<PAGE>
MORGAN STANLEY DEAN WITTER JAPAN FUND TWO WORLD TRADE CENTER,
LETTER TO THE SHAREHOLDERS MAY 31, 1998 NEW YORK, NEW YORK 10048
DEAR SHAREHOLDER:
The twelve-month period ended May 31, 1998, was another difficult term for
Japan. Problems both domestically and in other Asian countries took their toll
on the financial markets and the economy. The current diagnosis of a
recessionary economy, falling corporate profits and spiraling bad debt in the
banking and construction industries is a far cry from the optimism of a year
ago. Given this scenario, the short-term outlook is not encouraging.
In the first quarter of 1997, the Japanese economy exhibited strong growth,
manufacturers posted double-digit profit gains and the government felt
sufficiently confident to tighten fiscal policy by means of an increased
consumption tax. The market responded positively to this evidence of economic
strength, with the Nikkei Index reaching a high of 20,681 on June 16, 1997.
However, as the year progressed, it became increasingly obvious that the
Japanese economy was slowing, consumers were saving rather than spending and
corporations were going to have to struggle to meet profit forecasts.
By September, as the first signs of trouble in Asia surfaced, Japan was forced
to come to terms with the realization that its economy was heading into
recession. The initial government response was confused and inconsistent. It
attempted to boost investor confidence in the market with proposed reform and
stimulation packages. These were only marginally successful. The well-publicized
bankruptcies of Sanyo and Yamanichi Securities, combined with dramatic declines
in other Asian financial markets, induced a major Japanese market crisis in late
November.
In December, the Japanese government scrambled for support proposals that would
convince increasingly skeptical investors that economic growth could be
stimulated and a complete financial sector meltdown
could be avoided. Despite ongoing leaks of a proposed Y30 trillion financial
sector support package coupled with a Y2 trillion tax rebate, the market
continued to fall. By January 12, 1998, the Nikkei had plummeted to a 12-month
low of 14,664.
<PAGE>
MORGAN STANLEY DEAN WITTER JAPAN FUND
LETTER TO THE SHAREHOLDERS MAY 31, 1998, CONTINUED
As 1998 progressed, the Japanese market rebounded somewhat as investors grew
optimistic that the government's efforts might prove effective. Several
important initiatives were announced by the government at this time, including:
banks would be permitted to revalue land assets upward without incurring any tax
liability; the government would purchase preference shares from banks to
increase the bank's equity capital and recent personal tax cuts were made
permanent. Also, a further significant supplementary economic package was
announced in late February 1998.
Investors were also encouraged by the recoveries in other Asian markets,
following the announcement of the renegotiation of U.S. $23 billion of
short-term debt in Korea. A report of new corruption scandals concerning both
the banks and the Ministry of Finance, which led to the arrests of Japanese bank
and ministry officials, did not deter investor optimism.
Despite further support proposals and a Y16 trillion supplementary budget,
current data continues to support an economic slowdown. Corporations are openly
admitting to a major downturn in their business dealings with Asia, and more
complete (but not total) disclosure on bank and construction bad debt have all
affected the situation negatively.
PERFORMANCE AND PORTFOLIO
During the fiscal year ended May 31, 1998, Morgan Stanley Dean Witter Japan
Fund's Class B shares produced a total return of -24.12 percent versus -28.25
percent for the Morgan Stanley Capital International (MSCI) Japan Index and
- -22.08 percent for the Lipper Japanese Funds Average. Since their inception on
July 28, 1997, through May 31, 1998, the Fund's Class A, C and D shares posted
total returns of -26.64 percent, -27.07 percent and -26.64 percent, respectively
versus -31.07 percent for the MSCI Japan Index and -25.99 percent for the Lipper
Japanese Funds Average. The performance of the Fund's four share classes varies
because of differing sales charges and expenses.
The accompanying chart compares the performance of the Fund's Class B shares
from inception (April 26, 1996) through the fiscal year ended May 31, 1998,
versus similar investments in the issues that comprise the MSCI Japan Index and
the Lipper Japanese Funds Average.
The Fund has retained a strategic emphasis on exporting blue-chip companies,
such as Sony, Rohm, Bridgestone, Matsushita Electric and Canon, that continue to
benefit from superior technology and transparency of earnings. Other major
positions include Nippon Telegraph & Telephone, a major telecommunications
company, and Secon Company, a major securities firm. The portfolio is
underweighted in the banking sector because of the quantity of bad debts that
has been exposed. It is also underweighted in the domestic cyclical sector
because of the ongoing Japanese recession.
2
<PAGE>
MORGAN STANLEY DEAN WITTER JAPAN FUND
LETTER TO THE SHAREHOLDERS MAY 31, 1998, CONTINUED
OUTLOOK
Continuing volatility in Asia and fears of further bankruptcies in Japan have
disheartened and discouraged domestic and international investors alike. In the
face of an economy in recession and corporate profits in decline, the short-term
outlook is poor. However, the market has discounted a lot of bad news and at
current levels is close to major support lines seen in 1992, 1995 and 1997.
Public money has been utilized to support the market and, with an upcoming
election in July, the desire to avoid further deterioration is stronger than
ever.
Looking out over the next 18 to 24 months, there are some encouraging signs.
Announcements of share buy backs and the issuing of return on equity and return
on investment targets suggest that companies are aware of the need to improve
shareholder value. Similarly, the banks' improvement in the degree of bad debt
disclosure and the announcements of various joint ventures (often with foreign
partners) is positive news in a sector that has underperformed for a number of
years. The market has discounted a great deal of negative data, and any sign of
an improvement in the domestic economy should sustain a substantial market
rally. However, Asia in general is a major uncertainty and is likely to remain
so for the near term.
In summary, Japan remains in crisis and the process of recovery from the
excesses of the late 1980s has been slow. Nevertheless, we believe that Japan
eventually will resolve its problems. Given this conviction, we continue to
believe that the Fund provides a viable long-term opportunity for investors to
participate in the world's second-largest economy.
We appreciate your ongoing support of Morgan Stanley Dean Witter Japan Fund and
look forward to continuing to serve your investment objectives in the months and
years to come.
Very truly yours,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
3
<PAGE>
MORGAN STANLEY DEAN WITTER JAPAN FUND
LETTER TO THE SHAREHOLDERS MAY 31, 1998, CONTINUED
* * *
In May 1998, Morgan Stanley Dean Witter Japan Fund's sub-advisor, Morgan
Grenfell Investment Services Limited, advised the Board of Trustees of the Fund
and Morgan Stanley Dean Witter Advisors Inc. of its resignation as sub-advisor,
effective at the close of business on September 30, 1998. On June 2, 1998, the
Board of Trustees unanimously recommended that a new sub-advisory agreement with
Morgan Stanley Asset Management Inc. ("MSAM"), an affiliate of Morgan Stanley
Dean Witter Advisors Inc., be submitted to shareholders for approval at a
special meeting expected to be held in August 1998. A letter enclosing a
prospectus supplement, which contains complete details, has been mailed to you.
4
<PAGE>
MORGAN STANLEY DEAN WITTER JAPAN FUND
FUND PERFORMANCE MAY 31, 1998
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Growth of $10,000 -- Class B
Shares
($ in Thousands)
Fund MSCI JAPAN(4) Lipper(5)
<S> <C> <C> <C>
April-1996 $10,000 $10,000 $10,000
May-1996 $ 9,610 $ 9,481 $ 9,654
May-1997 $8,790 $8,033 $8,904
May-1998 $6,470(3) $5,764 $6,938
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. PERFORMANCE FOR CLASS
A, CLASS C, AND CLASS D SHARES WILL VARY FROM THE PERFORMANCE OF CLASS B
SHARES SHOWN ABOVE DUE TO DIFFERENCES IN SALES CHARGES AND EXPENSES.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS*
- -----------------------------------------------------------------------------------------------------------------
CLASS B** CLASS A+
- ----------------------------------------------------- ------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year (24.12)(1) (27.91)(2) Since Inception (7/28/97) (26.64)(1) (30.49)(2)
Since Inception (4/26/96) (17.58)(1) (18.77)(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C++ CLASS D++
- ------------------------------------------------------ ------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Since Inception (7/28/97) (27.07)(1) (27.80)(2) Since Inception (7/28/97) (26.64)(1)
</TABLE>
- ------------------------
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable sales charge. See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value after the deduction of a 3% CDSC, assuming a complete
redemption on May 31, 1998.
(4) The Morgan Stanley Capital International Japan Index is a capitalization
weighted index that measures performance, in US dollars, of companies
listed on the Japanese Stock Exchange. 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.
(5) The Lipper Japanese Fund Average tracks the performance of all funds that
concentrate their investments in equity securities of Japanese companies.
* For periods of less than one year, the fund quotes its total return on a
non-annualized basis.
** The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%. The
CDSC declines to 0% after six years.
+ The maximum front-end sales charge for Class A is 5.25%.
++ The maximum contingent deferred sales charge for Class C shares is 1% for
shares redeemed within one year of purchase.
++ Class D shares have no sales charge.
5
<PAGE>
MORGAN STANLEY DEAN WITTER JAPAN FUND
PORTFOLIO OF INVESTMENTS MAY 31, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (92.4%)
AUTOMOBILES (5.5%)
253,000 Bridgestone Corp...................................................................... $ 5,757,868
156,000 Suzuki Motor Co., Ltd................................................................. 1,268,448
------------
7,026,316
------------
BANKING (3.8%)
291,000 Bank of Tokyo-Mitsubishi Ltd.......................................................... 2,986,496
121,000 Mitsubishi Trust & Banking............................................................ 1,071,876
142,000 Sumitomo Trust & Banking.............................................................. 745,538
------------
4,803,910
------------
BUILDING & CONSTRUCTION (0.7%)
120,000 National House Industrial............................................................. 950,666
------------
BUSINESS & PUBLIC SERVICES (4.5%)
27,000 Asatsu Inc............................................................................ 533,777
129,000 Mitsubishi Logistic................................................................... 1,272,812
70,000 Secom Co.............................................................................. 3,967,591
------------
5,774,180
------------
BUSINESS EQUIPMENT (2.0%)
233,000 Ricoh Co., Ltd........................................................................ 2,510,393
------------
CHEMICALS (6.0%)
640,000 Asahi Chemical Industrial Co., Ltd.................................................... 2,207,850
237,000 Nippon Zeon Co., Ltd.................................................................. 645,200
256,000 Shin-Etsu Chemical Co................................................................. 4,747,569
------------
7,600,619
------------
COMPUTER SOFTWARE & SERVICES (1.8%)
58 NTT Data Corp......................................................................... 2,322,506
------------
ELECTRICAL EQUIPMENT (17.4%)
318,000 Canon, Inc............................................................................ 7,557,796
279,000 Matsushita Electric Industrial Co., Ltd............................................... 4,360,317
157,000 Matsushita Electric Works............................................................. 1,310,501
191,000 Omron Corp............................................................................ 2,874,973
71,500 Sony Corp............................................................................. 6,024,847
------------
22,128,434
------------
ELECTRONICS (17.7%)
427,000 Furukawa Electric Co.................................................................. 1,353,115
34,000 Kyocera Corp.......................................................................... 1,655,311
215,000 Minebea Co., Ltd...................................................................... 2,200,324
80,000 Murata Manufacturing Co., Ltd......................................................... 2,321,930
308,000 NGK Insulators, Ltd................................................................... 2,768,340
125,000 Olympus Optical Co., Ltd.............................................................. 1,174,829
70,000 Rohm Co., Ltd......................................................................... 7,259,633
371,000 Sumitomo Electric Industries.......................................................... 3,866,309
------------
22,599,791
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
ENGINEERING & CONSTRUCTION (2.3%)
290,000 Kajima Corp........................................................................... $ 776,954
116,000 Kandenko Co., Ltd..................................................................... 665,005
121,000 Kinden Corp........................................................................... 1,459,669
------------
2,901,628
------------
FINANCIAL SERVICES (2.0%)
29,000 Japan Associated Finance.............................................................. 887,649
156,000 Nomura Securities Co., Ltd............................................................ 1,696,507
------------
2,584,156
------------
INSURANCE (2.5%)
193,000 Sumitomo Marine & Fire................................................................ 1,070,292
225,000 Tokio Marine & Fire Insurance Co...................................................... 2,126,035
------------
3,196,327
------------
MACHINERY (3.9%)
153,000 Asahi Diamond Industries Co., Ltd..................................................... 685,387
1,212,000 Kawasaki Heavy Industries............................................................. 2,260,771
569,000 NSK Ltd............................................................................... 2,048,974
------------
4,995,132
------------
METALS (1.0%)
630,000 Mitsubishi Materials Corp............................................................. 1,225,063
------------
PHARMACEUTICALS (3.6%)
152,000 Banyu Pharmaceutical Co., Ltd......................................................... 1,823,781
117,000 Sankyo Co., Ltd....................................................................... 2,814,404
------------
4,638,185
------------
REAL ESTATE (2.8%)
207,000 Mitsubishi Estate Co., Ltd............................................................ 1,814,325
216,000 Mitsui Fudosan Co..................................................................... 1,743,867
------------
3,558,192
------------
RECREATION (1.8%)
25,000 H.I.S. Co., Ltd....................................................................... 396,111
48,500 Sony Music Entertainment Inc.......................................................... 1,945,589
------------
2,341,700
------------
RETAIL (6.2%)
82,900 Family Mart Co., Ltd.................................................................. 3,104,645
75,000 Ito-Yokado Co., Ltd................................................................... 3,727,044
55,000 York-Benimaru......................................................................... 1,105,149
------------
7,936,838
------------
STEEL & IRON (0.4%)
544,000 NKK Corp.............................................................................. 462,312
------------
TELECOMMUNICATIONS (5.5%)
595 DDI Corp.............................................................................. 1,705,510
645 Nippon Telegraph & Telephone Corp..................................................... 5,295,643
------------
7,001,153
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER JAPAN FUND
PORTFOLIO OF INVESTMENTS MAY 31, 1998, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
TEXTILES (0.7%)
319,000 Teijin Ltd............................................................................ $ 960,331
------------
TRANSPORTATION (0.3%)
115,000 Tobu Railway Co., Ltd................................................................. 325,495
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $158,338,621)........................................................ 117,843,327
------------
</TABLE>
<TABLE>
<CAPTION>
CURRENCY
AMOUNT IN
THOUSANDS
- -------------
<C> <S> <C>
PURCHASED PUT OPTIONS ON FOREIGN CURRENCY (4.4%)
JPY 6,939,576 August 11, 1998/JPY 123.48 (IDENTIFIED COST $1,517,400)............................ 5,586,280
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ----------
<C> <S> <C>
SHORT-TERM INVESTMENT (a) (1.8%)
U.S. GOVERNMENT AGENCY
$ 2,300 Federal Home Loan Mortgage Corp. 5.55% due 06/01/98 (AMORTIZED COST $2,300,000)....... 2,300,000
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $162,156,021) (b)........................................................ 98.6 % $ 125,729,607
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................................ 1.4 1,769,903
------ -------------
NET ASSETS................................................................................ 100.0 % $ 127,499,510
------ -------------
------ -------------
</TABLE>
- ---------------------
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $11,619,822 and the
aggregate gross unrealized depreciation is $48,046,236, resulting in net
unrealized depreciation of $36,426,414.
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT MAY 31, 1998:
<TABLE>
<CAPTION>
CONTRACTS
TO IN DELIVERY UNREALIZED
DELIVER EXCHANGE FOR DATE APPRECIATION
- --------------------------------------------
<S> <C> <C> <C>
$937,924 JPY 129,921,213 06/01/98 $2,229
$260,821 JPY 36,170,592 06/02/98 319
------
Total unrealized
appreciation.................. $2,548
------
------
</TABLE>
CURRENCY ABBREVIATION:
<TABLE>
<S> <C>
JPY Japanese Yen.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER JAPAN FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $162,156,021).............................................................. $125,729,607
Cash.......................................................................................... 748,489
Receivable for:
Investments sold.......................................................................... 640,651
Dividends................................................................................. 505,655
Shares of beneficial interest sold........................................................ 130,814
Deferred organizational expenses.............................................................. 116,373
Prepaid expenses and other assets............................................................. 76,398
------------
TOTAL ASSETS............................................................................. 127,947,987
------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased................................................. 151,036
Investment management fee................................................................. 111,034
Plan of distribution fee.................................................................. 110,573
Accrued expenses and other payables........................................................... 75,834
------------
TOTAL LIABILITIES........................................................................ 448,477
------------
NET ASSETS............................................................................... $127,499,510
------------
------------
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................... $213,250,030
Net unrealized depreciation................................................................... (36,468,480)
Undistributed net investment income........................................................... 611,788
Accumulated net realized loss................................................................. (49,893,828)
------------
NET ASSETS............................................................................... $127,499,510
------------
------------
CLASS A SHARES:
Net Assets.................................................................................... $126,203
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 18,775
NET ASSET VALUE PER SHARE................................................................ $6.72
------------
------------
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE)........................................ $7.09
------------
------------
CLASS B SHARES:
Net Assets.................................................................................... $125,007,914
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 18,743,414
NET ASSET VALUE PER SHARE................................................................ $6.67
------------
------------
CLASS C SHARES:
Net Assets.................................................................................... $1,737,575
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 260,304
NET ASSET VALUE PER SHARE................................................................ $6.68
------------
------------
CLASS D SHARES:
Net Assets.................................................................................... $627,818
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 93,420
NET ASSET VALUE PER SHARE................................................................ $6.72
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER JAPAN FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1998*
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $196,241 foreign withholding tax)........................................... $ 1,148,888
Interest...................................................................................... 417,743
------------
TOTAL INCOME............................................................................. 1,566,631
------------
EXPENSES
Investment management fee..................................................................... 1,817,407
Plan of distribution fee (Class A shares)..................................................... 505
Plan of distribution fee (Class B shares)..................................................... 1,807,418
Plan of distribution fee (Class C shares)..................................................... 6,449
Transfer agent fees and expenses.............................................................. 470,568
Custodian fees................................................................................ 138,812
Registration fees............................................................................. 86,721
Shareholder reports and notices............................................................... 67,455
Professional fees............................................................................. 55,530
Organizational expenses....................................................................... 37,966
Trustees' fees and expenses................................................................... 10,337
Other......................................................................................... 10,536
------------
TOTAL EXPENSES........................................................................... 4,509,704
------------
NET INVESTMENT LOSS...................................................................... (2,943,073)
------------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss on:
Investments............................................................................... (28,090,423)
Foreign exchange transactions............................................................. (318,323)
------------
NET LOSS................................................................................. (28,408,746)
------------
Net change in unrealized appreciation/depreciation on:
Investments............................................................................... (21,268,884)
Translation of forward foreign currency contracts, other assets and liabilities
denominated in foreign currencies....................................................... (75,287)
------------
NET DEPRECIATION......................................................................... (21,344,171)
------------
NET LOSS................................................................................. (49,752,917)
------------
NET DECREASE.................................................................................. $(52,695,990)
------------
------------
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER JAPAN FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED FOR THE YEAR
MAY 31, ENDED
1998* MAY 31, 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss............................................................. $ (2,943,073) $ (4,281,589)
Net realized loss............................................................... (28,408,746) (17,458,743)
Net change in unrealized depreciation........................................... (21,344,171) (5,808,933)
------------ ------------
NET DECREASE............................................................... (52,695,990) (27,549,265)
Net decrease from transactions in shares of beneficial interest................. (59,523,451) (6,276,032)
------------ ------------
NET DECREASE............................................................... (112,219,441) (33,825,297)
NET ASSETS:
Beginning of period............................................................. 239,718,951 273,544,248
------------ ------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $611,788 AND $0,
RESPECTIVELY)............................................................... $127,499,510 $239,718,951
------------ ------------
------------ ------------
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER JAPAN FUND
NOTES TO FINANCIAL STATEMENTS MAY 31, 1998
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley 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
commenced operations on April 26, 1996. On July 28, 1997, the Fund commenced
offering three additional classes of shares, with the then current shares
designated as Class B shares.
Effective June 22, 1998, the following entities have changed their name:
<TABLE>
<CAPTION>
OLD NAME NEW NAME
- ---------------------------------------- ----------------------------------------
<S> <C>
Dean Witter Japan Fund Morgan Stanley Dean Witter Japan Fund
Dean Witter InterCapital Inc. Morgan Stanley Dean Witter Advisors Inc.
Morgan Stanley Dean Witter Distributors
Dean Witter Distributors Inc. Inc.
</TABLE>
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase, some Class
A shares, and most Class B shares and Class C shares are subject to a contingent
deferred sales charge imposed on shares redeemed within one year, six years and
one year, respectively. Class D shares are not subject to a sales charge.
Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price (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 Morgan Stanley Dean Witter Advisors Inc. (the "Investment
Manager") or Morgan Grenfell Investment Services Limited
11
<PAGE>
MORGAN STANLEY DEAN WITTER JAPAN FUND
NOTES TO FINANCIAL STATEMENTS MAY 31, 1998, CONTINUED
(the "Sub-Advisor") 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 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. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
D. OPTION ACCOUNTING PRINCIPLES -- When the Fund purchases a call or put option,
the premium paid is recorded as an investment which is subsequently
marked-to-market to reflect the current market value. If a purchased option
expires, the Fund will realize a loss to the extent of the premium paid. If the
Fund enters into a closing sale transaction, a gain or loss is realized for the
difference between the proceeds from the sale and the cost of the option. If a
put option is exercised, the cost of the security or currency sold upon exercise
will be increased by the premium originally paid. If a call option is exercised,
the cost of the security purchased upon exercise will be increased by the
premium originally paid.
12
<PAGE>
MORGAN STANLEY DEAN WITTER JAPAN FUND
NOTES TO FINANCIAL STATEMENTS MAY 31, 1998, CONTINUED
E. 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 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 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.
F. 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.
G. 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.
H. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
13
<PAGE>
MORGAN STANLEY DEAN WITTER JAPAN FUND
NOTES TO FINANCIAL STATEMENTS MAY 31, 1998, CONTINUED
I. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $200,000 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 the Sub-Advisor and the Investment
Manager, the Sub-Advisor 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-Advisor monthly compensation equal to 40% of its monthly compensation.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A - up
to 0.25% of the average daily net assets of Class A; (ii) Class B - 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Class B shares
since the inception of the Fund (not including reinvestment of dividend or
capital gain distributions) less the average daily aggregate net asset value of
the Class B shares redeemed since the Fund's inception upon which a contingent
deferred sales charge has been imposed or waived; or (b) the average daily net
assets of Class B; and (iii) Class C - up to 1.0% of the average daily net
assets of Class C. In the case of Class A shares, amounts paid under the Plan
are paid to the Distributor for services provided. In the case of Class B and
Class C shares, amounts paid under the Plan are paid to the Distributor for
services provided and the expenses borne by it and others in the distribution of
the shares of these Classes,
14
<PAGE>
MORGAN STANLEY DEAN WITTER JAPAN FUND
NOTES TO FINANCIAL STATEMENTS MAY 31, 1998, CONTINUED
including the payment of commissions for sales of these Classes and incentive
compensation to, and expenses of, Morgan Stanley Dean Witter Financial Advisors,
and others who engage in or support distribution of the shares or who service
shareholder accounts, including overhead and telephone expenses; printing and
distribution of prospectuses and reports used in connection with the offering of
these shares to other than current shareholders; and preparation, printing and
distribution of sales literature and advertising materials. In addition, the
Distributor may utilize fees paid pursuant to the Plan, in the case of Class B
shares, to compensate Dean Witter Reynolds Inc. ("DWR"), an affiliate of the
Investment Manager and Distributor, and other selected broker-dealers for their
opportunity costs in advancing such amounts, which compensation would be in the
form of a carrying charge on any unreimbursed expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts, including
carrying charges, totaled $16,172,790 at May 31, 1998.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the period ended May 31, 1998, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.24% and
1.0%, respectively.
The Distributor has informed the Fund that for the period ended May 31, 1998, it
received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares and Class C shares of $1,117,070 and $368, respectively
and received $6,525 in front-end sales charges from sales of the Fund's Class A
shares. The respective shareholders pay such charges which are not an expense of
the Fund.
15
<PAGE>
MORGAN STANLEY DEAN WITTER JAPAN FUND
NOTES TO FINANCIAL STATEMENTS MAY 31, 1998, CONTINUED
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended May 31, 1998 aggregated $11,918,607
and $63,364,718, respectively.
For the year ended May 31, 1998, the Fund incurred $8,553 in brokerage
commissions with Morgan Stanley & Co., an affiliate of the Investment Manager,
for portfolio transactions executed on behalf of the Fund.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At May 31, 1998, the Fund had
transfer agent fees and expenses payable of approximately $3,400.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
MAY 31, 1998 MAY 31, 1997
---------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
CLASS A SHARES*
Sold............................................................. 1,653,350 $ 11,512,949 -- --
Redeemed (1,634,575) (11,582,196) -- --
----------- -------------- ----------- -------------
Net increase (decrease) - Class A................................ 18,775 (69,247) -- --
----------- -------------- ----------- -------------
CLASS B SHARES
Sold............................................................. 8,327,661 65,197,758 13,534,303 $ 114,115,612
Redeemed......................................................... (16,855,398) (127,207,599) (14,718,440) (120,391,644)
----------- -------------- ----------- -------------
Net decrease - Class B........................................... (8,527,737) (62,009,841) (1,184,137) (6,276,032)
----------- -------------- ----------- -------------
CLASS C SHARES*
Sold............................................................. 272,435 1,993,277 -- --
Redeemed......................................................... (12,131) (85,899) -- --
----------- -------------- ----------- -------------
Net increase - Class C........................................... 260,304 1,907,378 -- --
----------- -------------- ----------- -------------
CLASS D SHARES*
Sold............................................................. 143,074 983,689 -- --
Redeemed......................................................... (49,654) (335,430) -- --
----------- -------------- ----------- -------------
Net increase - Class D........................................... 93,420 648,259
----------- -------------- ----------- -------------
Net decrease in Fund............................................. (8,155,238) $ (59,523,451) (1,814,137) $ (6,276,032)
----------- -------------- ----------- -------------
----------- -------------- ----------- -------------
</TABLE>
- ---------------------
* For the period July 28, 1997 (issue date) through May 31, 1998.
16
<PAGE>
MORGAN STANLEY DEAN WITTER JAPAN FUND
NOTES TO FINANCIAL STATEMENTS MAY 31, 1998, CONTINUED
6. FEDERAL INCOME TAX STATUS
At May 31, 1998, the Fund had a net capital loss carryover of approximately
$29,365,000 of which $448,000 will be available through May 31, 2005 and
$28,917,000 will be available through May 31, 2006 to offset future capital
gains to the extent provided by regulations.
Capital losses incurred after October 31 ("post-October losses") within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
approximately $19,268,000 during fiscal 1998.
As of May 31, 1998, the Fund had temporary book/tax differences attributable to
post-October losses and capital loss deferrals on wash sales and permanent
book/tax differences primarily attributable to foreign currency gains. To
reflect reclassifications arising from the permanent differences, paid-in-
capital was charged $37,966, accumulated net realized loss was charged
$3,516,895 and undistributed net investment income was credited $3,554,861.
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.
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.
At May 31, 1998, there were outstanding forward contracts, used to facilitate
settlement of foreign currency denominated portfolio transactions.
8. SUBSEQUENT EVENT
In May 1998, the sub-advisor advised the Fund's Board of Directors and the
Investment Manager of its resignation as sub-advisor, effective at the close of
business on September 30, 1998. On June 2, 1998, the Board of Directors
unanimously recommended that a new sub-advisory agreement with Morgan Stanley
Asset Management Inc., an affiliate of the Investment Manager, be submitted to
shareholders for approval at a special meeting expected to be held in August
1998.
17
<PAGE>
MORGAN STANLEY 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 PERIOD
FOR THE YEAR FOR THE YEAR APRIL 26, 1996*
ENDED ENDED THROUGH
MAY 31, 1998**++ MAY 31, 1997 MAY 31, 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 8.79 $ 9.61 $ 10.00
------- ------ ------
Net investment loss..................... (0.13) (0.16) --
Net realized and unrealized loss........ (1.99) (0.66) (0.39)
------- ------ ------
Total from investment operations........ (2.12) (0.82) (0.39)
------- ------ ------
Net asset value, end of period.......... $ 6.67 $ 8.79 $ 9.61
------- ------ ------
------- ------ ------
TOTAL INVESTMENT RETURN+................ (24.12)% (8.53)% (3.90)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses................................ 2.48% 2.43% 2.84%(2)
Net investment loss..................... (1.62)% (1.77)% (0.52)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands.............................. $125,008 $239,719 $273,544
Portfolio turnover rate................. 7% 25% --
Average commission rate paid............ $0.0093 $0.0227 $0.0424
</TABLE>
- ---------------------
* Commencement of operations.
** Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
MORGAN STANLEY DEAN WITTER JAPAN FUND
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
MAY 31, 1998++
- ----------------------------------------------------------------------------------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 9.16
------
Net investment income................................................. 0.05
Net realized and unrealized loss...................................... (2.49)
------
Total from investment operations...................................... (2.44)
------
Net asset value, end of period........................................ $ 6.72
------
------
TOTAL INVESTMENT RETURN+.............................................. (26.64)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.83%(2)
Net investment income................................................. 0.75%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $126
Portfolio turnover rate............................................... 7%
Average commission rate paid.......................................... $0.0093
</TABLE>
<TABLE>
<S> <C>
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 9.16
------
Net investment loss................................................... (0.07)
Net realized and unrealized loss...................................... (2.41)
------
Total from investment operations...................................... (2.48)
------
Net asset value, end of period........................................ $ 6.68
------
------
TOTAL INVESTMENT RETURN+.............................................. (27.07)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 2.52%(2)
Net investment loss................................................... (1.21)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $1,738
Portfolio turnover rate............................................... 7%
Average commission rate paid.......................................... $0.0093
</TABLE>
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
MORGAN STANLEY DEAN WITTER JAPAN FUND
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
MAY 31, 1998++
- ----------------------------------------------------------------------------------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 9.16
-------
Net investment loss................................................... (0.01)
Net realized and unrealized loss...................................... (2.43)
-------
Total from investment operations...................................... (2.44)
-------
Net asset value, end of period........................................ $ 6.72
-------
-------
TOTAL INVESTMENT RETURN+.............................................. (26.64)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.60%(2)
Net investment loss................................................... (0.23)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $628
Portfolio turnover rate............................................... 7%
Average commission rate paid.......................................... $0.0093
</TABLE>
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
MORGAN STANLEY DEAN WITTER JAPAN FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER JAPAN FUND
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter Japan
Fund (the "Fund"), formerly Dean Witter Japan Fund, at May 31, 1998, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended and the financial highlights for
each of the periods presented, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at May 31, 1998 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
JULY 10, 1998
21
<PAGE>
TRUSTEES MORGAN STANLEY
Michael Bozic DEAN WITTER
Charles A. Fiumefreddo JAPAN FUND
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
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center -- D Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
SUB-ADVISOR
Morgan Grenfell Investment Services Limited
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 ANNUAL REPORT
effective prospectus. MAY 31, 1998
