<PAGE>
DEAN WITTER JAPAN FUND TWO WORLD TRADE CENTER, NEW YORK, NEW YORK
10048
LETTER TO THE SHAREHOLDERS NOVEMBER 30, 1996
DEAR SHAREHOLDER:
Dean Witter Japan Fund commenced operations on April 26, 1996. For the
six-months ended November 30, 1996, the Fund registered a total return of -11.24
percent. The period under review was marked by considerable volatility in both
the domestic Japanese market and the yen/U.S. dollar exchange rate. Indeed,
during this time the yen weakened from approximately 105 to 114 versus the
dollar, while the broad Tokyo Stock Price Index declined from 1697 to 1562. This
instability had a significant impact on the Fund's performance, as reflected in
its disappointing total return.
POSITIVE FUNDAMENTAL, NEGATIVE RETURNS
Japan's poor market performance occurred against a backdrop of a gradually --
albeit more slowly than anticipated -- improving domestic economy, spurred by
rising corporate profits and continuing low interest rates. Fundamental factors
such as these would normally be considered positive for the equity market. As
such, the negative return produced by both the market and the Fund is primarily
attributable to the continuing lack of confidence among local Japanese investors
who, with few exceptions, remained sellers for much of 1996 preferring to invest
in cash or bonds. Non-Japanese investors, by contrast, were buyers for much of
the year. But foreign investor sentiment dampened recently as well, as
weaker-than-anticipated economic data, a political impasse and concerns
regarding the yen's weakness dominated the financial scene.
THE PORTFOLIO
The Fund has remained fully invested throughout the period under review. At the
sector level, the portfolio maintains an overweighting in capital equipment and
an underweighting in banks. Those banks whose stocks are held, such as Bank of
Tokyo-Mitsubishi, Ltd. and Sumitomo Bank have already undergone significant
restructuring and fund raising, and are well on the way to completely rebound
from the bad debts accumulated during what is referred as the "bubble" economy
in Japan. Individual stock selection will continue to concentrate on companies
<PAGE>
DEAN WITTER JAPAN FUND
LETTER TO THE SHAREHOLDERS NOVEMBER 30, 1996, CONTINUED
that are expected to benefit most from a recovery in the basic economy, such as
Mitsubishi Heavy Industries, Ltd. and Asahi Chemical Industrial Co., Ltd. There
is also a focus on companies that are expected to perform well under a weaker
yen, such as Canon, Inc., Sony Corp. and Matsushita Electric Industrial Co.,
Ltd.
GOING FORWARD
The statement by Japanese authorities at the end of October that they did not
wish to see further yen weakness has had limited success in turning the market
around. What's more, the remark came amid continued bond market strength, with
interest rates remaining at record lows. Ten-year Japanese bonds are trading at
less than three percent and are expected to remain at that level for the
remainder of their fiscal year through March 1997. Also on a positive note,
corporate profits have exhibited strong double-digit growth which is expected to
continue through the first quarter of 1997. These factors constitute a favorable
environment for Japanese equities and may allow the market to post attractive
results early in the coming year.
Despite the turmoil of the past year and the likelihood of short-term market
volatility, the Fund's Sub-Adviser, Morgan Grenfell Investment Services Limited,
maintains a positive outlook. The portfolio management team at Morgan Grenfell
continues to believe that the Japanese market will produce attractive returns in
1997 and that it offers a prudent diversification to U.S. investors. The basis
for this optimism remains the same as when the Fund was launched, that is, an
improving Japanese economy, low interest rates, rising corporate profits and a
supportive currency will eventually lead to rises in equity prices.
We appreciate your ongoing support of Dean Witter Japan Fund and look forward to
continuing to serve your investment needs.
Very truly yours,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER JAPAN FUND
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (99.4%)
AUTOMOBILES (7.1%)
176,000 Alpine Electronics Inc............. $ 2,766,907
309,000 Bridgestone Corp................... 5,699,104
255,000 Mitsubishi Motors Corp............. 1,995,477
260,000 Nissan Motor Co. Ltd............... 1,847,356
551,000 Suzuki Motor Co. Ltd............... 5,758,739
---------------
18,067,583
---------------
BANKING (10.9%)
449,000 Asahi Bank, Ltd.................... 4,377,218
463,000 Bank of Tokyo - Mitsubishi Ltd..... 9,474,706
161,000 Mitsubishi Trust & Banking......... 2,587,651
285,000 Sanwa Bank, Ltd.................... 4,705,779
275,000 Sumitomo Bank...................... 4,782,189
192,000 Sumitomo Trust & Banking........... 2,124,715
---------------
28,052,258
---------------
BUILDING & CONSTRUCTION (0.9%)
164,000 National House Industrial.......... 2,347,796
---------------
BUSINESS & PUBLIC SERVICES (2.6%)
33,000 Asatsu Inc......................... 1,165,115
164,000 Mitsubishi Logistic................ 2,592,658
51,000 Secom Co........................... 3,077,200
---------------
6,834,973
---------------
BUSINESS EQUIPMENT (1.2%)
275,000 Ricoh Company, Ltd................. 2,946,601
---------------
CHEMICALS (4.9%)
846,000 Asahi Chemical Industrial Co.
Ltd................................ 5,557,773
322,000 Nippon Zeon Co. Ltd................ 1,436,641
297,000 Shin-Etsu Chemical Co.............. 5,425,610
---------------
12,420,024
---------------
ELECTRICAL EQUIPMENT (13.4%)
383,000 Canon, Inc......................... 8,073,072
748,000 Hitachi, Ltd....................... 6,963,640
396,000 Matsushita Electric Industrial Co.,
Ltd................................ 6,851,572
254,000 Matsushita Electric Works.......... 2,364,658
232,000 Omron Corp......................... 4,421,570
89,100 Sony Corp.......................... 5,704,716
---------------
34,379,228
---------------
ELECTRONICS (10.4%)
585,000 Furukawa Electric Co............... 3,067,320
10,700 Keyence Corp....................... 1,296,856
46,000 Kyocera Corp....................... 2,957,316
45,500 Mabuchi Motor Co................... 2,285,790
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
<C> <S> <C>
99,000 Murata Manufacturing Co., Ltd...... $ 3,330,142
377,000 NGK Insulators, Ltd................ 3,840,857
178,000 Olympus Optical Co. Ltd............ 1,672,756
90,000 Rohm Co., Ltd...................... 5,525,206
194,000 Sumitomo Electric Industries....... 2,726,155
---------------
26,702,398
---------------
ENGINEERING & CONSTRUCTION (3.1%)
381,000 Kajima Corp........................ 3,045,055
204,000 Kandenko Co., Ltd.................. 1,952,925
204,000 Kinden Corp........................ 2,830,845
---------------
7,828,825
---------------
FINANCIAL SERVICES (5.3%)
33,000 Japan Associated Finance........... 2,631,653
313,000 New Japan Securities Co., Ltd.*.... 1,374,495
379,000 Nomura Securities Co. Ltd.......... 6,391,006
65,000 Promise Co., Ltd................... 3,253,996
---------------
13,651,150
---------------
INSURANCE (2.6%)
445,000 Sumitomo Marine & Fire............. 3,165,730
306,000 Tokio Marine & Fire Insurance
Co................................. 3,386,264
---------------
6,551,994
---------------
INTERNATIONAL TRADE (2.7%)
605,000 Mitsubishi Corp.................... 7,013,877
---------------
MACHINERY (7.9%)
201,000 Asahi Diamond Industries Co.
Ltd................................ 2,083,084
72,000 Fuji Machine Manufacturing Co...... 1,953,979
1,281,000 Kawasaki Heavy Industries.......... 5,872,844
623,000 Mitsubishi Heavy Industries,
Ltd................................ 5,088,618
796,000 NSK Ltd............................ 5,082,487
---------------
20,081,012
---------------
METALS (1.5%)
860,000 Mitsubishi Materials Corp.......... 3,852,099
---------------
MISCELLANEOUS MATERIALS & COMMODITIES (0.9%)
274,000 Minebea Co., Ltd................... 2,339,083
---------------
PHARMACEUTICALS (2.5%)
208,000 Banyu Pharmaceutical Co. Ltd....... 2,667,135
142,000 Sankyo Co. Ltd..................... 3,803,794
---------------
6,470,929
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER JAPAN FUND
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1996 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
<C> <S> <C>
REAL ESTATE (3.0%)
311,000 Mitsubishi Estate Co. Ltd.......... $ 3,933,251
321,000 Mitsui Fudosan Co.................. 3,805,990
---------------
7,739,241
---------------
RECREATION (1.0%)
28,600 H.I.S. Company Ltd................. 1,331,284
26,900 Sony Music Entertainment Inc....... 1,105,674
---------------
2,436,958
---------------
RETAIL (1.4%)
28,700 FamilyMart......................... 1,134,288
48,000 Ito-Yokado Co. Ltd................. 2,424,029
---------------
3,558,317
---------------
RETAIL - DEPARTMENT STORES (0.5%)
93,000 Isetan............................. 1,274,196
---------------
RETAIL - FOOD CHAINS (0.9%)
70,000 York-Benimaru...................... 2,182,505
---------------
RETAIL - SPECIALTY (0.5%)
95,000 Best Denki Co. Ltd................. 1,184,788
---------------
STEEL & IRON (3.2%)
889,000 Kobe Steel Ltd..................... 2,069,076
1,770,000 NKK Corp.*......................... 4,352,714
178,000 Yamato Kogyo Co., Ltd.............. 1,766,555
---------------
8,188,345
---------------
TELECOMMUNICATIONS (4.0%)
742 DDI Corp........................... 5,311,172
700 Nippon Telegraph & Telephone
Corp............................... 4,992,096
---------------
10,303,268
---------------
TEXTILES (2.9%)
514,000 Teijin Ltd......................... 2,451,273
339,000 Tokyo Style........................ 5,001,932
---------------
7,453,205
---------------
TRANSPORTATION (3.0%)
778,000 Nippon Yusen Kabushiki Kaish....... 3,723,959
695,000 Tobu Railway Co. Ltd............... 3,863,824
---------------
7,587,783
---------------
UTILITIES - GAS (1.1%)
871,000 Osaka Gas Co....................... 2,685,061
---------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $293,393,181)..... 254,133,497
---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------------
<C> <S> <C>
CONVERTIBLE BOND (0.4%)
FINANCIAL
$ 100,000 Sumitomo Bank International 0.00%
due 05/31/01 144A** (Identified
Cost $915,918)..................... $ 950,729
---------------
SHORT-TERM INVESTMENT (a) (0.2%)
U.S. GOVERNMENT AGENCY
400 Student Loan Marketing Assoc. 5.70%
due 12/06/96 (Amortized Cost
$399,937).......................... 399,937
---------------
TOTAL INVESTMENTS
(IDENTIFIED COST
$294,709,036) (B)........... 100.0% 255,484,163
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES....... 0.0 95,056
----- ------------
NET ASSETS.................. 100.0% $255,579,219
----- ------------
----- ------------
<FN>
- ---------------------
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(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 $1,516,651 and the
aggregate gross unrealized depreciation is $40,741,524, resulting in net
unrealized depreciation of $39,224,873.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER JAPAN FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $294,709,036)............................ $255,484,163
Cash........................................................ 140,481
Receivable for:
Dividends............................................... 523,308
Shares of beneficial interest sold...................... 294,237
Interest................................................ 3,963
Foreign withholding taxes reclaimed..................... 2,337
Deferred organizational expenses............................ 182,503
Prepaid expenses and other assets........................... 75,769
------------
TOTAL ASSETS........................................... 256,706,761
------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased............... 537,551
Plan of distribution fee................................ 214,331
Investment management fee............................... 214,331
Organizational expenses..................................... 10,624
Accrued expenses and other payables......................... 150,705
------------
TOTAL LIABILITIES...................................... 1,127,542
------------
NET ASSETS:
Paid-in-capital............................................. 298,308,671
Net unrealized depreciation................................. (39,248,335)
Net investment loss......................................... (2,479,585)
Accumulated net realized loss............................... (1,001,532)
------------
NET ASSETS............................................. $255,579,219
------------
------------
NET ASSET VALUE PER SHARE,
29,949,264 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$8.53
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER JAPAN FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $116,399 foreign withholding tax)......... $ 619,692
Interest (net of $294 foreign withholding tax).............. 169,201
------------
TOTAL INCOME........................................... 788,893
------------
EXPENSES
Investment management fee................................... 1,365,097
Plan of distribution fee.................................... 1,365,097
Transfer agent fees and expenses............................ 278,067
Custodian fees.............................................. 123,825
Professional fees........................................... 70,659
Organizational expenses..................................... 20,783
Shareholder reports and notices............................. 17,140
Registration fees........................................... 16,618
Trustees' fees and expenses................................. 7,653
Other....................................................... 3,539
------------
TOTAL EXPENSES......................................... 3,268,478
------------
NET INVESTMENT LOSS.................................... (2,479,585)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments............................................. (278,124)
Foreign exchange transactions........................... 82,068
------------
NET LOSS............................................... (196,056)
------------
Net change in unrealized appreciation/depreciation on:
Investments............................................. (29,854,030)
Translation of forward foreign currency contracts, other
assets and liabilities denominated in foreign
currencies............................................ (78,929)
------------
NET DEPRECIATION....................................... (29,932,959)
------------
NET LOSS............................................... (30,129,015)
------------
NET DECREASE................................................ $(32,608,600)
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER JAPAN FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
PERIOD
APRIL 26,
FOR THE SIX 1996*
MONTHS ENDED THROUGH
NOVEMBER 30, 1996 MAY 31,
(UNAUDITED) 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss......................................... $ (2,479,585) $ (129,720)
Net realized loss........................................... (196,056) (805,476)
Net change in unrealized depreciation....................... (29,932,959) (9,315,376)
------------- -----------
NET DECREASE........................................... (32,608,600) (10,250,572)
------------- -----------
Net increase from transactions in shares of beneficial
interest.................................................. 14,643,571 283,694,820
------------- -----------
NET INCREASE (DECREASE)................................ (17,965,029) 273,444,248
NET ASSETS:
Beginning of period......................................... 273,544,248 100,000
------------- -----------
END OF PERIOD
(INCLUDING A NET INVESTMENT LOSS OF $2,479,585 AND $0,
RESPECTIVELY)........................................... $255,579,219 $273,544,248
------------- -----------
------------- -----------
<FN>
- ---------------------
* Commencement of operations.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER JAPAN FUND
NOTES TO FINANCIAL STATEMENTS NOVEMBER 30, 1996 (UNAUDITED)
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Japan Fund (the "Fund") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as a non-diversified, open-end management
investment company. The Fund's investment objective is to seek long-term capital
appreciation. The Fund seeks to meet its investment objective by investing
primarily in securities of issuers located in Japan. The Fund was organized as a
Massachusetts business trust on January 22, 1996 and had no operations other
than those relating to organizational matters and the issuance of 10,000 shares
of beneficial interest for $100,000 to Dean Witter InterCapital Inc. (the
"Investment Manager") to effect the Fund's initial capitalization. The Fund
commenced operations on April 26, 1996.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price (in
cases where securities are traded on more than one exchange, the securities are
valued on the exchange designated as the primary market by the Trustees); (2)
all other portfolio securities for which over-the-counter market quotations are
readily available are valued at the latest available bid price prior to the time
of valuation; (3) when market quotations are not readily available, including
circumstances under which it is determined by the Investment Manager that sale
or bid prices are not reflective of a security's market value, portfolio
securities are valued at their fair value as determined in good faith under
procedures established by and under the general supervision of the Trustees
(valuation of debt securities for which market quotations are not readily
available may be based upon current market prices of securities which are
comparable in coupon, rating and maturity or an appropriate matrix utilizing
similar factors); (4) certain portfolio securities may be valued by an outside
pricing service approved by the Trustees. The pricing service may utilize a
matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research and evaluations by 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
<PAGE>
DEAN WITTER JAPAN FUND
NOTES TO FINANCIAL STATEMENTS NOVEMBER 30, 1996 (UNAUDITED) CONTINUED
maturity and thereafter at amortized cost based on their value on the 61st day.
Short-term debt securities having a maturity date of sixty days or less at the
time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date
except for certain dividends on foreign securities which are recorded as soon as
the Fund is informed after the ex-dividend date. Discounts are accreted over the
life of the respective securities. Interest income is accrued daily.
C. FOREIGN CURRENCY TRANSLATION -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value of
investment securities, other assets and liabilities and forward contracts are
translated at the exchange rates prevailing at the end of the period; and (2)
purchases, sales, income and expenses are translated at the exchange rates
prevailing on the respective dates of such transactions. The resultant exchange
gains and losses are included in the Statement of Operations as realized and
unrealized gain/loss on foreign exchange transactions. Pursuant to U.S. Federal
income tax regulations, certain foreign exchange gains/losses included in
realized and unrealized gain/loss are included in or are a reduction of ordinary
income for federal income tax purposes. The Fund does not isolate that portion
of the results of operations arising as a result of changes in the foreign
exchange rates from the changes in the market prices of the securities.
D. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund may enter into forward foreign
currency contracts which are valued daily at the appropriate exchange rates. The
resultant unrealized exchange gains and losses are included in the Statement of
Operations as unrealized foreign currency gain or loss and in the Statement of
Assets and Liabilities as part of the related foreign currency denominated asset
or liability. The Fund records realized gains or losses on delivery of the
currency or at the time the forward contract is extinguished (compensated) by
entering into a closing transaction prior to delivery.
E. 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.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
<PAGE>
DEAN WITTER JAPAN FUND
NOTES TO FINANCIAL STATEMENTS NOVEMBER 30, 1996 (UNAUDITED) CONTINUED
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. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $207,000 and was reimbursed
for the full amount thereof. Such expenses have been deferred and are being
amortized on the straight-line method over a period not to exceed five years
from the commencement of operations.
2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, calculated daily and payable monthly, by applying the
annual rate of 1.0% to the net assets of the Fund determined as of the close of
each business day.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
Under a Sub-Advisory Agreement between Morgan Grenfell Investment Services Ltd.
(the "Sub-Adviser") and the Investment Manager, the Sub-Adviser provides the
Fund with investment advice and portfolio management relating to the Fund's
investments in securities, subject to the overall supervision of the Investment
Manager. As compensation for the services provided pursuant to the Sub-Advisory
Agreement, the Investment Manager pays the Sub-Adviser monthly compensation
equal to 40% of its monthly compensation.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act pursuant
to which the Fund pays the Distributor compensation, accrued daily and payable
monthly, at an annual rate of 1.0% of the lesser of: (a) the average daily
aggregate
<PAGE>
DEAN WITTER JAPAN FUND
NOTES TO FINANCIAL STATEMENTS NOVEMBER 30, 1996 (UNAUDITED) CONTINUED
gross sales of the Fund's shares since the Fund's inception (not including
reinvestment of dividend or capital gain distributions) less the average daily
aggregate net asset value of the Fund's shares redeemed since the Fund's
inception upon which a contingent deferred sales charge has been imposed or upon
which such charge has been waived; or (b) the Fund's average daily net assets.
Amounts paid under the Plan are paid to the Distributor to compensate it for the
services provided and the expenses borne by it and others in the distribution of
the Fund's shares, including the payment of commissions for sales of the Fund's
shares and incentive compensation to, and expenses of, the account executives of
Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and
Distributor, and other employees or selected broker-dealers who engage in or
support distribution of the Fund's shares or who service shareholder accounts,
including overhead and telephone expenses, printing and distribution of
prospectuses and reports used in connection with the offering of the Fund's
shares to other than current shareholders and preparation, printing and
distribution of sales literature and advertising materials. In addition, the
Distributor may be compensated under the Plan for its opportunity costs in
advancing such amounts which compensation would be in the form of a carrying
charge on any unreimbursed expenses incurred by the Distributor.
Although there is no legal obligation for the Fund to pay expenses incurred in
excess of payments made to the Distributor under the Plan and the proceeds of
contingent deferred sales charges paid by investors upon redemption of shares,
if for any reason the Plan is terminated, the Trustees will consider at that
time the manner in which to treat such expenses. The Distributor has advised the
Fund that such excess amounts, including carrying charges, totaled $16,124,257
at November 30, 1996.
Provided that the Plan continues in effect, any cumulative expenses incurred but
not yet recovered by the Distributor, may be recovered through future
distribution fees from the Fund and contingent deferred sales charges from the
Fund's shareholders.
The Distributor has informed the Fund that for the six months ended November 30,
1996, it received approximately $343,000 in contingent deferred sales charges
from redemptions of the Fund's shares.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended November 30, 1996 aggregated
$40,196,026 and $4,145,785, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At November 30, 1996, the Fund had
transfer agent fees and expenses payable of approximately $52,000.
<PAGE>
DEAN WITTER JAPAN FUND
NOTES TO FINANCIAL STATEMENTS NOVEMBER 30, 1996 (UNAUDITED) CONTINUED
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE PERIOD
NOVEMBER 30, 1996 APRIL 26, 1996*
---------------------------- THROUGH MAY 31, 1996
----------------------------
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Sold......................................... 5,777,395 $ 52,998,507 28,633,915 $ 285,529,384
Repurchased.................................. (4,283,419) (38,354,936) (188,627) (1,834,564)
----------- -------------- ----------- --------------
Net increase................................. 1,493,976 $ 14,643,571 28,445,288 $ 283,694,820
----------- -------------- ----------- --------------
----------- -------------- ----------- --------------
<FN>
- ---------------------
* Commencement of operations.
</TABLE>
6. FEDERAL INCOME TAX STATUS
Foreign currency losses incurred after October 31 ("post-October losses") within
the taxable year are deemed to arise on the first business day of the Fund's
next taxable year. The Fund incurred and will elect to defer net foreign
currency losses of approximately $771,000 during fiscal 1996. As of May 31,
1996, the Fund had temporary book/tax differences primarily attributable to
post-October losses and permanent book/tax differences primarily attributable a
to net operating loss.
7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into forward foreign currency contracts ("forward contracts")
to facilitate settlement of foreign currency denominated portfolio transactions
or to manage foreign currency exposure associated with foreign currency
denominated securities. At November 30, 1996, there were no outstanding forward
contracts.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Fund bears the risk of
an unfavorable change in the foreign exchange rates underlying the forward
contracts. Risks may also arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their contracts.
<PAGE>
DEAN WITTER JAPAN FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE PERIOD
NOVEMBER 30, APRIL 26, 1996*
1996 THROUGH
(UNAUDITED) MAY 31, 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 9.61 $ 10.00
-------- --------
Net investment loss................................................... (0.08) --
Net realized and unrealized loss...................................... (1.00) (0.39)
-------- --------
Net asset value, end of period........................................ $ 8.53 $ 9.61
-------- --------
-------- --------
TOTAL INVESTMENT RETURN+.............................................. (11.24)%(1) (3.90)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 2.39%(2) 2.84%(2)
Net investment loss................................................... (1.82)%(2) (0.52)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $255,579 $273,544
Portfolio turnover rate............................................... 2%(1) --
Average commission rate paid.......................................... $0.0284 $0.0424
<FN>
- ---------------------
* Commencement of operations.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
SUB-ADVISOR
Morgan Grenfell Investment Services Limited
The financial statements included herein have been taken from the records of the
Fund without examination by the independent accountants and accordingly they do
not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of the
Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DEAN WITTER
JAPAN FUND
[GRAPHIC]
SEMIANNUAL REPORT
NOVEMBER 30, 1996
