<PAGE>
Two World Trade Center,
New York, New York 10048
MORGAN STANLEY DEAN WITTER 21ST CENTURY TREND FUND
LETTER TO THE SHAREHOLDERS July 31, 2000
DEAR SHAREHOLDER:
Morgan Stanley Dean Witter 21st Century Trend Fund commenced operations on
February 25, 2000. The Fund seeks long-term capital appreciation by investing
primarily in common stocks of companies that the Fund's managers expect to
benefit from the development of a modern, worldwide economy in the new
millennium. The Fund focused its initial investments on healthcare and
technology. As central banks in the United States and Europe signaled that they
would take steps to slow world economic growth, the Fund's emphasis shifted
away from cyclical growth companies. The Fund continued to focus on healthcare,
which is a steady growth sector, and increased its emphasis on other steady
growth industries.
MARKET OVERVIEW
The period from February 25, 2000, through July 31, 2000, was a turbulent one
for the U.S. stock market. A confluence of events in March raised concerns
about a slowdown in the deployment of new technology, which in turn led to a
sharp correction in the Nasdaq and new-economy stocks. First, the Department of
Justice moved to split up Microsoft to prevent it from using its monopoly power
to restrain competition. Second, President Clinton spoke of potential controls
on the patenting of intellectual property in the genomics area. Finally,
evidence grew that the economy was on the verge of overheating, leading the
Federal Reserve Board to raise interest rates by a total of 75 basis points
during this period.
The markets rebounded toward the end of the second quarter, as inflation data
became more benign and the economy began to slow. The best-performing sectors
for the period were those that would benefit from a soft landing, including
financial services, real estate and utilities, as well as steady growth sectors
such as consumer staples and pharmaceuticals.
PERFORMANCE
From its inception through July 31, 2000, the Fund's Class A, B, C and D shares
posted total returns of -16.20 percent, -16.50 percent, -16.50
<PAGE>
MORGAN STANLEY DEAN WITTER 21ST CENTURY TREND FUND
LETTER TO THE SHAREHOLDERS July 31, 2000, continued
percent and -16.20 percent, respectively. For the same period the Standard and
Poor's 500 Index (S&P 500) returned 7.93 percent. The performance of the Fund's
four share classes varies because of differing expenses. The total return
figures given assume the reinvestment of all distributions but do not reflect
the deduction of any applicable sales charges.
The Fund's underperformance relative to its benchmark can be attributed
partially to its early emphasis on technology stocks, which corrected sharply
in March and have continued to experience increased volatility.
PORTFOLIO STRATEGY
The Fund's investment process focuses on those industries and companies we
believe are best positioned to benefit from worldwide economic, social and
demographic trends. The Fund was overweighted in healthcare relative to the S&P
500 during this period, because we expect this sector to benefit from a
combination of aging populations in the industrialized countries and new
technology being developed to reduce health-care costs. The Fund has
concentrated its health-care investments in biotechnology companies and generic
drug companies involved with reducing the costs of drug discovery or disease
treatment.
Another important area of focus for the Fund is information technology. This
industry has grown three to five times faster than the world economy in real
terms for the last 20 years. Within this sector the Fund has emphasized
telecommunications equipment, which continues to benefit from worldwide
deregulation of the communications industry and the construction of new,
competitive networks. The Fund has also favored companies that produce software
related to electronic commerce, which we believe will be the key driver for
corporations looking to increase efficiency in coming years. The Fund was
overweighted in technology relative to the S&P 500 for much of the period, but
ended it slightly underweighted. The reason we made this change is that
although technology is a high-growth sector, it is cyclical. Technology
spending slows when the world economy slows. Therefore, earnings in the
technology sector could be vulnerable during the global slowdown we expect over
the next 12 months.
The Fund ended the period with a greater emphasis on financial-services stocks,
as we grew more confident that the economy would experience a soft landing.
Within that sector, we have concentrated on wealth-management companies, which
should benefit from the growing worldwide trend of individuals taking
responsibility for their own retirement savings. In addition, investment
brokers in the capital markets business should continue to benefit as economies
worldwide become more entrepreneurial and capitalist.
2
<PAGE>
MORGAN STANLEY DEAN WITTER 21ST CENTURY TREND FUND
LETTER TO THE SHAREHOLDERS July 31, 2000, continued
Finally, the Fund is overweighted in oil-services stocks. We expect this sector
to continue to enjoy robust earnings growth through 2001 as capital spending
should remain strong, given tight production capacity for oil and gas
worldwide.
LOOKING AHEAD
We expect the global economy to slow during the next 12 months, leading to a
slowdown in earnings growth as well. We have positioned the Fund for this
scenario by focusing on steady growth companies that we expect will continue to
enjoy relatively strong earnings in such an environment.
We appreciate your ongoing support of Morgan Stanley Dean Witter 21st Century
Trend Fund and look forward to continuing to serve your investment needs. Very
truly yours,
/s/ C. Fiumefreddo /s/ Mitchell M. Merin
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
3
<PAGE>
MORGAN STANLEY DEAN WITTER 21ST CENTURY TREND FUND
PORTFOLIO OF INVESTMENTS July 31, 2000
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
<S> <C> <C>
COMMON STOCKS (89.6%)
Aerospace (0.6%)
74,100 Boeing Co. ........................... $ 3,630,900
------------
Alcoholic Beverages (1.6%)
113,000 Anheuser-Busch Companies, Inc......... 9,096,500
------------
Beverages - Non-Alcoholic (1.2%)
51,200 Coca-Cola Co. ........................ 3,139,200
82,000 PepsiCo, Inc. ........................ 3,756,625
------------
6,895,825
------------
Biotechnology (7.8%)
26,000 Alkermes, Inc.* ...................... 861,250
60,000 Amgen Inc.* .......................... 3,896,250
69,400 Celgene Corp.* ....................... 3,604,462
47,100 Cephalon, Inc.* ...................... 1,898,719
82,200 COR Therapeutics, Inc.* .............. 6,617,100
35,000 Genentech, Inc.* ..................... 5,324,375
41,700 Genzyme Corp. (General
Division)* ......................... 2,895,544
16,000 Human Genome Sciences, Inc.* ......... 1,933,000
50,000 IDEC Pharmaceuticals Corp.* .......... 6,140,625
10,700 Illumina, Inc.* ...................... 374,500
35,400 Immunex Corp.* ....................... 1,794,337
50,000 Invitrogen Corp.* .................... 3,137,500
29,000 Medarex, Inc.* ....................... 2,113,375
22,400 Millennium Pharmaceuticals, Inc.* 2,156,000
10,100 Trimeris, Inc.* ...................... 576,962
23,600 Vertex Pharmaceuticals, Inc.* ........ 2,311,325
------------
45,635,324
------------
Books/Magazines (0.1%)
25,000 Penton Media, Inc. ................... 865,625
------------
Broadcasting (1.4%)
42,000 Clear Channel Communications, Inc.* 3,199,875
38,600 Univision Communications, Inc.
(Class A)* ......................... 4,796,050
------------
7,995,925
------------
Cellular Telephone (0.4%)
47,000 Sprint Corp. (PCS Group)* ............ 2,596,750
------------
Clothing/Shoe/Accessory Stores (1.4%)
161,000 Gap, Inc. (The) ...................... 5,765,812
113,900 Limited, Inc. (The) .................. 2,327,831
------------
8,093,643
------------
Computer Communications (5.3%)
2,700 Avici Systems Inc.* .................. 265,612
167,000 Cisco Systems, Inc.* ................. 10,928,062
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------- ------------
<S> <C> <C>
88,400 Extreme Networks, Inc.* .............. $ 12,344,231
20,000 Juniper Networks, Inc.* .............. 2,848,750
25,000 Proxim, Inc.* ........................ 1,901,562
20,000 Redback Networks, Inc.* .............. 2,600,000
------------
30,888,217
------------
Computer Software (3.1%)
52,000 Check Point Software
Technologies Ltd. (Israel)* ........ 6,032,000
13,700 i2 Technologies, Inc.* ............... 1,777,575
80,000 Oracle Corp.* ........................ 6,015,000
20,000 Siebel Systems, Inc.* ................ 2,900,000
9,500 Support.com, Inc.* ................... 324,187
10,000 TIBCO Software, Inc.* ................ 1,030,000
------------
18,078,762
------------
Computer/Video Chains (0.2%)
22,000 RadioShack Corp. ..................... 1,240,250
------------
Contract Drilling (1.4%)
62,400 ENSCO International Inc. ............. 2,106,000
104,000 Global Marine, Inc.* ................. 2,944,500
59,000 Transocean Sedco Forex Inc. .......... 2,920,500
------------
7,971,000
------------
Diversified Electronic Products (0.7%)
3,400 Exfo Electro-Optical Engineering
Inc. (Canada)* ..................... 176,162
110,000 NEC Corp. (Japan) .................... 2,936,015
6,300 Siemens AG (Registered Shares)
(Germany) .......................... 980,396
------------
4,092,573
------------
Diversified Financial Services (3.8%)
92,000 American Express Co. ................. 5,215,250
240,000 Citigroup, Inc.** .................... 16,935,000
------------
22,150,250
------------
Diversified Manufacturing (0.5%)
58,000 Tyco International Ltd.
(Bermuda) .......................... 3,103,000
------------
E.D.P. Peripherals (0.3%)
20,000 Network Appliance, Inc.* ............. 1,723,750
------------
E.D.P. Services (0.6%)
55,000 Automatic Data Processing, Inc. ...... 2,725,937
20,000 First Data Corp. ..................... 921,250
------------
3,647,187
------------
Electric Utilities (0.3%)
29,000 Calpine Corp.* ....................... 2,066,250
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
MORGAN STANLEY DEAN WITTER 21ST CENTURY TREND FUND
PORTFOLIO OF INVESTMENTS July 31, 2000, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------- -------------
<S> <C> <C>
Electrical Products (0.7%)
153,000 American Power Conversion Corp.* $ 3,891,937
------------
Electronic Components (0.7%)
80,000 Jabil Circuit, Inc.* ................. 4,005,000
------------
Electronic Data Processing (2.9%)
52,000 Apple Computer, Inc.* ................ 2,642,250
46,000 Gateway, Inc.* ....................... 2,538,625
10,000 Hewlett-Packard Co. .................. 1,091,875
20,300 International Business Machines
Corp. .............................. 2,282,481
1,240,000 Legend Holdings Ltd. (Hong Kong)...... 1,399,208
64,200 Sun Microsystems, Inc.* .............. 6,769,087
------------
16,723,526
------------
Engineering & Construction (0.6%)
100,000 Metromedia Fiber Network, Inc.
(Class A)* ......................... 3,512,500
------------
Finance Companies (2.2%)
25,400 Capital One Financial Corp. .......... 1,489,075
117,000 Household International, Inc. ........ 5,213,812
51,200 MBNA Corp. ........................... 1,708,800
46,000 Providian Financial Corp. ............ 4,689,125
------------
13,100,812
------------
Generic Drugs (4.9%)
91,100 Alpharma Inc. (Class A) .............. 5,967,050
146,000 Barr Laboratories, Inc.* ............. 7,884,000
174,600 IVAX Corp.* .......................... 8,599,050
110,300 Watson Pharmaceuticals, Inc.* ........ 6,094,075
------------
28,544,175
------------
Internet Services (4.3%)
51,000 America Online, Inc.* ................ 2,718,937
26,000 Ariba, Inc.* ......................... 3,014,375
29,600 Art Technology Group, Inc.* .......... 2,575,200
139,000 BEA Systems, Inc.* ................... 5,985,688
17,400 Blue Martini Software, Inc.* ......... 1,034,213
60,000 VeriSign, Inc.* ...................... 9,521,250
16,000 Virage, Inc.* ........................ 263,000
------------
25,112,663
------------
Investment Bankers/Brokers/ Services
(6.2%)
72,000 Edwards (A.G.), Inc. ................. 3,807,000
57,000 Legg Mason, Inc. ..................... 2,964,000
93,000 Lehman Brothers Holdings, Inc. ....... 10,450,875
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------- ------------
<S> <C> <C>
112,000 Merrill Lynch & Co., Inc. ............ $ 14,476,000
117,400 Schwab (Charles) Corp. ............... 4,241,075
------------
35,938,950
------------
Major Banks (2.0%)
70,000 Bank of New York Co., Inc. ........... 3,276,875
144,600 FleetBoston Financial Corp. .......... 5,178,488
26,000 Morgan (J.P.) & Co., Inc. ............ 3,471,000
------------
11,926,363
------------
Major Pharmaceuticals (2.6%)
135,000 Abbott Laboratories .................. 5,619,375
38,800 American Home Products Corp. ......... 2,058,825
25,000 Johnson & Johnson .................... 2,326,563
58,000 Pfizer Inc. .......................... 2,501,250
38,000 SmithKline Beecham PLC (Class A)
(ADR) (United Kingdom) ............. 2,432,000
------------
14,938,013
------------
Media Conglomerates (2.5%)
100,000 News Corporation Ltd. (The)
(ADR) (Australia) .................. 4,925,000
145,000 Viacom, Inc. (Class B)
(Non-Voting)* ...................... 9,615,313
------------
14,540,313
------------
Medical Specialties (3.4%)
84,900 ALZA Corp. * ......................... 5,497,275
55,000 Baxter International, Inc. ........... 4,276,250
75,000 Biomet, Inc. ......................... 3,356,250
40,000 Endocare, Inc.* ...................... 737,500
23,200 Inhale Therapeutic Systems, Inc.* 1,883,550
31,600 MiniMed, Inc.* ....................... 3,983,575
------------
19,734,400
------------
Medical/Dental Distributors (0.9%)
30,000 Andrx Corp.* ......................... 2,341,875
42,000 Cardinal Health, Inc. ................ 3,087,000
------------
5,428,875
------------
Military/Gov't/Technical (0.4%)
36,500 General Dynamics Corp. ............... 2,059,969
------------
Multi-Line Insurance (1.2%)
81,000 American International Group, Inc. 7,102,688
------------
Oilfield Services/Equipment (1.8%)
16,300 BJ Services Co.* ..................... 951,513
59,000 Cooper Cameron Corp.* ................ 3,812,875
42,000 Grant Prideco, Inc.* ................. 845,250
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER 21ST CENTURY TREND FUND
PORTFOLIO OF INVESTMENTS July 31, 2000, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------- -------------
<S> <C> <C>
23,600 Schlumberger Ltd. .................... $ 1,744,925
40,400 Smith International, Inc.* ........... 2,883,550
------------
10,238,113
------------
Other Pharmaceuticals (4.3%)
40,000 Allergan, Inc. ....................... 2,677,500
46,632 Biovail Corp. (Canada)* .............. 2,704,656
21,000 Elan Corp. PLC (ADR) (Ireland)* ...... 1,122,188
48,000 Forest Laboratories, Inc.* ........... 5,136,000
19,500 Medicis Pharmaceutical Corp.
(Class A)* ......................... 1,096,875
16,200 Sepracor, Inc.* ...................... 1,713,150
100,000 Serono SA (ADR) (Switzerland)* ....... 2,700,000
126,100 Teva Pharmaceutical Industries
Ltd. (ADR) (Israel) ................ 7,660,575
------------
24,810,944
------------
Other Telecommunications (1.1%)
222,000 Asia Satellite Telecommunications
Holdings Ltd. (Hong Kong) .......... 731,583
27,000 Efficient Networks, Inc.* ............ 1,695,938
100 JSAT Corp. (Japan) ................... 639,854
250,500 Magyar Tavkozlesi RT (Hungary)........ 1,654,926
90,000 Netia Holdings S.A. (ADR)
(Poland)* .......................... 1,901,250
------------
6,623,551
------------
Package Goods/Cosmetics (0.4%)
62,600 Avon Products, Inc. .................. 2,484,438
------------
Packaged Foods (0.2%)
9,500 Groupe Danone (France) ............... 1,426,456
------------
Precision Instruments (1.2%)
58,700 Waters Corp.* ........................ 6,963,288
------------
Semiconductors (8.0%)
21,000 Applied Micro Circuits Corp.* ........ 3,134,250
7,200 Broadcom Corp. (Class A)* ............ 1,614,600
180,000 Intel Corp. .......................... 12,015,000
203,900 Micron Technology, Inc.* ............. 16,617,850
14,000 PMC-Sierra, Inc.* .................... 2,714,250
15,000 SDL, Inc.* ........................... 5,205,938
65,000 TranSwitch Corp.* .................... 5,191,875
------------
46,493,763
------------
Telecommunication Equipment (5.9%)
14,000 CIENA Corp.* ......................... 1,989,750
40,800 Comverse Technology, Inc.* ........... 3,580,200
14,000 Corning Inc. ......................... 3,275,125
86,000 Motorola, Inc. ....................... 2,843,375
18,800 Netro Corp.* ......................... 1,016,375
3,200 New Focus, Inc.* ..................... 321,200
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------- -------------
<S> <C> <C>
75,000 Nortel Networks Corp. (Canada) ....... $ 5,578,125
20,000 ONI Systems Corp.* ................... 1,771,250
85,500 Scientific-Atlanta, Inc. ............. 6,583,500
94,000 Tekelec* ............................. 3,689,500
60,000 UTStarcom, Inc.* ..................... 1,526,250
32,600 Virata Corp.* ........................ 2,086,400
------------
34,261,050
------------
Telecommunications (0.5%)
190,000 Hellenic Telecommunication
Organization S.A. (ADR)
(Greece) ........................... 2,078,125
12,000 Telefonica S.A. (ADR) (Spain)* ....... 759,750
------------
2,837,875
------------
TOTAL COMMON STOCKS
(Cost $488,005,705)................... 522,471,393
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
-----------
<S> <C> <C>
SHORT-TERM INVESTMENT (a) (10.1%)
U.S. GOVERNMENT AGENCY
$ 58,900 Federal Home Loan Banks
6.43% due 08/01/00
(Cost $58,900,000).......... 58,900,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $546,905,705) (b)......... 99.7% 581,371,393
OTHER ASSETS IN EXCESS OF
LIABILITIES .................... 0.3 1,708,753
----- -----------
NET ASSETS ..................... 100.0% $583,080,146
===== ============
</TABLE>
--------------------------------
ADR American Depository Receipt.
* Non-income producing security.
** A portion of this security is segregated in connection with delayed
delivery transactions.
(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 $62,061,174 and the aggregate gross
unrealized depreciation is $27,595,486, resulting in net
unrealized appreciation of $34,465,688.
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER 21ST CENTURY TREND FUND
PORTFOLIO OF INVESTMENTS July 31, 2000, continued
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JULY 31, 2000:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS IN EXCHANGE DELIVERY APPRECIATION
TO DELIVER FOR DATE (DEPRECIATION)
--------------- ----------------- ---------- ---------------
<S> <C> <C> <C>
SGD 4,498,544 $ 2,592,373 08/02/00 $ 4,639
$ 642,497 JPY 70,000,000 08/04/00 (2,643)
$ 1,436,180 EUR 1,544,612 08/31/00 (5,406)
--------
Net unrealized depreciation ............ $ (3,410)
========
</TABLE>
Currency Abbreviations:
----------------------
EUR Euro.
JPY Japanese Yen.
SGD Singapore Dollar.
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER 21ST CENTURY TREND FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2000
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(cost $546,905,705)............................................. $581,371,393
Cash ............................................................. 35,740
Receivable for:
Investments sold .............................................. 23,771,797
Shares of beneficial interest sold ............................ 420,037
Dividends ..................................................... 134,595
Foreign withholding taxes reclaimed ........................... 23,639
Deferred offering costs .......................................... 92,114
Prepaid expenses and other assets ................................ 42,510
------------
TOTAL ASSETS .................................................. 605,891,825
------------
LIABILITIES:
Payable for:
Investments purchased ......................................... 20,834,675
Shares of beneficial interest repurchased ..................... 808,323
Plan of distribution fee ...................................... 476,780
Investment management fee ..................................... 385,869
Offering costs ................................................... 44,641
Accrued expenses and other payables .............................. 261,391
------------
TOTAL LIABILITIES ............................................. 22,811,679
------------
NET ASSETS .................................................... $583,080,146
============
COMPOSITION OF NET ASSETS:
Paid-in-capital .................................................. $695,303,275
Net unrealized appreciation ...................................... 34,466,420
Net investment loss .............................................. (306)
Net realized loss ................................................ (146,689,243)
------------
NET ASSETS .................................................... $583,080,146
============
CLASS A SHARES:
Net Assets ....................................................... $55,551,625
Shares Outstanding (unlimited authorized, $.01 par value)......... 6,632,599
NET ASSET VALUE PER SHARE ..................................... $8.38
=====
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ............... $8.84
=====
CLASS B SHARES:
Net Assets ....................................................... $460,663,015
Shares Outstanding (unlimited authorized, $.01 par value)......... 55,179,630
NET ASSET VALUE PER SHARE ..................................... $8.35
=====
CLASS C SHARES:
Net Assets ....................................................... $66,447,723
Shares Outstanding (unlimited authorized, $.01 par value)......... 7,959,296
NET ASSET VALUE PER SHARE ..................................... $8.35
=====
CLASS D SHARES:
Net Assets ....................................................... $417,783
Shares Outstanding (unlimited authorized, $.01 par value)......... 49,829
NET ASSET VALUE PER SHARE ..................................... $8.38
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER 21ST CENTURY TREND FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the period February 25, 2000* through July 31, 2000
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT LOSS:
INCOME
Interest ................................................... $ 2,552,611
Dividends (net of $28,633 foreign withholding tax) ......... 904,288
-------------
TOTAL INCOME ............................................ 3,456,899
-------------
EXPENSES
Plan of distribution fee (Class A shares) .................. 65,467
Plan of distribution fee (Class B shares) .................. 1,990,726
Plan of distribution fee (Class C shares) .................. 299,688
Investment management fee .................................. 1,915,627
Transfer agent fees and expenses ........................... 352,722
Registration fees .......................................... 195,416
Offering costs ............................................. 69,972
Custodian fees ............................................. 52,859
Professional fees .......................................... 45,500
Shareholder reports and notices ............................ 9,000
Trustees fees and expenses ................................. 5,462
Other ...................................................... 6,618
-------------
TOTAL EXPENSES .......................................... 5,009,057
-------------
NET INVESTMENT LOSS ..................................... (1,552,158)
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss .......................................... (146,689,549)
Net unrealized appreciation ................................ 34,466,420
-------------
NET LOSS ................................................. (112,223,129)
-------------
NET DECREASE ............................................... $(113,775,287)
=============
</TABLE>
---------------
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER 21ST CENTURY TREND FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 25, 2000*
THROUGH
JULY 31, 2000
-------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss ..................................................... $ (1,552,158)
Net realized loss ....................................................... (146,689,549)
Net unrealized appreciation ............................................. 34,466,420
--------------
NET DECREASE ......................................................... (113,775,287)
--------------
Net increase from transactions in shares of beneficial interest ......... 696,755,433
--------------
NET INCREASE ......................................................... 582,980,146
NET ASSETS:
Beginning of period ..................................................... 100,000
--------------
END OF PERIOD
(Including a net investment loss of $306) ............................ $ 583,080,146
==============
</TABLE>
---------------
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER 21ST CENTURY TREND FUND
NOTES TO FINANCIAL STATEMENTS July 31, 2000
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter 21st Century Trend Fund (the "Fund") is registered
under the Investment Company Act of 1940, as amended (the "Act"), as a
diversified, open-end management investment company. The Fund's investment
objective is long-term capital appreciation. The Fund seeks to achieve its
objective by investing primarily in common stocks of companies which are
expected to benefit from the development of a modern worldwide economy. The
Fund was organized as a Massachusetts business trust on September 29, 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 February 25, 2000.
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 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
11
<PAGE>
MORGAN STANLEY DEAN WITTER 21ST CENTURY TREND FUND
NOTES TO FINANCIAL STATEMENTS July 31, 2000, continued
factors); and (4) short-term debt securities having a maturity date of more
than sixty days at time of purchase are valued on a mark-to-market basis until
sixty days prior to maturity and thereafter at amortized cost based on their
value on the 61st day. Short-term debt securities having a maturity date of
sixty days or less at the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS - Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
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.
12
<PAGE>
MORGAN STANLEY DEAN WITTER 21ST CENTURY TREND FUND
NOTES TO FINANCIAL STATEMENTS July 31, 2000, 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 $162,000 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.
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 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
13
<PAGE>
MORGAN STANLEY DEAN WITTER 21ST CENTURY TREND FUND
NOTES TO FINANCIAL STATEMENTS July 31, 2000, continued
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 $27,906,955 at July 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 July 31, 2000, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
1.00%, respectively.
The Distributor has informed the Fund that for the period ended July 31, 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 $12,060, $449,504
and $46,655, respectively and received $120,350 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 July 31, 2000 aggregated
$1,549,211,183, and $914,516,235, respectively.
For the period ended July 31, 2000, the Fund incurred brokerage commissions
with Dean Witter Reynolds Inc., an affiliate of the Investment Manager and
Distributor, of $21,110, for portfolio transactions executed on behalf of the
Fund.
For the period ended July 31, 2000, the Fund incurred brokerage commissions of
$181,619 with Morgan Stanley & Co., Inc., an affiliate of the Investment
Manager and Distributor, for portfolio transactions executed on behalf of the
Fund. At July 31, 2000, the Fund's payable for investments purchased included
unsettled trades with Morgan Stanley & Co., Inc. of $5,017,910.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent.
14
<PAGE>
MORGAN STANLEY DEAN WITTER 21ST CENTURY TREND FUND
NOTES TO FINANCIAL STATEMENTS July 31, 2000, continued
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 25, 2000*
THROUGH
JULY 31, 2000
----------------------------------
SHARES AMOUNT
--------------- ----------------
<S> <C> <C>
CLASS A SHARES
Sold ........................... 7,743,006 $ 77,392,951
Redeemed ....................... (1,112,907) (9,914,497)
---------- -------------
Net increase - Class A ......... 6,630,099 67,478,454
---------- -------------
CLASS B SHARES
Sold ........................... 58,761,538 579,766,669
Redeemed ....................... (3,584,408) (30,883,818)
---------- -------------
Net increase - Class B ......... 55,177,130 548,882,851
---------- -------------
CLASS C SHARES
Sold ........................... 8,829,570 87,600,592
Redeemed ....................... (872,774) (7,699,317)
---------- -------------
Net increase - Class C ......... 7,956,796 79,901,275
---------- -------------
CLASS D SHARES
Sold ........................... 53,575 541,697
Redeemed ....................... (6,246) (48,844)
---------- -------------
Net increase - Class D ......... 47,329 492,853
---------- -------------
Net increase in Fund ........... 69,811,354 $ 696,755,433
========== =============
</TABLE>
------------
* Commencement of operations.
6. FEDERAL INCOME TAX STATUS
Capital and foreign currency losses incurred after October 31 ("post-October
losses") within the taxable year are deemed to arise on the first business day
of the Fund's next taxable year. The Fund incurred and will elect to defer net
capital and foreign currency losses of approximately $132,654,000 and $8,000,
respectively, during fiscal 2000.
As of July 31, 2000, the Fund had temporary book/tax differences primarily
attributable to post-October losses and capital loss deferrals on wash sales
and permanent book/tax differences primarily attributable to a net operating
loss and nondeductible expenses. To reflect reclassifications arising from the
permanent differences, paid-in-capital was charged $1,552,158, net realized
loss was credited $306 and net investment loss was credited $1,551,852.
15
<PAGE>
Morgan Stanley Dean Witter 21st Century Trend Fund
Notes to Financial Statements July 31, 2000, continued
7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into forward foreign currency contracts ("forward
contracts") to facilitate settlement of foreign currency denominated portfolio
transactions or to manage foreign currency exposure associated with foreign
currency denominated securities.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Fund bears the risk
of an unfavorable change in the foreign exchange rates underlying the forward
contracts. Risks may also arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their contracts.
At July 31, 2000, there were outstanding forward contracts.
16
<PAGE>
Morgan Stanley Dean Witter 21st Century Trend Fund
Financial Highlights
Selected ratios and per share data for a share of beneficial interest
outstanding throughout the period:
<TABLE>
<CAPTION>
FOR THE PERIOD FEBRUARY 25, 2000*
THROUGH JULY 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) .................. - (0.03) (0.03) 0.01
Net realized and unrealized loss .............. (1.62) (1.62) (1.62) (1.63)
------ ------ ------ ------
Total loss from investment operations .......... (1.62) (1.65) (1.65) (1.62)
------ ------ ------ ------
Net asset value, end of period ................. $ 8.38 $ 8.35 $ 8.35 $ 8.38
====== ====== ====== ======
TOTAL RETURN+(1) ............................... (16.20)% (16.50)% (16.50)% (16.20)%
RATIOS TO AVERAGE NET ASSETS (2)(3):
Expenses ....................................... 1.29 % 2.04 % 2.04 % 1.04 %
Net investment income (loss) ................... 0.06 % (0.69)% (0.69)% 0.31 %
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........ $55,552 $460,663 $66,448 $418
Portfolio turnover rate (1) .................... 195 % 195 % 195 % 195 %
</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
17
<PAGE>
MORGAN STANLEY DEAN WITTER 21ST CENTURY TREND FUND
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF MORGAN STANLEY DEAN WITTER 21ST CENTURY TREND FUND:
We have audited the accompanying statement of assets and liabilities of Morgan
Stanley Dean Witter 21st Century Trend Fund (the "Fund"), including the
portfolio of investments, as of July 31, 2000, and the related statements of
operations and changes in net assets, and financial highlights for the period
February 25, 2000 (commencement of operations) to July 31, 2000. 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.
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 at July
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, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Morgan Stanley Dean
Witter 21st Century Trend Fund as of July 31, 2000, the results of its
operations, the changes in its net assets and the financial highlights for the
period February 25, 2000 (commencement of operations) to July 31, 2000 in
conformity with accounting principles generally accepted in the United States
of America.
Deloitte & Touche LLP
New York, New York
September 18, 2000
18
<PAGE>
MORGAN STANLEY DEAN WITTER 21ST CENTURY TREND FUND
CHANGE IN INDEPENDENT ACCOUNTANTS
On July 1, 2000 PricewaterhouseCoopers LLP resigned as independent accountants
of the Fund.
The report of PricewaterhouseCoopers LLP on the financial statements of the Fund
as of November 11, 1999 contained no adverse opinion or disclaimer of opinion
and was not qualified or modified as to uncertainty, audit scope or accounting
principle.
From November 11, 1999 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 statement.
The Fund, with the approval of its Board of Trustees and its Audit Committee,
engaged Deloitte & Touche LLP as its new independent accountants for the year
ended July 31, 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
Michelle Kaufman
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
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
21ST CENTURY
TREND FUND
[GRAPHIC OMITTED]
ANNUAL REPORT
JULY 31, 2000
