<PAGE> 1
MORGAN STANLEY DEAN WITTER NEXT GENERATION TRUST Two World Trade Center
LETTER TO THE SHAREHOLDERS January 31, 2000 New York, New York 10048
DEAR SHAREHOLDER:
Morgan Stanley Dean Witter Next Generation Trust, which commenced operations on
November 26, 1999, aims to capitalize on the vast and growing demographic trend
of consumption by Generation Y (individuals born after 1980). The Fund seeks
long-term growth of capital by investing in companies of any asset size that
manufacture or develop products or provide services which may be used by, or
appeal to, children, teenagers or young adults. Technology (hardware, software,
services and components), the retail sector (both traditional and internet),
consumer goods and services (media, leisure products, apparel) and consumer
products (food, beverage and personal care) all figure prominently in the Fund's
portfolio.
PERFORMANCE
In the period from inception to January 31, 2000, Morgan Stanley Dean Witter
Next Generation Trust's Class A, B, C and D shares posted total returns of
- -3.92 percent, -4.09 percent, -4.09 percent and -3.90 percent, respectively. For
the same period, the Standard & Poor's 500 Composite Stock Price Index (S&P 500)
returned -1.28 percent. The total return figures shown assume the
reinvestment of all distributions and do not reflect the deduction of any
applicable sales charges. The performance of the Fund's four share classes
varies because of differing expenses.
It should be noted that this data reflects only two months of performance during
a period of extreme market volatility around the globe. The Fund's initial
investments were made as the market soared in December and then pulled back in
January; however, our decision to invest as quickly as possible was made with a
positive long-term forecast in mind.
As of January 31, the Fund's key holdings included America Online, the Walt
Disney Company, Microsoft and Motorola. The international positions of the Fund
also offer exposure to similar growth trends with current holdings in global
leaders such as Sony (Japan, consumer electronics), Alcatel (France,
telecommunications equipment) and Grupo Televisa (Mexican media). The Fund may
invest up to 35 percent of its assets in foreign securities.
<PAGE> 2
MORGAN STANLEY DEAN WITTER NEXT GENERATION TRUST
LETTER TO THE SHAREHOLDERS January 31, 2000, continued
LOOKING AHEAD
We are optimistic about the long-term investment merits of companies that market
their products or services to Generation Y, believing that strong earnings
prospects will translate into strong share-price performance. We remain mindful,
however, that growth stocks (particularly technology issues) may be volatile in
times of market turbulence. We will continue to seek out companies and sectors
that we believe have strong management teams, competitive advantages and
compelling stock valuations as we pursue the Fund's objective of long-term
capital growth.
We appreciate your ongoing support of Morgan Stanley Dean Witter Next Generation
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>
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER NEXT GENERATION TRUST
PORTFOLIO OF INVESTMENTS January 31, 2000 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (93.5%)
Apparel (0.5%)
38,200 Nautica Enterprises, Inc.*.... $ 339,025
-----------
Books/Magazines (3.1%)
150,000 Class Editori SpA (Italy)..... 2,212,512
-----------
Broadcasting (6.6%)
23,000 Grupo Televisa S.A. (GDR)
(Mexico)*.................... 1,276,500
16,100 Hispanic Broadcasting
Corp.*....................... 1,673,394
15,500 Univision Communications, Inc.
(Class A)*................... 1,660,437
-----------
4,610,331
-----------
Catalog/Specialty Distribution (2.3%)
15,200 Amazon.com, Inc.*............. 981,350
40,000 eToys, Inc.*.................. 582,500
-----------
1,563,850
-----------
Cellular Telephone (2.3%)
15,200 Nextel Communications, Inc.
(Class A)*................... 1,615,950
-----------
Clothing/Shoe/Accessory Stores (8.8%)
55,300 Abercrombie & Fitch Co. (Class
A)*.......................... 1,182,037
32,500 American Eagle Outfitters,
Inc.*........................ 1,180,156
31,200 Gap, Inc. (The)............... 1,394,250
80,100 Ross Stores, Inc. ............ 1,016,269
85,500 Too, Inc.*.................... 1,416,094
-----------
6,188,806
-----------
Computer Software (1.7%)
12,500 Microsoft Corp.*.............. 1,222,656
-----------
Computer/Video Chains (2.0%)
30,000 Best Buy Co., Inc.*........... 1,432,500
-----------
Consumer Electronics/Appliances (5.4%)
65,000 Pioneer Corp. (Japan)......... 1,754,794
8,200 Sony Corp. (Japan)............ 2,058,015
-----------
3,812,809
-----------
Consumer Sundries (2.2%)
95,000 Luxottica Group SpA (ADR)
(Italy)...................... 1,525,937
-----------
Discount Chains (1.7%)
21,300 Wal-Mart Stores, Inc. ........ 1,166,175
-----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Diversified Electronic Products (5.3%)
15,100 Siemens AG (Registered Shares)
(Germany).................... $ 2,064,613
450,000 VTech Holdings Ltd. (Hong
Kong)........................ 1,674,271
-----------
3,738,884
-----------
Electronic Data Processing (10.2%)
14,400 Apple Computer, Inc.*......... 1,493,100
200,000 Bull SA (France)*............. 1,504,120
41,000 Fujitsu Ltd. (Japan).......... 1,515,267
20,100 Gateway, Inc.*................ 1,229,869
12,900 International Business
Machines Corp. .............. 1,447,219
-----------
7,189,575
-----------
Internet Services (7.8%)
20,100 America Online, Inc.*......... 1,144,444
27,300 EarthLink Network, Inc.*...... 1,167,075
46,400 StarMedia Network, Inc.*...... 1,484,800
5,150 Yahoo! Inc.*.................. 1,658,300
-----------
5,454,619
-----------
Major Pharmaceuticals (1.8%)
15,050 Johnson & Johnson............. 1,295,241
-----------
Media Conglomerates (4.7%)
51,100 Disney (Walt) Co. ............ 1,855,569
18,000 Time Warner Inc. ............. 1,438,875
-----------
3,294,444
-----------
Movies/Entertainment (6.6%)
45,000 Edel Music AG (Germany)....... 1,572,048
12,900 Electronic Arts Inc.*......... 1,054,575
25,000 EM TV & Merchandising AG
(Germany).................... 2,037,840
-----------
4,664,463
-----------
Newspapers (2.8%)
156,000 Gruppo Editoriale L'Espresso
(Italy)...................... 1,980,082
-----------
Other Consumer Services (1.7%)
43,000 MP3.com, Inc.*................ 1,212,062
-----------
Other Telecommunications (4.0%)
2,100,000 City Telecom (HK) Ltd. (Hong
Kong)........................ 1,470,891
34,000 Qwest Communications
International, Inc.*......... 1,338,750
-----------
2,809,641
-----------
Package Goods/Cosmetics (2.0%)
23,900 Colgate-Palmolive Co. ........ 1,416,075
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER NEXT GENERATION TRUST
PORTFOLIO OF INVESTMENTS January 31, 2000 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Recreational Products/Toys (1.3%)
300,000 Acclaim Entertainment,
Inc.*........................ $ 937,500
-----------
Restaurants (1.5%)
28,600 McDonald's Corp. ............. 1,063,563
-----------
Shoe Manufacturing (3.0%)
55,000 Madden (Steven), Ltd.*........ 852,500
27,600 Nike, Inc. (Class B).......... 1,255,800
-----------
2,108,300
-----------
Telecommunication Equipment (4.2%)
7,300 Alcatel (France).............. 1,445,120
10,900 Motorola, Inc. ............... 1,490,575
-----------
2,935,695
-----------
TOTAL COMMON STOCKS
(Identified Cost
$68,249,696).................. 65,790,695
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (a) (6.4%)
U.S. GOVERNMENT AGENCY
$ 4,500 Federal Home Loan Mortgage
Corp.
5.75% due 02/01/00
(Identified Cost
$4,500,000).................. $ 4,500,000
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $72,749,696) (b).. $99.9% $70,290,695
OTHER ASSETS IN EXCESS
OF LIABILITIES..................... 0.1 55,956
---- -----------
NET ASSETS......................... 100.0% $70,346,651
====== ===========
</TABLE>
- ---------------------
<TABLE>
<C> <S>
ADR American Depository Receipt.
GDR Global 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
$5,132,889 and the aggregate gross unrealized
depreciation is $7,591,890, resulting in net
unrealized depreciation of $2,459,001.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER NEXT GENERATION TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
January 31, 2000 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $72,749,696).............................. $70,290,695
Cash........................................................ 91,004
Receivable for:
Shares of beneficial interest sold...................... 115,755
Dividends............................................... 16,594
Deferred offering costs..................................... 122,541
Prepaid expenses and other assets........................... 6,967
-----------
TOTAL ASSETS............................................ 70,643,556
-----------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased............... 121,863
Plan of distribution fee................................ 60,577
Investment management fee............................... 47,556
Accrued expenses and other payables......................... 26,079
Offering costs.............................................. 40,830
-----------
TOTAL LIABILITIES....................................... 296,905
-----------
NET ASSETS.............................................. $70,346,651
===========
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $73,450,106
Net unrealized depreciation................................. (2,459,014)
Net investment loss......................................... (134,574)
Net realized loss........................................... (509,867)
-----------
NET ASSETS.............................................. $70,346,651
===========
CLASS A SHARES:
Net Assets.................................................. $3,991,826
Shares Outstanding (unlimited authorized, $.01 par value)... 416,294
NET ASSET VALUE PER SHARE............................... $9.59
===========
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value)........ $10.12
===========
CLASS B SHARES:
Net Assets.................................................. $57,263,673
Shares Outstanding (unlimited authorized, $.01 par value)... 5,975,773
NET ASSET VALUE PER SHARE............................... $9.58
===========
CLASS C SHARES:
Net Assets.................................................. $9,067,114
Shares Outstanding (unlimited authorized, $.01 par value)... 946,198
NET ASSET VALUE PER SHARE............................... $9.58
===========
CLASS D SHARES:
Net Assets.................................................. $24,038
Shares Outstanding (unlimited authorized, $.01 par value)... 2,506
NET ASSET VALUE PER SHARE............................... $9.59
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER NEXT GENERATION TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the period November 26, 1999* through January 31, 2000
(unaudited)
NET INVESTMENT LOSS:
INCOME
Interest.................................................... $ 239,461
Dividends (net of $60 foreign withholding tax).............. 22,328
-----------
TOTAL INCOME............................................ 261,789
-----------
EXPENSES
Plan of distribution fee (Class A shares)................... 2,046
Plan of distribution fee (Class B shares)................... 109,890
Plan of distribution fee (Class C shares)................... 18,784
Investment management fee................................... 102,678
Offering costs.............................................. 27,459
Transfer agent fees and expenses............................ 17,603
Professional fees........................................... 14,261
Registration fees........................................... 5,505
Shareholder reports and notices............................. 3,768
Trustees' fees and expenses................................. 2,341
Other....................................................... 2,020
-----------
TOTAL EXPENSES.......................................... 306,355
-----------
NET INVESTMENT LOSS..................................... (44,566)
-----------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss........................................... (509,867)
Net unrealized depreciation................................. (2,459,014)
-----------
NET DECREASE............................................ $(2,968,881)
===========
</TABLE>
- ---------------------
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER NEXT GENERATION TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD
NOVEMBER 26, 1999*
THROUGH
JANUARY 31, 2000
- --------------------------------------------------------------------------------
(unaudited)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss......................................... $ (44,566)
Net realized loss........................................... (509,867)
Net unrealized depreciation................................. (2,459,014)
-----------
NET DECREASE............................................ (3,013,447)
-----------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A shares.............................................. (8,507)
Class B shares.............................................. (69,265)
Class C shares.............................................. (12,183)
Class D shares.............................................. (53)
-----------
TOTAL DIVIDENDS......................................... (90,008)
-----------
Net increase from transactions in shares of beneficial
interest................................................... 73,350,106
-----------
NET INCREASE............................................ 70,246,651
NET ASSETS:
Beginning of period......................................... 100,000
-----------
END OF PERIOD
(Including a net investment loss of $134,574)........... $70,346,651
===========
</TABLE>
- ---------------------
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER NEXT GENERATION TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 2000 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Next Generation 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
objective by investing at least 65% of its total assets in common stocks of
companies which manufacture products or provide services for children, teenagers
and/or young adults. The Fund was organized as a Massachusetts business trust on
July 8, 1999 and had no operations other than those relating to organizational
matters and the issuance of 2,500 shares of beneficial interest by each class
for $25,000 of each class to Morgan Stanley Dean Witter Advisors Inc. (the
"Investment Manager") to effect the Fund's initial capitalization. The Fund
commenced operations on November 26, 1999.
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;
(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 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); and (4) short-term debt securities having a maturity date of
more than sixty days at time of purchase are valued on a mark-to-market
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER NEXT GENERATION TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 2000 (unaudited) continued
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. FOREIGN CURRENCY TRANSLATION -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value of
investment securities, other assets and liabilities and forward foreign currency
contracts are translated at the exchange rates prevailing at the end of the
period; and (2) purchases, sales, income and expenses are translated at the
exchange rates prevailing on the respective dates of such transactions. The
resultant exchange gains and losses are included in the Statement of Operations
as realized and unrealized gain/loss on foreign exchange transactions. Pursuant
to U.S. Federal income tax regulations, certain foreign exchange gains/losses
included in realized and unrealized gain/loss are included in or are a reduction
of ordinary income for federal income tax purposes. The Fund does not isolate
that portion of the results of operations arising as a result of changes in the
foreign exchange rates from the changes in the market prices of the securities.
E. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund may enter into forward foreign
currency contracts which are valued daily at the appropriate exchange rates. The
resultant unrealized exchange gains and losses are included in the Statement of
Operations as unrealized gain/loss on foreign exchange transactions. The Fund
records realized gains or losses on delivery of the currency or at the time the
forward contract is extinguished (compensated) by entering into a closing
transaction prior to delivery.
F. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER NEXT GENERATION TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 2000 (unaudited) continued
G. 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.
H. OFFERING COSTS -- The Investment Manager incurred offering costs on behalf of
the Fund in the amount of approximately $150,000 which will be reimbursed for
the full amount thereof. Such expenses were deferred and are being amortized by
the Fund on the straight-line method over the period of benefit of approximately
one year or less 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
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER NEXT GENERATION TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 2000 (unaudited) continued
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 shares to other than current
shareholders; and (3) preparation, printing and distribution of sales literature
and advertising materials. In addition, the Distributor may utilize fees paid
pursuant to the Plan, in the case of Class B shares, to compensate Dean Witter
Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and Distributor,
and other selected broker-dealers for their opportunity costs in advancing such
amounts, which compensation would be in the form of a carrying charge on any
unreimbursed expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts, including
carrying charges, totaled $4,245,329 at January 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 period ended January 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.
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER NEXT GENERATION TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 2000 (unaudited) continued
The Distributor has informed the Fund that for the period ended January 31,
2000, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $31,094 and $15,042,
respectively and received $11,644 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 period ended January 31, 2000 aggregated
$69,806,583, and $1,047,023, respectively.
At January 31, 2000, the Fund's payable for investments purchased included
unsettled trades with DWR of $269,438. For the period ended January 31, 2000,
the Fund incurred brokerage commissions with DWR of $8,810, for portfolio
transactions executed on behalf of the Fund.
For the period ended January 31, 2000, the Fund incurred brokerage commissions
of $2,000 with Morgan Stanley & Co., Inc., an affiliate of the Investment
Manager and Distributor, for portfolio transactions executed on behalf of the
Fund.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At January 31, 2000, the Fund had
transfer agent fees and expenses payable of approximately $2,300.
5. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into forward foreign currency contracts ("forward contracts")
to facilitate settlement of foreign currency denominated portfolio transactions
or to manage foreign currency exposure associated with foreign currency
denominated securities.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Fund bears the risk of
an unfavorable change in the foreign exchange rates underlying the forward
contracts. Risks may also arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their contracts.
At January 31, 2000, there were no outstanding forward contracts.
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER NEXT GENERATION TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 2000 (unaudited) continued
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 26, 1999*
THROUGH
JANUARY 31, 2000
-----------------------
(unaudited)
SHARES AMOUNT
--------- -----------
<S> <C> <C>
CLASS A
Sold........................................................ 483,166 $ 4,837,293
Reinvestment of dividends................................... 766 7,781
Redeemed.................................................... (70,138) (705,706)
--------- -----------
Net increase - Class A...................................... 413,794 4,139,368
--------- -----------
CLASS B
Sold........................................................ 6,318,309 63,256,830
Reinvestment of dividends................................... 6,383 64,799
Redeemed.................................................... (351,419) (3,537,415)
--------- -----------
Net increase - Class B...................................... 5,973,273 59,784,214
--------- -----------
CLASS C
Sold........................................................ 1,165,926 11,669,535
Reinvestment of dividends................................... 1,087 11,040
Redeemed.................................................... (223,315) (2,254,114)
--------- -----------
Net increase - Class C...................................... 943,698 9,426,461
--------- -----------
CLASS D
Sold........................................................ 1 10
Reinvestment of dividends................................... 5 53
--------- -----------
Net increase - Class D...................................... 6 63
--------- -----------
Net increase in Fund........................................ 7,330,771 $73,350,106
========= ===========
</TABLE>
- ---------------
* Commencement of operations.
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER NEXT GENERATION TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout the period:
<TABLE>
<CAPTION>
FOR THE PERIOD NOVEMBER 26, 1999*
THROUGH JANUARY 31, 2000
-------------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
SHARES SHARES SHARES SHARES
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA++:
Net asset value, beginning of period........................ $10.00 $10.00 $10.00 $10.00
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (loss)............................... 0.01 (0.01) (0.01) 0.01
Net realized and unrealized loss........................... (0.40) (0.40) (0.40) (0.40)
------ ------ ------ ------
Total loss from investment operations....................... (0.39) (0.41) (0.41) (0.39)
------ ------ ------ ------
Less dividends from net investment income:.................. (0.02) (0.01) (0.01) (0.02)
------ ------ ------ ------
Net asset value, end of period.............................. $ 9.59 $ 9.58 $ 9.58 $ 9.59
====== ====== ====== ======
TOTAL RETURN+(1)............................................ (3.92)% (4.09)% (4.09)% (3.90)%
RATIOS TO AVERAGE NET ASSETS(2)(3):
Expenses.................................................... 1.53% 2.28% 2.28% 1.28%
Net investment income (loss)................................ 0.38% (0.37)% (0.37)% 0.63%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $3,992 $57,264 $9,067 $24
Portfolio turnover rate (1)................................. 2% 2% 2% 2%
</TABLE>
- ---------------------
* Commencement of operations.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE> 15
(This Page Intentionally Left Blank)
<PAGE> 16
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
Mark Bavoso
Vice President
David Dineen
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
NEXT GENERATION
TRUST
[GRAPHIC]
Semiannual Report
January 31, 2000
