<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND TWO WORLD TRADE CENTER,
MINERALS TRUST NEW YORK, NEW YORK 10048
LETTER TO THE SHAREHOLDERS OCTOBER 31, 1998
DEAR SHAREHOLDER:
The fiscal year ended October 31, 1998, continued to be a difficult period for
gold and other precious metals. Several factors contributed to gold's struggle
during the period under review. Probably the most significant factor was the low
rate of inflation in the United States. Another negative influence was the
decision by several European central banks to sell gold reserves to meet
European Monetary Union (EMU) requirements for reduced budget deficits. Also,
because gold tends to perform poorly when the U.S. dollar is strong, the price
of bullion suffered as the U.S. dollar continued to outpace all other major
currencies, particularly the Japanese yen. The financial woes of the Asian
economies during the period reinforced the U.S. dollar's strength, thus
contributing to the downward pressure on the price of gold.
Gold opened the period at a 12-year low of $311 per ounce and dropped to a
19-year low of $273 per ounce in August. In September, anticipation that the
Federal Reserve Board would ease monetary policy resulted in a weakening of the
U.S. dollar and an increase in the gold price. Bullion ended the period under
review at $293 per ounce.
PERFORMANCE AND PORTFOLIO
For the twelve-month period ended October 31, 1998, the average precious metals
fund, as measured by the Lipper Gold-Oriented Funds Index, returned -25.29
percent. Morgan Stanley Dean Witter Precious Metals and Minerals Trust was no
exception, as its Class B shares posted a total return of -26.86 percent. During
the same period, the Fund's Class A, C and D shares returned -26.38 percent,
- -26.75 percent and -26.68 percent, respectively. The performance of the Fund's
four share classes varies, because each class has different expenses. The
broader market, as measured by the Standard & Poor's 500 Composite Stock Price
Index (S&P 500), earned a 21.99 percent return. The
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
LETTER TO THE SHAREHOLDERS OCTOBER 31, 1998, CONTINUED
accompanying chart illustrates the performance of a $10,000 investment in the
Fund's Class B shares versus that of similar hypothetical investments in the
Lipper Gold-Oriented Funds Index and the S&P 500.
At period end, the Fund's key portfolio holdings included Stillwater Mining,
Euro-Nevada Mining, Placer Dome, Barrick Gold and Battle Mountain Gold.
Geographically, the Fund's assets were 46 percent invested in Canada, 32 percent
in the United States, 18 percent in Australia and 3 percent in the United
Kingdom.
LOOKING AHEAD
The spread of the "Asian flu" to Russia and Latin America has led to concerns
about whether the United States can withstand growing outside financial
pressures. If the health of the U.S. economy appears threatened, as the
economies of Latin America experience further difficulties and Japan seeks to
resolve its financial problems, we would expect pressures on the U.S. dollar.
This trend would likely create more interest in gold as a hedge for the dollar
and would be positive for bullion over the long term, because gold is considered
a safe haven in times of financial uncertainty. Precious metals stocks should
also perform well in such an environment.
We believe that the long-term outlook for precious metals is promising. Supply
is slowing as high-cost mines close, and demand is currently strong. Future
trends may depend on the impact that the upcoming European Monetary Union has on
the market. Also, if the reactions of the world's central bankers to the ongoing
global financial crisis lead to higher inflation, we could expect to see an
increase in the price of gold.
We appreciate your ongoing support of Morgan Stanley Dean Witter Precious Metals
and Minerals Trust and look forward to continuing to serve your investment
objectives.
Very truly yours,
/s/ Charles A. Fiumefreddo
- --------------------------
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
2
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND
MINERALS TRUST
FUND PERFORMANCE OCTOBER 31, 1998
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GROWTH OF $10,000--CLASS B
($ in Thousands)
Fund S&P 500(4) Lipper(5)
<S> <C> <C> <C>
August 6, 1990 $10,000 $10,000 $10,000
October 31, 1990 $8,570 $9,179 $8,663
October 31, 1991 $8,675 $12,251 $9,060
October 31, 1992 $7,984 $13,469 $7,436
October 31, 1993 $10,956 $15,476 $11,871
October 31, 1994 $11,634 $16,072 $13,717
October 31, 1995 $10,147 $20,313 $11,157
October 31, 1996 $11,764 $25,200 $13,248
October 31, 1997 $7,848 $33,277 $8,554
October 31, 1998 $5,740(3) $40,594 $6,390
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. PERFORMANCE FOR CLASS
A, CLASS C, AND CLASS D SHARES WILL VARY FROM THE PERFORMANCE OF CLASS B
SHARES SHOWN ABOVE DUE TO DIFFERENCES IN SALES CHARGES AND EXPENSES.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------------------------------------------------------------------------------
CLASS B SHARES* CLASS A SHARES**
- ----------------------------------------------- -----------------------------------------------
PERIOD ENDED 10/31/98 PERIOD ENDED 10/31/98
- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1 Year (26.86)%(1) (30.52)%(2) 1 Year (26.38)%(1) (30.25)%(2)
5 Years (12.13) (1) (12.44) (2) Since Inception (7/28/97) (30.25) (1) (33.18) (2)
Since Inception (8/6/90) (6.52) (1) (6.52) (2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES+ CLASS D SHARES++
- ----------------------------------------------- -----------------------------------------------
PERIOD ENDED 10/31/98 PERIOD ENDED 10/31/98
- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1 Year (26.75)%(1) (27.49)%(2) 1 Year (26.68)%(1)
Since Inception (7/28/97) (30.69) (1) (30.69) (2) Since Inception (7/28/97) (30.47) (1)
</TABLE>
- ------------------------
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable sales charge. See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value assuming a complete redemption on October 31, 1998.
(4) The Standard and Poor's 500 Stock 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.
* The maximum CDSC for Class B is 5.0%. The CDSC declines to 0% after six
years.
** The maximum front-end sales charge for Class A is 5.25%.
+ The maximum CDSC for Class C shares is 1% for shares redeemed within one
year of purchase.
++ Class D shares have no sales charge.
3
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (99.1%)
AUSTRALIA (18.0%)
GOLD MINING
600,000 Delta Gold NL.......................................................................... $ 980,928
500,000 Resolute Ltd........................................................................... 430,560
1,250,000 Ross Mining NL......................................................................... 811,200
-----------
2,222,688
-----------
PRECIOUS METALS
700,000 Acacia Resources Ltd................................................................... 1,113,840
300,000 Lihir Gold Ltd.*....................................................................... 415,584
25,000 Lihir Gold Ltd. (ADR)*................................................................. 662,500
800,000 Normandy Mining Ltd.................................................................... 713,856
200,000 Ranger Minerals NL*.................................................................... 549,120
-----------
3,454,900
-----------
TOTAL AUSTRALIA........................................................................ 5,677,588
-----------
CANADA (45.9%)
GOLD MINING
50,000 IAMGOLD, International African Mining Gold Corp.*...................................... 141,005
50,000 IAMGOLD, International African Mining Gold Corp. - 144A*............................... 141,005
100,000 Sutton Resources Ltd.*................................................................. 385,738
200,000 Yamana Resources, Inc.*................................................................ 154,295
-----------
822,043
-----------
PRECIOUS METALS
90,000 Aber Resources Ltd.*................................................................... 504,700
200,000 Agnico-Eagle Mines Ltd................................................................. 998,379
85,000 Barrick Gold Corp...................................................................... 1,816,875
200,000 Cambior Inc. (ADR)..................................................................... 1,000,000
135,000 Euro-Nevada Mining Corp................................................................ 2,109,238
75,000 Franco Nevada Mining Corp. Ltd......................................................... 1,446,515
350,000 Geomaque Explorations Ltd.*............................................................ 349,433
200,000 Greenstone Resources Ltd.*............................................................. 286,548
300,000 Meridian Gold Inc.*.................................................................... 1,556,250
125,000 Placer Dome, Inc. (ADR)................................................................ 1,968,750
100,000 Prime Resources Group, Inc. (ADR)...................................................... 849,271
125,000 Repadre Capital Corp.*................................................................. 202,593
650,000 Vengold Inc.*.......................................................................... 526,742
-----------
13,615,294
-----------
TOTAL CANADA........................................................................... 14,437,337
-----------
UNITED KINGDOM (3.1%)
OTHER METALS/MINERALS
20,000 Rio Tinto PLC (ADR).................................................................... 990,000
-----------
UNITED STATES (32.0%)
CONSUMER SPECIALTIES
50,000 Lazare Kaplan International, Inc.*..................................................... 387,500
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
OTHER METALS/MINERALS
75,000 Freeport-McMoran Copper & Gold, Inc. (Class A)......................................... $ 895,313
20,000 Freeport-McMoran Copper & Gold, Inc. (Class B)......................................... 246,250
-----------
1,141,563
-----------
PRECIOUS METALS
300,000 Battle Mountain Gold Co................................................................ 1,631,250
125,000 Crown Resources Corp.*................................................................. 312,500
85,000 Getchell Gold Corp.*................................................................... 1,487,500
100,000 Homestake Mining Co.................................................................... 1,187,500
70,375 Newmont Mining Corp.................................................................... 1,495,469
75,000 Stillwater Mining Co.*................................................................. 2,428,125
-----------
8,542,344
-----------
TOTAL UNITED STATES.................................................................... 10,071,407
-----------
ZIMBABWE (0.1%)
OTHER METALS/MINERALS
120,000 Zimbabwe Platinum Mines Ltd.*.......................................................... 29,203
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $39,486,619).......................................................... 31,205,535
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ----------
<C> <S> <C>
SHORT-TERM INVESTMENT (2.2%)
REPURCHASE AGREEMENT
$ 684 The Bank of New York 5.125% due 11/02/98 (dated 10/30/98; proceeds $683,945)
(IDENTIFIED COST $683,653) (a)....................................................... 683,653
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $40,170,272) (b).......................................................... 101.3 % 31,889,188
LIABILITIES IN EXCESS OF OTHER ASSETS...................................................... (1.3) (420,898)
------ ------------
NET ASSETS................................................................................. 100.0 % $ 31,468,290
------ ------------
------ ------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Collateralized by $697,301 Student Loan Marketing Association 5.077% due
11/19/98 valued at $697,326.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $2,346,405 and the
aggregate gross unrealized depreciation is $10,627,489, resulting in net
unrealized depreciation of $8,281,084.
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $40,170,272)............................................................... $ 31,889,188
Receivable for:
Shares of beneficial interest sold........................................................ 149,650
Dividends................................................................................. 30,654
Prepaid expenses and other assets............................................................. 39,781
------------
TOTAL ASSETS............................................................................. 32,109,273
------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased................................................. 283,981
Investments purchased..................................................................... 254,856
Plan of distribution fee.................................................................. 27,378
Investment management fee................................................................. 22,099
Accrued expenses and other payables........................................................... 52,669
------------
TOTAL LIABILITIES........................................................................ 640,983
------------
NET ASSETS............................................................................... $ 31,468,290
------------
------------
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................... $ 60,013,917
Net unrealized depreciation................................................................... (8,281,197)
Accumulated net investment loss............................................................... (127,339)
Accumulated net realized loss................................................................. (20,137,091)
------------
NET ASSETS............................................................................... $ 31,468,290
------------
------------
CLASS A SHARES:
Net Assets.................................................................................... $91,152
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 18,054
NET ASSET VALUE PER SHARE................................................................ $5.05
------------
------------
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE)........................................ $5.33
------------
------------
CLASS B SHARES:
Net Assets.................................................................................... $30,005,023
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 5,990,376
NET ASSET VALUE PER SHARE................................................................ $5.01
------------
------------
CLASS C SHARES:
Net Assets.................................................................................... $1,045,540
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 208,707
NET ASSET VALUE PER SHARE................................................................ $5.01
------------
------------
CLASS D SHARES:
Net Assets.................................................................................... $326,575
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 64,942
NET ASSET VALUE PER SHARE................................................................ $5.03
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1998
<TABLE>
<S> <C>
NET INVESTMENT LOSS:
INCOME
Dividends (net of $14,613 foreign withholding tax)............................................ $ 247,239
Interest...................................................................................... 145,797
------------
TOTAL INCOME............................................................................. 393,036
------------
EXPENSES
Plan of distribution fee (Class A shares)..................................................... 147
Plan of distribution fee (Class B shares)..................................................... 306,235
Plan of distribution fee (Class C shares)..................................................... 9,392
Investment management fee..................................................................... 256,380
Registration fees............................................................................. 88,745
Transfer agent fees and expenses.............................................................. 86,657
Professional fees............................................................................. 53,618
Shareholder reports and notices............................................................... 49,175
Custodian fees................................................................................ 16,621
Trustees' fees and expenses................................................................... 10,804
Other......................................................................................... 7,989
------------
TOTAL EXPENSES........................................................................... 885,763
------------
NET INVESTMENT LOSS...................................................................... (492,727)
------------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss on:
Investments............................................................................... (9,648,954)
Foreign exchange transactions............................................................. (629)
------------
NET LOSS................................................................................. (9,649,583)
------------
Net change in unrealized appreciation/depreciation on:
Investments............................................................................... (420,844)
Translation of other assets and liabilities denominated in foreign currencies............. 22
------------
NET DEPRECIATION......................................................................... (420,822)
------------
NET LOSS................................................................................. (10,070,405)
------------
NET DECREASE.................................................................................. $(10,563,132)
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY 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, OCTOBER 31,
1998 1997*
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss................................................... $ (492,727) $ (575,376)
Net realized loss..................................................... (9,649,583) (9,101,223)
Net change in unrealized depreciation................................. (420,822) (9,193,959)
------------- -------------
NET DECREASE..................................................... (10,563,132) (18,870,558)
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class B shares.................................................... -- (656,572)
Net realized gain
Class B shares.................................................... -- (3,712,483)
------------- -------------
TOTAL DIVIDENDS AND DISTRIBUTIONS................................ -- (4,369,055)
------------- -------------
Net increase from transactions in shares of beneficial interest....... 3,551,128 878,665
------------- -------------
NET DECREASE..................................................... (7,012,004) (22,360,948)
NET ASSETS:
Beginning of period................................................... 38,480,294 60,841,242
------------- -------------
END OF PERIOD
(INCLUDING NET INVESTMENT LOSSES OF $127,339 AND $191,129,
RESPECTIVELY)..................................................... $ 31,468,290 $ 38,480,294
------------- -------------
------------- -------------
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1998
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Precious Metals and Minerals Trust (the "Fund"),
formerly Dean Witter Precious Metals and Minerals Trust, 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 and 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 Morgan Stanley Dean
8
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1998, CONTINUED
Witter Advisors Inc. (the "Investment Manager"), formerly Dean Witter
InterCapital Inc., 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 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.
9
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1998, CONTINUED
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
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
10
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1998, CONTINUED
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
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 (1)
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; (2) printing and distribution of prospectuses and reports
used in connection with the offering of these shares to other than current
shareholders; and (3) 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
11
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1998, CONTINUED
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
$3,830,463 at October 31, 1998.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the year ended October 31, 1998, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.23% and
1.0%, respectively.
The Distributor has informed the Fund that for the year ended October 31, 1998,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares and Class C shares of $81,003 and $1,677, respectively and
received approximately $4,714 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 October 31, 1998 aggregated
$15,521,451 and $10,677,356, respectively.
For the year ended October 31, 1998, the Fund incurred $13,415 in brokerage
commissions with DWR for portfolio transactions executed on behalf of the Fund.
For the year ended October 31, 1998, the Fund incurred $2,500 in brokerage
commissions with Morgan Stanley & Co., Inc., an affiliate of the Investment
Manager and Distributor, 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 October 31, 1998, the Fund had
transfer agent fees and expenses payable of approximately $500.
12
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1998, CONTINUED
5. SHARES OF BENEFICIAL INTEREST
Transaction in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1998 OCTOBER 31, 1997*
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold............................................................. 163,290 $ 830,904 4,703 $ 37,724
Redeemed......................................................... (149,939) (771,988) -- --
----------- -------------- ----------- ------------
Net increase -- Class A.......................................... 13,351 58,916 4,703 37,724
----------- -------------- ----------- ------------
CLASS B SHARES
Sold............................................................. 10,593,880 59,088,953 12,331,939 111,539,261
Reinvestment of dividends and distributions...................... -- -- 402,436 4,004,238
Redeemed......................................................... (10,149,788) (56,742,708) (12,648,999) (115,262,441)
----------- -------------- ----------- ------------
Net increase -- Class B.......................................... 444,092 2,346,245 85,376 281,058
----------- -------------- ----------- ------------
CLASS C SHARES
Sold............................................................. 604,559 3,428,478 95,151 732,145
Redeemed......................................................... (465,261) (2,500,980) (25,742) (182,272)
----------- -------------- ----------- ------------
Net increase -- Class C.......................................... 139,298 927,498 69,409 549,873
----------- -------------- ----------- ------------
CLASS D SHARES
Sold............................................................. 362,666 2,036,922 1,259 10,010
Redeemed......................................................... (298,983) (1,818,453) -- --
----------- -------------- ----------- ------------
Net increase -- Class D.......................................... 63,683 218,469 1,259 10,010
----------- -------------- ----------- ------------
Net increase in Fund............................................. 660,424 $ 3,551,128 160,747 $ 878,665
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
- ---------------------
* For Class A, C and D, for the period July 28, 1997 (issue date) through
October 31, 1997.
6. FEDERAL INCOME TAX STATUS
At October 31, 1998, the Fund had a net capital loss carryover of approximately
$20,110,000 of which $10,239,000 will be available through October 31, 2005 and
$9,871,000 will be available through October 31, 2006 to offset future capital
gains to the extent provided by regulations.
As of October 31, 1998, 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 $404,421, accumulated net
realized loss was charged $152,096 and net investment loss was credited
$556,517.
13
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 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 October 31, 1998, there were no outstanding forward contracts.
14
<PAGE>
MORGAN STANLEY 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 YEAR ENDED OCTOBER 31
----------------------------------------------------------------
1998++ 1997*++ 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period.... $ 6.85 $ 11.14 $ 9.77 $ 11.45 $ 10.80
-------- -------- -------- -------- --------
Income (loss) from investment
operations:
Net investment loss.................. (0.09) (0.10) (0.10) (0.08) (0.06)
Net realized and unrealized gain
(loss)............................... (1.75) (3.35) 1.66 (1.38) 0.73
-------- -------- -------- -------- --------
Total income (loss) from investment
operations............................. (1.84) (3.45) 1.56 (1.46) 0.67
-------- -------- -------- -------- --------
Less dividends and distributions from:
Net investment income................ -- (0.13) -- -- --
Net realized gain.................... -- (0.71) (0.19) (0.22) (0.02)
-------- -------- -------- -------- --------
Total dividends and distributions....... -- (0.84) (0.19) (0.22) (0.02)
-------- -------- -------- -------- --------
Net asset value, end of period.......... $ 5.01 $ 6.85 $ 11.14 $ 9.77 $ 11.45
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL RETURN+........................... (26.86)% (33.29)% 15.93% (12.78)% 6.18%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................ 2.78%(1) 2.36% 2.27% 2.29% 2.28%
Net investment loss..................... (1.55)%(1) (1.13)% (0.84)% (0.70)% (0.87)%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands.............................. $30,005 $37,964 $60,841 $55,448 $73,444
Portfolio turnover rate................. 36% 53% 46% 23% 46%
</TABLE>
- ---------------------
* 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 charges. Calculated based on the
net asset value as of the last business day of the period.
(1) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH OCTOBER
OCTOBER 31, 1998 31, 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 6.86 $ 7.95
------ ------
Loss from investment operations:
Net investment loss...................................... (0.05) --
Net realized and unrealized loss......................... (1.76) (1.09)
------ ------
Total loss from investment operations....................... (1.81) (1.09)
------ ------
Net asset value, end of period.............................. $ 5.05 $ 6.86
------ ------
------ ------
TOTAL RETURN+............................................... (26.38)% (13.71)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 2.01%(3) 1.61%(2)
Net investment loss......................................... (0.78)%(3) (0.08)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $91 $32
Portfolio turnover rate..................................... 36% 53%
</TABLE>
<TABLE>
<S> <C> <C>
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $6.84 $7.95
------ ------
Loss from investment operations:
Net investment loss...................................... (0.09) (0.02)
Net realized and unrealized loss......................... (1.74) (1.09)
------ ------
Total loss from investment operations....................... (1.83) (1.11)
------ ------
Net asset value, end of period.............................. $5.01 $6.84
------ ------
------ ------
TOTAL RETURN+............................................... (26.75)% (13.96)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 2.78%(3) 2.37%(2)
Net investment loss......................................... (1.55)%(3) (0.79)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $1,046 $475
Portfolio turnover rate..................................... 36% 53%
</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 charges. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 6.86 $ 7.95
------ ------
Income (loss) from investment operations:
Net investment income.................................... 0.02 --
Net realized and unrealized loss......................... (1.85) (1.09)
------ ------
Total loss from investment operations....................... (1.83) (1.09)
------ ------
Net asset value, end of period.............................. $ 5.03 $ 6.86
------ ------
------ ------
TOTAL RETURN+............................................... (26.68)% (13.71)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.78%(3) 1.35%(2)
Net investment income (loss)................................ (0.55)%(3) 0.22%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $327 $9
Portfolio turnover rate..................................... 36% 53%
</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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND
MINERALS TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY 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 Morgan Stanley Dean Witter Precious
Metals and Minerals Trust (the "Fund"), formerly Dean Witter Precious Metals and
Minerals Trust at October 31, 1998, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 1998 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
DECEMBER 7, 1998
18
<PAGE>
TRUSTEES
Michael Bozic MORGAN STANLEY DEAN WITTER
Charles A. Fiumefreddo PRECIOUS METALS
Edwin J. Garn AND MINERALS TRUST
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS [PHOTO]
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
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS ANNUAL REPORT
OCTOBER 31, 1998
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.
