's shareholders.                                          

   As discussed in the Prospectus, due to the relatively high cost of handling
small investments, the Fund reserves the right to redeem, at net asset value,   
the shares of any shareholder (other than shares held in an Individual          
Retirement Account or custodial account under Section 403(b)(7) of the Internal 
Revenue Code) whose shares due to redemptions by the shareholder have a value   
of less than $1,000 or such lesser amounts as may be fixed by the Board of      
Directors. However, before the Fund redeems such shares and sends the proceeds  
to the shareholder, it will notify the shareholder that the value of his or her 
shares is less than $1,000 and allow him or her sixty days to make an           
additional investment in an amount which will increase the value of his or her  
account to $1,000 or more before the redemption is processed.                   

  It has been and remains the Fund's policy and practice that, if checks for
redemption proceeds remain uncashed, no interest will accrue on amounts         
represented by such uncashed checks.                                            

SYSTEMATIC WITHDRAWAL PLAN. As discussed in the Prospectus, a systematic
withdrawal plan is available for shareholders who own or purchase shares of the 
Fund having a minimum value of $5,000, which provides for monthly or quarterly  
checks in any dollar amount, not less than $25, or in any whole percentage of   
the account balance, on an annualized basis. The Transfer Agent acts as agent   
for the shareholder in tendering to the Fund for redemption sufficient full and 
fractional shares to provide the amount of the periodic withdrawal payment      
designated in the application. The shares will be redeemed at their net asset   
value determined, at the shareholder's option, on the tenth or twenty-fifth day 
(or next business day) of the relevant month or quarter and normally a check    
for the proceeds will be mailed by the Transfer Agent within five days after    
the date of redemption. The withdrawal plan may be terminated at any time by    
the Fund.                                                                       

  Any shareholder who wishes to have payments under the withdrawal plan made
to a third party or sent to an address other than the one listed on the account 
must send complete written instructions to the Transfer Agent to enroll in the  
withdrawal plan. The shareholder's signature on such instructions must be       
guaranteed by an eligible guarantor acceptable to the Transfer Agent            
(shareholders should contact the Transfer Agent for a determination as to       
whether a particular institution is such an eligible guarantor). A shareholder  
may, at any time, change the amount and interval of withdrawal payments through 
his or her Account Executive or by written notification to the Transfer Agent.  
In addition, the party and/or the address to which checks are mailed may be     
changed by written notification to the Transfer Agent, with signature           
guarantees required in the manner described above. The shareholder may also     
terminate the withdrawal plan at any time by written notice to the Transfer     
Agent. In the event of such                                                     

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termination, the account will be continued as a regular shareholder investment  
account. The shareholder may also redeem all or part of the shares held in the  
withdrawal plan account (see "Redemption of Fund Shares" in the Prospectus) at  
any time. If the number of shares redeemed is greater than the number of shares 
paid as dividends, such redemptions may, of course, eventually result in        
liquidation of all the shares in the account. The automatic cash withdrawal     
method of redemption is not available for shares held in an Exchange Privilege  
Account.                                                                        

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

DIVIDENDS AND DISTRIBUTIONS. As discussed in the Prospectus, the Fund   
intends to distribute all of its daily net investment income and net short-term 
capital gains, if any, to shareholders of record as of the close of business    
the preceding business day. Net income, for dividend purposes, includes accrued 
interest and amortization of market discount, plus or minus any gains or losses 
realized on sales of portfolio securities, less the amortization of market      
premium and the estimated expenses of the Fund. Net income will be calculated   
immediately prior to the determination of net asset value per share of the      
Fund.                                                                           

The Board of Directors may revise the dividend policy, or postpone the  
payment of dividends, if the Fund should have or anticipate any large           
unexpected expense, loss or fluctuation in net assets which, in the opinion of  
the Board, might have a significant adverse effect on shareholders.             

  It has been and remains the Fund's policy and practice that, if checks for
dividends or distributions paid in cash remain uncashed, no interest will       
accrue on amounts represented by such uncashed checks.                          

TAXES. The Fund has qualified and intends to remain qualified as a      
regulated investment company under Subchapter M of the Internal Revenue Code.   
If so qualified, the Fund will not be subject to federal income tax provided    
that it distributes all of its taxable net investment income and all of its net 
realized gains.                                                                 

Gains or losses on the sales of securities by the Fund will be long-term
capital gains or losses if the securities have been held by the Fund for more   
than one year. Gains or losses on the sale of securities held for one year or   
less will be short-term capital gains or losses.                                

 Shareholders will be subject to federal income tax on dividends paid from
interest income derived from taxable securities and on distributions of         
realized net short-term and long-term capital gains. Such interest and realized 
net short-term capital gains dividends and distributions are taxable to the     
shareholder as ordinary dividend income regardless of whether the shareholder   
receives such distributions in additional shares or in cash. Since the Fund's   
income is expected to be derived entirely from interest rather than dividends,  
none of such distributions will be eligible for the federal dividends received  
deduction available to corporations. Realized net long-term gains               
distributions, which are taxable as long-term capital gains, are not eligible   
for the dividends received deduction.                                           

The Fund may be subject to tax or taxes in certain states where it does 
business. Furthermore, in those states which have income tax laws, the tax      
treatment of the Fund and of shareholders with respect to distributions by the  
Fund may differ from federal tax treatment.                                     

   Shareholders are urged to consult their own tax advisers regarding specific
questions as to federal, state or local taxes.                                  

INFORMATION ON COMPUTATION OF YIELD                                             

The Fund's current yield for the seven days ended August 31, 1997 was   
5.13%. The effective annual yield on this date was 5.26%, assuming daily        
compounding.                                                                    

  The Fund's annualized current yield, as may be quoted from time to time in
advertisements and other communications to shareholders and potential           
investors, is computed by determining, for a stated seven-day period, the net   
change, exclusive of capital changes and including the value of additional      

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shares purchased with dividends and any dividends declared therefrom (which     
reflect deductions of all expenses of the Fund such as management fees), in the 
value of a hypothetical pre-existing account having a balance of one share at   
the beginning of the period, and dividing the difference by the value of the    
account at the beginning of the base period to obtain the base period return,   
and then multiplying the base period return by (365/7).                         

 The Fund's annualized effective yield, as may be quoted from time to time
in advertisements and other communications to shareholders and potential        
investors, is computed by determining (for the same stated seven-day period as  
for the current yield) the net change, exclusive of capital changes and         
including the value of additional shares purchased with dividends and any       
dividends declared therefrom (which reflect deductions of all expenses of the   
Fund such as management fees), in the value of a hypothetical pre-existing      
account having a balance of one share at the beginning of the period, and       
dividing the difference by the value of the account at the beginning of the     
base period to obtain the base period return, and then compounding the base     
period return by adding 1, raising the sum to a power equal to 365 divided by   
7, and subtracting 1 from the result.                                           

   The yields quoted in any advertisement or other communication should not be
considered a representation of the yields of the Fund in the future since the   
yield is not fixed. Actual yields will depend not only on the type, quality and 
maturities of the investments held by the Fund and changes in interest rates on 
such investments, but also on changes in the Fund's expenses during the period. 

Yield information may be useful in reviewing the performance of the Fund
and for providing a basis for comparison with other investment alternatives.    
However, unlike bank deposits or other investments which typically pay a fixed  
yield for a stated period of time, the Fund's yield fluctuates.                 

The Fund may also advertise the growth of hypothetical investments of   
$10,000, $50,000 and $100,000 in shares of the Fund by adding the sum of all    
distributions on 10,000, 50,000 or 100,000 shares of the Fund since inception   
to $10,000, $50,000 and $100,000, as the case may be. Investments of $10,000,   
$50,000 and $100,000 in the Fund at inception would have grown to $50,111,      
$250,555 and $501,110, respectively, at August 31, 1997.                        

DESCRIPTION OF COMMON STOCK                                                     
--------------------------------------------------------------------------------

The Fund has an authorized capital of 25 billion shares of common stock 
with a par value of $.01 per share. All shares are of the same class and are    
freely transferable. Each outstanding share is entitled to one vote on all      
matters submitted to a vote of shareholders and to a pro rata share of the      
Fund's net assets in liquidation and of dividends declared. The Fund may also   
issue fractional shares.                                                        

The shares of the Fund do not have cumulative voting rights, which means
that the holders of more than fifty percent of the shares voting in any         
election of directors can, if they choose to do so, elect all of the directors  
of the Fund, in which event the holders of the remaining shares will be unable  
to elect any person as a director. Shares issued will be fully paid and         
non-assessable and will have no preemptive, conversion or sinking rights.       

CUSTODIAN AND TRANSFER AGENT                                                    
--------------------------------------------------------------------------------

   The Bank of New York, 90 Washington Street, New York, New York 10286 is the
Custodian of the Fund's assets. Any of the Fund's cash balances in excess of    
$100,000 are unprotected by federal deposit insurance. Such balances may, at    
times, be substantial.                                                          

   Dean Witter Trust FSB, Harborside Financial Center, Plaza Two, Jersey City,
New Jersey 07311 is the Transfer Agent of the Fund's shares, Dividend           
Disbursing Agent for payment of dividends and distributions on Fund shares, and 
Agent for shareholders under various investment plans described herein. Dean    
Witter Trust FSB is an affiliate of Dean Witter InterCapital Inc., the Fund's   
Investment Manager, and of Dean Witter Distributors Inc., the Fund's            
Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean Witter Trust 
FSB's responsibilities include maintaining shareholder accounts, including      
providing                                                                       

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subaccounting and recordkeeping services for certain retirement accounts;       
disbursing cash dividends and reinvesting dividends; processing account         
registration changes; handling purchase and redemption transactions; mailing    
prospectuses and reports; mailing and tabulating proxies; processing share      
certificate transactions; and maintaining shareholder records and lists. For    
these services Dean Witter Trust FSB receives a per shareholder account fee.    

INDEPENDENT ACCOUNTANTS                                                         
--------------------------------------------------------------------------------

   Price Waterhouse LLP serves as the independent accountants of the Fund. The
independent accountants are responsible for auditing the annual financial       
statements of the Fund.                                                         

REPORTS TO SHAREHOLDERS                                                         
--------------------------------------------------------------------------------

   The Fund will send to shareholders, at least semi-annually, reports showing
the Fund's portfolio and other information. An annual report, containing        
financial statements together with the report of its independent accountants,   
will be sent to shareholders each year.                                         

 The Fund's fiscal year ends on August 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose      
selection is made annually by the Fund's Board of Directors.                    

LEGAL COUNSEL                                                                   
--------------------------------------------------------------------------------

Barry Fink, Esq., who is an officer and the General Counsel of the      
Investment Manager, is an officer and the General Counsel of the Fund.          

EXPERTS                                                                         
--------------------------------------------------------------------------------

 The annual financial statements of the Fund for the year ended August 31,
1997, which are included in the Prospectus and incorporated by reference in     
this Statement of Additional Information, have been so included and             
incorporated in reliance on the report of Price Waterhouse LLP, independent     
accountants, given on the authority of said firm as experts in auditing and     
accounting.                                                                     

REGISTRATION STATEMENT                                                          
--------------------------------------------------------------------------------

  This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has     
filed with the Securities and Exchange Commission. The complete Registration    
Statement may be obtained from the Securities and Exchange Commission upon      
payment of the fee prescribed by the rules and regulations of the Commission.   

FINANCIAL STATEMENTS                                                            
--------------------------------------------------------------------------------

The audited financial statements of the Fund for the fiscal year ended  
August 31, 1997, and the report of the independent accountants thereon, are set 
forth in the Fund's Prospectus, and are incorporated herein by reference.       

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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
                                                           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        
exchange or the Options Clearing Corporation ("OCC") to handle                  

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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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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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 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 

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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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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.

SEE NOTES TO FINANCIAL STATEMENTS 

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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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DEAN WITTER RETIREMENT SERIES - VALUE-ADDED MARKET                              
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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 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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PORTFOLIO OF INVESTMENTS July 31, 1997, continued                                          

 NUMBER OF                                                                                 
   SHARES                                                                         VALUE    
-------------------------------------------------------------------------------------------
    1,800    Inland Steel Industries, Inc.  ..................................  $   41,288 
      750    Nucor Corp.  ....................................................      46,547 
    1,150    USX-U.S. Steel Group, Inc.  .....................................      42,047 
    2,400    Worthington Industries, Inc.  ...................................      47,400 
                                                                              -------------
                                                                                   312,320 
                                                                              -------------
             Telecommunications -                                                          
             Long Distance (1.0%)                                                          
    1,300    AT&T Corp.  .....................................................      47,856 
    2,300    Frontier Corp.  .................................................      47,438 
    1,200    MCI Communications Corp.  .......................................      42,225 
      850    Sprint Corp.  ...................................................      42,075 
    1,500    WorldCom, Inc.* .................................................      52,406 
                                                                              -------------
                                                                                   232,000 
                                                                              -------------
             Telecommunications -Wireless (0.2%)                                           
    1,500    Airtouch Communications, Inc.* ..................................      49,406 
                                                                              -------------
             Textiles (0.9%)                                                               
    1,700    Fruit of the Loom, Inc. (Class A)* ..............................      46,538 
      850    Liz Claiborne, Inc.  ............................................      40,694 
    1,400    Russell Corp.  ..................................................      40,863 
      900    Springs Industries, Inc. (Class A) ..............................      43,538 
      550    VF Corp.  .......................................................      49,363 
                                                                              -------------
                                                                                   220,996 
                                                                              -------------
             Tobacco (0.6%)                                                                
    1,150    Fortune Brands, Inc.  ...........................................      40,753 
    1,050    Philip Morris Companies, Inc.  ..................................      47,381 
    1,500    UST, Inc.  ......................................................      43,594 
                                                                              -------------
                                                                                   131,728 
                                                                              -------------
             Toys (0.4%)                                                                   
    1,600    Hasbro Inc.  ....................................................      49,100 
    1,350    Mattel, Inc.  ...................................................      46,913 
                                                                              -------------
                                                                                    96,013 
                                                                              -------------
             Truckers (0.4%)                                                               
    1,300    Caliber System, Inc.  ...........................................      50,619 
    1,250    Ryder System, Inc.  .............................................      44,766 
                                                                              -------------
                                                                                    95,385 
                                                                              -------------
             Utilities - Electric (4.9%)                                                   
      900    American Electric Power Co., Inc. ...............................      40,275 
    1,700    Baltimore Gas & Electric Co.  ...................................      47,281 
    1,300    Carolina Power & Light Co.  .....................................      46,313 
    2,300    Central & South West Corp.  .....................................      46,144 
    1,200    CINergy Corp.  ..................................................      40,350 
    1,400    Consolidated Edison Co. of New York, Inc.  ......................  $   44,275 
    1,450    Detroit Edison Co.  .............................................      43,409 
    1,300    Dominion Resources, Inc.  .......................................      47,775 
    1,050    Duke Energy Corp.  ..............................................      53,222 
    1,700    Edison International ............................................      42,925 
    1,450    Entergy Corp.  ..................................................      39,603 
    1,000    FPL Group, Inc.  ................................................      47,875 
    1,200    General Public Utilities Corp.  .................................      41,625 
    2,200    Houston Industries, Inc.  .......................................      46,063 
    4,300    Niagara Mohawk Power Corp.* .....................................      40,044 
      800    Northern States Power Co.  ......................................      41,100 
    1,950    Ohio Edison Co.  ................................................      43,388 
    2,050    PacifiCorp ......................................................      45,741 
    2,100    PECO Energy Co.  ................................................      49,350 
    1,700    PG & E Corp.  ...................................................      42,181 
    2,300    PP&L Resources, Inc.  ...........................................      47,006 
    1,900    Public Service Enterprise Group, Inc.  ..........................      47,025 
    1,900    Southern Co.  ...................................................      41,681 
    1,200    Texas Utilities Co.  ............................................      42,525 
    2,100    Unicom Corp.  ...................................................      47,644 
    1,200    Union Electric Co.  .............................................      46,200 
                                                                              -------------
                                                                                 1,161,020 
                                                                              -------------
             Utilities - Natural Gas (2.4%)                                                
      800    Coastal Corp.  ..................................................      43,500 
      600    Columbia Gas System, Inc.  ......................................      41,250 
      700    Consolidated Natural Gas Co.  ...................................      40,513 
    1,300    Eastern Enterprises .............................................      46,556 
    1,200    Enron Corp.  ....................................................      45,525 
    1,900    ENSERCH Corp.  ..................................................      42,275 
    1,200    NICOR, Inc.  ....................................................      43,950 
    2,800    NorAm Energy Corp.  .............................................      44,800 
    1,250    ONEOK Inc.  .....................................................      43,750 
    1,200    Pacific Enterprises .............................................      40,125 
    1,100    Peoples Energy Corp.  ...........................................      42,213 
      900    Sonat, Inc.  ....................................................      44,888 
      900    Williams Cos., Inc.  ............................................      41,175 
                                                                              -------------
                                                                                   560,520 
                                                                              -------------
             Utilities - Telephone (1.4%)                                                  
    1,250    Alltel Corp.  ...................................................      41,094 
      650    Ameritech Corp.  ................................................      43,834 
      550    Bell Atlantic Corp.  ............................................      39,909 
      850    BellSouth Corp.  ................................................      40,269 
    1,000    GTE Corp.  ......................................................      46,500 

                       SEE NOTES TO FINANCIAL STATEMENTS                                   

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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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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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   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 n                                                 
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  

                                           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 LIQUID ASSET FUND INC.  
PART C  
OTHER INFORMATION   

ITEM 15. INDEMNIFICATION                                                        

The response to this item is incorporated herein by reference to Item 27  
of Post-Effective Amendment No. 34 to Registrant's Registration Statement on    
Form N-1A, dated October 24, 1997, which was filed electronically pursuant to   
Regulation S-T on October 23, 1997 ("Post-Effective Amendment No. 34") as an    
amendment to Registrant's Registration Statement on Form N-1A (File Nos.        
811-2575 and 2-53856) filed on October 23, 1997 (the "Registration              
Statement")                                                                     

ITEM 16. EXHIBITS                                                               

(1)     Amended Articles of Incorporation dated May 13, 1975 ("Articles of    
   Incorporation") (incorporated herein by reference to Exhibit 1 of
Registrant's initial Registration Statement)                  

(2)     Amended and Restated Bylaws of Registrant dated as of January 25,     
1995 (incorporated herein by reference to Exhibit 2 of        
Post-Effective Amendment No. 32 to Registrant's Registration  
Statement ("Post-Effective Amendment No. 32"))                

(3)     Not Applicable                                                        

(4)     Copy of Agreement and Plan of Reorganization (filed herewith as       
Exhibit A to the Proxy Statement and Prospectus)              

(5)     Not Applicable                                                        

(6)     Investment Management Agreement (incorporated herein by reference to  
Exhibit 5 to Post-Effective Amendment No. 34)                 

(7) (a)    Distribution Agreement between Registrant and Dean Witter          
        Distributors Inc. (incorporated herein by reference to Exhibit 6
to Post-Effective Amendment No. 34)                     

(b)    Form of Selected Dealer's Agreement (incorporated herein by    
    reference to Exhibit 6 to Post-Effective Amendment No. 30 to
          Registrant's Registration Statement ("Post-Effective Amendment No.
30"))                                                   

(8)     Not Applicable                                                        

(9) (a)    Custody Agreement dated September 30, 1991 (incorporated herein by 
  reference to Exhibit 8 to Post-Effective Amendment No. 32)

(b)    Amendment to the Custodian Agreement dated April 17, 1996      
        (incorporated herein by reference to Exhibit 8 to Post-Effective
Amendment No. 33)                                       

(c)   Amended and Restated Transfer Agency and Services Agreement   

(10)     Amended and Restated Plan of Distribution pursuant to Rule 12b-1,      
     dated July 23, 1997 (incorporated herein by reference to Exhibit 15
to Post-Effective Amendment No. 34)                           

(11) (a)    Opinion and consent of Gordon Altman Butowsky Weitzen Shalov &      
Wein                                                    

(b)    Opinion and consent of Piper & Marbury                         

(12)     Opinion and consent of Gordon Altman Butowsky Weitzen Shalov & Wein    
regarding tax matters                                         

(13)     Form of Services Agreement between Dean Witter InterCapital Inc. and   
     Dean Witter Services Company Inc. (incorporated herein by reference
to Exhibit 9 to Post-Effective Amendment No. 32)              

(14)     Consent of Independent Accountants                                     

(15)     Not Applicable                                                         

C-1               

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(16)     Powers of Attorney                                                     

(17) (a)   Registrant's Rule 24f-2 Notice pursuant to Rule 24f-2 under the      
      Investment Company Act of 1940, for its fiscal year ended August
    31, 1997 (incorporated herein by reference to Form 24f-2 filed
      with the Securities and Exchange Commission on October 27, 1997)

(b)    Form of Proxy                                                    

ITEM 17. UNDERTAKINGS                                                           

1. The undersigned Registrant agrees that prior to any public reoffering  
of the securities registered through the use of the prospectus which is a       
part of this registration statement on Form N-14 by any person or party who     
is deemed to be an underwriter within the meaning of Rule 145(c) of the         
Securities Act of 1933, the reoffering prospectus will contain the              
information called for by the applicable registration form for reofferings by   
persons who may be deemed underwriters, in addition to the information called   
for by the other items of the applicable form.                                  

2. The undersigned Registrant agrees that every prospectus that is filed  
under paragraph (1) above will be filed as a part of an amendment to this       
registration statement on Form N-14 and will not be used until the amendment    
is effective, and that, in determining any liability under the Securities Act   
of 1933, each post-effective amendment shall be deemed to be a new              
registration statement for the securities offered therein, and the offering     
of the securities at that time shall be deemed to be the initial bona fide      
offering of them.                                                               

C-2               

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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 LIQUID ASSET FUND INC.
                  By: /s/ Barry Fink
                                         . ...............................
                  Barry Fink
                                    Vice President and Secretary

As required by the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the dates         
indicated.                                                                      

                                                                [Download Table]

             SIGNATURE                         TITLE                    DATE      
---------------------------------  ---------------------------- ------------------
                                                                                  
1. Principal Executive Officer                                                    
   /s/ Charles A. Fiumefreddo      Chief Executive Officer,     April 30, 1998    
   .............................   Director and Chairman                          
   Charles A. Fiumefreddo                                                         
2. Principal Financial Officer                                                    
   /s/ Thomas A. Caloia            Treasurer                                      
   .............................                                April 30, 1998    
   Thomas F. Caloia                                                               
3. Majority of Directors                                                          
 /s/ Michael Bozic                 Director                     April 30, 1998    
 ...............................                                                  
 Michael Bozic                                                                    
 /s/ Edwin J. Garn                 Director                     April 30, 1998    
 ...............................                                                  
 Edwin J. Garn                                                                    
 /s/ John R. Haire                 Director                     April 30, 1998    
 ...............................                                                  
 John R. Haire                                                                    
 /s/ Manuel H. Johnson             Director                     April 30, 1998    
 ...............................                                                  
 Manuel H. Johnson                                                                
 /s/ Michael E. Nugent             Director                     April 30, 1998    
 ...............................                                                  
 Michael E. Nugent                                                                
 /s/ John L. Schroeder             Director                     April 30, 1998    
 ...............................                                                  
 John L. Schroeder                                                                
 /s/ Philip J. Purcell             Director                     April 30, 1998    
 ...............................                                                  
 Philip J. Purcell                                                                
 /s/ Wayne E. Hedien               Director                     April 30, 1998    

...............................                                               
Wayne E. Hedien                                                               

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EXHIBIT INDEX   

                                                        [Enlarge/Download Table]

   EXHIBIT                                                                                  PAGE  
   NUMBER                                      EXHIBIT                                     NUMBER 
-----------  -------------------------------------------------------------------------- ----------
                                                                                                  
      (9)    (c) Amended and Restated Transfer Agency and Services Agreement                      
     (11)    (a) Opinion and consent of Gordon Altman Butowsky Weitzen Shalov & Wein              
             (b) Opinion and consent of Piper & Marbury                                           
     (12)    Opinion and consent of Gordon Altman Butowsky Weitzen Shalov & Wein                  
             regarding tax matters                                                                
     (14)    Consent of Independent Accountants                                                   
     (16)    Powers of Attorney                                                                   
     (17)    (b) Form of Proxy