<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
LETTER TO THE SHAREHOLDERS May 31, 1998
Two World Trade Center, New York, New York 10048
DEAR SHAREHOLDER:
The U.S. stock market advanced significantly during the fiscal year ended May
31, 1998, supported by a decline in long-term interest rates. Concern about the
receding Asian economies and their slow process of reform dominated the world
outlook and contributed to the drop in long-term rates from 6.91 percent to
5.80 percent.
The expansion of the U.S. economy is now in its seventh year, unemployment is
at a 28-year low and the increase in hourly earnings has accelerated to more
than 4 percent. Normally, these signs of an overheating economy might induce
the Federal Reserve Board to increase interest rates. However, Asia represents
about one-third of the global economy and prior to its current financial crisis
had been contributing significantly to earnings growth for many large U.S.
companies. South Korea's industrial production declined 11 percent in April and
China's exports declined 1.5 percent in May. We believe the considerable
weakness in Asia could negatively affect U.S. growth, causing manufacturing
jobs to continue to decline and increasing unemployment later this year. Given
this scenario, we believe the Federal Reserve Board is likely to delay
increasing interest rates.
Over the past 12 months, the Standard & Poor's Financial Index outperformed the
Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index), gaining 38.4
percent. The financial services industry achieved healthy earnings growth due
to a robust economy and the benefits of consolidation. The brokerage sector had
the strongest earnings growth and the most acquisition activity, which drove it
up 62 percent. This was followed by gains of 45 percent for the savings and
loan sector, 37 percent for banking and 31 percent for insurance.
PERFORMANCE
During the fiscal year ended May 31, 1998, Morgan Stanley Dean Witter Financial
Services Trust's Class B shares produced a total return of 45.25 percent versus
30.67 percent for the S&P 500 Index and 41.07 percent for
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
LETTER TO THE SHAREHOLDERS May 31, 1998, continued
the Lipper Financial Services Funds Index. Since their inception on July 28,
1997, through May 31, 1998, the Fund's Class A, C and D shares posted total
returns of 27.74 percent, 26.95 percent and 27.03 percent, respectively, versus
32.71 percent for the S&P 500 Index and 21.75 percent for the Lipper Financial
Services Funds Index. The performance of the Fund's four share classes varies
because of differing sales charges and expenses.
The accompanying chart illustrates the growth of a hypothetical $10,000
investment in the Fund's Class B shares from inception (February 26, 1997)
through the fiscal year ended May 31, 1998, versus similar investments in the
issues that comprise the S&P 500 Index and Lipper Financial Services Funds
Index.
PORTFOLIO STRATEGY
The Fund is positioned to benefit from the growth in the wealth management
industry. In fact, half the stocks in the portfolio derive some portion of
their earnings from this business. The Fund is overweighted in brokerage, life
insurance and annuity stocks and is market weighted in asset management
companies. In addition, the Fund's bank stock investments focus on companies
that emphasize wealth management.
The Fund is market weighted in regional banks and underweighted in money-center
banks, thrifts and property and casualty insurers.
The Fund has committed 7 percent of its assets to European financial services
companies. Europe is in the early stages of an economic recovery. It is also
moving towards more shareholder oriented corporate management which is putting
greater emphasis on improving profitability. Our focus is on banks in Spain and
Italy, because they have virtually no exposure to Asia. We also have positions
in several European insurance companies that either are focused on wealth
management or that appear to have substantial opportunities for restructuring.
Exposure to the consumer finance sector was increased during the fiscal year.
In recent years, bankruptcies have accounted for about half of the credit
losses in the credit card business. The number of bankruptcies actually fell in
May, a major trend change after rising steadily for many years. The Fund has
also added exposure to financial and data servicing companies, which have
lagged the stock market for two years and are more defensive in nature. The
Fund continues to look for opportunities in the emerging electronic commerce
sector, which represents about 4 percent of the Fund's assets.
OUTLOOK
We continue to believe that the Fund will be well served by its focus on those
sectors of financial services that are best positioned to benefit from
consolidation, deregulation and technology. Earnings momentum
2
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
LETTER TO THE SHAREHOLDERS May 31, 1998, continued
for many financial services stocks peaked in 1996. However, earnings growth
continues at a low double-digit rate, exceeding that of nonfinancial companies.
We believe that financial services stocks are attractively valued at a 24
percent discount to the S&P 500.
Recently, the number of mergers in the financial services industry has slowed.
The most notable transactions have been mergers of equals between the larger
players, which are focused on gaining scale and global reach. We believe that
the resulting companies will be more diversified, which should lead to more
stable earnings per share growth, and possibly better stock valuations.
We appreciate your support of Morgan Stanley Dean Witter Financial Services
Trust and look forward to continuing to serve your investment needs and
objectives.
Sincerely,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
Chairman of the Board
3
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
FUND PERFORMANCE May 31, 1998
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
GROWTH OF $10,000 CLASS B SHARES
- -------------------------------------------------------------------------------
Date TOTAL S&P 500(4) LIPPER(5)
- -------------------------------------------------------------------------------
February 26, 1997 $10,000 $10,000 $10,000
- -------------------------------------------------------------------------------
May 31, 1997 $10,650 $10,602 $10,407
- -------------------------------------------------------------------------------
May 31, 1998 $14,197(3) $13,853 $14,682
- -------------------------------------------------------------------------------
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.
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B SHARES**
- ------------------------------------------------------------
PERIOD ENDED 5/31/98
- --------------------------
<S> <C> <C>
1 year 45.25%(1) 40.25%(2)
From Inception (2/26/97) 35.12%(1) 32.17%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES++
- -------------------------------------------------------------
PERIOD ENDED 5/31/98
- --------------------------
<S> <C> <C>
From Inception (7/28/97) 26.95%(1) 25.95%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS A SHARES+
- -------------------------------------------------------------
PERIOD ENDED 5/31/98
- --------------------------
<S> <C> <C>
From Inception (7/28/97) 27.74%(1) 21.03%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARES+++
- -------------------------------------------------------------
PERIOD ENDED 5/31/98
- --------------------------
<S> <C>
From Inception (7/28/97) 27.03%(1)
</TABLE>
<PAGE>
- --------------
(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 4% CDSC, assuming a complete
redemption on May 31, 1998.
(4) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a
broad-based index, the performance of which is based on the average
performance of 500 widely held common stocks. The performance of the
Index does not include any expenses, fees or charges. The Index is
unmanaged and should not be considered an investment.
(5) The Lipper Financial Services Funds Index is an equally-weighted
performance index of the largest qualifying funds (based on net assets)
in the Lipper Financial Services Funds objective. The Index, which is
adjusted for capital gains distributions and income dividends, is
unmanaged and should not be considered an investment. There are currently
10 funds represented in this Index.
* 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 shares is
5%. The CDSC declines to 0% after six years.
+ The maximum front-end sales charge for Class A shares 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.
4
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
PORTFOLIO OF INVESTMENTS May 31, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (91.0%)
Advertising (0.1%)
10,800 Young & Rubicam, Inc.* ............... $ 302,400
------------
Annuities (10.4%)
60,000 Allmerica Financial Corp. ............ 3,761,250
220,000 Equitable Companies, Inc. ............ 15,152,500
30,000 Hartford Financial Services Group
Inc. ............................... 3,301,875
25,400 Hartford Life, Inc. (Class A) ........ 1,308,100
50,000 Lincoln National Corp. ............... 4,493,750
140,000 Nationwide Financial Services,
Inc. (Class A) ....................... 6,081,250
110,000 SunAmerica, Inc. ..................... 5,348,750
------------
39,447,475
------------
Asset Management (1.8%)
100,000 Affiliated Managers Group, Inc.*...... 3,581,250
50,000 Amvescap PLC (ADR)
(United Kingdom) ................... 2,653,125
41,600 Federated Investors, Inc.
(Class B)* ......................... 746,200
------------
6,980,575
------------
Banks -- European (2.7%)
63,000 Banco Bilbao Vizcaya, S.A.
(Spain) ............................ 3,161,633
42,500 Corporacion Bancaria de Espana,
S.A. (Spain) ....................... 3,618,274
620,000 Credito Italiano SPA (Italy) ......... 3,454,466
------------
10,234,373
------------
Banks -- Midwest (3.4%)
36,000 Comerica, Inc. ....................... 2,367,000
52,500 Fifth Third Bancorp. ................. 2,585,625
67,000 National City Corp. .................. 4,539,250
90,000 Norwest Corp. ........................ 3,498,750
------------
12,990,625
------------
Banks -- Money Center (5.7%)
60,000 BankAmerica Corp. .................... 4,961,250
15,000 Bankers Trust Corp. .................. 1,852,500
50,000 Citicorp ............................. 7,456,250
20,000 NationsBank Corp. .................... 1,515,000
93,000 Travelers Group, Inc. ................ 5,673,000
------------
21,458,000
------------
Banks -- North East (9.2%)
65,000 Bank of New York Co., Inc. ........... 3,973,125
90,000 BankBoston Corp. ..................... 9,483,750
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<S> <C> <C>
40,000 Fleet Financial Group, Inc. .......... $ 3,280,000
100,000 Mellon Bank Corp. .................... 6,743,750
138,000 North Fork Bancorporation, Inc. ...... 3,320,625
23,500 PNC Bank Corp. ....................... 1,357,125
75,000 State Street Corp. ................... 5,170,312
25,000 Summit Bancorp ....................... 1,253,125
------------
34,581,812
------------
Banks -- South East (9.5%)
72,000 AmSouth Bancorporation ............... 2,767,500
90,000 Compass Bancshares Inc. .............. 4,269,375
30,000 Crestar Financial Corp. .............. 1,723,125
40,000 First American Corp. ................. 1,842,500
40,000 First Tennessee National Corp. ....... 1,265,000
87,540 First Union Corp. .................... 4,842,056
50,000 First Virginia Banks, Inc. ........... 2,612,500
87,000 National Commerce Bancorporation ..... 3,849,750
96,600 Provident Bankshares Corp. ........... 3,018,750
60,000 Regions Financial Corp. .............. 2,460,000
63,000 Southtrust Corp. ..................... 2,551,500
41,000 Union Planters Corp. ................. 2,398,500
30,000 Wachovia Corp. ....................... 2,401,875
------------
36,002,431
------------
Banks -- West (3.4%)
60,000 City National Corp. .................. 2,205,000
105,000 U.S. Bancorp ......................... 4,108,125
10,000 Wells Fargo & Co. .................... 3,615,000
55,000 Zions Bancorporation ................. 2,825,625
------------
12,753,750
------------
Brokerage (8.8%)
28,000 Bear Stearns Companies, Inc. ......... 1,519,000
87,500 Edwards (A.G.), Inc. ................. 3,538,281
15,000 Everen Capital Corp. ................. 775,312
45,300 Hambrecht & Quist Group, Inc.*........ 1,392,975
34,600 Legg Mason, Inc. ..................... 2,086,812
110,000 Lehman Brothers Holdings, Inc. ....... 7,803,125
25,000 McDonald & Co. Investments, Inc. 750,000
100,000 Merrill Lynch & Co., Inc. ............ 8,950,000
57,000 Morgan Keegan, Inc. .................. 1,307,437
80,000 Paine Webber Group, Inc. ............. 3,435,000
54,000 Raymond James Financial, Inc. ........ 1,633,500
------------
33,191,442
------------
Computer Software (0.9%)
75,000 Compuware Corp.* ..................... 3,440,625
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
PORTFOLIO OF INVESTMENTS May 31, 1998 (continued)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<S> <C> <C>
Credit Card (4.3%)
70,000 American Express Co. ................. $ 7,183,750
140,000 Providian Financial Corp. ............ 8,907,500
------------
16,091,250
------------
Disability Insurance (2.2%)
120,000 Provident Companies, Inc. ............ 4,425,000
68,000 UNUM Corp. ........................... 3,778,250
------------
8,203,250
------------
Financial & Data Servicing (4.7%)
60,000 Automatic Data Processing, Inc. ...... 3,817,500
65,000 Ceridian Corp.* ...................... 3,510,000
165,000 First Data Corp. ..................... 5,486,250
250,000 PMT Services, Inc.* .................. 4,843,750
------------
17,657,500
------------
Financial Services (2.9%)
50,000 Associates First Capital Corp.
(Class A) .......................... 3,740,625
75,000 General Electric Co. ................. 6,253,125
37,500 Heller Financial, Inc.* .............. 1,045,313
------------
11,039,063
------------
Insurance Brokers (1.5%)
50,000 Aon Corp. ............................ 3,203,125
28,000 Marsh & McLennan Companies, Inc. ..... 2,451,750
------------
5,654,875
------------
Life Insurance (6.6%)
90,000 Aegon N.V. (ARS) (Netherlands) ....... 7,138,125
55,000 American General Corp. ............... 3,691,875
98,000 Protective Life Corp. ................ 3,528,000
100,000 ReliaStar Financial Corp. ............ 4,325,000
80,000 Torchmark Corp. ...................... 3,430,000
25,000 Transamerica Corp. ................... 2,875,000
------------
24,988,000
------------
Multi-line Insurance (3.1%)
10,800 Allianz AG (Germany) ................. 3,411,481
37,000 American International Group,
Inc. ............................... 4,581,063
58,000 Assurances Generales de France
(France) ........................... 3,574,686
------------
11,567,230
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<S> <C> <C>
On Line Trade (4.0%)
54,000 America Online, Inc.* ................ $ 4,498,875
85,000 Cendant Corp.* ....................... 1,843,438
140,000 Checkfree Holdings Corp.* ............ 3,167,500
120,000 Intuit, Inc.* ........................ 5,700,000
------------
15,209,813
------------
Property -- Casualty Insurance (1.2%)
50,000 Allstate Corp. ....................... 4,706,250
------------
Real Estate Related (0.7%)
30,000 LandAmerica Financial Group,
Inc. ............................... 1,432,500
20,000 MGIC Investment Corp. ................ 1,198,750
------------
2,631,250
------------
Reinsurers (1.4%)
20,000 Ace, Ltd. (Bermuda) .................. 712,500
11,900 Annuity and Life Re (Holdings),
Ltd.* .............................. 270,725
19,000 General Re Corp. ..................... 4,177,625
------------
5,160,850
------------
Specialty Insurance (2.1%)
90,000 Ambac Financial Group, Inc. .......... 4,921,875
5,500 Executive Risk, Inc. ................. 346,156
75,000 Mutual Risk Management Ltd.
(Bermuda) .......................... 2,629,688
------------
7,897,719
------------
Thrifts -- West (0.4%)
20,000 Ahmanson (H.F.) & Co. ................ 1,525,000
------------
TOTAL COMMON STOCKS
(Identified Cost $286,722,613)........ 343,715,558
------------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS (5.1%)
$ 9,000 U.S. Treasury Bond 6.125%
due 11/15/27 ......................... 9,403,560
36,000 U.S. Treasury Bond Strips 0.00%
due 05/15/20 ......................... 9,873,360
----------
TOTAL U.S. GOVERNMENT
OBLIGATIONS
(Identified Cost $19,129,989) .......... 19,276,920
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
PORTFOLIO OF INVESTMENTS May 31, 1998 (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (0.8%)
REPURCHASE AGREEMENT
$ 2,934 The Bank of New York 5.50%
due 06/01/98 (dated 05/29/98;
proceeds $2,935,068) (a)
(Identified Cost $2,933,723) ........ $ 2,933,723
------------
TOTAL INVESTMENTS
(Identified Cost $308,786,325) (b)..... 96.9% $365,926,201
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES ................. 3.1 11,867,803
----- ------------
NET ASSETS ............................ 100.0% $377,794,004
===== ============
</TABLE>
- --------------
ADR American Depository Receipt.
ARS American Regulatory Share.
* Non-income producing security.
(a) Collateralized by $2,930,328 U.S. Treasury Note 5.875% due
01/31/99 valued at $2,992,397.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$61,638,355 and the aggregate gross unrealized depreciation is
$4,498,479, resulting in net unrealized appreciation of
$57,139,876.
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (identified cost $308,786,325)........ $365,926,201
Cash ..................................................................... 5,801
Receivable for:
Investments sold ...................................................... 23,188,436
Shares of beneficial interest sold .................................... 1,395,138
Dividends ............................................................. 246,140
Interest .............................................................. 26,362
Deferred organizational expenses ......................................... 45,714
Prepaid expenses and other assets ........................................ 78,326
------------
TOTAL ASSETS .......................................................... 390,912,118
------------
LIABILITIES:
Payable for:
Investments purchased ................................................. 12,136,153
Shares of beneficial interest repurchased ............................. 364,090
Plan of distribution fee .............................................. 322,520
Investment management fee ............................................. 243,122
Accrued expenses ......................................................... 52,229
------------
TOTAL LIABILITIES ..................................................... 13,118,114
------------
NET ASSETS ............................................................ $377,794,004
============
COMPOSITION OF NET ASSETS:
Paid-in-capital .......................................................... $291,903,985
Net unrealized appreciation .............................................. 57,139,970
Accumulated undistributed net realized gain .............................. 28,750,049
------------
NET ASSETS ............................................................ $377,794,004
============
CLASS A SHARES:
Net Assets ............................................................... $2,249,376
Shares Outstanding (unlimited authorized, $.01 par value) ................ 155,771
NET ASSET VALUE PER SHARE ............................................. $14.44
======
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ..................... $15.24
======
CLASS B SHARES:
Net Assets ............................................................... $370,180,704
Shares Outstanding (unlimited authorized, $.01 par value) ................ 25,739,241
NET ASSET VALUE PER SHARE ............................................. $14.38
======
CLASS C SHARES:
Net Assets ............................................................... $5,283,584
Shares Outstanding (unlimited authorized, $.01 par value) ................ 367,546
NET ASSET VALUE PER SHARE ............................................. $14.38
======
CLASS D SHARES:
Net Assets ............................................................... $80,340
Shares Outstanding (unlimited authorized, $.01 par value) ................ 5,597
NET ASSET VALUE PER SHARE ............................................. $14.35
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended May 31, 1998*
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $17,767 foreign withholding tax)................... $ 3,375,251
Interest ............................................................ 994,348
------------
TOTAL INCOME ..................................................... 4,369,599
------------
EXPENSES
Plan of distribution fee (Class A shares) ........................... 2,103
Plan of distribution fee (Class B shares) ........................... 2,700,250
Plan of distribution fee (Class C shares) ........................... 13,962
Investment management fee ........................................... 2,043,713
Transfer agent fees and expenses .................................... 343,134
Registration fees ................................................... 163,025
Professional fees ................................................... 37,210
Custodian fees ...................................................... 30,621
Shareholder reports and notices ..................................... 23,405
Trustees' fees and expenses ......................................... 14,651
Organizational expenses ............................................. 9,717
Other ............................................................... 2,639
------------
TOTAL EXPENSES ................................................... 5,384,430
------------
NET INVESTMENT LOSS .............................................. (1,014,831)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ...................................................... 36,711,345
Foreign exchange transactions .................................... (116)
------------
NET GAIN ......................................................... 36,711,229
------------
Net change in unrealized appreciation on:
Investments ...................................................... 52,567,205
Translation of other assets and liabilities denominated in
foreign currencies ............................................. 94
------------
NET APPRECIATION ................................................. 52,567,299
------------
NET GAIN ......................................................... 89,278,528
------------
NET INCREASE ........................................................ $ 88,263,697
============
</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 FINANCIAL SERVICES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FEBRUARY 26, 1997*
ENDED THROUGH
MAY 31, 1998** MAY 31,1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS :
OPERATIONS :
Net investment income (loss) ......................... $ (1,014,831) $ 261,857
Net realized gain (loss) ............................. 36,711,229 (3,256,066)
Net change in unrealized appreciation ................ 52,567,299 4,572,671
------------ ------------
NET INCREASE ...................................... 88,263,697 1,578,462
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM :
Net investment income
Class A shares .................................... (3,881) --
Class B shares .................................... (455,578) --
Class C shares .................................... (2,430) --
Class D shares .................................... (1,110) --
Net realized gain
Class A shares .................................... (10,962) --
Class B shares .................................... (3,673,879) --
Class C shares .................................... (12,423) --
Class D shares .................................... (2,737) --
------------ ------------
TOTAL DIVIDENDS AND DISTRIBUTIONS ................. (4,163,000) --
------------ ------------
Net increase from transactions in shares of beneficial
interest ........................................... 117,042,732 174,972,113
------------ ------------
NET INCREASE ...................................... 201,143,429 176,550,575
NET ASSETS:
Beginning of period .................................. 176,650,575 100,000
------------ ------------
END OF PERIOD
(Including undistributed net investment income
of $0 and $267,531, respectively) ............... $377,794,004 $176,650,575
============ ============
</TABLE>
- --------------
* Commencement of operations.
** Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Financial Services Trust (the "Fund") is registered
under the Investment Company Act of 1940, as amended (the "Act"), as a
diversified, open-end management investment company. The Fund's investment
objective is long-term capital appreciation. The Fund seeks to achieve its
objective by investing at least 65% of its total assets in the equity
securities of companies in the financial services and financial services
related industries. The Fund was organized as a Massachusetts business trust on
November 8, 1996 and had no other operations other than those relating to
organizational matters and the issuance of 10,000 shares of beneficial interest
for $100,000 to Morgan Stanley Dean Witter Advisors Inc. (the "Investment
Manager") to effect the Fund's initial capitalization. The Fund commenced
operations on February 26, 1997. 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 Financial Services Morgan Stanley Dean Witter Financial
Trust Services Trust
Dean Witter InterCapital Inc. Morgan Stanley Dean Witter Advisors Inc.
Dean Witter Distributors Inc. Morgan Stanley Dean Witter
Distributors 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 security
is 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
11
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998, continued
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 portfolio securities valued by such pricing service; and (5) short-term
debt securities having a maturity date of more than sixty days at time of
purchase are valued on a mark-to-market basis until sixty days prior to
maturity and thereafter at amortized cost based on their value on the 61st day.
Short-term debt securities having a maturity date of sixty days or less at the
time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined 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. 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.
12
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998, continued
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.
E. 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 gain/loss on foreign exchange
transactions. 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.
F. 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.
G. 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.
H. ORGANIZATIONAL EXPENSES -- The Investment Manager incurred the
organizational expenses of the Fund in the amount of approximately $61,100
which have been 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 AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.75% 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
13
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998, continued
space, facilities, equipment, clerical, bookkeeping and certain legal services
and pays the salaries of all personnel, including officers of the Fund who are
employees of the Investment Manager. The Investment Manager also bears the cost
of telephone services, heat, light, power and other utilities provided to the
Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by 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
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, 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 $13,332,953 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
14
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998, continued
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 0.25% 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 $654,092 and $951, respectively and
received $83,387 in front-end sales charges from sales of the Fund's Class A
shares. The respective shareholders pay such charges which are not an expense
of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended May 31, 1998 aggregated
$368,687,499 and $256,505,630, respectively. Included in the aforementioned are
purchases and sales of U.S. Government securities of $50,835,267 and
$33,677,617, respectively.
For the year ended May 31, 1998, the Fund incurred brokerage commissions of
$55,735 with DWR for portfolio transactions executed on behalf of the Fund. At
May 31, 1998, the Fund's receivable for investments sold included unsettled
trades with DWR of $881,390.
For the year ended May 31, 1998, the Fund incurred brokerage commissions of
$30,982 with Morgan Stanley & Co., Inc., 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 $2,600.
15
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998, continued
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FEBRUARY 26, 1997*
ENDED THROUGH
MAY 31, 1998 MAY 31, 1997
------------------------------ -----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
CLASS A SHARES**
Sold ................................................ 300,963 $ 4,241,757 -- --
Reinvestment of dividends and distributions ......... 1,064 13,954 -- --
Repurchased ......................................... (146,256) (2,205,269) -- --
---------- ------------ ---------- -------------
Net increase - Class A .............................. 155,771 2,050,442 -- --
---------- ------------ ---------- -------------
CLASS B SHARES
Sold ................................................ 19,573,073 253,166,642 19,038,217 $ 188,928,099
Reinvestment of dividends and distributions ......... 293,365 3,846,011 -- --
Repurchased ......................................... (11,707,449) (147,225,462) (1,467,965) (13,955,986)
---------- ------------ ---------- -------------
Net increase - Class B .............................. 8,158,989 109,787,191 17,570,252 174,972,113
---------- ------------ ---------- -------------
CLASS C SHARES**
Sold ................................................ 381,780 5,334,663 -- --
Reinvestment of dividends and distributions ......... 1,101 14,425 -- --
Repurchased ......................................... (15,335) (211,713) -- --
---------- ------------ ---------- -------------
Net increase - Class C .............................. 367,546 5,137,375 -- --
---------- ------------ ---------- -------------
CLASS D SHARES** ....................................
Sold ................................................ 159,352 2,256,843 -- --
Reinvestment of dividends and ditributions .......... 46 610 -- --
Repurchased ......................................... (153,801) (2,189,729) -- --
---------- ------------ ---------- -------------
Net increase - Class D .............................. 5,597 67,724 -- --
---------- ------------ ---------- -------------
Net increase in Fund ................................ 8,687,903 $117,042,732 17,570,252 $ 174,972,113
========== ============ ========== =============
</TABLE>
- --------------
* Commencement of operations.
** For the period July 28, 1997 (issue date) through May 31, 1998.
6. FEDERAL INCOME TAX STATUS
As of May 31, 1998, the Fund had permanent book/tax differences primarily
attributable to a net operating loss. To reflect reclassifications arising from
these differences, paid-in-capital was charged $205,186, accumulated
undistributed net realized gain was charged $1,005,113 and net investment loss
was credited $1,210,299.
16
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998, continued
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 no outstanding forward contracts.
17
<PAGE>
MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
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 FEBRUARY 26, 1997*
ENDED THROUGH
MAY 31, 1998**++ MAY 31, 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............ $10.05 $10.00
------ ------
Net investment income (loss) .................... (0.05) 0.01
Net realized and unrealized gain ................ 4.58 0.04
------ ------
Total from investment operations ................ 4.53 0.05
------ ------
Less dividends and distributions from:
Net investment income .......................... (0.02) --
Net realized gain .............................. (0.18) --
------ ------
Total dividends and distributions ............... (0.20) --
------ ------
Net asset value, end of period .................. $14.38 $10.05
====== ======
TOTAL INVESTMENT RETURN+ ........................ 45.25% 0.50%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 1.98% 2.23%(2)
Net investment income (loss) .................... (0.38)% 0.64%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $370,181 $176,651
Portfolio turnover rate ......................... 99% 17%(1)
Average commission rate paid .................... $0.0533 $0.0573
</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 FINANCIAL SERVICES TRUST
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 ............ $11.51
------
Net investment income ........................... 0.04
Net realized and unrealized gain ................ 3.13
------
Total from investment operations ................ 3.17
------
Less dividends and distributions from:
Net investment income .......................... (0.06)
Net realized gain .............................. (0.18)
------
Total dividends and distributions ............... (0.24)
------
Net asset value, end of period .................. $14.44
======
TOTAL INVESTMENT RETURN+ ........................ 27.74%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 1.23%(2)
Net investment income ........................... 0.34%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $2,249
Portfolio turnover rate ......................... 99%
Average commission rate paid .................... $0.0533
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............ $11.51
------
Net investment loss ............................. (0.05)
Net realized and unrealized gain ................ 3.13
------
Total from investment operations ................ 3.08
------
Less dividends and distributions from:
Net investment income .......................... (0.03)
Net realized gain .............................. (0.18)
------
Total dividends and distributions ............... (0.21)
------
Net asset value, end of period .................. $14.38
======
TOTAL INVESTMENT RETURN+ ........................ 26.95%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 1.96%(2)
Net investment loss ............................. (0.42)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $5,284
Portfolio turnover rate ......................... 99%
Average commission rate paid .................... $0.0533
</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 FINANCIAL SERVICES TRUST
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 ............ $ 11.51
-------
Net investment income ........................... 0.08
Net realized and unrealized gain ................ 3.01
-------
Total from investment operations ................ 3.09
-------
Less dividends and distributions from:
Net investment income .......................... (0.07)
Net realized gain .............................. (0.18)
-------
Total dividends and distributions ............... (0.25)
-------
Net asset value, end of period .................. $14.35
======
TOTAL INVESTMENT RETURN+ ........................ 27.03%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 0.94%(2)
Net investment income ........................... 0.63%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $80
Portfolio turnover rate ......................... 99%
Average commission rate paid .................... $0.0533
</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 FINANCIAL SERVICES TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER FINANCIAL SERVICES TRUST
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
Financial Services Trust (the "Fund"), formerly Dean Witter Financial Services
Trust, at May 31, 1998, the results of its operations for the year then ended,
and the changes in its net assets 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 and
the application of alternative auditing procedures where confirmations from
brokers were not received, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
July 6, 1998
- -------------------------------------------------------------------------------
1998 FEDERAL TAX NOTICE (unaudited)
For the year ended May 31, 1998, 21.10% of the Fund's income dividends
qualified for the dividends received deduction available to corporations.
- -------------------------------------------------------------------------------
21
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
Anita H. Kolleeny
Vice President
Michelle Kaufman
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - 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
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.
MORGAN STANLEY
DEAN WITTER
FINANCIAL SERVICES
TRUST
[Graphic]
ANNUAL REPORT
MAY 31, 1998
