<PAGE> 1
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST Two World Trade Center,
New York, New York 10048
LETTER TO THE SHAREHOLDERS February 28, 1999
DEAR SHAREHOLDER:
During the six-month period ended February 28, 1999, the domestic equity market,
led primarily by the largest market-capitalization stocks and a resurgent
technology sector, rebounded sharply from a late summer correction.
After soaring to a record high of 9,338 in July, the Dow plunged nearly 1,800
points by the end of August. Several factors combined to drag down the prices of
stocks, including a slowdown in profits growth, the persistent Asian contagion,
Russia's debt default and devaluation of the ruble, the worsening White House
scandal and the near collapse of a major hedge fund. Fortunately, the steadying
influence of the Goldilocks economy -- featuring economic expansion with low
inflation -- pulled the market out of its summer slump and propelled it toward
new highs during January and February.
PERFORMANCE
For the six-month period ended February 28, 1999, Morgan Stanley Dean Witter
Market Leader Trust's Class B shares posted a total return of 38.74 percent,
compared to returns of 30.27 percent for the broad-based S&P 500 Index and 31.87
percent for the Lipper Growth Funds Index. For the same period, the Fund's Class
A, C and D shares posted returns of 39.26 percent, 39.09 percent and 39.63
percent, respectively. Performance of the Fund's four share classes varies
because of differing expenses.
The Fund's strong performance relative to its benchmarks was due primarily to
its focus on large-capitalization, industry-leading companies and its
overweighting in the technology sector. During this period many of the Fund's
portfolio holdings were among the market's strongest performers, including
Cisco, EMC Corporation and Intel. In September the Fund took advantage of the
market's weakness to add to or initiate new positions in some market-leading
companies at extremely attractive prices. These included America Online,
Worldcom, Chase Manhattan, Citigroup and Compaq, among others.
<PAGE> 2
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
LETTER TO THE SHAREHOLDERS February 28, 1999, continued
PORTFOLIO STRATEGY
The Fund continues to focus on companies regarded as leaders in their respective
industries that offer good growth prospects in revenues and net income and have
the ability to expand their businesses both domestically and abroad during
difficult times. On an industry level, the Fund emphasized the technology (27.1
percent), financial services (17.4 percent) and health-care sectors (12.3
percent). The companies represented in the Fund's technology holdings were among
the period's strongest performers. These holdings included Cisco, Nokia, America
Online and EMC.
The financial services sector also performed strongly during this period. Six
months ago, many leading financial services companies were trading at levels 50
percent below their 52-week highs, on fears of a global recession and subsequent
liquidity crisis. The Fund increased its exposure to this sector throughout the
market turmoil and was rewarded for doing so, as many of the high-quality
financial services companies that the Fund owns, such as American International
Group, Merrill Lynch, Chase Manhattan and Citigroup, turned in strong returns
through the end of February.
Energy and basic materials stocks were weak relative performers in this period
as declining crude oil and commodity prices created a tough operating
environment. However, we believe that, given the current depressed levels, a
long-term investment focus on the positive expectations for this sector is
justified, particularly the oil-drilling and services sector.
LOOKING AHEAD
We believe that the companies held in the Fund's portfolio will continue to
increase both revenues and earnings, as well as market share, under either
favorable or difficult conditions. Accordingly, the Fund's investment strategy
going forward is to continue to purchase -- at the best possible price -- stocks
issued by leading U.S. and global companies, which we believe are poised to
grow.
We appreciate your ongoing support of Morgan Stanley Dean Witter Market Leader
Trust and look forward to continuing to serve your investment needs.
Very truly yours,
/S/ CHARLES A. FIUMEFREDDO
CHARLES A. FIUMEFREDDO
Chairman of the Board
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
PORTFOLIO OF INVESTMENTS February 28, 1999 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (91.6%)
BASIC MATERIALS (4.3%)
Forest Products (1.4%)
30,000 Georgia-Pacific Corp. ....... $ 2,197,500
------------
Major Chemicals (0.8%)
25,000 Du Pont (E.I.) de Nemours &
Co., Inc. .................. 1,282,813
------------
Specialty Steels (2.1%)
75,000 Nucor Corp. ................. 3,342,188
------------
TOTAL BASIC MATERIALS........ 6,822,501
------------
CAPITAL GOODS (5.2%)
Aerospace (2.1%)
27,000 United Technologies Corp. ... 3,344,625
------------
Building Products (1.3%)
40,000 Masco Corp. ................. 1,050,000
40,000 Royal Group Technologies Ltd.
(Canada)*................... 1,035,000
------------
2,085,000
------------
Construction/Agricultural
Equipment/Trucks (0.7%)
80,000 JLG Industries, Inc. ........ 1,125,000
------------
Fluid Controls (0.8%)
60,000 Roper Industries, Inc. ...... 1,327,500
------------
Metal Fabrications (0.3%)
40,000 Atchison Casting Corp.*...... 390,000
------------
TOTAL CAPITAL GOODS.......... 8,272,125
------------
CONSUMER/COMMERCIAL SERVICES (1.2%)
Diversified Commercial Services
55,000 CheckFree Holdings Corp.*.... 1,870,000
------------
CONSUMER NON-DURABLES (0.6%)
Tobacco
25,000 Philip Morris Companies,
Inc. ....................... 978,125
------------
ENERGY (8.0%)
Contract Drilling (0.9%)
115,000 Noble Drilling Corp.*........ 1,423,125
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Integrated Oil Companies (1.5%)
20,000 Chevron Corp. ............... $ 1,537,500
30,000 Unocal Corp. ................ 845,625
------------
2,383,125
------------
Oil & Gas Production (0.4%)
65,000 Snyder Oil Corp. ............ 678,438
------------
Oil Refining/Marketing (0.7%)
35,000 Sunoco, Inc. ................ 1,065,313
------------
Oil/Gas Transmission (2.4%)
100,000 Williams Companies, Inc. .... 3,700,000
------------
Oilfield Services/Equipment (2.1%)
56,000 Halliburton Co. ............. 1,582,000
35,000 Schlumberger, Ltd. .......... 1,699,688
------------
3,281,688
------------
TOTAL ENERGY................. 12,531,689
------------
ENTERTAINMENT & LEISURE (3.7%)
Broadcasting (1.3%)
30,000 Jacor Communications,
Inc.*....................... 2,092,500
------------
Restaurants (2.4%)
45,000 McDonald's Corp. ............ 3,825,000
------------
TOTAL ENTERTAINMENT &
LEISURE...................... 5,917,500
------------
FINANCIAL SERVICES (17.4%)
Diversified Financial Services (3.4%)
62,500 Citigroup, Inc. ............. 3,671,875
25,000 Equitable Companies, Inc. ... 1,689,063
------------
5,360,938
------------
Finance Companies (4.0%)
62,000 Fannie Mae................... 4,339,999
85,000 Newcourt Credit Group, Inc.
(Canada).................... 2,018,750
------------
6,358,749
------------
Investment Bankers/Brokers/
Services (1.5%)
30,000 Merrill Lynch & Co., Inc. ... 2,302,500
------------
Investment Managers (0.9%)
45,000 Franklin Resources, Inc. .... 1,431,563
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
PORTFOLIO OF INVESTMENTS February 28, 1999 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Major Banks (4.7%)
40,000 BankBoston Corp. ............ $ 1,617,500
20,000 Bank One Corp. .............. 1,075,000
60,000 Chase Manhattan Corp. (The).. 4,777,500
------------
7,470,000
------------
Multi-Line Insurance (2.9%)
40,500 American International
Group, Inc. ................ 4,614,469
------------
TOTAL FINANCIAL SERVICES..... 27,538,219
------------
HEALTHCARE (12.3%)
Hospital/Nursing Management (0.7%)
60,000 Columbia/HCA Healthcare
Corp. ...................... 1,072,500
------------
Major Pharmaceuticals (10.3%)
85,000 American Home Products
Corp. ...................... 5,057,500
30,000 Johnson & Johnson............ 2,561,250
66,000 Merck & Co., Inc. ........... 5,395,499
20,000 Pfizer, Inc. ................ 2,638,750
15,000 Zeneca Group PLC (ADR)
(United Kingdom)............ 615,938
------------
16,268,937
------------
Medical Specialties (1.3%)
60,000 Becton, Dickinson & Co. ..... 2,010,000
------------
TOTAL HEALTHCARE............. 19,351,437
------------
MULTI-SECTOR COMPANIES (1.0%)
Conglomerates
15,000 General Electric Co. ........ 1,504,688
------------
RETAIL (4.9%)
Clothing/Shoe/Accessory Chains (2.8%)
150,000 TJX Companies, Inc. ......... 4,284,375
------------
Department Stores (2.1%)
94,000 Saks, Inc.*.................. 3,378,125
------------
TOTAL RETAIL................. 7,662,500
------------
TECHNOLOGY (27.1%)
Computer Communications (5.2%)
40,000 3Com Corp.*.................. 1,257,500
15,000 Ascend Communications,
Inc.*....................... 1,154,063
58,500 Cisco Systems, Inc.*......... 5,722,030
------------
8,133,593
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Computer Hardware (7.4%)
87,000 Compaq Computer Corp. ....... $ 3,066,750
41,000 EMC Corp.*................... 4,197,374
20,000 Gateway 2000, Inc.*.......... 1,453,750
45,000 Hewlett-Packard Co. ......... 2,989,688
------------
11,707,562
------------
Computer Software (2.4%)
20,000 BMC Software, Inc.*.......... 817,500
20,000 Microsoft Corp.*............. 3,001,250
------------
3,818,750
------------
Internet Services (3.4%)
60,000 America Online, Inc.*........ 5,336,250
------------
Semiconductors (4.0%)
29,000 Intel Corp. ................. 3,478,187
60,000 Vitesse Semiconductor
Corp.*...................... 2,752,500
------------
6,230,687
------------
Telecommunication Equipment (4.7%)
15,000 Motorola, Inc. .............. 1,053,750
47,000 Nokia Corp. (ADR)
(Finland)*.................. 6,374,374
------------
7,428,124
------------
TOTAL TECHNOLOGY............. 42,654,966
------------
TELECOMMUNICATIONS (5.3%)
Cellular Telephone (1.5%)
80,000 Nextel Communications, Inc.
(Class A)*.................. 2,405,000
------------
Major U.S. Telecommunications (3.4%)
30,000 AT&T Corp. .................. 2,463,750
35,000 MCI WorldCom, Inc.*.......... 2,887,500
------------
5,351,250
------------
Other Telecommunications (0.4%)
30,000 ICG Communications, Inc.*.... 562,500
------------
TOTAL TELECOMMUNICATIONS..... 8,318,750
------------
TRANSPORTATION (0.6%)
Railroads
20,000 Canadian National Railway
Co. ........................ 966,250
------------
TOTAL COMMON STOCKS
(Identified Cost
$109,680,830)................ 144,388,750
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
PORTFOLIO OF INVESTMENTS February 28, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (a) (5.4%)
U.S. GOVERNMENT AGENCIES
$6,400 Federal Home Loan Mortgage
Corp. 4.70% due 03/01/99.... $ 6,400,000
1,150 Federal Home Loan Mortgage
Corp. 4.74% due 03/04/99.... 1,149,546
1,000 Federal National Mortgage
Assoc. 4.71% due 03/08/99... 999,084
------------
TOTAL SHORT-TERM INVESTMENTS
(Amortized Cost
$8,548,630).................. 8,548,630
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $118,229,460)
(b)............................. 97.0% 152,937,380
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES........... 3.0 4,704,056
----- ------------
NET ASSETS...................... 100.0% $157,641,436
===== ============
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $42,844,584 and the
aggregate gross unrealized depreciation is $8,136,664, resulting in net
unrealized appreciation of $34,707,920.
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1999 (unaudited)
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $118,229,460)........... $152,937,380
Cash...................................... 75,972
Receivable for:
Investments sold...................... 5,273,571
Shares of beneficial interest sold.... 410,916
Dividends............................. 86,628
Deferred organizational expenses.......... 41,979
Prepaid expenses.......................... 132,269
------------
TOTAL ASSETS.......................... 158,958,715
------------
LIABILITIES:
Payable for:
Investments purchased................. 852,000
Shares of beneficial interest
repurchased.......................... 186,307
Plan of distribution fee.............. 130,195
Investment management fee............. 98,011
Accrued expenses.......................... 50,766
------------
TOTAL LIABILITIES..................... 1,317,279
------------
NET ASSETS............................ $157,641,436
============
COMPOSITION OF NET ASSETS:
Paid-in-capital........................... $122,216,587
Net unrealized appreciation............... 34,707,920
Accumulated net investment loss........... (708,587)
Accumulated undistributed net realized
gain..................................... 1,425,516
------------
NET ASSETS............................ $157,641,436
============
CLASS A SHARES:
Net Assets................................ $572,576
Shares Outstanding (unlimited authorized,
$.01 par value).......................... 42,246
NET ASSET VALUE PER SHARE............. $13.55
============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net
asset value)......................... $14.30
============
CLASS B SHARES:
Net Assets................................ $155,472,918
Shares Outstanding (unlimited authorized,
$.01 par value).......................... 11,578,055
NET ASSET VALUE PER SHARE............. $13.43
============
CLASS C SHARES:
Net Assets................................ $1,533,979
Shares Outstanding (unlimited authorized,
$.01 par value).......................... 114,027
NET ASSET VALUE PER SHARE............. $13.45
============
CLASS D SHARES:
Net Assets................................ $61,963
Shares Outstanding (unlimited authorized,
$.01 par value).......................... 4,558
NET ASSET VALUE PER SHARE............. $13.59
============
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the six months ended February 28, 1999
(unaudited)
<S> <C>
NET INVESTMENT LOSS:
INCOME
Dividends (net of $1,007 foreign
withholding tax)......................... $ 570,916
Interest.................................. 112,066
-----------
TOTAL INCOME.......................... 682,982
-----------
EXPENSES
Plan of distribution fee (Class A
shares).................................. 467
Plan of distribution fee (Class B
shares).................................. 683,055
Plan of distribution fee (Class C
shares).................................. 1,971
Investment management fee................. 521,561
Transfer agent fees and expenses.......... 89,261
Registration fees......................... 29,058
Professional fees......................... 22,752
Shareholder reports and notices........... 22,260
Custodian fees............................ 7,638
Organizational expenses................... 6,664
Trustees' fees and expenses............... 1,163
Other..................................... 5,719
-----------
TOTAL EXPENSES........................ 1,391,569
-----------
NET INVESTMENT LOSS................... (708,587)
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain......................... 1,598,326
Net change in unrealized depreciation..... 43,420,293
-----------
NET GAIN.............................. 45,018,619
-----------
NET INCREASE.............................. $44,310,032
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998
- ------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss................................. $ (708,587) $ (1,114,437)
Net realized gain................................... 1,598,326 489,937
Net change in unrealized
appreciation/depreciation.......................... 43,420,293 (12,924,249)
------------ ------------
NET INCREASE (DECREASE)......................... 44,310,032 (13,548,749)
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares.................................. -- (2,346)
Class B shares.................................. -- (371,207)
Class C shares.................................. -- (3,451)
Class D shares.................................. -- (1,350)
Net realized gain
Class A shares.................................. -- (2,408)
Class B shares.................................. -- (791,200)
Class C shares.................................. -- (5,177)
Class D shares.................................. -- (1,210)
------------ ------------
TOTAL DIVIDENDS AND DISTRIBUTIONS............... -- (1,178,349)
------------ ------------
Net increase (decrease) from transactions in shares
of beneficial interest............................. (7,076,042) 27,225,224
------------ ------------
NET INCREASE.................................... 37,233,990 12,498,126
NET ASSETS:
Beginning of period................................. 120,407,446 107,909,320
------------ ------------
END OF PERIOD
(Including a net investment loss of $708,587 and
$0, respectively)............................... $157,641,436 $120,407,446
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
NOTES TO FINANCIAL STATEMENTS February 28, 1999 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Market Leader 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 growth of capital. The Fund seeks to achieve its investment objective
by investing at least 65% of its assets in equity securities issued by companies
that are established leaders in their respective fields in growing industries in
domestic and foreign markets. The Fund was organized as a Massachusetts business
trust on November 4, 1996 and commenced operations on April 28, 1997. 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, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price (in
cases where securities are traded on more than one exchange, the security is
valued on the exchange designated as the primary market pursuant to procedures
adopted by the Trustees); (2) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest 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 or bid prices are not reflective of a security's market
value, portfolio securities are valued at their fair value as determined in good
faith under procedures established by and under the general supervision of the
Trustees (valuation of debt securities for which market quotations are not
readily available may be based upon current market prices of securities which
are comparable in coupon, rating and maturity or an appropriate matrix
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
NOTES TO FINANCIAL STATEMENTS February 28, 1999 (unaudited) continued
utilizing similar factors); (4) certain portfolio securities may be valued by an
outside pricing service approved by the Trustees. The pricing service may
utilize a matrix system incorporating security quality, maturity and coupon as
the evaluation model parameters, and/or research and evaluations by its staff,
including review of broker-dealer market price quotations, if available, in
determining what it believes is the fair valuation of the portfolio securities
valued by such pricing service; and (5) short-term debt securities having a
maturity date of more than sixty days at time of purchase are valued on a
mark-to-market basis until sixty days prior to maturity and thereafter at
amortized cost based on their value on the 61st day. Short-term debt securities
having a maturity date of sixty days or less at the time of purchase are valued
at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
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. 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.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
NOTES TO FINANCIAL STATEMENTS February 28, 1999 (unaudited) continued
F. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $71,000, of which
approximately $70,000 have been reimbursed. The balance was absorbed by the
Investment Manager. Such expenses have been deferred and are being amortized on
the straight-line method over a period not to exceed five years from the
commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.75% to the net assets of the Fund determined as of the close of
each business day.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A -- up
to 0.25% of the average daily net assets of Class A; (ii) Class B -- 1.0% of the
average daily net assets of Class B; and (iii) Class C -- up to 1.0% of the
average daily net assets of Class C. In the case of Class A shares, amounts paid
under the Plan are paid to the Distributor for services provided. In the case of
Class B and Class C shares, amounts paid under the Plan are paid to the
Distributor for (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
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
NOTES TO FINANCIAL STATEMENTS February 28, 1999 (unaudited) continued
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") and other selected
broker-dealers for their opportunity costs in advancing such amounts, which
compensation would be in the form of a carrying charge on any unreimbursed
expenses.
In the case of Class B Shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts, including
carrying charges, totaled $6,012,383 at February 28, 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 representative may be reimbursed in the subsequent
calendar year. For the six months ended February 28, 1999, the distribution fee
was accrued for Class A shares and Class C shares at the annual rate of 0.22%
and 0.33%, respectively.
The Distributor has informed the Fund that for the six months ended February 28,
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 $14, $174,376
and $519, respectively and received $5,287 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 six months ended February 28, 1999 aggregated
$48,144,699 and $54,168,664, respectively.
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
NOTES TO FINANCIAL STATEMENTS February 28, 1999 (unaudited) continued
For the six months ended February 28, 1999, the Fund incurred $16,850 in
brokerage commissions with DWR for portfolio transactions executed on behalf of
the Fund.
For the six months ended February 28, 1999, the Fund incurred brokerage
commissions of $10,900 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 February 28, 1999, the Fund had
transfer agent fees and expenses payable of approximately $9,100.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998
------------------------- -------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold........................................................ 38,679 $ 506,328 19,166 $ 222,348
Reinvestment of dividends and distributions................. -- -- 356 3,757
Redeemed.................................................... (29,194) (380,364) (13,425) (161,666)
---------- ------------ ---------- ------------
Net increase - Class A...................................... 9,485 125,964 6,097 64,439
---------- ------------ ---------- ------------
CLASS B SHARES
Sold........................................................ 1,342,112 17,210,749 4,268,628 48,133,147
Reinvestment of dividends and distributions................. -- -- 103,104 1,088,780
Redeemed.................................................... (1,824,401) (21,931,398) (2,239,034) (25,726,473)
---------- ------------ ---------- ------------
Net increase (decrease) - Class B........................... (482,289) (4,720,649) 2,132,698 23,495,454
---------- ------------ ---------- ------------
CLASS C SHARES
Sold........................................................ 26,750 331,470 85,684 979,787
Reinvestment of dividends and distributions................. -- -- 801 8,447
Redeemed.................................................... (9,676) (109,710) (18,464) (215,453)
---------- ------------ ---------- ------------
Net increase - Class C...................................... 17,074 221,760 68,021 772,781
---------- ------------ ---------- ------------
CLASS D SHARES
Sold........................................................ 14,014 160,200 293,504 3,408,442
Reinvestment of dividends and distributions................. -- -- 36 384
Redeemed.................................................... (262,036) (2,863,317) (41,879) (516,276)
---------- ------------ ---------- ------------
Net increase (decrease) - Class D........................... (248,022) (2,703,117) 251,661 2,892,550
---------- ------------ ---------- ------------
Net increase (decrease) in Fund............................. (703,752) $ (7,076,042) 2,458,477 $ 27,225,224
========== ============ ========== ============
</TABLE>
6. FEDERAL INCOME TAX STATUS
At August 31, 1998, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales.
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER MARKET LEADER 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 SIX FOR THE YEAR APRIL 28, 1997*
MONTHS ENDED ENDED THROUGH
FEBRUARY 28, 1999++ AUGUST 31, 1998++ AUGUST 31, 1997**
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(unaudited)
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 9.68 $10.81 $10.00
------ ------ ------
Income (loss) from investment operations:
Net investment income (loss)............................... (0.06) (0.09) 0.04
Net realized and unrealized gain (loss).................... 3.81 (0.95) 0.77
------ ------ ------
Total income (loss) from investment operations.............. 3.75 (1.04) 0.81
------ ------ ------
Less dividends and distributions from:
Net investment income...................................... -- (0.03) --
Net realized gain.......................................... -- (0.06) --
------ ------ ------
Total dividends and distributions........................... -- (0.09) --
------ ------ ------
Net asset value, end of period.............................. $13.43 $ 9.68 $10.81
====== ====== ======
TOTAL RETURN+............................................... 38.74 %(1) (9.65)% 8.10%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 2.02 %(2)(4) 2.06 %(4) 2.34%(2)(3)
Net investment income (loss)................................ (1.04)%(2)(4) (0.81)%(4) 1.21%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $155,473 $116,693 $107,298
Portfolio turnover rate..................................... 36 %(1) 68 % 22%(1)
</TABLE>
- ---------------------
* Commencement of operations.
** Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all of its expenses that were reimbursed or waived by
the Investment Manager, the annualized expense and net investment income
ratios would have been 2.47% and 1.08%, respectively.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
FEBRUARY 28, 1999 AUGUST 31, 1998 AUGUST 31, 1997
- -----------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 9.73 $10.82 $10.90
------ ------ ------
Income (loss) from investment operations:
Net investment income (loss)............................... (0.01) (0.01) 0.01
Net realized and unrealized gain (loss).................... 3.83 (0.96) (0.09)
------ ------ ------
Total income (loss) from investment operations.............. 3.82 (0.97) (0.08)
------ ------ ------
Less dividends and distributions from:
Net investment income...................................... -- (0.06) --
Net realized gain.......................................... -- (0.06) --
------ ------ ------
Total dividends and distributions........................... -- (0.12) --
------ ------ ------
Net asset value, end of period.............................. $13.55 $ 9.73 $10.82
====== ====== ======
TOTAL RETURN+............................................... 39.26 %(1) (8.98)% (0.73)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.24 %(2)(3) 1.31 %(3) 1.89 %(2)
Net investment income (loss)................................ (0.26)%(2)(3) (0.06)%(3) 1.30 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $573 $319 $288
Portfolio turnover rate..................................... 36 %(1) 68 % 22 %(1)
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 9.67 $10.81 $10.90
------ ------ ------
Income (loss) from investment operations:
Net investment income (loss)............................... (0.02) (0.10) 0.01
Net realized and unrealized gain (loss).................... 3.80 (0.94) (0.10)
------ ------ ------
Total income (loss) from investment operations.............. 3.78 (1.04) (0.09)
------ ------ ------
Less dividends and distributions from:
Net investment income...................................... -- (0.04) --
Net realized gain.......................................... -- (0.06) --
------ ------ ------
Total dividends and distributions........................... -- (0.10) --
------ ------ ------
Net asset value, end of period.............................. $13.45 $ 9.67 $10.81
====== ====== ======
TOTAL RETURN+............................................... 39.09 %(1) (9.63)% (0.83)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.35 %(2)(3) 2.06 %(3) 2.54 %(2)
Net investment income (loss)................................ (0.37)%(2)(3) (0.81)%(3) 0.61 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $1,534 $937 $313
Portfolio turnover rate..................................... 36 %(1) 68 % 22 %(1)
</TABLE>
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE> 15
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
FEBRUARY 28, 1999 AUGUST 31, 1998 AUGUST 31, 1997
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(unaudited)
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 9.74 $10.82 $10.90
------ ------ ------
Income (loss) from investment operations:
Net investment income...................................... -- -- 0.02
Net realized and unrealized gain (loss).................... 3.85 (0.95) (0.10)
------ ------ ------
Total income (loss) from investment operations.............. 3.85 (0.95) (0.08)
------ ------ ------
Less dividends and distributions from:
Net investment income...................................... -- (0.07) --
Net realized gain.......................................... -- (0.06) --
------ ------ ------
Total dividends and distributions........................... -- (0.13) --
------ ------ ------
Net asset value, end of period.............................. $13.59 $ 9.74 $10.82
====== ====== ======
TOTAL RETURN+............................................... 39.63 %(1) (8.81)% (0.73)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.02 %(2)(3) 1.06 %(3) 1.43 %(2)
Net investment income (loss)................................ (0.04)%(2)(3) 0.19 %(3) 1.81 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $62 $2,459 $10
Portfolio turnover rate..................................... 36 %(1) 68 % 22 %(1)
</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
15
<PAGE> 16
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
Guy G. Rutherfurd Jr.
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
The financial statements included herein have been taken from the records of the
Fund without examination by the independent accountants and accordingly they do
not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of the
Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
MORGAN STANLEY
DEAN WITTER
MARKET LEADER
TRUST
[MORGAN STANLEY GRAPHIC]
SEMIANNUAL REPORT
FEBRUARY 28, 1999
