<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, 1999
DEAR SHAREHOLDER:
The twelve-month period ended October 31, 1999, was a challenging one for the
precious-metals market. Prior to the start of the fiscal year, in August 1998,
gold hit a 19-year low of $273 per ounce after two and a half years of declining
prices. In the aftermath of the near collapse of a major U.S. hedge fund that
summer, the Federal Reserve Board began to ease monetary policy aggressively,
which resulted in a weakening of the U.S. dollar and a temporary reversal in the
gold price.
After a rally to $300 per ounce in the autumn of 1998, the gold price drifted to
a year-end level of $288 and remained around $280 to $290 in the first four
months of 1999. It appeared then that perhaps all the bad news was out and gold
would finally begin to build a base. However, this was not the case. As we have
seen in the past two years, a period of steady prices in the gold market has
resulted in a series of announcements of planned sales of gold reserves. An
announcement by the International Monetary Fund (IMF) of its intention to sell
gold to provide debt relief for highly indebted nations, and the prospect of
Swiss sales, kept constant pressure on gold prices. The final blow came on
May 7 from the Bank of England's surprise announcement of its intention to sell
415 of its 715 metric tons of reserves, commencing with a series of auctions.
Following this news, the price of gold dropped swiftly by some $35, to nearly
$262 per ounce.
The results of the first British reserve auction on July 6 were interpreted
negatively and gold's price responded by falling to a new 20-year low of $252
per ounce. The devastation to the gold market resulted in intense political
pressure on the IMF and the central banks to curtail the sale and lending of
reserves. The cries of protest were first heeded in the U.S. Congress, which had
effective veto power over IMF sales. Finally, in an unexpected statement, 15
(mostly European) central banks announced that they would limit gold sales and
lending for five years. The participating central banks have pledged to limit
gold sales to approximately 400 metric tons annually. This action, coupled
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
LETTER TO THE SHAREHOLDERS OCTOBER 31, 1999, CONTINUED
with the express stance of other major central banks (particularly the U.S.,
Japan, Australia, and the IMF) not to sell gold, indicates that approximately 90
percent of official-sector gold reserves are now frozen. The 15 central banks
also agreed not to expand their gold leasing over this five-year period, thereby
placing a ceiling on speculative investors' ability to short the market. The
announcement sparked a sharp short-covering rally, which carried gold prices to
a closing spike-high of more than $326 per ounce in early October. Since then,
gold has settled back in the $290 to $300 range, closing October at $299.20 per
ounce.
PERFORMANCE AND PORTFOLIO
For the twelve-month period ended October 31, 1999, Morgan Stanley Dean Witter
Precious Metals and Minerals Trust's Class B shares posted a total return
of -3.19 percent versus 1.55 percent for the Lipper Gold Funds Index and 25.66
percent for the Standard & Poor's 500 Composite Stock Price Index (S&P 500). For
the same period, the Fund's Class A, C and D shares produced total returns
of -1.98 percent, -3.19 percent and -2.39 percent, respectively. Performance of
the Fund's four share classes varies because of differing expenses. (The total
return figures shown assume the reinvestment of all distributions and do not
reflect the deduction of any applicable sales charges.) The accompanying chart
compares the Fund's performance to that of the Lipper and S&P indexes.
The Fund's performance reflected the generally lackluster environment of the
precious-metals market. The Fund's underweighting in areas of the world that
performed well during the fiscal year hindered its performance relative to the
Lipper index. At the end of October, the Fund's key holdings included
Franco-Nevada Mining, Placer Dome, Barrick Gold, Stillwater Mining and Agnico
Eagle Mines.
LOOKING AHEAD
On December 21, 1999, at a special meeting of shareholders of Morgan Stanley
Dean Witter Precious Metals and Minerals Trust, a proposal to have the Fund's
assets acquired by Morgan Stanley Dean Witter Natural Resource Development
Securities, pursuant to a reorganization plan, was approved. Accordingly,
shareholders will receive corresponding shares of Morgan Stanley Dean Witter
Natural Resource Development Securities equal to the value of their holdings in
Morgan Stanley Dean Witter Precious Metals and Minerals Trust as of the
valuation date, currently anticipated to be on or about January 28, 2000. Each
shareholder of Morgan Stanley Dean Witter Precious Metals and Minerals
2
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
LETTER TO THE SHAREHOLDERS OCTOBER 31, 1999, CONTINUED
Trust will receive the same class of shares of Morgan Stanley Dean Witter
Natural Resource Development Securities as is currently held by that shareholder
in the Fund on the valuation date. This transaction is a nontaxable event.
We appreciate your support of Morgan Stanley Dean Witter Precious Metals and
Minerals Trust and look forward to continuing to serve your investment needs.
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO /s/ MITCHELL M. MERIN
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
CHAIRMAN OF THE BOARD PRESIDENT
3
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND
MINERALS TRUST
FUND PERFORMANCE OCTOBER 31, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GROWTH OF $10,000 -- CLASS B SHARES
($ IN THOUSANDS)
<S> <C> <C> <C>
Fund S & P 500 (4) Lipper (5)
August-1990 $10,000 $10,000 $10,000
October-1990 $8,570 $9,179 $8,419
October-1991 $8,675 $12,251 $8,805
October-1992 $7,984 $13,469 $7,227
October-1993 $10,956 $15,476 $11,537
October-1994 $11,634 $16,072 $13,331
October-1995 $10,147 $20,313 $10,843
October-1996 $11,764 $25,200 $12,875
October-1997 $7,848 $33,277 $8,312
October-1998 $5,740 $40,594 $6,210
October-1999 $5,557(3) $51,012 $6,307
</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+
--------------------------------------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year (3.19)%(1) (8.03)%(2) 1 Year (1.98)%(1) (7.13)%(2)
5 Years (13.74) (1) (14.05) (2) Since Inception (7/28/97) (18.92) (1) (20.83) (2)
Since Inception (8/6/90) (6.16) (1) (6.16) (2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES++ CLASS D SHARES#
------------------------------------------------- -------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year (3.19)%(1) (4.16)%(2) 1 Year (2.39)%(1)
Since Inception (7/28/97) (19.65) (1) (19.65) (2) Since Inception (7/28/97) (19.21) (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, 1999.
(4) The Standard & 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.
4
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1999
<TABLE>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (99.6%)
AUSTRALIA (17.5%)
PRECIOUS METALS
900,000 Acacia Resources Ltd.................................................................... $ 1,591,773
800,000 Delta Gold NL........................................................................... 1,348,744
500,000 Newcrest Mining Ltd.*................................................................... 1,402,821
900,000 Normandy Mining Ltd..................................................................... 681,370
-----------
TOTAL AUSTRALIA......................................................................... 5,024,708
-----------
CANADA (52.0%)
OTHER METALS/MINERALS
50,000 Dia Met Minerals Ltd. (Class A)*........................................................ 718,459
250,000 Namibian Minerals Corp.................................................................. 1,265,625
-----------
1,984,084
-----------
PRECIOUS METALS
270,000 Agnico-Eagle Mines Ltd.................................................................. 2,173,721
85,000 Barrick Gold Corp....................................................................... 1,556,562
46,300 Barrick Gold Corp....................................................................... 850,883
155,000 Franco Nevada Mining Corp. Ltd.......................................................... 2,874,856
250,000 Kinross Gold Corp.*..................................................................... 636,932
300,000 Meridian Gold Inc.*..................................................................... 2,137,500
225,000 Placer Dome, Inc. (ADR)................................................................. 2,728,125
-----------
12,958,579
-----------
TOTAL CANADA............................................................................ 14,942,663
-----------
PERU (5.9%)
OTHER METALS/MINERALS
100,000 Minas Buenaventura S.A. (ADR)*.......................................................... 1,700,000
-----------
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
UNITED KINGDOM (5.6%)
OTHER METALS/MINERALS
30,000 Anglo American PLC (ADR)................................................................ $ 1,605,000
-----------
UNITED STATES (18.6%)
PRECIOUS METALS
50,000 Apex Silver Mines Ltd................................................................... 678,125
75,000 Homestake Mining Co..................................................................... 628,125
80,000 Newmont Mining Corp..................................................................... 1,755,000
112,500 Stillwater Mining Co.*.................................................................. 2,264,062
-----------
TOTAL UNITED STATES..................................................................... 5,325,312
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL COMMON STOCKS
(IDENTIFIED COST $25,189,396) (a).......................................................... 99.6% 28,597,683
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................................. 0.4 120,320
----- ------------
NET ASSETS................................................................................. 100.0% $ 28,718,003
----- ------------
----- ------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $4,504,849 and the
aggregate gross unrealized depreciation is $1,096,562, resulting in net
unrealized appreciation of $3,408,287.
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $25,189,396)............................................................... $ 28,597,683
Cash (including ($125,091) in foreign currency)............................................... 95,696
Receivable for:
Investments sold.......................................................................... 125,963
Dividends................................................................................. 12,375
Shares of beneficial interest sold........................................................ 3,104
Prepaid expenses and other assets............................................................. 46,072
------------
TOTAL ASSETS............................................................................. 28,880,893
------------
LIABILITIES:
Payable for:
Plan of distribution fee.................................................................. 26,740
Investment management fee................................................................. 22,262
Shares of beneficial interest repurchased................................................. 21,829
Accrued expenses and other payables........................................................... 92,059
------------
TOTAL LIABILITIES........................................................................ 162,890
------------
NET ASSETS............................................................................... $ 28,718,003
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................... $ 57,698,554
Net unrealized appreciation................................................................... 3,409,159
Accumulated net investment loss............................................................... (40,619)
Accumulated net realized loss................................................................. (32,349,091)
------------
NET ASSETS............................................................................... $ 28,718,003
============
CLASS A SHARES:
Net Assets.................................................................................... $279,358
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 56,460
NET ASSET VALUE PER SHARE................................................................ $4.95
============
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET
ASSET VALUE)............................................................................ $5.22
============
CLASS B SHARES:
Net Assets.................................................................................... $26,584,064
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 5,482,165
NET ASSET VALUE PER SHARE................................................................ $4.85
============
CLASS C SHARES:
Net Assets.................................................................................... $1,772,828
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 365,711
NET ASSET VALUE PER SHARE................................................................ $4.85
============
CLASS D SHARES:
Net Assets.................................................................................... $81,753
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)..................................... 16,638
NET ASSET VALUE PER SHARE................................................................ $4.91
============
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1999
<TABLE>
<S> <C>
NET INVESTMENT LOSS:
INCOME
Dividends (net of $18,362 foreign withholding tax)............................................ $ 328,668
Interest...................................................................................... 105,394
------------
TOTAL INCOME............................................................................. 434,062
------------
EXPENSES
Plan of distribution fee (Class A shares)..................................................... 1,544
Plan of distribution fee (Class B shares)..................................................... 280,466
Plan of distribution fee (Class C shares)..................................................... 16,587
Investment management fee..................................................................... 247,980
Professional fees............................................................................. 107,809
Transfer agent fees and expenses.............................................................. 87,250
Shareholder reports and notices............................................................... 73,832
Registration fees............................................................................. 72,850
Custodian fees................................................................................ 13,820
Trustees' fees and expenses................................................................... 12,054
Other......................................................................................... 3,701
------------
TOTAL EXPENSES........................................................................... 917,893
------------
NET INVESTMENT LOSS...................................................................... (483,831)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss on:
Investments............................................................................... (12,212,000)
Foreign exchange transactions............................................................. (810)
------------
NET LOSS................................................................................. (12,212,810)
------------
Net change in unrealized appreciation/ depreciation on:
Investments............................................................................... 11,689,371
Translation of other assets and liabilities denominated in foreign currencies............. 985
------------
NET APPRECIATION......................................................................... 11,690,356
------------
NET LOSS................................................................................. (522,454)
------------
NET DECREASE.................................................................................. $ (1,006,285)
============
</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>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss..................................................... $ (483,831) $ (492,727)
Net realized loss....................................................... (12,212,810) (9,649,583)
Net change in unrealized appreciation................................... 11,690,356 (420,822)
------------ ------------
NET DECREASE....................................................... (1,006,285) (10,563,132)
Net increase (decrease) from transactions in shares of beneficial
interest.............................................................. (1,744,002) 3,551,128
------------ ------------
NET DECREASE....................................................... (2,750,287) (7,012,004)
NET ASSETS:
Beginning of period..................................................... 31,468,290 38,480,294
------------ ------------
END OF PERIOD
(INCLUDING NET INVESTMENT LOSSES OF $40,619 AND $127,339,
RESPECTIVELY)....................................................... $ 28,718,003 $ 31,468,290
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1999
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley 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 converted to a multiple class
share structure.
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 and 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 Witter Advisors 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
8
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1999, 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
9
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1999, CONTINUED
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 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.
10
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1999, CONTINUED
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 proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any
11
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1999, CONTINUED
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 $4,147,385 at
October 31, 1999.
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, 1999, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.24% and
1.0%, respectively.
The Distributor has informed the Fund that for the year ended October 31, 1999,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class A shares, Class B shares and Class C shares of $75,057, $89,406 and
$2,529, respectively and received approximately $7,752 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 year ended October 31, 1999 aggregated $20,226,430
and $22,311,653, respectively.
For the year ended October 31, 1999, the Fund incurred $4,519 in brokerage
commissions with DWR 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, 1999, the Fund had
transfer agent fees and expenses payable of approximately $4,500.
12
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1999, 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, 1999 OCTOBER 31, 1998
------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold................................................... 1,726,177 $ 8,595,102 163,290 $ 830,904
Redeemed............................................... (1,687,771) (8,562,051) (149,939) (771,988)
---------- ------------ ----------- ------------
Net increase - Class A................................. 38,406 33,051 13,351 58,916
---------- ------------ ----------- ------------
CLASS B SHARES
Sold................................................... 6,524,567 32,305,892 10,593,880 59,088,953
Redeemed............................................... (7,032,778) (34,689,628) (10,149,788) (56,742,708)
---------- ------------ ----------- ------------
Net increase (decrease) - Class B...................... (508,211) (2,383,736) 444,092 2,346,245
---------- ------------ ----------- ------------
CLASS C SHARES
Sold................................................... 1,307,205 6,577,314 604,559 3,428,478
Redeemed............................................... (1,150,201) (5,630,673) (465,261) (2,500,980)
---------- ------------ ----------- ------------
Net increase - Class C................................. 157,004 946,641 139,298 927,498
---------- ------------ ----------- ------------
CLASS D SHARES
Sold................................................... 517,526 2,450,652 362,666 2,036,922
Redeemed............................................... (565,830) (2,790,610) (298,983) (1,818,453)
---------- ------------ ----------- ------------
Net increase (decrease) - Class D...................... (48,304) (339,958) 63,683 218,469
---------- ------------ ----------- ------------
Net increase (decrease) in Fund........................ (361,105) $ (1,744,002) 660,424 $ 3,551,128
========== ============ =========== ============
</TABLE>
6. FEDERAL INCOME TAX STATUS
At October 31, 1999, the Fund had a net capital loss carryover of approximately
$31,763,000, which may be used to offset future capital gains to the extent
provided by regulations, which is available through October 31 of the following
years:
<TABLE>
<CAPTION>
(AMOUNT IN THOUSANDS)
- -----------------------------
2005 2006 2007
- ------- -------- --------
<S> <C> <C>
$10,239 $9,871 $11,653
======= ====== =======
</TABLE>
As of October 31, 1999, 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 held by the Fund and permanent book/tax
differences primarily attributable to a net operating loss. To reflect
reclassifications arising from the permanent differences, paid-in-capital was
charged $571,361, accumulated net realized loss was credited $810 and
accumulated net investment loss was credited $570,551.
13
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1999, 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, 1999, there were no outstanding forward contracts.
8. FUND MERGER
On December 21, 1999, shareholders of the Fund approved a reorganization plan
("the Plan") whereby the Fund would be merged into Morgan Stanley Dean Witter
Natural Resource Development Securities Inc. ("Natural Resource"). Pursuant to
the Plan, the assets of the Fund will be combined with the assets of Natural
Resource and shareholders of the Fund will become shareholders of Natural
Resource, receiving shares of the corresponding class of Natural Resource equal
to the value of their holdings in the Fund. The merger is expected to close on
or about January 28, 2000.
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 PERIOD
FOR THE YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
OCTOBER 31, 1999 OCTOBER 31, 1998 OCTOBER 31, 1997
- -------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value,
beginning of
period.... $ 5.05 $ 6.86 $ 7.95
------- ------- -------
Loss from
investment
operations:
Net
investment
loss.... (0.04) (0.05) --
Net realized
and
unrealized
loss.... (0.06) (1.76) (1.09)
------- ------- -------
Total loss from
investment
operations... (0.10) (1.81) (1.09)
------- ------- -------
Net asset value,
end of
period.... $ 4.95 $ 5.05 $ 6.86
======= ======= =======
TOTAL RETURN+... (1.98)% (26.38)% (13.71)%(1)
RATIOS TO
AVERAGE NET
ASSETS:
Expenses... 2.24 %(3) 2.01 %(3) 1.61 %(2)
Net investment
loss...... (0.84)%(3) (0.78)%(3) (0.08)%(2)
SUPPLEMENTAL DATA:
Net assets, end
of period, in
thousands...... $279 $91 $32
Portfolio
turnover
rate........... 69 % 36 % 53 %
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* 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.
(3) Reflects overall Fund ratios for investment income and
non-class specific expenses.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31
------------------------------------------------------------------------
1999++ 1998++ 1997*++ 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period................ $ 5.01 $ 6.85 $11.14 $ 9.77 $11.45
------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment loss.............................. (0.08) (0.09) (0.10) (0.10) (0.08)
Net realized and unrealized gain (loss).......... (0.08) (1.75) (3.35) 1.66 (1.38)
------ ------ ------ ------ ------
Total income (loss) from investment operations...... (0.16) (1.84) (3.45) 1.56 (1.46)
------ ------ ------ ------ ------
Less dividends and distributions from:
Net investment income............................ -- -- (0.13) -- --
Net realized gain................................ -- -- (0.71) (0.19) (0.22)
------ ------ ------ ------ ------
Total dividends and distributions................... -- -- (0.84) (0.19) (0.22)
------ ------ ------ ------ ------
Net asset value, end of period...................... $ 4.85 $ 5.01 $ 6.85 $11.14 $ 9.77
====== ====== ====== ====== ======
TOTAL RETURN+....................................... (3.19)% (26.86)% (33.29)% 15.93 % (12.78)%
RATIOS TO AVERAGE NET ASSETS:
Expenses............................................ 3.00 %(1) 2.78 %(1) 2.36 % 2.27 % 2.29 %
Net investment loss................................. (1.60)%(1) (1.55)%(1) (1.13)% (0.84)% (0.70)%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............. $26,584 $30,005 $37,964 $60,841 $55,448
Portfolio turnover rate............................. 69 % 36 % 53 % 46 % 23 %
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* 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) Reflects overall Fund ratios for investment income and
non-class specific expenses.
</TABLE>
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 FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
OCTOBER 31, 1999 OCTOBER 31, 1998 OCTOBER 31, 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 5.01 $ 6.84 $ 7.95
------ ------ ------
Loss from investment operations:
Net investment loss...................................... (0.07) (0.09) (0.02)
Net realized and unrealized loss......................... (0.09) (1.74) (1.09)
------ ------ ------
Total loss from investment operations....................... (0.16) (1.83) (1.11)
------ ------ ------
Net asset value, end of period.............................. $ 4.85 $ 5.01 $ 6.84
====== ====== ======
TOTAL RETURN+............................................... (3.19)% (26.75)% (13.96)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 3.00%(3) 2.78%(3) 2.37%(2)
Net investment loss......................................... (1.60)%(3) (1.55)%(3) (0.79)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $1,773 $1,046 $475
Portfolio turnover rate..................................... 69% 36% 53%
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* 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.
(3) Reflects overall Fund ratios for investment income and
non-class specific expenses.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
OCTOBER 31, 1999 OCTOBER 31, 1998 OCTOBER 31, 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 5.03 $ 6.86 $ 7.95
------- ------- -------
Income (loss) from investment operations:
Net investment income (loss)............................. (0.04) 0.02 --
Net realized and unrealized loss......................... (0.08) (1.85) (1.09)
------- ------- -------
Total loss from investment operations....................... (0.12) (1.83) (1.09)
------- ------- -------
Net asset value, end of period.............................. $ 4.91 $ 5.03 $ 6.86
======= ======= =======
TOTAL RETURN+............................................... (2.39)% (26.68)% (13.71)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 2.00%(3) 1.78%(3) 1.35%(2)
Net investment income (loss)................................ (0.60)%(3) (0.55)%(3) 0.22%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $82 $327 $9
Portfolio turnover rate..................................... 69% 36% 53%
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* 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.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
<TABLE>
<S> <C>
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND
MINERALS TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
</TABLE>
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") at October 31, 1999, 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 indicated, 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, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
As described in Note 8 to the financial statements, the Fund's Trustees and
shareholders have approved a reorganization plan whereby the Fund would be
merged into Morgan Stanley Dean Witter Natural Resource Development Securities
Inc.
PricewaterhouseCoopers LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
DECEMBER 21, 1999
19
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
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
Mitchell M. Merin
President
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
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. Read the
prospectus carefully before investing.
MORGAN STANLEY DEAN WITTER PRECIOUS METALS AND MINERALS TRUST
[GRAPHIC]
ANNUAL REPORT
OCTOBER 31, 1999
