<PAGE>
Two World Trade Center, New York, New York 10048
Morgan Stanley Dean Witter Market Leader Trust
Letter to the Shareholders August 31, 2000
DEAR SHAREHOLDER:
During the 12-month period ended August 31, 2000, the U.S. equity markets
reached new heights amid episodes of increased volatility. Technology stocks,
driven by rapid sales and earnings growth combined with strong inflows of money
into growth-stock mutual funds, dominated the U.S. equity market's performance.
However, technology issues registered most of their positive returns in the
first six months; for the latter half of the period, the major technology-stock
averages were actually down. From the closing months of 1999 through March
2000, new-economy stocks reached unsustainably high valuation levels at the
expense of old-economy issues, which languished near all-time low valuation
levels. This historically large valuation gap has since begun to revert to more
normal levels.
PERFORMANCE
For the 12-month period ended August 31, 2000, Morgan Stanley Dean Witter
Market Leader Trust's Class B shares posted a total return of 46.35 percent,
compared to 16.31 percent for the S&P 500. For the same period, the Fund's
Class A, C and D shares posted returns of 47.49 percent, 46.33 percent and
47.84 percent, respectively. Performance of the Fund's four classes varies
because each has different expenses. The total return figures given assume the
reinvestment of all distributions but do not reflect the deduction of any
applicable sales charges. The accompanying chart compares the Fund's
performance to that of the S&P 500.
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 different types of
economic environments. The Fund also tries to maintain a balanced approach by
investing some of its assets in companies the Fund's management believes are
undervalued.
<PAGE>
Morgan Stanley Dean Witter Market Leader Trust
Letter to the Shareholders August 31, 2000, continued
During the fiscal year, the Fund placed a heavy emphasis on such high-growth
sectors as technology and communications. The Fund has also focused on some
economically sensitive industries like basic materials and energy. Strong
economic growth throughout the world has created a much better operating
environment for many of these companies, which combined with their depressed
valuations makes them very attractive investment opportunities.
We recently increased the financial-services segment in the Fund's portfolio in
anticipation of the Fed possibly discontinuing its restrictive monetary policy
and adopting a neutral or even a loosening bias. The health-care sector has
remained under pressure, notably from the presidential candidates proposing new
prescription drug benefits for the elderly, which could negatively affect
pharmaceutical companies. The Fund has been slightly underweighted in health
care, focusing its investments in that area on biotechnology companies and
HMOs.
LOOKING AHEAD
We believe that the valuation gap between new-economy and old-economy stocks
will gradually revert closer to the mean. If the Fed's tightening has indeed
run its course and the consensus begins thinking more about Fed rate cuts going
forward, such a backdrop would likely be very favorable for stocks in general
and financial stocks in particular. The Fund will continue to focus 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 conditions.
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 /s/ Mitchell M. Merin
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
2
<PAGE>
Morgan Stanley Dean Witter Market Leader Trust
Fund Performance August 31, 2000
GROWTH OF $10,000 CLASS B
Date Total S&P 500
---- ----- -------
April 28, 1997 $10,000 $10,000
August 31, 1997 $10,810 $11,723
August 31, 1998 $9,767 $12,673
August 31, 1999 $15,226 $17,718
August 31, 2000 $22,084 (3) $20,608
-- Fund -- S&P 500 (4)
Past performance is not predictive of future returns. Investment return and
principal value will fluctuate. When you sell fund shares, they may be worth
less than their original cost. Performance for Class A, Class C, and Class D
shares will vary from the performance of Class B shares shown above due to
differences in sales charges and expenses.
Average Annual Total Returns
--------------------------------------------------------------------------------
Class A Shares*
---------------------------------------------------------------
Period Ended 8/31/00
---------------------------
1 Year 47.49%(1) 39.74%(2)
Since Inception (7/28/97) 26.98%(1) 24.79%(2)
Class B Shares**
---------------------------------------------------------------
Period Ended 8/31/00
---------------------------
1 Year 46.35%(1) 41.35%(2)
Since Inception (4/28/97) 27.09%(1) 26.74%(2)
Class C Shares+
---------------------------------------------------------------
Period Ended 8/31/00
---------------------------
1 Year 46.33%(1) 45.33%(2)
Since Inception (7/28/97) 26.13%(1) 26.13%(2)
Class D Shares++
---------------------------------------------------------------
Period Ended 8/31/00
---------------------------
1 Year 47.84%(1)
Since Inception (7/28/97) 27.33%(1)
---------------
(1) Figure shown assumes reinvestment of all distributions and does not
reflect the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction
of the maximum applicable sales charge. See the Fund's current prospectus
for complete details on fees and sales charges.
(3) Closing value after the deduction of a 2% contingent deferred sales
charge (CDSC), assuming a complete redemption on August 31, 2000.
(4) The Standard and Poor's 500 Index (S&P 500(Reg. TM)) is a broad-based
index, the performance of which is based on the performance of 500
widely-held common stocks chosen for market size, liquidity and industry
group representation. The Index does not include any expenses, fees or
charges. The Index is unmanaged and should not be considered an
investment.
* 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 contingent deferred sales charge for Class C shares is 1% for
shares redeemed within one year of purchase.
++ Class D shares have no sales charge.
3
<PAGE>
Morgan Stanley Dean Witter Market Leader Trust
Portfolio of Investments August 31, 2000
NUMBER OF
SHARES VALUE
---------- ------------
COMMON STOCKS (92.9%)
BASIC MATERIALS (3.2%)
Aluminum (1.2%)
229,000 Alcoa, Inc. ............................. $ 7,614,250
------------
Forest Products (0.4%)
59,300 Weyerhaeuser Co. ........................ 2,746,331
------------
Precious Metals (1.0%)
350,000 Newmont Mining Corp. .................... 6,496,875
------------
Steel (0.6%)
110,000 Nucor Corp. ............................. 4,042,500
------------
TOTAL BASIC MATERIALS ................... 20,899,956
------------
CAPITAL GOODS (6.7%)
Building Products (0.9%)
273,100 Royal Group Technologies Ltd.* (Canada).. 5,888,719
------------
Industrial Conglomerates (4.4%)
170,900 General Electric Co. .................... 10,029,694
247,000 Tyco International Ltd. (Bermuda) 14,079,000
71,000 United Technologies Corp. ............... 4,433,062
------------
28,541,756
------------
Industrial Machinery (1.3%)
255,800 Roper Industries, Inc. .................. 8,281,525
------------
Metal Fabrications (0.1%)
180,000 Atchison Casting Corp.* ................. 1,001,250
------------
TOTAL CAPITAL GOODS ..................... 43,713,250
------------
ENERGY (6.6%)
Contract Drilling (0.6%)
80,000 Noble Drilling Corp.* ................... 3,880,000
------------
Integrated Oil (2.5%)
70,000 Chevron Corp. ........................... 5,915,000
280,000 Conoco, Inc. (Class B) .................. 7,315,000
102,800 Unocal Corp. ............................ 3,430,950
------------
16,660,950
------------
Oil & Gas Production (2.1%)
125,000 Apache Corp. ............................ 7,875,000
97,000 Devon Energy Corp. ...................... 5,680,562
------------
13,555,562
------------
Oilfield Services/Equipment (1.4%)
121,000 Halliburton Co. ......................... 6,413,000
35,000 Schlumberger Ltd. (Netherlands) ......... 2,985,937
------------
9,398,937
------------
TOTAL ENERGY ............................ 43,495,449
------------
ENTERTAINMENT & LEISURE (5.2%)
Broadcasting (1.3%)
120,000 Clear Channel Communications, Inc.* ..... $ 8,685,000
------------
Cable/Satellite TV (1.4%)
249,100 Comcast Corp. (Class A Special)* ........ 9,278,975
------------
Recreational Products (1.3%)
140,100 Eastman Kodak Co. ....................... 8,721,225
------------
Restaurants (1.2%)
257,700 McDonald's Corp. ........................ 7,698,788
------------
TOTAL ENTERTAINMENT & LEISURE ........... 34,383,988
------------
FINANCIAL SERVICES (13.5%)
Finance/Rental/Leasing (3.8%)
186,000 Fannie Mae .............................. 9,997,500
130,000 Providian Financial Corp. ............... 14,941,875
------------
24,939,375
------------
Financial Conglomerates (1.4%)
162,667 Citigroup, Inc. ......................... 9,495,667
------------
Investment Banks/Brokers (0.9%)
40,000 Lehman Brothers Holdings, Inc. .......... 5,800,000
------------
Major Banks (4.0%)
272,000 Chase Manhattan Corp. (The) ............. 15,198,000
252,000 FleetBoston Financial Corp. ............. 10,757,250
------------
25,955,250
------------
Multi-Line Insurance (1.4%)
99,500 American International Group, Inc. ...... 8,867,937
------------
Savings Banks (2.0%)
372,000 Washington Mutual, Inc. ................. 13,020,000
------------
TOTAL FINANCIAL SERVICES ................ 88,078,229
------------
HEALTHCARE (8.7%)
Biotechnology (0.6%)
55,000 Amgen Inc.* ............................. 4,169,687
------------
Hospital/Nursing Management (1.3%)
245,000 HCA - The Healthcare Corp. .............. 8,452,500
------------
Managed Health Care (1.1%)
75,000 UnitedHealth Group Inc. ................. 7,087,500
------------
Medical Specialties (0.7%)
160,000 Becton, Dickinson & Co. ................. 4,820,000
------------
Pharmaceuticals: Major (5.0%)
113,000 American Home Products Corp. ............ 6,123,188
80,500 Johnson & Johnson ....................... 7,400,969
89,000 Lilly (Eli) & Co. ....................... 6,497,000
See Notes to Financial Statements
4
<PAGE>
Morgan Stanley Dean Witter Market Leader Trust
Portfolio of Investments August 31, 2000, continued
NUMBER OF
SHARES VALUE
----------- ------------
87,200 Merck & Co., Inc. ...................... $ 6,093,100
160,700 Pfizer Inc. ............................ 6,950,275
------------
33,064,532
------------
TOTAL HEALTHCARE ....................... 57,594,219
------------
RETAIL (2.7%)
Apparel/Footwear Retail (0.8%)
285,000 TJX Companies, Inc. .................... 5,361,562
------------
Discount Stores (1.3%)
185,000 Wal-Mart Stores, Inc. .................. 8,775,937
------------
Home Improvement Chains (0.6%)
76,500 Home Depot, Inc. (The) ................. 3,676,781
------------
TOTAL RETAIL ........................... 17,814,280
------------
TECHNOLOGY (22.7%)
Computer Communications (4.0%)
250,000 3Com Corp.* ............................ 4,156,250
324,000 Cisco Systems, Inc.* ................... 22,194,000
------------
26,350,250
------------
Computer Peripherals (2.7%)
178,000 EMC Corp.* ............................. 17,444,000
------------
Computer Processing Hardware (1.6%)
299,500 Compaq Computer Corp. .................. 10,201,719
------------
Electronics/Appliances (1.5%)
207,000 Maytag Corp. ........................... 7,891,875
13,000 Samsung Electronics (GDR) - 144A**
(Korea) ................................ 1,644,500
------------
9,536,375
------------
Electronic Equipment/Instruments (1.8%)
93,000 JDS Uniphase Corp.* .................... 11,577,047
------------
Internet Software/Services (1.8%)
123,000 America Online, Inc.* .................. 7,210,875
65,000 Exodus Communications, Inc.* ........... 4,448,437
------------
11,659,312
------------
Packaged Software (3.2%)
151,000 Microsoft Corp.* ....................... 10,541,687
119,400 Oracle Corp.* .......................... 10,857,938
------------
21,399,625
------------
Semiconductors (6.1%)
160,800 Intel Corp. ............................ 12,039,900
10,000 SDL, Inc.* ............................. 3,973,125
67,600 Texas Instruments, Inc. ................ $ 4,524,975
215,000 Vitesse Semiconductor Corp.* ........... 19,094,688
------------
39,632,688
------------
TOTAL TECHNOLOGY ....................... 147,801,016
------------
TELECOMMUNICATIONS (22.4%)
Major Telecommunications (2.0%)
47,800 China Unicom Ltd.* (ADR) (Hong Kong).... 1,111,350
121,500 Verizon Communications ................. 5,300,437
189,300 WorldCom, Inc.* ........................ 6,909,450
------------
13,321,237
------------
Specialty Telecommunications (1.1%)
85,000 Efficient Networks, Inc.* .............. 4,567,422
50,000 Qwest Communications
International, Inc.* ................... 2,581,250
------------
7,148,672
------------
Telecommunication Equipment (15.0%)
40,700 CIENA Corp.* ........................... 9,022,681
136,000 Comverse Technology, Inc.* ............. 12,503,500
63,000 Corning Inc. ........................... 20,660,063
16,000 Corvis Corporation* .................... 1,661,000
332,000 Motorola, Inc. ......................... 11,972,750
365,000 Nokia Oyj (ADR) (Finland) .............. 16,402,188
257,100 Nortel Networks Corp. (Canada) ......... 20,969,719
64,500 Scientific - Atlanta, Inc. ............. 5,026,969
------------
98,218,870
------------
Wireless Communications (4.3%)
199,000 Nextel Communications, Inc. (Class A)*.. 11,032,063
118,000 Vodafone Group PLC (ADR)
(United Kingdom) ..................... 4,830,625
54,000 Voicestream Wireless Corp.* ............ 6,078,375
123,000 Western Wireless Corp. (Class A)* ...... 6,288,375
------------
28,229,438
------------
TOTAL TELECOMMUNICATIONS ............... 146,918,217
------------
TRANSPORTATION (1.2%)
Airlines (1.2%)
155,000 Delta Air Lines, Inc. .................. 7,672,500
------------
TOTAL COMMON STOCKS
(Cost $442,376,300) .................... 608,371,104
------------
See Notes to Financial Statements
5
<PAGE>
Morgan Stanley Dean Witter Market Leader Trust
Portfolio of Investments August 31, 2000, continued
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
----------- ------------
CONVERTIBLE BONDS (0.2%)
TELECOMMUNICATIONS (0.2%)
Telecommunication Equipment (0.1%)
$ 600 Cyras Systems, Inc. - 144A**
4.50% due 08/15/05 ........... $ 708,000
------------
Wireless Communications (0.1%)
850 Nextel Communications, Inc.
5.25% due 01/15/10 ........... 867,068
------------
TOTAL CONVERTIBLE BONDS
(Cost $1,596,625) .............. 1,575,068
------------
SHORT-TERM INVESTMENT (a) (11.1%)
U.S. GOVERNMENT AGENCY
72,950 Federal National Mortgage Assoc.
6.53% due 09/01/00
(Cost $72,950,000) ........... 72,950,000
------------
TOTAL INVESTMENTS
(Cost $516,922,925) (b)......... 104.2 % 682,896,172
LIABILITIES IN EXCESS OF OTHER
ASSETS ......................... (4.2) (27,931,650)
----- ------------
NET ASSETS ..................... 100.0 % $654,964,522
===== ============
--------------------------------
ADR American Depository Receipt.
GDR Global Depository Receipt.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(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 the
aggregate cost for book purposes. The aggregate gross unrealized
appreciation is $172,109,016 and the aggregate gross unrealized
depreciation is $6,135,769, resulting in net unrealized appreciation
of $165,973,247.
See Notes to Financial Statements
6
<PAGE>
Morgan Stanley Dean Witter Market Leader Trust
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
August 31, 2000
ASSETS:
Investments in securities, at value
(cost $516,922,925) ............................. $682,896,172
Cash ............................................... 54,406
Receivable for:
Investments sold .............................. 20,036,843
Shares of beneficial interest sold ............ 6,065,558
Dividends ..................................... 412,913
Deferred organizational expenses ................... 16,261
Prepaid expenses and other assets .................. 104,262
------------
TOTAL ASSETS ................................... 709,586,415
------------
LIABILITIES:
Payable for:
Investments purchased ......................... 53,405,758
Plan of distribution fee ...................... 464,977
Investment management fee ..................... 381,350
Shares of beneficial interest repurchased ..... 230,230
Accrued expenses ................................... 139,578
------------
TOTAL LIABILITIES .............................. 54,621,893
------------
NET ASSETS ..................................... $654,964,522
============
COMPOSITION OF NET ASSETS:
Paid-in-capital .................................... $477,783,877
Net unrealized appreciation ........................ 165,973,247
Accumulated undistributed net realized gain ........ 11,207,398
------------
NET ASSETS ..................................... $654,964,522
============
CLASS A SHARES:
Net Assets ......................................... $ 12,677,013
Shares Outstanding (unlimited authorized, $.01
par value) ...................................... 588,934
NET ASSET VALUE PER SHARE ...................... $21.53
======
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset
value) ......................................... $22.72
======
CLASS B SHARES:
Net Assets ......................................... $571,732,757
Shares Outstanding (unlimited authorized, $.01
par value) ...................................... 27,131,756
NET ASSET VALUE PER SHARE ...................... $21.07
======
CLASS C SHARES:
Net Assets ......................................... $ 22,736,120
Shares Outstanding (unlimited authorized, $.01
par value) ...................................... 1,076,922
NET ASSET VALUE PER SHARE ...................... $21.11
======
CLASS D SHARES:
Net Assets ......................................... $ 47,818,632
Shares Outstanding (unlimited authorized, $.01
par value) ...................................... 2,203,350
NET ASSET VALUE PER SHARE ...................... $21.70
======
STATEMENT OF OPERATIONS
For the year ended August 31, 2000
NET INVESTMENT LOSS:
INCOME
Dividends (net of $16,583 foreign withholding
tax) ........................................... $ 2,933,193
Interest .......................................... 2,118,155
------------
TOTAL INCOME .................................. 5,051,348
------------
EXPENSES
Plan of distribution fee (Class A shares) ......... 14,043
Plan of distribution fee (Class B shares) ......... 3,671,545
Plan of distribution fee (Class C shares) ......... 109,744
Investment management fee ......................... 2,989,794
Transfer agent fees and expenses .................. 332,155
Registration fees ................................. 197,161
Professional fees ................................. 70,474
Shareholder reports and notices ................... 68,058
Custodian fees .................................... 21,530
Organizational expenses ........................... 14,230
Trustees' fees and expenses ....................... 13,609
Other ............................................. 9,338
------------
TOTAL EXPENSES ................................ 7,511,681
------------
NET INVESTMENT LOSS ........................... (2,460,333)
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ................................. 19,304,282
Net change in unrealized appreciation ............. 117,448,320
------------
NET GAIN ...................................... 136,752,602
------------
NET INCREASE ...................................... $134,292,269
============
See Notes to Financial Statements
7
<PAGE>
Morgan Stanley Dean Witter Market Leader Trust
Financial Statements, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
AUGUST 31, 2000 AUGUST 31, 1999
----------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss .................................. $ (2,460,333) $ (1,447,953)
Net realized gain .................................... 19,304,282 8,339,076
Net change in unrealized appreciation ................ 117,448,320 57,237,300
------------- ------------
NET INCREASE ...................................... 134,292,269 64,128,423
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN:
Class A shares ....................................... (115,703) -
Class B shares ....................................... (13,296,841) -
Class C shares ....................................... (299,828) -
Class D shares ....................................... (109,770) -
------------- ------------
TOTAL DISTRIBUTIONS ............................... (13,822,142) -
------------- ------------
Net increase from transactions in shares of beneficial
interest ........................................... 340,711,906 9,246,620
------------- ------------
NET INCREASE ...................................... 461,182,033 73,375,043
NET ASSETS:
Beginning of period .................................. 193,782,489 120,407,446
------------- ------------
END OF PERIOD ..................................... $ 654,964,522 $193,782,489
============= ============
</TABLE>
See Notes to Financial Statements
8
<PAGE>
Morgan Stanley Dean Witter Market Leader Trust
Notes to Financial Statements August 31, 2000
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 portfolio security listed or traded
on the New York or American Stock Exchange, NASDAQ, or other exchange is valued
at its latest sale price, 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 a security is 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; (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 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
9
<PAGE>
Morgan Stanley Dean Witter Market Leader Trust
Notes to Financial Statements August 31, 2000, continued
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 tax purposes are reported as distributions of paid-in-capital.
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.
10
<PAGE>
Morgan Stanley Dean Witter Market Leader Trust
Notes to Financial Statements August 31, 2000, continued
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 rates to the net assets of the Fund determined as of the close of each
business day: 0.75% to the portion of daily net assets not exceeding $1 billion
and effective May 1, 2000, the Agreement was amended to reduce the annual rate
to 0.725% of the portion of daily net assets in excess of $1 billion.
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 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 totaled
$11,505,808 at August 31, 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 year ended August 31, 2000, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
1.0%, respectively.
The Distributor has informed the Fund that for the year ended August 31, 2000,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class A shares, Class B shares and Class C
11
<PAGE>
Morgan Stanley Dean Witter Market Leader Trust
Notes to Financial Statements August 31, 2000, continued
shares of $12, $415,998 and $5,693, respectively and received $86,912 in
front-end sales charges from sales of the Fund's Class A shares. The respective
shareholders pay such charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended August 31, 2000 aggregated
$608,638,046 and $316,987,446, respectively.
For the year ended August 31, 2000, the Fund incurred brokerage commissions
with Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Investment Manager
and Distributor, of $56,452 for portfolio transactions executed on behalf of
the Fund. At August 31, 2000, the Fund's receivable for investments sold
included unsettled trades with DWR of $855,615.
For the year ended August 31, 2000, the Fund incurred brokerage commissions of
$65,374 with Morgan Stanley & Co., Inc., an affliate of the Investment Manager
and Distributor, for portfolio transactions executed on behalf of the Fund. At
August 31, 2000, the Fund's payable for investments purchased and receivable
for investments sold included unsettled trades with Morgan Stanley & Co., Inc.
of $10,937,253 and $1,550,667, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent.
5. FEDERAL INCOME TAX STATUS
At August 31, 2000, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales and permanent book/tax
differences primarily attributable to a net operating loss. To reflect
reclassifications arising from the permanent differences, paid-in-capital was
charged $19,325, accumulated undistributed net realized gain was charged
$2,441,008 and accumulated undistributed net investment income was credited
$2,460,333.
12
<PAGE>
Morgan Stanley Dean Witter Market Leader Trust
Notes to Financial Statements August 31, 2000, continued
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
AUGUST 31, 2000 AUGUST 31, 1999
--------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- ----------------- --------------- ----------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold .................................. 655,848 $ 12,583,632 83,365 $ 1,181,215
Reinvestment of distributions ......... 5,607 97,681 - -
Redeemed .............................. (136,053) (2,647,333) (52,594) (727,278)
-------- -------------- ------- -------------
Net increase - Class A ................ 525,402 10,033,980 30,771 453,937
-------- -------------- ------- -------------
CLASS B SHARES
Sold .................................. 20,711,097 387,480,028 4,845,409 69,690,625
Reinvestment of distributions ......... 699,938 12,003,937 - -
Redeemed .............................. (6,837,029) (128,672,808) (4,348,003) (59,846,856)
---------- -------------- ---------- -------------
Net increase - Class B ................ 14,574,006 270,811,157 497,406 9,843,769
---------- -------------- ---------- -------------
CLASS C SHARES
Sold .................................. 999,832 18,875,641 112,429 1,624,859
Reinvestment of distributions ......... 16,364 281,123 - -
Redeemed .............................. (119,382) (2,255,641) (29,274) (404,672)
---------- -------------- ---------- -------------
Net increase - Class C ................ 896,814 16,901,123 83,155 1,220,187
---------- -------------- ---------- -------------
CLASS D SHARES
Sold .................................. 2,698,282 52,898,133 115,422 1,690,861
Reinvestment of distributions ......... 1,786 31,317 - -
Redeemed .............................. (532,773) (9,963,804) (331,947) (3,962,134)
---------- -------------- ---------- -------------
Net increase (decrease) - Class D ..... 2,167,295 42,965,646 (216,525) (2,271,273)
---------- -------------- ---------- -------------
Net increase in Fund .................. 18,163,517 $ 340,711,906 394,807 $ 9,246,620
========== ============== ========== =============
</TABLE>
13
<PAGE>
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 YEAR ENDED AUGUST 31, JULY 28, 1997*
------------------------------------------------------ THROUGH
2000 1999 1998 AUGUST 31, 1997
--------------------------------------------------------------------------
<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) .......................... 0.02 (0.05) (0.01) 0.01
Net realized and unrealized gain (loss) ............... 7.05 5.61 (0.96) (0.09)
------- ------ ------ ------
Total income (loss) from investment operations ......... 7.07 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 ......................... $ 21.53 $15.29 $ 9.73 $10.82
======= ====== ====== ======
TOTAL RETURN+ ......................................... 47.49% 57.14 % (8.98)% (0.73)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 1.18%(3) 1.23 %(3) 1.31 %(3) 1.89 %(2)
Net investment income (loss) ........................... 0.08%(3) (0.14)%(3) (0.06)%(3) 1.30 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $12,677 $971 $319 $288
Portfolio turnover rate ................................ 86% 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
14
<PAGE>
Morgan Stanley Dean Witter Market Leader Trust
Financial Highlights, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED AUGUST 31, APRIL 28, 1997*
---------------------------------------------------- THROUGH
2000++ 1999++ 1998++ AUGUST 31, 1997**
--------------------------------------------------------------------------
<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) .......................... (0.13) (0.12) (0.09) 0.04
Net realized and unrealized gain (loss) ............... 6.94 5.53 (0.95) 0.77
------ ------ ------ ------
Total income (loss) from investment operations ......... 6.81 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 ......................... $21.07 $15.09 $ 9.68 $10.81
====== ====== ====== ======
TOTAL RETURN+ ......................................... 46.35 % 55.89 % (9.65)% 8.10%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 1.93 %(4) 1.99 %(4) 2.06 %(4) 2.34%(2)(3)
Net investment income (loss) ........................... (0.67)%(4) (0.90)%(4) (0.81)%(4) 1.21%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $571,733 $189,534 $116,693 $107,298
Portfolio turnover rate ................................ 86 % 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 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
15
<PAGE>
Morgan Stanley Dean Witter Market Leader Trust
Financial Highlights, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED AUGUST 31, JULY 28, 1997*
-------------------------------------------------------- THROUGH
2000 1999 1998 AUGUST 31, 1997
---------------------------------------------------------------------------
<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) .......................... (0.12) (0.09) (0.10) 0.01
Net realized and unrealized gain (loss) ............... 6.94 5.54 (0.94) (0.10)
------ ------ ------ ------
Total income (loss) from investment operations ......... 6.82 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 ......................... $21.11 $15.12 $ 9.67 $10.81
====== ====== ====== ======
TOTAL RETURN+ ......................................... 46.33 % 56.36 % (9.63)% (0.83)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 1.93 %(3) 1.75 %(3) 2.06 %(3) 2.54 %(2)
Net investment income (loss) ........................... (0.67)%(3) (0.66)%(3) (0.81)%(3) 0.61 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $22,736 $2,723 $937 $313
Portfolio turnover rate ................................ 86 % 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>
Morgan Stanley Dean Witter Market Leader Trust
Financial Highlights, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED AUGUST 31, JULY 28, 1997*
--------------------------------------------- THROUGH
2000 1999 1998 AUGUST 31, 1997
----------------------------------------------------------------
<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 ................................. 0.08 - - 0.02
Net realized and unrealized gain (loss) ............... 7.08 5.63 (0.95) (0.10)
------ ------ ------ ------
Total income (loss) from investment operations ......... 7.16 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) - (0.13) -
------ ------ ------ ------
Net asset value, end of period ......................... $21.70 $15.37 $ 9.74 $10.82
====== ====== ====== ======
TOTAL RETURN+ ......................................... 47.84% 57.80 % (8.81)% (0.73)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 0.93%(3) 0.99 %(3) 1.06 %(3) 1.43 %(2)
Net investment income .................................. 0.33%(3) 0.10 %(3) 0.19 %(3) 1.81 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $47,819 $554 $2,459 $10
Portfolio turnover rate ................................ 86% 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
17
<PAGE>
Morgan Stanley Dean Witter Market Leader Trust
Independent Auditors' Report
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
MORGAN STANLEY DEAN WITTER MARKET LEADER TRUST:
We have audited the accompanying statement of assets and liabilities of Morgan
Stanley Dean Witter Market Leader Trust (the "Fund") including the portfolio of
investments, as of August 31, 2000, and the related statements of operations
and changes in net assets, and the financial highlights for the year then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended August 31,
1999 and the financial highlights for each of the periods in the three year
period ended August 31, 1999 were audited by other independent accountants
whose report, dated October 8, 1999, expressed an unqualified opinion on that
statement and financial highlights.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 2000 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Morgan Stanley Dean Witter Market Leader Trust as of August 31, 2000, the
results of its operations, the changes in its net assets and the financial
highlights for the year then ended in conformity with accounting principles
generally accepted in the United States of America.
Deloitte & Touche LLP
New York, New York
October 9, 2000
2000 FEDERAL TAX NOTICE (unaudited)
During the fiscal year ended August 31, 2000, the Fund paid to
shareholders $0.73 per share from long-term capital gains.
18
<PAGE>
Morgan Stanley Dean Witter Market Leader Trust
Change in Independent Accountants
On July 1, 2000 PricewaterhouseCoopers LLP resigned as independent accountants
of the Fund.
The reports of PricewaterhouseCoopers LLP on the financial statements of the
Fund for the past two fiscal years contained no adverse opinion or disclaimer
of opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle.
In connection with its audits for the two most recent fiscal years and through
July 1, 2000, there have been no disagreements with PricewaterhouseCoopers LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of PricewaterhouseCoopers LLP would have caused them to
make reference thereto in their report on the financial statements for such
years.
The Fund, with the approval of its Board of Trustees and its Audit Committee,
engaged Deloitte & Touche LLP as its new independent accountants as of July 1,
2000.
19
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
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. Rutherfurd Jr.
Vice President
Aaron Clark
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 AUDITORS
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of
the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus. Read the
prospectus carefully before investing.
Morgan Stanley Dean Witter Distributors Inc., member NASD.
MORGAN STANLEY
DEAN WITTER
MARKET LEADER
TRUST
[GRAPHIC OMITTED]
ANNUAL REPORT
AUGUST 31, 2000
