MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND, N-30D, 1999-07-20

MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
N-30D, 1999-07-20

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<PAGE>

MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE TWO WORLD TRADE CENTER,
FUND NEW YORK, NEW YORK 10048
"BEST IDEAS" PORTFOLIO
LETTER TO THE SHAREHOLDERS MAY 31, 1999

DEAR SHAREHOLDER:

During the twelve-month period ended May 31, 1999, there were as many cyclical
shifts and volatile rotations as have occurred in some ten-year economic cycles.
This period witnessed new levels of asset price fluctuation and required
investment managers to engage in nimble trading strategies to avoid falling
victim to emotional, knee-jerk investor reactions.

MARKET OVERVIEW

The period under review began with a sharp correction in global equity markets
resulting from a number of currency devaluations in emerging Asian economies. In
1997 and the beginning of 1998, that region's economic boom led to extreme
valuation levels in local markets that dangerously stretched balance sheets for
individuals, corporations and governments alike. In the summer of 1998 the boom
turned to bust and stock market crashes in Malaysia, Singapore, Thailand and
Indonesia resulted from the delinking -- and subsequent devaluations -- of those
countries' currencies. From July to September, global equity markets suffered a
severe correction as fears of a deflationary spiral took hold across the globe.

Fortunately, corporate profits in the United States and Europe continued to
benefit from increased productivity and began to stage a comeback by the fall of
1998. Most global markets began to recover in earnest when the U.S. Federal
Reserve Board lowered interest rates in a dramatic and rapid fashion in the
fourth quarter of 1998 to try to mitigate the impact of global economic
uncertainty.

As other central banks around the globe accelerated their pace of easing
monetary policies, concerns began to shift again, this time from price deflation
to rapid global growth and potential price inflation. From the end of February
to the end of May 1999, equity markets marked time, masking a powerful rotation
from growth stocks to long-out-of-favor industrials, basic materials and energy
companies -- precisely the types of companies that would benefit most from
global economic growth.

<PAGE>
MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO
LETTER TO THE SHAREHOLDERS MAY 31, 1999, CONTINUED

PERFORMANCE

For the fiscal year ended May 31, 1999, Morgan Stanley Dean Witter Competitive
Edge Fund "Best Ideas" Portfolio's Class A, B, C and D shares returned 5.01
percent, 4.27 percent, 4.44 percent and 5.26 percent, respectively. Performance
of the Portfolio's four share classes varies because of differing expenses.
During the same period, the Lipper Global Funds Index returned 4.58 percent,
while the Morgan Stanley Capital International World Index (MSCI World Index)
returned 13.54 percent. The accompanying chart compares the Portfolio's
performance with that of the MSCI World and Lipper indexes.

The Portfolio's performance during the period was consistent with that of other
funds in its Lipper peer group. The Portfolio and its peer group significantly
underperformed the MSCI World Index during the period. This underperformance can
be attributed to regional allocation. The two best-performing regions in the
MSCI World Index, North America and the Pacific, represented a much larger
portion of the index than their comparable representations in the Portfolio. As
the North American and Pacific markets climbed in price and valuation, other
markets around the globe became more attractive, and the Portfolio's assets were
allocated to those regions (primarily the United Kingdom and the 11 European
countries denominated in euros) that we believe offer greater long-term value.

PORTFOLIO

The Portfolio continues to invest in stocks selected by the Morgan Stanley Dean
Witter Equity Research Department on the basis of their ability to demonstrate a
long-term, sustainable competitive edge over their rivals. The portfolio manager
then determines the weighting of each position and, consequently, the
Portfolio's country exposure.

As of May 31, 1999, the portfolio manager had invested 98.7 percent of the
Portfolio's net assets in 40 equity positions throughout the world, with the
remainder held in U.S. commercial paper. Equity holdings in companies based in
the United States represented approximately 58 percent of the Portfolio's total
assets, with the remainder diversified throughout 10 other countries. In
descending order, beginning with the largest exposure, these countries were
France, Japan, the United Kingdom, Hong Kong, Switzerland, Sweden, Finland, the
Netherlands, Australia and Germany.

The Portfolio's larger positions at the end of May included Clear Channel
Communications (broadcasting) and Cisco Systems (computer communications) in the
United States; Groupe Danone

2
<PAGE>
MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO
LETTER TO THE SHAREHOLDERS MAY 31, 1999, CONTINUED

(packaged foods) and TOTAL (oil refining/marketing) in France; Sony Corporation
(consumer electronics/appliances) and Fujitsu Inc. (computer hardware) in Japan
and Invensys PLC (industrial machinery/components) and Diageo PLC (alcoholic
beverages) in the United Kingdom.

LOOKING AHEAD

While the period under review certainly underscored the futility of attempting
to predict short-term market fluctuations, we have every confidence that the
Fund's holdings provide an outstanding array of globally diversified
opportunities for long-term equity investors. The next several months may hold
some uncertainty tied first to a recovering global economy and potentially
higher interest rates and, second, to the unknown impact of the Year 2000 (Y2K)
computer changeover. While these and other events may create near-term
volatility, we believe that staying the course with global leaders is a prudent
strategy for the long term.

On May 1, 1999, Mitchell M. Merin was named President of the Morgan Stanley Dean
Witter Funds. Mr. Merin is also the President and Chief Operating Officer of
Asset Management for Morgan Stanley Dean Witter & Co. and President, Chief
Executive Officer and Director of Morgan Stanley Dean Witter Advisors Inc., the
Fund's investment manager. He also serves as Chairman, Chief Executive Officer
and Director of the Fund's distributor and transfer agent.

We appreciate your ongoing support of Morgan Stanley Dean Witter Competitive
Edge Fund "Best Ideas" Portfolio and look forward to continuing to serve your
investment objectives.

Very truly yours,

[SIGNATURE] [SIGNATURE]
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
CHAIRMAN OF THE BOARD PRESIDENT

3
<PAGE>

MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE
FUND
"BEST IDEAS" PORTFOLIO
FUND PERFORMANCE MAY 31, 1999

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
Growth of $10,000 ($ in
Thousands)

Class A Class B Class C Class D MSCI IX (4) LIPPER (5)
<S> <C> <C> <C> <C> <C> <C>
February 25, 1998 $9,475 $10,000 $10,000 $10,000 $10,000 $10,000
May 31, 1998 $9,826 $10,350 $10,350 $10,380 $10,397 $10,565
May 31, 1999 10318 (3) 10392 (3) 10810 (3) 10926 (3) $11,804 $11,049
</TABLE>

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. PERFORMANCE FOR CLASS
A, CLASS B, CLASS C, AND CLASS D SHARES WILL VARY DUE TO DIFFERENCES IN
SALES CHARGES AND EXPENSES.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------------------------------------------------------------------------------
CLASS A SHARES* CLASS B SHARES**
- ----------------------------------------------- -----------------------------------------------
PERIOD ENDED 5/31/99 PERIOD ENDED 5/31/99
- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1 Year 5.01%(1) (0.51)%(2) 1 Year 4.27%(1) (0.73)%(2)
Since Inception (2/25/98) 7.00%(1) 2.51%(2) Since Inception (2/25/98) 6.24%(1) 3.10 %(2)
</TABLE>

<TABLE>
<CAPTION>
CLASS C SHARES+ CLASS D SHARES++
- ----------------------------------------------- -------------------------------------------------
PERIOD ENDED 5/31/99 PERIOD ENDED 5/31/99
- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1 Year 4.44%(1) 3.44%(2) 1 Year 5.26%(1)
Since Inception (2/25/98) 6.38%(1) 6.38%(2) Since Inception (2/25/98) 7.29%(1)
</TABLE>

- ------------------------
(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 assuming a complete redemption on May 31, 1999.
(4) The Morgan Stanley Capital International World Index (MSCI) measures the
performance for a diverse range of global stock markets including the U.S.,
Canada, Europe, Australia, New Zealand and the Far East. The index does not
include any expenses, fees or charges. The index is unmanaged and should
not be considered an investment.
(5) The Lipper Global Fund Index is an equally-weighted performance index of
the largest qualifying funds (based on net assets) in the Lipper Global
Funds objective. The Index, which is adjusted for capital gains
distributions and income dividends, is unmanaged and should not be
considered an investment. There are currently 30 funds in the index.
* The maximum front-end sales charge for Class A shares 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.

4
<PAGE>
MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO
PORTFOLIO OF INVESTMENTS MAY 31, 1999
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON AND PREFERRED STOCKS (98.7%)
AUSTRALIA (2.6%)
MEDIA CONGLOMERATES
6,220,200 News Corporation Ltd. (Pref.)...................................................... $ 47,425,002
--------------

FINLAND (2.9%)
PAPER
1,852,500 UPM-Kymmene Oyj.................................................................... 54,283,215
--------------
FRANCE (8.0%)
MULTI-LINE INSURANCE
336,000 AXA................................................................................ 38,717,079
--------------
OIL REFINING/MARKETING
467,000 Total S.A. (B Shares).............................................................. 56,734,055
--------------
PACKAGED FOODS
193,850 Groupe Danone...................................................................... 53,366,750
--------------
TOTAL FRANCE....................................................................... 148,817,884
--------------

GERMANY (2.1%)
MOTOR VEHICLES
60,000 Bayerische Motoren Werke (BMW) AG.................................................. 38,416,752
--------------

JAPAN (7.3%)
COMPUTER HARDWARE
2,745,000 Fujitsu Ltd........................................................................ 45,580,764
--------------
CONSUMER ELECTRONICS/APPLIANCES
633,630 Sony Corp.......................................................................... 59,170,052
--------------
SPECIALTY CHEMICALS
1,008,400 Shin-Etsu Chemical Co., Ltd........................................................ 31,085,080
--------------
TOTAL JAPAN........................................................................ 135,835,896
--------------
NETHERLANDS (2.7%)
ALCOHOLIC BEVERAGES
911,000 Heineken NV........................................................................ 50,634,510
--------------
SWEDEN (3.0%)
LIFE INSURANCE
3,225,000 Skandia Forsakrings AB............................................................. 55,296,425
--------------

<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>

SWITZERLAND (3.1%)
BUILDING MATERIALS
48,300 Holderbank Financiere Glarus AG (B Shares)......................................... $ 57,384,887
--------------

UNITED KINGDOM (8.6%)
ALCOHOLIC BEVERAGES
4,436,000 Diageo PLC......................................................................... 46,633,603
--------------
DIVERSIFIED FINANCIAL SERVICES
1,900,000 HSBC Holdings PLC.................................................................. 61,981,819
--------------
INDUSTRIAL MACHINERY/COMPONENTS
11,340,000 Invensys PLC....................................................................... 51,661,621
--------------

TOTAL UNITED KINGDOM............................................................... 160,277,043
--------------

UNITED STATES (58.4%)
AIR FREIGHT/DELIVERY SERVICES
888,000 FDX Corp.*......................................................................... 48,895,500
--------------
BEVERAGES - NON-ALCOHOLIC
1,300,000 Coca-Cola Enterprises, Inc......................................................... 47,125,000
--------------
BROADCASTING
785,000 Clear Channel Communications, Inc.*................................................ 51,859,062
--------------
COMPUTER COMMUNICATIONS
467,000 Cisco Systems, Inc.*............................................................... 50,873,813
--------------
COMPUTER HARDWARE
464,000 EMC Corp.*......................................................................... 46,226,000
--------------
COMPUTER SOFTWARE
490,000 Microsoft Corp.*................................................................... 39,536,875
--------------
DISCOUNT CHAINS
910,000 Wal-Mart Stores, Inc............................................................... 38,788,750
--------------
DIVERSIFIED FINANCIAL SERVICES
344,000 American Express Co................................................................ 41,688,500
--------------
DIVERSIFIED MANUFACTURING
390,000 Tyco International Ltd............................................................. 34,076,250
--------------
ELECTRICAL PRODUCTS
757,000 Emerson Electric Co................................................................ 48,353,375
384,000 General Electric Co................................................................ 39,048,000
--------------
87,401,375
--------------
INTERNET SERVICES
330,000 America Online, Inc.*.............................................................. 39,393,750
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO
PORTFOLIO OF INVESTMENTS MAY 31, 1999, CONTINUED

<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
MAJOR BANKS
1,233,300 Bank of New York Co., Inc.......................................................... $ 44,090,475
--------------
MAJOR CHEMICALS
700,000 Du Pont (E.I.) de Nemours & Co., Inc. ............................................. 45,806,250
--------------
MAJOR PHARMACEUTICALS
734,000 American Home Products Corp........................................................ 42,296,750
590,000 Lilly (Eli) & Co................................................................... 42,148,125
--------------
84,444,875
--------------
MAJOR U.S. TELECOMMUNICATIONS
480,000 MCI WorldCom, Inc.*................................................................ 41,430,000
--------------
MEDIA CONGLOMERATES
1,390,800 Disney (Walt) Co. ................................................................. 40,507,050
602,000 Time Warner Inc. .................................................................. 40,973,625
--------------
81,480,675
--------------
MEDICAL EQUIPMENT & SUPPLIES
620,000 Medtronic, Inc..................................................................... 44,020,000
--------------
OILFIELD SERVICES/EQUIPMENT
1,110,000 Halliburton Co..................................................................... 45,926,250
720,000 Schlumberger Ltd................................................................... 43,335,000
--------------
89,261,250
--------------
SEMICONDUCTORS
724,000 Intel Corp. ....................................................................... 39,322,250
--------------
SERVICES TO THE HEALTH INDUSTRY
1,050,000 Quintiles Transnational Corp.*..................................................... 42,525,000
--------------
TELECOMMUNICATIONS EQUIPMENT
840,000 Lucent Technologies Inc. .......................................................... 47,775,000
--------------

TOTAL UNITED STATES................................................................ 1,086,020,650
--------------

TOTAL COMMON AND PREFERRED STOCKS
(IDENTIFIED COST $1,631,847,495)................................................... 1,834,392,264
--------------
</TABLE>

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT (a) (1.8%)
U.S. GOVERNMENT AGENCY
$ 33,900 Federal Home Loan Mortgage Corp. 4.72% due 06/01/99 (AMORTIZED COST $33,900,000)... $ 33,900,000
--------------
</TABLE>

<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $1,665,747,495) (b).................................................... 100.5% 1,868,292,264

LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS.......................................... (0.5) (9,619,457)
------ ---------------

NET ASSETS.............................................................................. 100.0% $ 1,858,672,807
------ ---------------
------ ---------------
</TABLE>

- ---------------------

* Non-income producing security.
(a) Security was 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 $232,208,923 and the
aggregate gross unrealized depreciation is $29,664,154, resulting in net
unrealized appreciation of $202,544,769.

SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO
PORTFOLIO OF INVESTMENTS MAY 31, 1999, CONTINUED
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Air Freight/Delivery Services................................................... $ 48,895,500 2.6%
Alcoholic Beverages............................................................. 97,268,113 5.2
Beverages - Non-Alcoholic....................................................... 47,125,000 2.5
Broadcasting.................................................................... 51,859,062 2.8
Building Materials.............................................................. 57,384,887 3.1
Computer Communications......................................................... 50,873,813 2.7
Computer Hardware............................................................... 91,806,764 4.9
Computer Software............................................................... 39,536,875 2.1
Consumer Electronics/Appliances................................................. 59,170,052 3.2
Discount Chains................................................................. 38,788,750 2.1
Diversified Financial Services.................................................. 103,670,319 5.6
Diversified Manufacturing....................................................... 34,076,250 1.8
Electrical Products............................................................. 87,401,375 4.7
Industrial Machinery/Components................................................. 51,661,621 2.8
Internet Services............................................................... 39,393,750 2.1
Life Insurance.................................................................. 55,296,425 3.0
Major Banks..................................................................... 44,090,475 2.4
Major Chemicals................................................................. 45,806,250 2.5
Major Pharmaceuticals........................................................... 84,444,875 4.5
Major U.S. Telecommunications................................................... 41,430,000 2.2
Media Conglomerates............................................................. 128,905,677 6.9

<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Medical Equipment & Supplies.................................................... $ 44,020,000 2.4%
Motor Vehicles.................................................................. 38,416,752 2.1
Multi-Line Insurance............................................................ 38,717,079 2.1
Oil Refining/Marketing.......................................................... 56,734,055 3.1
Oilfield Services/Equipment..................................................... 89,261,250 4.8
Packaged Foods.................................................................. 53,366,750 2.9
Paper........................................................................... 54,283,215 2.9
Semiconductors.................................................................. 39,322,250 2.1
Services To The Health Industry................................................. 42,525,000 2.3
Specialty Chemicals............................................................. 31,085,080 1.7
Telecommunications Equipment.................................................... 47,775,000 2.6
U.S. Government Agency.......................................................... 33,900,000 1.8
-------------- -----
$1,868,292,264 100.5%
-------------- -----
-------------- -----
</TABLE>

<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Common Stocks................................................................... $1,786,967,262 96.1%
Preferred Stock................................................................. 47,425,002 2.6
Short-Term Investment........................................................... 33,900,000 1.8
-------------- -----
$1,868,292,264 100.5%
-------------- -----
-------------- -----
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1999

<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,665,747,495).......................................................... $1,868,292,264
Cash........................................................................................ 128,244
Receivable for:
Foreign withholding taxes reclaimed..................................................... 2,157,250
Dividends............................................................................... 945,168
Shares of beneficial interest sold...................................................... 809,112
Deferred organizational expenses............................................................ 105,073
Prepaid expenses and other assets........................................................... 153,332
--------------
TOTAL ASSETS........................................................................... 1,872,590,443
--------------
LIABILITIES:
Payable for:
Investments purchased................................................................... 10,432,884
Plan of distribution fee................................................................ 1,277,724
Investment management fee............................................................... 1,054,167
Shares of beneficial interest repurchased............................................... 956,549
Accrued expenses and other payables......................................................... 196,312
--------------
TOTAL LIABILITIES...................................................................... 13,917,636
--------------
NET ASSETS............................................................................. $1,858,672,807
--------------
--------------
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................. $1,731,705,495
Net unrealized appreciation................................................................. 202,434,673
Accumulated net investment loss............................................................. (53,762)
Accumulated net realized loss............................................................... (75,413,599)
--------------
NET ASSETS............................................................................. $1,858,672,807
--------------
--------------
CLASS A SHARES:
Net Assets.................................................................................. $98,784,413
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 9,110,813
NET ASSET VALUE PER SHARE.............................................................. $10.84
--------------
--------------
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE)........................................ $11.44
--------------
--------------
CLASS B SHARES:
Net Assets.................................................................................. $1,614,228,992
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 150,068,555
NET ASSET VALUE PER SHARE.............................................................. $10.76
--------------
--------------
CLASS C SHARES:
Net Assets.................................................................................. $142,048,476
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 13,175,973
NET ASSET VALUE PER SHARE.............................................................. $10.78
--------------
--------------
CLASS D SHARES:
Net Assets.................................................................................. $3,610,926
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 332,322
NET ASSET VALUE PER SHARE.............................................................. $10.87
--------------
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO
FINANCIAL STATEMENTS, CONTINUED

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1999

<TABLE>
<S> <C>
NET INVESTMENT LOSS:

INCOME
Dividends (net of $1,359,859 foreign withholding tax)......................................... $ 22,384,835
Interest...................................................................................... 3,125,089
------------

TOTAL INCOME............................................................................. 25,509,924
------------

EXPENSES
Plan of distribution fee (Class A shares)..................................................... 269,275
Plan of distribution fee (Class B shares)..................................................... 17,044,208
Plan of distribution fee (Class C shares)..................................................... 1,351,991
Investment management fee..................................................................... 12,794,605
Transfer agent fees and expenses.............................................................. 3,048,971
Custodian fees................................................................................ 490,850
Registration fees............................................................................. 300,560
Shareholder reports and notices............................................................... 199,668
Professional fees............................................................................. 78,843
Organizational expenses....................................................................... 32,854
Trustees' fees and expenses................................................................... 11,845
Other......................................................................................... 44,837
------------

TOTAL EXPENSES........................................................................... 35,668,507
------------

NET INVESTMENT LOSS...................................................................... (10,158,583)
------------

NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss on:
Investments............................................................................... (61,968,287)
Foreign exchange transactions............................................................. (56,367)
------------

NET LOSS................................................................................. (62,024,654)
------------
Net change in unrealized appreciation/depreciation on:
Investments............................................................................... 149,051,718
Translation of forward foreign currency contracts, other assets and liabilities
denominated in foreign currencies....................................................... (85,624)
------------

NET APPRECIATION......................................................................... 148,966,094
------------

NET GAIN................................................................................. 86,941,440
------------

NET INCREASE.................................................................................. $ 76,782,857
------------
------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO
FINANCIAL STATEMENTS, CONTINUED

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FEBRUARY 25, 1998*
ENDED THROUGH
MAY 31, 1999 MAY 31, 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>

INCREASE (DECREASE) IN NET ASSETS:

OPERATIONS:
Net investment income (loss)........................................ $ (10,158,583) $ 4,398,617
Net realized loss................................................... (62,024,654) (13,168,378)
Net change in unrealized appreciation............................... 148,966,094 53,468,579
-------------- ----------------------

NET INCREASE................................................... 76,782,857 44,698,818
-------------- ----------------------

DIVIDENDS TO SHAREHOLDERS FROM NET
INVESTMENT INCOME:
Class A shares...................................................... (518,953) --
Class B shares...................................................... (5,088,869) --
Class C shares...................................................... (458,864) --
Class D shares...................................................... (41,260) --
-------------- ----------------------

TOTAL DIVIDENDS................................................ (6,107,946) --
-------------- ----------------------
Net increase (decrease) from transactions in shares of beneficial
interest.......................................................... (223,088,882) 1,966,337,960
-------------- ----------------------

NET INCREASE (DECREASE)........................................ (152,413,971) 2,011,036,778

NET ASSETS:
Beginning of period................................................. 2,011,086,778 50,000
-------------- ----------------------

END OF PERIOD
(INCLUDING AN ACCUMULATED NET INVESTMENT LOSS OF $53,762 AND
UNDISTRIBUTED NET INVESTMENT INCOME OF $5,900,361,
RESPECTIVELY)................................................... $1,858,672,807 $ 2,011,086,778
-------------- ----------------------
-------------- ----------------------
</TABLE>

- ---------------------

* Commencement of operations.

SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO
NOTES TO FINANCIAL STATEMENTS MAY 31, 1999

1. ORGANIZATION AND ACCOUNTING POLICIES

Morgan Stanley Dean Witter Competitive Edge Fund (the "Fund") is registered
under the Investment Company Act of 1940, as amended (the "Act"), as a
diversified, open-end management investment company, which currently consists of
two separate Portfolios. The information contained in this report is for the
"Best Ideas" Portfolio (the "Portfolio"). The Portfolio's investment objective
is to provide long term capital growth. The Portfolio seeks to achieve its
objective by investing at least 80% of its net assets in common stocks of U.S.
and non-U.S. companies included on the "Best Ideas" list, a research compilation
assembled and maintained by Morgan Stanley Dean Witter Equity Research. The
Portfolio was organized as a Massachusetts business trust on October 16, 1997
and had no operations other than those relating to organizational matters and
the issuance of 1,250 shares of beneficial interest by each class for $12,500 of
each class to Morgan Stanley Dean Witter Advisors Inc. (the "Investment
Manager") to effect the Portfolio's initial capitalization. The Portfolio
commenced operations on February 25, 1998.

The Portfolio 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 stock exchange is valued at its latest sale price on
that exchange prior to the time when assets are valued; if there were no sales
that day, the security is valued at the latest bid price (in cases where 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
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

11
<PAGE>
MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO
NOTES TO FINANCIAL STATEMENTS MAY 31, 1999, CONTINUED

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; 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 respective life of the 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 Portfolio 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 Portfolio 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 Portfolio 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 foreign currency

12
<PAGE>
MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO
NOTES TO FINANCIAL STATEMENTS MAY 31, 1999, CONTINUED

gain or loss. The Portfolio 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.

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. ORGANIZATIONAL EXPENSES -- The Investment Manager incurred the organizational
expenses of the Portfolio in the amount of approximately $140,000 which have
been reimbursed for the full amount thereof. Such expenses have been deferred
and are being amortized on the straight-line method over a period not to exceed
five years from the commencement of operations.

2. INVESTMENT MANAGEMENT AGREEMENT

Pursuant to an Investment Management Agreement, the Portfolio pays the
Investment Manager a management fee, accrued daily and payable monthly, by
applying the following annual rates to the net assets of the Fund determined as
of the close of each business day: 0.65% of the portion of the daily net assets
not exceeding $1.5 billion and 0.625% of the portion of daily net assets
exceeding $1.5 billion.

Under the terms of the Agreement, in addition to managing the Portfolio's
investments, the Investment Manager maintains certain of the Portfolio's books
and records and furnishes, at its own

13
<PAGE>
MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO
NOTES TO FINANCIAL STATEMENTS MAY 31, 1999, CONTINUED

expense, office space, facilities, equipment, clerical, bookkeeping and certain
legal services and pays the salaries of all personnel, including officers of the
Portfolio 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 Portfolio.

3. PLAN OF DISTRIBUTION

Shares of the Portfolio are distributed by Morgan Stanley Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager.
The Portfolio has adopted a Plan of Distribution (the "Plan") pursuant to Rule
12b-1 under the Act. The Plan provides that the Portfolio will pay the
Distributor a fee which is accrued daily and paid monthly at the following
annual rates: (i) Class A -- up to 0.25% of the average daily net assets of
Class A; (ii) Class B -- 1.0% of the average daily net assets of Class B; and
(iii) Class C -- up to 1.0% of the average daily net assets of Class C. In the
case of Class A shares, amounts paid under the Plan are paid to the Distributor
for services provided. In the case of Class B and Class C shares, amounts paid
under the Plan are paid to the Distributor for (1) services provided and the
expenses borne by it and others in the distribution of the shares of these
Classes, including the payment of commissions for sales of these Classes and
incentive compensation to, and expenses of, Morgan Stanley Dean Witter Financial
Advisors and others who engage in or support distribution of the shares or who
service shareholder accounts, including overhead and telephone expenses; (2)
printing and distribution of prospectuses and reports used in connection with
the offering of these 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
Portfolio 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

14
<PAGE>
MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO
NOTES TO FINANCIAL STATEMENTS MAY 31, 1999, CONTINUED

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
Portfolio that such excess amounts, including carrying charges, totaled
$80,089,580 at May 31, 1999.

In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Portfolio 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 May 31, 1999, the distribution
fee was accrued for Class A shares and Class C shares at the annual rate of
0.24% and 0.83%, respectively.

The Distributor has informed the Portfolio that for the year ended May 31, 1999,
it received contingent deferred sales charges from certain redemptions of the
Portfolio's Class A shares, Class B shares and Class C shares of $31,943,
$7,118,234 and $316,659, respectively, and received $285,119 in front-end sales
charges from sales of the Portfolio's Class A shares. The respective
shareholders pay such charges which are not an expense of the Portfolio.

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 May 31, 1999 aggregated
$1,854,905,872 and $1,956,765,220, respectively.

For the year ended May 31, 1999, the Fund incurred brokerage commissions of
$2,226,782 with Morgan Stanley & Co., Inc., an affiliate of the Investment
Manager and Distributor, for portfolio transactions executed on behalf of the
Fund. At May 31, 1999, the Fund's payable for investments purchased included
unsettled trades with Morgan Stanley & Co., Inc. of $10,432,884.

Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Portfolio's transfer agent.

5. FEDERAL INCOME TAX STATUS

At May 31, 1999, the Fund had a net capital loss carryover of approximately
$60,680,000 which will be available through May 31, 2007 to offset future
capital gains to the extent provided by regulations.

15
<PAGE>
MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO
NOTES TO FINANCIAL STATEMENTS MAY 31, 1999, CONTINUED

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 currency losses
of approximately $54,000 during fiscal 1999.

As of May 31, 1999, 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,
foreign currency losses and nondeductible expenses. To reflect reclassifications
arising from the permanent differences, paid-in-capital was charged $10,368,773,
accumulated net realized loss was credited $56,367 and accumulated undistributed
net investment income was credited $10,312,406.

6. SHARES OF BENEFICIAL INTEREST

Transactions in shares of beneficial interest were as follows:

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FEBRUARY 25, 1998*
ENDED THROUGH
MAY 31, 1999 MAY 31, 1998
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
CLASS A
Sold.................................... 1,703,197 $ 16,901,264 11,592,880 $ 116,824,084
Reinvestment of dividends............... 49,227 485,379 -- --
Redeemed................................ (3,997,606) (41,066,748) (238,135) (2,486,285)
----------- ------------- ----------- --------------
Net increase (decrease) - Class A....... (2,245,182) (23,680,105) 11,354,745 114,337,799
----------- ------------- ----------- --------------

CLASS B
Sold.................................... 36,363,867 364,351,913 167,749,918 1,699,075,476
Reinvestment of dividends............... 485,760 4,770,136 -- --
Redeemed................................ (52,155,178) (526,365,062) (2,377,063) (24,804,561)
----------- ------------- ----------- --------------
Net increase (decrease) - Class B....... (15,305,551) (157,243,013) 165,372,855 1,674,270,915
----------- ------------- ----------- --------------

CLASS C
Sold.................................... 3,595,166 35,695,226 17,653,992 178,479,819
Reinvestment of dividends............... 44,094 432,997 -- --
Redeemed................................ (7,517,956) (76,432,043) (600,572) (6,271,272)
----------- ------------- ----------- --------------
Net increase (decrease) - Class C....... (3,878,696) (40,303,820) 17,053,420 172,208,547
----------- ------------- ----------- --------------

CLASS D
Sold.................................... 368,735 3,798,090 519,814 5,520,699
Reinvestment of dividends............... 2,677 26,448 -- --
Redeemed................................ (560,154) (5,686,482) -- --
----------- ------------- ----------- --------------
Net increase (decrease) - Class D....... (188,742) (1,861,944) 519,814 5,520,699
----------- ------------- ----------- --------------
Net increase (decrease) in Fund......... (21,618,171) $(223,088,882) 194,300,834 $1,966,337,960
----------- ------------- ----------- --------------
----------- ------------- ----------- --------------
</TABLE>

- ---------------------

* Commencement of operations.

16
<PAGE>
MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO
NOTES TO FINANCIAL STATEMENTS MAY 31, 1999, CONTINUED

7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS

The Portfolio 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 Portfolio 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 May 31, 1999, there were no outstanding forward contracts.

17
<PAGE>
MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO
FINANCIAL HIGHLIGHTS

Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:

<S> <C> <C>
CLASS B SHARES++

SELECTED PER SHARE DATA:

Net asset value, beginning of period..................... $ 10.35 $ 10.00
------ ------

Income (loss) from investment operations:
Net investment income (loss).......................... (0.06) 0.03
Net realized and unrealized gain...................... 0.50 0.32
------ ------

Total income from investment operations.................. 0.44 0.35
------ ------

Less dividends from net investment income................ (0.03) --
------ ------

Net asset value, end of period........................... $ 10.76 $ 10.35
------ ------
------ ------

TOTAL RETURN+............................................ 4.27% 3.50%(1)

RATIOS TO AVERAGE NET ASSETS:
Expenses................................................. 1.86%(3) 1.88%(2)

Net investment income (loss)............................. (0.58)%(3) 0.92%(2)

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.................. $1,614,229 $1,711,433

Portfolio turnover rate.................................. 97% 19%(1)
</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
18
<PAGE>
MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO
FINANCIAL HIGHLIGHTS, CONTINUED

<TABLE>
<CAPTION>
FOR THE
YEAR FOR THE PERIOD
ENDED FEBRUARY 25, 1998*
MAY 31, THROUGH
1999 MAY 31, 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period..................... $ 10.37 $ 10.00
---------- ------
Income from investment operations:
Net investment income................................. 0.02 0.05
Net realized and unrealized gain...................... 0.49 0.32
---------- ------
Total income from investment operations.................. 0.51 0.37
---------- ------
Less dividends from net investment income................ (0.04) --
---------- ------
Net asset value, end of period........................... $ 10.84 $ 10.37
---------- ------
---------- ------
TOTAL RETURN+............................................ 5.01% 3.70%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................. 1.10%(3) 1.13%(2)
Net investment income.................................... 0.18%(3) 1.66%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.................. $98,784 $117,750
Portfolio turnover rate.................................. 97% 19%(1)
</TABLE>

<TABLE>
<S> <C> <C>
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period...................... $ 10.35 $10.00
--------- ------
Income (loss) from investment operations:
Net investment income (loss)........................... (0.04) 0.03
Net realized and unrealized gain....................... 0.50 0.32
--------- ------
Total income from investment operations................... 0.46 0.35
--------- ------
Less dividends from net investment income................. (0.03) --
--------- ------
Net asset value, end of period............................ $ 10.78 $10.35
--------- ------
--------- ------
TOTAL RETURN+............................................. 4.44% 3.50%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................. 1.69%(3) 1.88%(2)
Net investment income (loss).............................. (0.41)%(3) 0.91%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands................... $142,048 $176,497
Portfolio turnover rate................................... 97% 19%(1)
</TABLE>

- ---------------------

SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO
FINANCIAL HIGHLIGHTS, CONTINUED

<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
YEAR FEBRUARY 25,
ENDED 1998*
MAY 31, THROUGH
1999 MAY 31, 1998
- -----------------------------------------------------------------------------------------

<S> <C> <C>
CLASS D SHARES++

SELECTED PER SHARE DATA:

Net asset value, beginning of period..................... $ 10.38 $10.00
--------- ------

Income from investment operations:
Net investment income................................. 0.03 0.08
Net realized and unrealized gain...................... 0.51 0.30
--------- ------

Total income from investment operations.................. 0.54 0.38
--------- ------

Less dividends from net investment income................ (0.05) --
--------- ------

Net asset value, end of period........................... $ 10.87 $10.38
--------- ------
--------- ------

TOTAL RETURN+............................................ 5.26% 3.80%(1)

RATIOS TO AVERAGE NET ASSETS:
Expenses................................................. 0.86%(3) 0.92%(2)

Net investment income.................................... 0.42%(3) 2.94%(2)

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.................. $ 3,611 $5,407

Portfolio turnover rate.................................. 97% 19%(1)
</TABLE>

- ---------------------

* Commencement of operations.
++ 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
20
<PAGE>

MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE
FUND
"BEST IDEAS" PORTFOLIO
REPORT OF INDEPENDENT ACCOUNTANTS

TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND -- "BEST IDEAS" PORTFOLIO

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter
Competitive Edge Fund -- "Best Ideas" Portfolio (the "Portfolio") at May 31,
1999, the results of its operations for the year then ended, and the changes in
its net assets and the financial highlights for the year then ended and for the
period February 25, 1998 (commencement of operations) through May 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Portfolio's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at May 31,
1999 by correspondence with the custodian and a broker, provide a reasonable
basis for the opinion expressed above.

PricewaterhouseCoopers LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
JULY 6, 1999

1999 FEDERAL TAX NOTICE (UNAUDITED)

For the year ended May 31, 1999, 100% of the income paid to
shareholders qualified for the dividends received deduction
available to corporations.

21
<PAGE>

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

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

This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of the
Fund.

This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.

MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND "BEST IDEAS" PORTFOLIO

[GRAPHIC]

ANNUAL REPORT
MAY 31, 1999