<PAGE> 1
<TABLE>
<S> <C>
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST Two World Trade Center, New York, New York 10048
LETTER TO THE SHAREHOLDERS February 29, 2000
</TABLE>
DEAR SHAREHOLDER:
During the six-month period ended February 29, 2000, financial markets around
the world continued to experience volatility. After peaking in the middle of
July, stock prices pulled back in the fall on concerns that the U.S. economy
might be growing too fast. The issue was manifested in two Federal Reserve Board
moves, in June and August, that raised the federal funds rate a total of 50
basis points. These actions were followed by two additional moves that raised
rates by another 50 basis points by the end of February. All of this occurred in
an economic setting in which inflation remained low while the economy continued
to grow.
There was a divergence between the technology-dominated new-economy stocks,
which posted impressive gains, and old-economy stocks, which have been
languishing despite good fundamentals. Technology shares have been driven by
rapid sales and earnings growth combined with strong inflows of money into
growth-oriented mutual funds. Many popular technology indexes were up
dramatically during this period despite the Federal Reserve Board's attempts to
slow the booming economy.
PERFORMANCE
For the six-month period ending February 29, 2000, Morgan Stanley Dean Witter
Market Leader Trust's Class B shares posted a total return of 34.34 percent
compared to 4.10 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 posted
returns of 34.81 percent, 34.34 percent and 35.03 percent, respectively. The
performance of the Fund's four share classes varies because of differing
expenses. The total return figures assume the reinvestment of all distributions
but do not reflect the deduction of any applicable sales charges.
<PAGE> 2
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
LETTER TO THE SHAREHOLDERS February 29, 2000, continued
The Fund's strong performance over the past six months can be attributed
primarily to its overweighting in technology and communications stocks. During
this period many of the Fund's largest holdings were among the market's best
performers, including JDS Uniphase, QualComm, Corning, Comverse Technology and
Nokia.
PORTFOLIO STRATEGY
The Fund continues to focus on fast-growing companies that are recognized as
leaders in their respective industries and that we believe have the ability to
expand their businesses both domestically and abroad. In addition, the Fund
continues to place a heavy emphasis on such high-growth global sectors as
technology and communications. These two sectors accounted for 48.2 percent of
the portfolio at the end of February, versus 41.2 percent for the S&P 500. The
Fund is also overweighted in such economically sensitive industries as basic
materials and energy. Strong economic growth globally has created a much better
operating environment for many of these companies. We believe that this trend,
combined with depressed valuations, makes these sectors attractive.
In this reporting period, the financial services sector has been plagued by
higher short-term interest rates and a less accommodative monetary policy.
Although many financial services companies have maintained their operating
performance in the face of rising rates, negative sentiment has pushed the
valuations of these stocks downward. Because of this trend, this sector is
underweighted relative to the S&P 500.
The health-care sector also remained under pressure during the period under
review, particularly as a result of political campaigning raising concerns about
free prescription drug benefits for the elderly. If enacted, such legislation
could negatively affect pharmaceutical companies. Because of these concerns, the
Fund is slightly underweighted in health care. Instead, the Fund has focused its
investments on biotechnology companies working in genomics.
LOOKING AHEAD
We believe the global economic recovery will continue in the months ahead.
However, continued strength in the U.S. economy could lead the Federal Reserve
to raise interest rates. Rising rates could pressure valuations in the first
half of 2000. Strong corporate earnings, which have helped the stock market
overcome past Fed rate hikes, are expected to improve, with increasing
efficiencies attributable to technology. In addition, we expect that the
valuation gap between new-economy stocks and value-oriented, old-economy issues
will begin to narrow. Going forward, the Fund will continue to focus
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
LETTER TO THE SHAREHOLDERS February 29, 2000, continued
its investments on leading U.S. and global companies that we believe have the
ability to increase revenues, earnings and market share under either favorable
or unfavorable market conditions.
We appreciate your ongoing support of Morgan Stanley Dean Witter Market Leader
Trust and look forward to continuing to serve your investment needs.
<TABLE>
<S> <C>
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO /s/ MITCHELL M. MERIN
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
</TABLE>
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
FUND PERFORMANCE February 29, 2000
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A*
- ----------------------------------------------
<S> <C> <C>
PERIOD ENDED 2/29/00
- -------------------------
Since Inception (7/28/97) 28.49%(1) 25.84%(2)
1 Year 52.13%(1) 44.14%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C+
- ----------------------------------------------
<S> <C> <C>
PERIOD ENDED 2/29/00
- -------------------------
Since Inception (7/28/97) 27.67%(1) 27.67%(2)
1 Year 51.02%(1) 50.02%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS B**
- ----------------------------------------------
<S> <C> <C>
PERIOD ENDED 2/29/00
- -------------------------
Since Inception (4/28/97) 28.67%(1) 28.00%(2)
1 Year 50.94%(1) 45.94%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS D++
- ----------------------------------------------
<S> <C> <C>
PERIOD ENDED 2/29/00
- -------------------------
Since Inception (7/28/97) 28.87%(1)
1 Year 52.60%(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS.
- ---------------------
<TABLE>
<S> <C>
(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.
* The maximum front-end sales charge for Class A is 5.25%.
** The maximum contingent deferred sales charge (CDSC) for
Class B is 5.0%. The CDSC declines to 0% after six years.
+ The maximum CDSC for Class C shares is 1% for shares
redeemed within one year of purchase.
++ Class D shares have no sales charge.
</TABLE>
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
PORTFOLIO OF INVESTMENTS February 29, 2000 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (94.5%)
BASIC MATERIALS (4.9%)
Forest Products (1.4%)
113,000 Weyerhaeuser Co. .............. $ 5,798,312
------------
Other Metals/Minerals (0.7%)
66,000 Phelps Dodge Corp. ............ 3,110,250
------------
Paper (0.5%)
40,000 Champion International
Corp. ........................ 2,070,000
------------
Specialty Steels (1.2%)
100,000 Nucor Corp. ................... 4,968,750
------------
Steel/Iron Ore (1.1%)
215,000 USX-U.S. Steel Group........... 4,703,125
------------
TOTAL BASIC MATERIALS.......... 20,650,437
------------
CAPITAL GOODS (5.9%)
Aerospace (0.8%)
64,000 United Technologies Corp. ..... 3,260,000
------------
Building Products (1.2%)
90,000 Masco Corp. ................... 1,608,750
165,100 Royal Group Technologies Ltd.*
(Canada)...................... 3,415,506
------------
5,024,256
------------
Construction/Agricultural
Equipment/Trucks (0.9%)
45,000 Caterpillar, Inc. ............. 1,577,812
260,000 JLG Industries, Inc. .......... 2,340,000
------------
3,917,812
------------
Diversified Manufacturing (1.2%)
135,000 Tyco International Ltd.
(Bermuda)..................... 5,121,562
------------
Fluid Controls (0.8%)
120,000 Roper Industries, Inc. ........ 3,270,000
------------
Metals Fabrications (0.3%)
180,000 Atchison Casting Corp.*........ 1,485,000
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------
<C> <S> <C>
Military/Gov't/Technical (0.7%)
48,000 PerkinElmer, Inc. ............. $ 3,102,000
------------
TOTAL CAPITAL GOODS............ 25,180,630
------------
ENERGY (7.7%)
Contract Drilling (1.1%)
125,000 Noble Drilling Corp.*.......... 4,500,000
------------
Electric Utilities (0.4%)
45,000 Montana Power Co. ............. 1,771,875
------------
Integrated Oil Companies (2.4%)
45,000 Chevron Corp. ................. 3,360,938
180,000 Conoco, Inc. (Class B)......... 3,543,750
127,800 Unocal Corp. .................. 3,418,650
------------
10,323,338
------------
Oil & Gas Production (2.1%)
123,500 Apache Corp. .................. 4,507,750
115,300 Devon Energy Corp.*............ 4,294,925
------------
8,802,675
------------
Oilfield Services/Equipment (1.7%)
121,000 Halliburton Co. ............... 4,620,688
35,000 Schlumberger Ltd.
(Netherlands)................. 2,585,625
------------
7,206,313
------------
TOTAL ENERGY................... 32,604,201
------------
ENTERTAINMENT & LEISURE (3.3%)
Broadcasting (0.7%)
45,000 Clear Channel Communications,
Inc.*......................... 2,998,125
------------
Cable Television (0.6%)
14,000 United Pan-Europe
Communications NV (ADR)*
(Netherlands)................. 2,775,500
------------
Media Conglomerates (1.1%)
54,500 Time Warner Inc. .............. 4,659,750
------------
Restaurants (0.9%)
115,000 McDonald's Corp. .............. 3,629,688
------------
TOTAL ENTERTAINMENT &
LEISURE........................ 14,063,063
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
PORTFOLIO OF INVESTMENTS February 29, 2000 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES (6.9%)
Diversified Financial Services (1.9%)
87,050 Citigroup, Inc. ............... $ 4,499,397
55,000 Providian Financial Corp. ..... 3,564,687
------------
8,064,084
------------
Finance Companies (1.5%)
116,000 Fannie Mae..................... 6,148,000
------------
Investment Bankers/Brokers/Services (0.9%)
53,300 Lehman Brothers Holdings,
Inc. ......................... 3,864,250
------------
Major Banks (1.2%)
62,000 Chase Manhattan Corp. (The).... 4,936,750
------------
Multi-Line Insurance (1.4%)
66,925 American International Group,
Inc. ......................... 5,918,680
------------
TOTAL FINANCIAL SERVICES....... 28,931,764
------------
HEALTHCARE (8.0%)
Biotechnology (1.8%)
85,000 Amgen Inc.*.................... 5,790,625
7,000 Millennium Pharmaceuticals,
Inc.*......................... 1,815,625
------------
7,606,250
------------
Hospital/Nursing Management (1.6%)
165,000 Columbia/HCA Healthcare
Corp. ........................ 3,186,563
90,000 Universal Health Services, Inc.
(Class B)*.................... 3,498,750
------------
6,685,313
------------
Major Pharmaceuticals (4.1%)
113,000 American Home Products
Corp. ........................ 4,915,500
75,000 Johnson & Johnson.............. 5,381,250
81,000 Merck & Co., Inc. ............. 4,986,563
62,000 Schering-Plough Corp. ......... 2,162,250
------------
17,445,563
------------
Services to the Health Industry (0.5%)
100,000 IMS Health Inc. ............... 2,012,500
------------
TOTAL HEALTHCARE............... 33,749,626
------------
MULTI-SECTOR COMPANIES (3.8%)
Biotechnology (0.7%)
14,000 Human Genome Sciences, Inc.*... 3,052,000
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------
<C> <S> <C>
Internet Services (0.7%)
25,000 China.com Corp. (Class A)*
(Hong Kong)................... $ 3,060,938
------------
Medical Specialties (1.1%)
44,000 PE Corporation-PE Biosystems
Group......................... 4,642,000
------------
Multi-Sector Companies (1.3%)
40,300 General Electric Co. .......... 5,327,156
------------
TOTAL MULTI-SECTOR COMPANIES... 16,082,094
------------
RETAIL (3.4%)
Building Materials/DIY Chains (0.4%)
32,250 Home Depot, Inc. (The)......... 1,864,453
------------
Clothing/Shoe/Accessory Stores (0.8%)
225,000 TJX Companies, Inc. ........... 3,585,937
------------
Discount Chains (2.2%)
208,300 Consolidated Stores Corp.*..... 2,343,375
51,200 Costco Wholesale Corp.*........ 2,547,200
90,000 Wal-Mart Stores, Inc. ......... 4,381,875
------------
9,272,450
------------
TOTAL RETAIL................... 14,722,840
------------
TECHNOLOGY (23.9%)
Computer Communications (4.5%)
106,100 Cisco Systems, Inc.*........... 14,018,462
16,500 Redback Networks, Inc.*........ 4,925,250
------------
18,943,712
------------
Computer Software (4.1%)
40,000 BMC Software, Inc.*............ 1,840,000
90,000 Microsoft Corp.*............... 8,038,125
99,400 Oracle Corp.*.................. 7,374,237
------------
17,252,362
------------
Diversified Electronic Products (2.4%)
38,000 JDS Uniphase Corp.*............ 10,015,375
------------
E.D.P. Peripherals (2.5%)
89,000 EMC Corp.*..................... 10,591,000
------------
E.D.P. Services (0.8%)
75,000 First Data Corp. .............. 3,375,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
PORTFOLIO OF INVESTMENTS February 29, 2000 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------
<C> <S> <C>
Electronic Data Processing (1.0%)
42,500 International Business
Machines Corp. ............... $ 4,335,000
------------
Internet Services (3.5%)
40,000 America Online, Inc.*.......... 2,360,000
15,000 Art Technology Group, Inc.*.... 2,167,500
32,000 Digex, Inc.*................... 5,186,000
27,000 Satyam Infoway Ltd. (ADR)*
(India)....................... 2,544,750
20,000 Terra Networks, S.A. (ADR)
(Spain)....................... 2,592,500
------------
14,850,750
------------
Semiconductors (5.1%)
63,000 Intel Corp. ................... 7,119,000
140,000 Vitesse Semiconductor Corp.*... 14,533,750
------------
21,652,750
------------
TOTAL TECHNOLOGY............... 101,015,949
------------
TELECOMMUNICATIONS (24.3%)
Cellular Telephone (4.1%)
76,000 Nextel Communications, Inc.
(Class A)*.................... 10,393,000
50,200 Voicestream Wireless Corp.*.... 6,679,737
------------
17,072,737
------------
Major U.S. Telecommunications (2.7%)
64,500 AT&T Corp. .................... 3,188,719
65,000 Bell Atlantic Corp. ........... 3,180,938
111,800 MCI WorldCom, Inc.*............ 4,989,075
------------
11,358,732
------------
Other Telecommunications (1.2%)
10,000 COLT Telecom Group PLC
(ADR) (United Kingdom)*....... 2,317,500
61,800 Global Crossing Ltd.
(Bermuda)*.................... 2,881,425
------------
5,198,925
------------
Telecommunication Equipment (16.3%)
55,100 CIENA Corp.*................... 8,798,781
42,000 Comverse Technology, Inc.*..... 8,245,125
78,000 Corning Inc.................... 14,664,000
23,500 Lucent Technologies Inc........ 1,398,250
63,000 Motorola, Inc.................. 10,741,500
73,000 Nokia Corp. (ADR) (Finland).... 14,476,813
93,000 Nortel Networks Corp.
(Canada)...................... 10,369,500
------------
68,693,969
------------
TOTAL
TELECOMMUNICATIONS............. 102,324,363
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------
<C> <S> <C>
TRANSPORTATION (2.4%)
Airlines (1.8%)
85,000 Delta Air Lines, Inc. ......... $ 3,878,125
200,000 Southwest Airlines Co. ........ 3,687,500
------------
7,565,625
------------
Railroads (0.6%)
100,000 Canadian National Railway
Co. .......................... 2,356,250
------------
TOTAL TRANSPORTATION........... 9,921,875
------------
TOTAL COMMON STOCKS
(Identified Cost
$288,013,022).................. 399,246,842
------------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<C> <S> <C>
SHORT-TERM INVESTMENT (a) (7.4%)
U.S. GOVERNMENT AGENCY
$31,100 Federal Home Loan Mortgage Corp.
5.72% due 03/01/00
(Amortized Cost $31,100,000)... 31,100,000
------------
TOTAL INVESTMENTS
(Identified Cost $319,113,022) (b).. 101.9% 430,346,842
LIABILITIES IN EXCESS OF
OTHER ASSETS........................ (1.9) (8,155,306)
----- ------------
NET ASSETS.......................... 100.0% $422,191,536
===== ============
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Purchased on a discount basis. The interest rate shown has 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 $129,636,237 and the
aggregate gross unrealized depreciation is $18,402,417, resulting in net
unrealized appreciation of $111,233,820.
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
February 29, 2000 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $319,113,022)........... $430,346,842
Cash...................................... 30,145
Receivable for:
Investments sold...................... 4,470,851
Shares of beneficial interest sold.... 2,465,109
Dividends............................. 203,590
Deferred organizational expenses.......... 28,341
Prepaid expenses and other assets......... 129,446
------------
TOTAL ASSETS.......................... $437,674,324
------------
LIABILITIES:
Payable for:
Investments purchased................. 14,487,168
Shares of beneficial interest
repurchased.......................... 375,658
Plan of distribution fee.............. 301,153
Investment management fee............. 232,142
Accrued expenses and other payables....... 86,667
------------
TOTAL LIABILITIES..................... 15,482,788
------------
NET ASSETS............................ $422,191,536
============
COMPOSITION OF NET ASSETS:
Paid-in-capital........................... $293,123,941
Net unrealized appreciation............... 111,233,820
Net investment loss....................... (1,061,155)
Accumulated undistributed net realized
gain..................................... 18,894,930
------------
NET ASSETS............................ $422,191,536
============
CLASS A SHARES:
Net Assets................................ $5,798,854
Shares Outstanding (unlimited authorized,
$.01 par value).......................... 294,617
NET ASSET VALUE PER SHARE............. $19.68
============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net
asset value)......................... $20.77
============
CLASS B SHARES:
Net Assets................................ $397,293,603
Shares Outstanding (unlimited authorized,
$.01 par value).......................... 20,541,680
NET ASSET VALUE PER SHARE............. $19.34
============
CLASS C SHARES:
Net Assets................................ $10,969,746
Shares Outstanding (unlimited authorized,
$.01 par value).......................... 566,111
NET ASSET VALUE PER SHARE............. $19.38
============
CLASS D SHARES:
Net Assets................................ $8,129,333
Shares Outstanding (unlimited authorized,
$.01 par value).......................... 410,186
NET ASSET VALUE PER SHARE............. $19.82
============
</TABLE>
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended February 29, 2000 (unaudited)
NET INVESTMENT LOSS:
INCOME
Dividends (net of $4,082 foreign
withholding tax)......................... $1,064,410
Interest.................................. 661,187
----------
TOTAL INCOME.......................... 1,725,597
----------
EXPENSES
Plan of distribution fee (Class A
shares).................................. 3,288
Plan of distribution fee (Class B
shares).................................. 1,375,971
Plan of distribution fee (Class C
shares).................................. 30,484
Investment management fee................. 1,077,400
Transfer agent fees and expenses.......... 129,310
Registration fees......................... 79,565
Professional fees......................... 42,777
Shareholder reports and notices........... 24,643
Custodian fees............................ 7,602
Organizational expenses................... 6,974
Trustees' fees and expenses............... 6,761
Other..................................... 1,977
----------
TOTAL EXPENSES........................ 2,786,752
----------
NET INVESTMENT LOSS................... (1,061,155)
----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain......................... 24,550,807
Net change in unrealized appreciation..... 62,708,893
----------
NET GAIN.............................. 87,259,700
----------
NET INCREASE.............................. $86,198,545
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
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 29, 2000 AUGUST 31, 1999
- ------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss.................................. $(1,061,155) $(1,447,953)
Net realized gain.................................... 24,550,807 8,339,076
Net change in unrealized appreciation................ 62,708,893 57,237,300
----------- -----------
NET INCREASE..................................... 86,198,545 64,128,423
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN:
Class A shares....................................... (115,703) --
Class B shares....................................... (13,296,842) --
Class C shares....................................... (299,828) --
Class D shares....................................... (109,770) --
----------- -----------
TOTAL DISTRIBUTIONS.............................. (13,822,143) --
----------- -----------
Net increase from transactions in shares of
beneficial interest................................. 156,032,645 9,246,620
----------- -----------
NET INCREASE..................................... 228,409,047 73,375,043
NET ASSETS:
Beginning of period.................................. 193,782,489 120,407,446
----------- -----------
END OF PERIOD
(Including a net investment loss of $1,061,155
and $0, respectively)............................ $422,191,536 $193,782,489
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
NOTES TO FINANCIAL STATEMENTS February 29, 2000 (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
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
NOTES TO FINANCIAL STATEMENTS February 29, 2000 (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.
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
NOTES TO FINANCIAL STATEMENTS February 29, 2000 (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
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
NOTES TO FINANCIAL STATEMENTS February 29, 2000 (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"), 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 in 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 $8,223,491 at February 29, 2000.
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 six months ended February 29, 2000, 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 six months ended February 29,
2000, it received contingent deferred sales charges from certain redemptions of
the Fund's Class A shares, Class B shares and Class C shares of $12, $182,010
and $1,526, respectively and received $32,038 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.
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
NOTES TO FINANCIAL STATEMENTS February 29, 2000 (unaudited) continued
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 29, 2000 aggregated
$235,820,498 and $105,376,326, respectively.
For the six months ended February 29, 2000, the Fund incurred $31,729 in
brokerage commissions with DWR for portfolio transactions executed on behalf of
the Fund. At February 29, 2000, the Fund's payables for investments purchased
included unsettled trades with DWR of $2,518,913.
For the six months ended February 29, 2000, the Fund incurred brokerage
commissions of $21,988 with Morgan Stanley & Co., Inc., an affiliate of the
Investment Manager and Distributor, for portfolio transactions executed on
behalf of the Fund. At February 29, 2000, the Fund's payable for investments
purchased included unsettled trades with Morgan Stanley & Co. Inc., of
$2,945,520.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At February 29, 2000, the Fund had
transfer agent fees and expenses payable of approximately $3,600.
5. FEDERAL INCOME TAX STATUS
At August 31, 1999, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales.
14
<PAGE> 15
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
NOTES TO FINANCIAL STATEMENTS February 29, 2000 (unaudited) continued
6. 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 29, 2000 AUGUST 31, 1999
------------------------- -------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold........................................................ 291,069 $ 5,180,604 83,365 $ 1,181,215
Reinvestment of distributions............................... 5,607 97,681 -- --
Redeemed.................................................... (65,591) (1,189,718) (52,594) (727,278)
---------- ------------ ---------- ------------
Net increase - Class A...................................... 231,085 4,088,567 30,771 453,937
---------- ------------ ---------- ------------
CLASS B SHARES
Sold........................................................ 9,956,695 172,730,989 4,845,409 69,690,625
Reinvestment of distributions............................... 699,938 12,003,937 -- --
Redeemed.................................................... (2,672,703) (46,161,240) (4,348,003) (59,846,856)
---------- ------------ ---------- ------------
Net increase - Class B...................................... 7,983,930 138,573,686 497,406 9,843,769
---------- ------------ ---------- ------------
CLASS C SHARES
Sold........................................................ 411,957 7,168,283 112,429 1,624,859
Reinvestment of distributions............................... 16,363 281,123 -- --
Redeemed.................................................... (42,318) (732,451) (29,274) (404,672)
---------- ------------ ---------- ------------
Net increase - Class C...................................... 386,002 6,716,955 83,155 1,220,187
---------- ------------ ---------- ------------
CLASS D SHARES
Sold........................................................ 797,546 14,455,149 115,422 1,690,861
Reinvestment of distributions............................... 1,786 31,317 -- --
Redeemed.................................................... (425,201) (7,833,029) (331,947) (3,962,134)
---------- ------------ ---------- ------------
Net increase (decrease) - Class D........................... 374,131 6,653,437 (216,525) (2,271,273)
---------- ------------ ---------- ------------
Net increase in Fund........................................ 8,975,148 $156,032,645 394,807 $ 9,246,620
========== ============ ========== ============
</TABLE>
15
<PAGE> 16
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 FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
FEBRUARY 29, 2000 AUGUST 31, 1999 AUGUST 31, 1998 AUGUST 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period.................... $15.29 $9.73 $10.82 $10.90
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (loss)........................... -- (0.05) (0.01) 0.01
Net realized and unrealized gain (loss)................ 5.22 5.61 (0.96) (0.09)
------ ------ ------ ------
Total income (loss) from investment operations.......... 5.22 5.56 (0.97) (0.08)
------ ------ ------ ------
Less dividends and distributions from:
Net investment income.................................. -- -- (0.06) --
Net realized gain...................................... (0.83) -- (0.06) --
------ ------ ------ ------
Total dividends and distributions....................... (0.83) -- (0.12) --
------ ------ ------ ------
Net asset value, end of period.......................... $19.68 $15.29 $9.73 $10.82
====== ====== ====== ======
TOTAL RETURN+........................................... 34.81%(1) 57.14 % (8.98)% (0.73)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................ 1.20%(2)(3) 1.23 %(3) 1.31 %(3) 1.89 %(2)
Net investment income (loss)............................ --%(2)(3) (0.14)%(3) (0.06)%(3) 1.30 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands................. $5,799 $971 $319 $288
Portfolio turnover rate................................. 39%(1) 83 % 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
16
<PAGE> 17
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR FOR THE YEAR APRIL 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
FEBRUARY 29, 2000++ AUGUST 31, 1999++ AUGUST 31, 1998++ AUGUST 31, 1997**
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period........... $15.09 $9.68 $10.81 $10.00
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (loss).................. (0.07) (0.12) (0.09) 0.04
Net realized and unrealized gain (loss)....... 5.15 5.53 (0.95) 0.77
------ ------ ------ ------
Total income (loss) from investment
operations.................................... 5.08 5.41 (1.04) 0.81
------ ------ ------ ------
Less dividends and distributions from:
Net investment income......................... -- -- (0.03) --
Net realized gain............................. (0.83) -- (0.06) --
------ ------ ------ ------
Total dividends and distributions.............. (0.83) -- (0.09) --
------ ------ ------ ------
Net asset value, end of period................. $19.34 $15.09 $9.68 $10.81
====== ====== ====== ======
TOTAL RETURN+.................................. 34.34 %(1) 55.89 % (9.65)% 8.10%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses....................................... 1.96 %(2)(4) 1.99 %(4) 2.06 %(4) 2.34%(2)(3)
Net investment income (loss)................... (0.76)%(2)(4) (0.90)%(4) (0.81)%(4) 1.21%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........ $397,294 $189,534 $116,693 $107,298
Portfolio turnover rate........................ 39 %(1) 83 % 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 waved 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
17
<PAGE> 18
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
FEBRUARY 29, 2000 AUGUST 31, 1999 AUGUST 31, 1998 AUGUST 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period.................... $15.12 $9.67 $10.81 $10.90
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (loss)........................... (0.07) (0.09) (0.10) 0.01
Net realized and unrealized gain (loss)................ 5.16 5.54 (0.94) (0.10)
------ ------ ------ ------
Total income (loss) from investment operations.......... 5.09 5.45 (1.04) (0.09)
------ ------ ------ ------
Less dividends and distributions from:
Net investment income.................................. -- -- (0.04) --
Net realized gain...................................... (0.83) -- (0.06) --
------ ------ ------ ------
Total dividends and distributions....................... (0.83) -- (0.10) --
------ ------ ------ ------
Net asset value, end of period.......................... $19.38 $15.12 $9.67 $10.81
====== ====== ====== ======
TOTAL RETURN+........................................... 34.34 %(1) 56.36 % (9.63)% (0.83)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................ 1.96 %(2)(3) 1.75 %(3) 2.06 %(3) 2.54 %(2)
Net investment income (loss)............................ (0.76)%(2)(3) (0.66)%(3) (0.81)%(3) 0.61 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands................. $10,970 $2,723 $937 $313
Portfolio turnover rate................................. 39 %(1) 83 % 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
18
<PAGE> 19
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
FEBRUARY 29, 2000 AUGUST 31, 1999 AUGUST 31, 1998 AUGUST 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period.................... $15.37 $9.74 $10.82 $10.90
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income.................................. 0.02 -- -- 0.02
Net realized and unrealized gain (loss)................ 5.26 5.63 (0.95) (0.10)
------ ------ ------ ------
Total income (loss)from investment operations........... 5.28 5.63 (0.95) (0.08)
------ ------ ------ ------
Less dividends and distributions from:
Net investment income.................................. -- -- (0.07) --
Net realized gain...................................... (0.83) -- (0.06) --
------ ------ ------ ------
Total dividends and distributions....................... (0.83) 15.37 (0.13) --
------ ------ ------ ------
Net asset value, end of period.......................... $19.82 $30.74 $9.74 $10.82
====== ====== ====== ======
TOTAL RETURN+........................................... 35.03%(1) 57.80% (8.81)% (0.73)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................ 0.96%(2)(3) 0.99%(3) 1.06 %(3) 1.43 %(2)
Net investment income................................... 0.24%(2)(3) 0.10%(3) 0.19 %(3) 1.81 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands................. $8,129 $554 $2,459 $10
Portfolio turnover rate................................. 39%(1) 83% 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
19
<PAGE> 20
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
Guy G. Rutherford, Jr.
Vice President
Aaron Clark
Assistant 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. Read the
prospectus carefully before investing.
MORGAN STANLEY
DEAN WITTER
MARKET LEADER
TRUST
Semiannual Report
February 29, 2000
