<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST TWO WORLD TRADE CENTER, NEW
YORK, NEW YORK 10048
LETTER TO THE SHAREHOLDERS OCTOBER 31, 1997
DEAR SHAREHOLDER:
The twelve-month period ended October 31, 1997, was an extremely difficult one
for precious metals and precious-metals-related securities. The Comex gold price
began the fiscal year at $377 per ounce, down from its February 1996 peak of
$415. The decline extended into January 1997 by falling to a near four-year low
of $345. Then, after a brief rally in February, bullion resumed its decline in
early July to around $320, tested that level in August and again in September,
and staged another brief rally, to nearly $340, at the end of September.
However, the recovery was short-lived and, as of October 31, 1997, gold had sunk
to a 12-year low of $311.30.
The precious-metal sector has been bombarded with bad news all year. Gold
continued to be pressured by concern over the selling of reserves by Europe's
central banks to meet European Monetary Union (EMU) requirements and
diversifying into "performing" assets, producer hedging and, importantly,
speculative short selling. A proposal was made by the International Monetary
Fund (IMF) to sell some of its reserves. However, that suggestion was met with
strong opposition and was tabled. The Dutch central bank's sale of gold reserves
was followed by the Bre-X scandal, in which the Bre-X company fraudulently, and
vastly, overstated the quantity of gold present at their Indonesian mine. Then
came the Swiss plan to use the proceeds from the sale of 400 tonnes of gold to
provide for a fund to assist holocaust victims. Following that announcement was
a disclosure that the Australian central bank had sold off two-thirds of its
reserves. Next was another Swiss proposal to sell 1,400 tonnes of gold, or
roughly one-half of Swiss reserves. This advice, which came from a panel of
experts hired by the Swiss central bank, would, if taken, require a change in
the Swiss constitution, which is unlikely, given the heavy political opposition
it would face. However, in this nervous market the news provided the ammunition
for short sellers to push gold to a 12-year low.
The gold market is ignoring, at least for the time being, such positive factors
as strong demand. The World Gold Council's quarterly report showed that demand
had reached record levels in the first nine months of 1997 and was up 11 percent
over 1996 at 2,190 tonnes. India was the
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
LETTER TO THE SHAREHOLDERS OCTOBER 31, 1997, CONTINUED
driving force behind the increase, with nine-month demand there exceeding that
of the whole of 1996. The recent currency crisis in Southeast Asia will diminish
demand in those four countries. However, because the combined consumption of
those nations represents only a small percentage of the world total, the effect
on total global demand should be negligible. In fact, currency turmoil may
ultimately have a positive impact on future demand if individuals in Hong Kong
and China buy gold to protect their purchasing power from currency instability.
On the production side, the low price of gold is forcing closures of high-cost
mines. The strong demand and softening of incremental supply has tightened an
already constricted market.
The gold market currently has some of the characteristics that led to the
precious metals bull market of 1993. A number of parallels are undoubtedly
there, such as depressed price, the resulting record levels of demand and heavy
speculative short selling. The events of the past year notwithstanding, we view
gold as an undervalued asset which at current levels provides an attractive
opportunity. Granted, thriving paper assets do not create a favorable
environment for gold, but present conditions have been
compounded by concerns over central
bank sales and, almost as important,
rumored central bank sales and
speculators, who have leveraged
these concerns further by heavy
short selling of gold bullion. In
1994 and 1995, gold averaged $385
per ounce under very sound
conditions -- healthy paper assets,
high real interest rates and low
inflation -- but it wasn't until
early 1996, when large speculators
initiated heavy short selling, that
gold prices and investor sentiment
both began their precipitous decline
to the current 12-year low.
Therefore, we believe that current
prices do not fully reflect the
underlying fundamentals but rather
psychology.
We remain skeptical of consensus
expectations that there will be large
central bank sales of gold, reflecting
a rethinking of the role of gold.
Bullion sales are unlikely, because of
gold's proven qualities as a
diversifying real asset (particularly
against the dollar), doubts that
central bankers would destroy a market
in which they are the single largest
investors, and legal and cultural
hurdles to such sales, both
domestically and internationally. We
expect the market to be positively
surprised once these large
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Growth of $10,000 -- Class B
($ in Thousands)
Average Annual Total Return
(Fund)
Life of
1 Year 5 Years Fund
- -33.29%(1) -0.34%(1) -3.29%(1)
- -36.36%(2) -0.70%(2) -3.29%(2)
Lipper
Fund S&P 500(4) IX(5)
August 1990 $10,000 $10,000 $10,000
October 1990 $8,570 $9,179 $8,663
October 1991 $8,675 $12,251 $9,060
October 1992 $7,984 $13,469 $7,436
October 1993 $10,956 $15,476 $11,871
October 1994 $11,634 $16,072 $13,717
October 1995 $10,147 $20,313 $11,158
October 1996 $11,764 $25,200 $13,251
October 1997 $7,848(3) $33,289 $8,559
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS.
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable contingent deferred sales charge (CDSC) (1 year-5%, 5
years-2%, since inception-0%). See Fund's current prospectus for complete
details on fees and sales charges.
(3) Closing Value assuming a complete redemption on October 31, 1997.
(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 Gold-Oriented Funds Index is an equally-weighted performance
index of the largest qualifying funds (based on net assets) in the Lipper
Gold-Oriented 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.
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
LETTER TO THE SHAREHOLDERS OCTOBER 31, 1997, CONTINUED
disposals of gold by the banks fail to materialize and bankers more clearly
define their stance on bullion as a core reserve asset in early 1998 prior to
the inception of EMU. We believe that this will restore investor confidence in
gold as an asset, prompting investors to seek it as a hedge and initiate short
covering.
PERFORMANCE AND PORTFOLIO
For the year ended October 31, 1997, Dean Witter Precious Metals and Minerals
Trust Class B posted a total return of -33.29 percent, including a long-term
capital gain distribution of $0.55 per share payable on December 31, 1996, to
shareholders of record as of December 23, 1996. Over the same period, the
Standard & Poor's 500 Composite Stock Price Index (S&P 500) returned 32.10
percent and the Lipper Gold-Oriented Funds Index returned -35.41 percent. The
Fund's performance reflects the generally poor environment of the precious
metals market during the period under review. Key holdings in the Fund include
such high-quality positions as Newmont Mining Corp., Getchell Gold Corp.,
Euro-Nevada Mining Corp., Freeport-McMoran Copper & Gold, Inc. (Class A) and
Barrick Gold Corp. The accompanying chart illustrates the performance of a
$10,000 investment in the Fund versus that of similar hypothetical investments
in the S&P 500 and the Lipper Gold-Oriented Funds Index.
LOOKING AHEAD
Long term, we believe the fundamental outlook for precious metals is positive.
Demand is strong, particularly in India, and production growth is slowing as
high-cost mines are closed. Future trends may depend to a large extent on the
market's perception of the outcome of EMU issues, particularly the role that
gold will play as a reserve to the new Euro currency. Regardless, however, of
what develops concerning EMU, the strong manufacturing demand, which is expected
to continue, should provide a favorable environment for precious metals
investments.
We appreciate your support of Dean Witter Precious Metals and Minerals Trust and
look forward to continuing to serve your investment objectives.
Sincerely,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
RESULTS OF SPECIAL MEETING (UNAUDITED)
On May 21, 1997, a special meeting of shareholders of Dean Witter Precious
Metals and Minerals Trust was held for the purpose of voting on four separate
matters, the results of which are as follows:
1) APPROVAL OF A NEW INVESTMENT MANAGEMENT AGREEMENT BETWEEN THE FUND AND DEAN
WITTER INTERCAPITAL INC., IN CONNECTION WITH THE MERGER OF MORGAN STANLEY
GROUP INC. WITH DEAN WITTER, DISCOVER & CO.:
<TABLE>
<CAPTION>
NO. OF
VOTE SHARES
---------------------------------------------------------- ------------
<S> <C>
For....................................................... 2,683,913
Against................................................... 108,569
Abstain................................................... 273,264
</TABLE>
2) ELECTION OF TRUSTEES:
<TABLE>
<S> <C>
Michael Bozic
For............................................... 2,786,783
Withheld.......................................... 278,963
Charles A. Fiumefreddo
For............................................... 2,795,161
Withheld.......................................... 270,585
Edwin J. Garn
For............................................... 2,795,594
Withheld.......................................... 270,152
John R. Haire
For............................................... 2,787,944
Withheld.......................................... 277,802
Wayne E. Hedien
For............................................... 2,791,653
Withheld.......................................... 274,093
Dr. Manuel H. Johnson
For............................................... 2,793,774
Withheld.......................................... 271,972
Michael E. Nugent
For............................................... 2,797,233
Withheld.......................................... 268,513
Philip J. Purcell
For............................................... 2,798,723
Withheld.......................................... 267,023
John L. Schroeder
For............................................... 2,794,746
Withheld.......................................... 271,000
</TABLE>
3) APPROVAL OF A NEW INVESTMENT POLICY WITH RESPECT TO INVESTMENTS IN CERTAIN
OTHER INVESTMENT COMPANIES:
<TABLE>
<CAPTION>
NO. OF
VOTE SHARES
---------------------------------------------------------- ----------
<S> <C>
For....................................................... 2,542,825
Against................................................... 207,152
Abstain................................................... 315,769
</TABLE>
4) RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP AS THE FUND'S
INDEPENDENT ACCOUNTANTS:
<TABLE>
<CAPTION>
NO. OF
VOTE SHARES
---------------------------------------------------------- ----------
<S> <C>
For....................................................... 2,784,698
Against................................................... 42,729
Abstain................................................... 238,319
</TABLE>
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (94.8%)
AUSTRALIA (10.3%)
COMMERCIAL SERVICES
125,000 Henry Walker Group Ltd.................................................................. $ 188,367
-----------
GOLD MINING
350,000 Acacia Resources Ltd.*.................................................................. 348,347
300,000 Delta Gold*............................................................................. 252,324
25,000 Lihir Gold Ltd. (ADR)*.................................................................. 662,500
1,100,000 Normandy Mining Ltd..................................................................... 1,195,035
150,000 Rangers Minerals NL..................................................................... 352,202
125,375 Western Mining Corp. Holdings Ltd.*..................................................... 443,770
-----------
3,254,178
-----------
METALS & MINING
200,000 North Ltd............................................................................... 522,591
-----------
TOTAL AUSTRALIA......................................................................... 3,965,136
-----------
CANADA (43.2%)
DIAMONDS
95,000 Aber Resources Ltd.*.................................................................... 1,119,710
-----------
GOLD
135,000 Euro-Nevada Mining Corp................................................................. 2,051,264
50,000 Franco Nevada Mining Co................................................................. 1,155,567
150,000 Romarco Minerals, Inc................................................................... 479,267
-----------
3,686,098
-----------
GOLD MINING
80,000 Barrick Gold Corp. (ADR)................................................................ 1,645,000
185,000 Bema Gold Corp.*........................................................................ 591,096
115,000 Cambior, Inc. (ADR)..................................................................... 905,625
350,000 Geomaque Explorations Ltd.*............................................................. 683,400
20,000 Goldcorp, Inc.*......................................................................... 110,054
130,000 Goldcorp, Inc. (ADR)*................................................................... 715,000
122,000 Greenstone Resources Ltd.*.............................................................. 996,166
400,000 Indomin Resources Ltd................................................................... 227,208
90,000 Kinross Gold Corp....................................................................... 377,024
80,000 Placer Dome, Inc. (ADR)................................................................. 1,240,000
50,000 Prime Resources Group, Inc.............................................................. 333,712
125,000 Prime Resources Group, Inc. (ADR)*...................................................... 834,280
125,000 Repadre Capital Corp.*.................................................................. 621,272
100,000 Sutton Resources Ltd.*.................................................................. 717,126
5,000 Teck Corp. (B Shares)................................................................... 86,978
50,000 Teck Corp. (B Shares) (ADR)............................................................. 869,782
550,000 Vengold Inc.*........................................................................... 702,925
200,000 Yamana Resources, Inc.*................................................................. 150,525
-----------
11,807,173
-----------
TOTAL CANADA............................................................................ 16,612,981
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
PERU (2.8%)
GOLD
60,000 Compania de Minas Buenaventura S.A. (ADR)*.............................................. $ 1,076,250
-----------
UNITED KINGDOM (3.9%)
GOLD MINING
50,000 Randgold Resources, Ltd. (GDR)* - 144A**................................................ 475,000
-----------
METALS & MINING
20,000 Rio Tinto PLC (ADR)..................................................................... 1,040,000
-----------
TOTAL UNITED KINGDOM.................................................................... 1,515,000
-----------
UNITED STATES (34.6%)
DIAMONDS
50,000 Lazare Kaplan International, Inc........................................................ 762,500
-----------
GOLD MINING
40,000 Battle Mountain Gold Co................................................................. 245,000
15,000 Bema Gold Corp.*........................................................................ 47,812
225,000 Canyon Resources Corp.*................................................................. 379,688
100,000 Crown Resource Corp.*................................................................... 525,000
80,000 Freeport-McMoran Copper & Gold, Inc. (Class A).......................................... 1,845,000
65,000 Getchell Gold Corp.*.................................................................... 2,340,000
120,000 Homestake Mining Co..................................................................... 1,485,000
200,000 Meridian Gold Inc.*..................................................................... 812,500
25,000 Newmont Gold Co......................................................................... 903,125
61,500 Newmont Mining Corp..................................................................... 2,152,500
-----------
10,735,625
-----------
PLATINUM & PALLADIUM
75,000 Stillwater Mining Co.*.................................................................. 1,556,250
-----------
SILVER
20,000 Coeur D'Alene Mines Corp.*.............................................................. 207,500
-----------
TOTAL UNITED STATES..................................................................... 13,261,875
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $44,291,482)........................................................... 36,431,242
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (a) (9.4%)
U.S. GOVERNMENT AGENCIES (8.8%)
$ 3,400 Federal Home Loan Mortgage Corp. 5.49-5.65% due 11/03/97-11/06/97 (AMORTIZED COST
$3,398,709)........................................................................... $ 3,398,709
-----------
REPURCHASE AGREEMENT (0.6%)
249 The Bank of New York 5.50% due 11/03/97 (dated 10/31/97; proceeds $249,067) (b)
(IDENTIFIED COST $248,952)............................................................ 248,952
-----------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $3,647,661)............................................................ 3,647,661
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $47,939,143) (C).......................................................... 104.2 % 40,078,903
LIABILITIES IN EXCESS OF OTHER ASSETS...................................................... (4.2) (1,598,609)
------ ------------
NET ASSETS................................................................................. 100.0 % $ 38,480,294
------ ------------
------ ------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
GDR Global Depository Receipt.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(a) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $247,927 U.S. Treasury Note 6.00% due 07/31/02 valued at
$253,932.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $1,118,528 and the
aggregate gross unrealized depreciation is $8,978,768, resulting in net
unrealized depreciation of $7,860,240.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $47,939,143)................................................................ $40,078,903
Receivable for:
Shares of beneficial interest sold......................................................... 41,799
Dividends.................................................................................. 31,990
Prepaid expenses and other assets.............................................................. 58,964
-----------
TOTAL ASSETS.............................................................................. 40,211,656
-----------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased.................................................. 1,607,273
Plan of distribution fee................................................................... 38,722
Investment management fee.................................................................. 31,000
Accrued expenses and other payables............................................................ 54,367
-----------
TOTAL LIABILITIES......................................................................... 1,731,362
-----------
NET ASSETS................................................................................ $38,480,294
-----------
-----------
COMPOSITION OF NET ASSETS:
Paid-in-capital................................................................................ $56,867,210
Net unrealized depreciation.................................................................... (7,860,375)
Accumulated net investment loss................................................................ (191,129)
Accumulated net realized loss.................................................................. (10,335,412)
-----------
NET ASSETS................................................................................ $38,480,294
-----------
-----------
CLASS A SHARES:
Net Assets..................................................................................... $32,257
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)...................................... 4,703
NET ASSET VALUE PER SHARE................................................................. $6.86
-----------
-----------
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET
ASSET VALUE)............................................................................ $7.24
-----------
-----------
CLASS B SHARES:
Net Assets..................................................................................... $37,964,399
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)...................................... 5,546,284
NET ASSET VALUE PER SHARE................................................................. $6.85
-----------
-----------
CLASS C SHARES:
Net Assets..................................................................................... $474,996
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)...................................... 69,409
NET ASSET VALUE PER SHARE................................................................. $6.84
-----------
-----------
CLASS D SHARES:
Net Assets..................................................................................... $8,642
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)...................................... 1,259
NET ASSET VALUE PER SHARE................................................................. $6.86
-----------
-----------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1997*
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $19,218 foreign withholding tax)............................................ $ 339,125
Interest...................................................................................... 292,931
------------
TOTAL INCOME............................................................................. 632,056
------------
EXPENSES
Plan of distribution fee (Class A shares)..................................................... 14
Plan of distribution fee (Class B shares)..................................................... 510,120
Plan of distribution fee (Class C shares)..................................................... 938
Investment management fee..................................................................... 408,911
Transfer agent fees and expenses.............................................................. 91,291
Professional fees............................................................................. 56,344
Registration fees............................................................................. 53,300
Shareholder reports and notices............................................................... 48,932
Custodian fees................................................................................ 21,452
Trustees' fees and expenses................................................................... 10,390
Other......................................................................................... 5,740
------------
TOTAL EXPENSES........................................................................... 1,207,432
------------
NET INVESTMENT LOSS...................................................................... (575,376)
------------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss on:
Investments............................................................................... (9,100,062)
Foreign exchange transactions............................................................. (1,161)
------------
NET LOSS................................................................................. (9,101,223)
------------
Net change in unrealized appreciation/ depreciation on:
Investments............................................................................... (9,193,814)
Translation of other assets and liabilities denominated in foreign currencies............. (145)
------------
NET DEPRECIATION......................................................................... (9,193,959)
------------
NET LOSS................................................................................. (18,295,182)
------------
NET DECREASE.................................................................................. $(18,870,558)
------------
------------
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1997* OCTOBER 31, 1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss........................ $ (575,376) $ (552,437)
Net realized gain (loss)................... (9,101,223) 3,861,093
Net change in unrealized
appreciation/depreciation................ (9,193,959) 4,900,602
----------------- ----------------
NET INCREASE (DECREASE)............... (18,870,558) 8,209,258
----------------- ----------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income
Class B shares......................... (656,572) --
Net realized gain
Class B shares......................... (3,712,483) (1,036,713)
----------------- ----------------
TOTAL DIVIDENDS AND DISTRIBUTIONS..... (4,369,055) (1,036,713)
----------------- ----------------
Net increase (decrease) from transactions
in shares of beneficial interest......... 878,665 (1,779,587)
----------------- ----------------
NET INCREASE (DECREASE)............... (22,360,948) 5,392,958
NET ASSETS:
Beginning of period........................ 60,841,242 55,448,284
----------------- ----------------
END OF PERIOD
(INCLUDING ACCUMULATED NET INVESTMENT
LOSSES OF $191,129 AND $567,810,
RESPECTIVELY).......................... $ 38,480,294 $60,841,242
----------------- ----------------
----------------- ----------------
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1997
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Precious Metals and Minerals 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 will attempt to achieve its investment
objective by investing principally in the securities of foreign and domestic
companies engaged in the exploration, mining, fabrication, processing,
distribution or trading of precious metals and minerals or in companies engaged
in financing, managing, controlling or operating companies engaged in these
activities and also by investing a portion of its assets in gold, silver,
platinum and palladium bullion and coins. The Fund was organized as a
Massachusetts business trust on December 28, 1989 and commenced operations on
August 6, 1990. On July 28, 1997, the Fund commenced offering three additional
classes of shares, with the then current shares designated as Class B shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase, some Class
A shares, and most Class B shares and Class C shares are subject to a contingent
deferred sales charge imposed on shares redeemed within one year, six years and
one year, respectively. Class D shares are not subject to a sales charge.
Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect 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 Dean Witter InterCapital Inc. (the "Investment Manager") that sale
and bid prices are not reflective of a security's market value, portfolio
securities are valued at their fair value as determined in good faith
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1997, CONTINUED
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); and (4) 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 from 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. 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 foreign currency gain or loss and in the Statement of
Assets and Liabilities as part of the related foreign currency
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1997, CONTINUED
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.
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 record date. The amount of dividends
and distributions from net investment income and net realized capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent that these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.80% 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.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1997, CONTINUED
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, including the
payment of commissions for sales of these Classes and incentive compensation to,
and expenses of, the account executives of Dean Witter Reynolds Inc. ("DWR"), an
affiliate of the Investment Manager and Distributor, and others who engage in or
support distribution of the shares or who service shareholder accounts,
including overhead and telephone expenses; printing and distribution of
prospectuses and reports used in connection with the offering of these shares to
other than current shareholders; and preparation, printing and distribution of
sales literature and advertising materials. In addition, the Distributor may
utilize fees paid pursuant to the Plan, in the case of Class B shares, to
compensate DWR and other selected broker-dealers for their opportunity costs in
advancing such amounts, which compensation would be in the form of a carrying
charge on any unreimbursed expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future 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 $3,486,664 at October 31, 1997.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 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
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1997, CONTINUED
that expenses representing a gross sales credit to account executives may be
reimbursed in the subsequent calendar year. For the period ended October 31,
1997, 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 year ended October 31, 1997,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares and Class C shares of $168,786 and $270, respectively. 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 October 31, 1997 aggregated
$24,268,174 and $26,955,238, respectively. Included in the aforementioned are
sales of U.S. Government securities of $3,337,938.
For the year ended October 31, 1997, the Fund incurred $750 in brokerage
commissions with DWR for portfolio transactions executed on behalf of the Fund.
Dean Witter Trust FSB, an affiliate of the Investment Manager and Distributor,
is the Fund's transfer agent. At October 31, 1997, the Fund had transfer agent
fees and expenses payable of approximately $2,300.
5. FEDERAL INCOME TAX STATUS
At October 31, 1997, the Fund had a net capital loss carryover of approximately
$10,239,000 available through October 31, 2005 to offset future capital gains to
the extent provided by regulations.
As of October 31, 1997, the Fund had temporary book/tax differences attributable
to capital loss deferrals on wash sales and income from the mark-to-market of
passive foreign investment companies ("PFICs") and permanent book/tax
differences primarily attributable to a net operating loss and tax adjustments
on PFICs sold by the Fund. To reflect reclassifications arising from the
permanent differences, paid-in-capital was charged $584,805, accumulated net
realized loss was charged $1,023,824 and accumulated net investment loss was
credited $1,608,629.
6. 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.
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1997, CONTINUED
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 October 31, 1997, there were no outstanding forward contracts.
7. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES*
Sold.............................................. 4,703 $ 37,724 -- --
----------- ------------ ----------- ------------
CLASS B SHARES
Sold.............................................. 12,331,939 111,539,261 11,549,105 $136,343,744
Reinvestment of dividends and distributions....... 402,436 4,004,238 90,619 963,279
Redeemed.......................................... (12,648,999) (115,262,441) (11,855,110) (139,086,610)
----------- ------------ ----------- ------------
Net increase (decrease) -- Class B................ 85,376 281,058 (215,386) (1,779,587)
----------- ------------ ----------- ------------
CLASS C SHARES*
Sold.............................................. 95,151 732,145 -- --
Redeemed.......................................... (25,742) (182,272) -- --
----------- ------------ ----------- ------------
Net increase -- Class C........................... 69,409 549,873 -- --
----------- ------------ ----------- ------------
CLASS D SHARES*
Sold.............................................. 1,259 10,010 -- --
----------- ------------ ----------- ------------
Net increase (decrease) in Fund................... 160,747 $ 878,665 (215,386) $ (1,779,587)
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
- ---------------------
* For the period July 28, 1997 (issue date) through October 31, 1997.
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS 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 ENDED OCTOBER 31 AUGUST 6, 1990*
-------------------------------------------------------------------------------- THROUGH
1997**++ 1996 1995 1994 1993 1992 1991 OCTOBER 31, 1990
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period.... $11.14 $9.77 $11.45 $10.80 $7.87 $8.59 $8.57 $10.00
-------- -------- -------- -------- -------- -------- -------- ------
Net investment income
(loss)................. (0.10) (0.10) (0.08) (0.06) (0.04) (0.05) 0.06 0.05
Net realized and
unrealized gain
(loss)................. (3.35) 1.66 (1.38) 0.73 2.97 (0.62) 0.03 (1.48)
-------- -------- -------- -------- -------- -------- -------- ------
Total from investment
operations............. (3.45) 1.56 (1.46) 0.67 2.93 (0.67) 0.09 (1.43)
-------- -------- -------- -------- -------- -------- -------- ------
Less dividends and
distributions from:
Net investment
income............... (0.13) -- -- -- -- (0.04) (0.07) --
Net realized gain.... (0.71) (0.19) (0.22) (0.02) -- (0.01) -- --
-------- -------- -------- -------- -------- -------- -------- ------
Total dividends and
distributions.......... (0.84) (0.19) (0.22) (0.02) -- (0.05) (0.07) --
-------- -------- -------- -------- -------- -------- -------- ------
Net asset value, end of
period................. $6.85 $11.14 $9.77 $11.45 $10.80 $7.87 $8.59 $8.57
-------- -------- -------- -------- -------- -------- -------- ------
-------- -------- -------- -------- -------- -------- -------- ------
TOTAL INVESTMENT
RETURN+................. (33.29)% 15.93% (12.78)% 6.18% 37.23% (7.97)% 1.23% (14.30)%(1)
RATIOS TO AVERAGE NET
ASSETS:
Expenses................ 2.36% 2.27% 2.29% 2.28% 2.79% 3.30% 2.18%(4) 1.49%(2)(3)
Net investment income
(loss)................. (1.13)% (0.84)% (0.70)% (0.87)% (1.07)% (0.74)% 0.93%(4) 2.99%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of
period, in thousands... $37,964 $60,841 $55,448 $73,444 $45,204 $15,135 $11,246 $ 5,843
Portfolio turnover
rate................... 53% 46% 23% 46% 25% 9% 11% --
Average commission rate
paid................... $0.0245 $0.0217 -- -- -- -- -- --
</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.
(3) If the Fund had borne all expenses that were assumed or waived by the
Investment Manager (after application of the Fund's expense limitation),
the above annualized expense and net investment income ratios would have
been 3.50% and 0.98%, respectively.
(4) If the Fund had borne all expenses that were assumed or waived by the
Investment Manager (after application of the Fund's expense limitation),
the above annualized expense and net investment income ratios would have
been 3.50% and (0.39)%, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
OCTOBER 31, 1997++
- ----------------------------------------------------------------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.............. $ 7.95
Net realized and unrealized loss.................. (1.09)
------
Net asset value, end of period.................... $ 6.86
------
------
TOTAL INVESTMENT RETURN+.......................... (13.71)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.......................................... 1.61%(2)
Net investment loss............................... (0.08)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........... $32
Portfolio turnover rate........................... 53%
Average commission rate paid...................... $0.0245
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.............. $ 7.95
------
Net investment loss............................... (0.02)
Net realized and unrealized loss.................. (1.09)
------
Total from investment operations.................. (1.11)
------
Net asset value, end of period.................... $ 6.84
------
------
TOTAL INVESTMENT RETURN+.......................... (13.96)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.......................................... 2.37%(2)
Net investment loss............................... (0.79)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........... $475
Portfolio turnover rate........................... 53%
Average commission rate paid...................... $0.0245
</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
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
OCTOBER 31, 1997++
- ----------------------------------------------------------------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.............. $ 7.95
Net realized and unrealized loss.................. (1.09)
------
Net asset value, end of period.................... $ 6.86
------
------
TOTAL INVESTMENT RETURN+.......................... (13.71)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.......................................... 1.35%(2)
Net investment income............................. 0.22%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........... $9
Portfolio turnover rate........................... 53%
Average commission rate paid...................... $0.0245
</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
<PAGE>
DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER PRECIOUS METALS AND MINERALS 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 Dean Witter Precious Metals and
Minerals Trust (the "Fund") at October 31, 1997, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 1997 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
DECEMBER 5, 1997
1997 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended October 31, 1997, the Fund paid to
shareholders $0.55 per share from long-term capital gains.
<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
Robert Rossetti
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust FSB
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and
trustees, fees, expenses and other pertinent information, please see the
prospectus of the Fund.
This report is not authorized for distribution to prospective investors in
the Fund unless preceded or accompanied by an effective prospectus.
DEAN WITTER
PRECIOUS METALS
AND MINERALS TRUST
[PHOTO]
ANNUAL REPORT
OCTOBER 31, 1997
