MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND, 485BPOS, 1999-07-15

MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
485BPOS, 1999-07-15

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 15, 1999

FILE NOS.:333-38297

811-8455

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------

FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 3 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/
AMENDMENT NO. 4 /X/
-------------------

MORGAN STANLEY DEAN WITTER COMPETITIVE
EDGE FUND

(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600

BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)

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

COPY TO:
DAVID M. BUTOWSKY, ESQ.
MAYER, BROWN & PLATT
1675 BROADWAY
NEW YORK, NEW YORK 10019

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

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:

As soon as practicable after this Post-Effective Amendment becomes effective.

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)

___ immediately upon filing pursuant to paragraph (b)

_X_ on August 10, 1999 pursuant to paragraph (b)

___ 60 days after filing pursuant to paragraph (a)

___ on (date) pursuant to paragraph (a) of rule 485.

AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS

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- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS - JULY , 1999

Morgan Stanley Dean Witter
COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO

[COVER PHOTO]

A MUTUAL FUND THAT SEEKS LONG-TERM CAPITAL GROWTH

The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon
the adequacy of this Prospectus. Any representation to the contrary is a
criminal offense.
<PAGE>
CONTENTS

<TABLE>
<S> <C> <C>
The Portfolio Investment Objective.................................. 1
Principal Investment Strategies....................... 1
Principal Risks....................................... 2
Past Performance...................................... 5
Fees and Expenses..................................... 5
Additional Risk Information........................... 6
Management of the Portfolio........................... 7

Shareholder Information Pricing Portfolio Shares.............................. 8
How to Buy Shares..................................... 8
How to Exchange Shares................................ 10
How to Sell Shares.................................... 11
Distributions......................................... 13
Tax Consequences...................................... 14
Share Class Arrangements.............................. 14

Financial Highlights ...................................................... 22

Our Family of Funds ...................................................... Inside Back Cover

THIS PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT THE MORGAN STANLEY
DEAN WITTER COMPETITIVE EDGE FUND -- "BEST IDEAS" PORTFOLIO. PLEASE READ
IT CAREFULLY AND KEEP IT FOR FUTURE REFERENCE.
</TABLE>

<PAGE>
[Sidebar]
CAPITAL GROWTH
AN INVESTMENT OBJECTIVE HAVING THE GOAL OF SELECTING SECURITIES WITH THE
POTENTIAL TO RISE IN PRICE RATHER THAN PAY OUT INCOME.
[End Sidebar]

THE PORTFOLIO

[ICON] INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------

Morgan Stanley Dean Witter Competitive Edge Fund -- "Best Ideas"
Portfolio seeks long-term capital growth.

[ICON] PRINCIPAL INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
The Portfolio will normally invest at least 80% of its assets in
common stock (including depository receipts) of companies included in
the "Best Ideas" subgroup of "Global Investing: The Competitive Edge
List," a research compilation assembled by Morgan Stanley Dean Witter
("MSDW") Equity Research -- and other securities selected by the
Portfolio's "Investment Manager," Morgan Stanley Dean Witter Advisors
Inc.

THE COMPETITIVE EDGE "BEST IDEAS" LIST. MSDW Equity Research is
recognized as a world leader in global financial research and
provides comprehensive research and in-depth knowledge about general
markets and specific companies from around the world. It believes
that companies with a sustainable competitive edge in the operations
of their businesses are worth more than their weaker competitors.
Through its ongoing research and analysis, MSDW Equity Research has
developed and undertaken a comprehensive study which it calls "Global
Investing: The Competitive Edge" which represents the list of those
companies.

MSDW Equity Research group's research analysts and strategists
presently evaluate approximately 2,100 companies in 21 industry
sectors worldwide. An initial comprehensive review was conducted in
October 1996 and identified 238 of these companies as having a
long-term sustainable competitive advantage in the global arena (the
"Competitive Edge List"). The criteria used to select companies that
have a global competitive advantage vary according to industry
sector. The Competitive Edge List is currently updated quarterly.
From the Competitive Edge List, MSDW Equity Research then assembles a
subgroup of approximately 40 companies which it considers at that
time to be the most attractive investment opportunities of the
companies identified as having a long-term sustainable competitive
advantage in the global arena (the "Competitive Edge 'Best Ideas'
List"). The Competitive Edge "Best Ideas" List is updated
continuously; a list of the companies contained on the Competitive
Edge "Best Ideas" List as of July , 1999 is set forth in the
Statement of Additional Information.

The Investment Manager intends to generally invest at least 1% and
not more than 5% of the Portfolio's assets in each company on the
Competitive Edge "Best Ideas" List. The Portfolio will purchase any
security which is added to the Competitive Edge "Best Ideas" List,
and generally will sell a security which is eliminated from the List
as soon as practicable after the List has been updated. Accordingly,
securities may be purchased and sold by the Portfolio when such
purchases and sales would not be made under traditional investment
criteria.

1
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The Portfolio may at times purchase securities that are not included
on the Competitive Edge "Best Ideas" List but are on the Competitive
Edge List or, in the event that the Investment Manager believes that
there are no suitable securities on the Competitive Edge List, the
Portfolio may purchase securities outside the list. Securities that
are not on the Competitive Edge "Best Ideas" List generally will not
exceed 35% of the Portfolio's total assets.

Common Stock is a share ownership or equity interest in a
corporation. It may or may not pay dividends, as some companies
reinvest all of their profits back into their businesses, while
others pay out some of their profits to shareholders as dividends. A
depository receipt is generally issued by a bank or financial
institution and represents an ownership interest in the common stock
or other equity securities of a foreign company.

The percentage limitations relating to the composition of the
Portfolio apply at the time the Portfolio acquires an investment and
refer to the Portfolio's net assets, unless otherwise noted.
Subsequent percentage changes that result from market fluctuations
will not require the Portfolio to sell any portfolio security. The
Portfolio may change its principal investment strategies without
shareholder approval; however, you would be notified of any changes.

[ICON] PRINCIPAL RISKS
- --------------------------------------------------------------------------------
There is no assurance that the Portfolio will achieve its investment
objective. The Portfolio's share price will fluctuate with changes in
the market value of its portfolio securities. When you sell
Portfolio's shares, they may be worth less than what you paid for
them and, accordingly, you can lose money investing in this
Portfolio.

COMMON STOCK. A principal risk of investing in the Portfolio is
associated with its investments in common stock. In particular the
prices of common stocks may fluctuate widely in response to
activities specific to the company as well as general market,
economic and political conditions.

COMPETITIVE EDGE "BEST IDEAS" LIST. The Portfolio invests principally
in securities included on the Competitive Edge "Best Ideas" List
which currently consists of 40 companies. As a result of the small
universe of stocks in which the Portfolio invests, it may be subject
to greater risks than would a more diversified company. At times the
Portfolio may be restricted in its ability to purchase or sell
securities on the Competitive Edge "Best Ideas" List as a result of
activities of affiliates of the Investment Manager. In addition,
performance of the securities included in the List cannot be used to
predict the performance of the Portfolio, an actively managed mutual
fund.

The Competitive Edge "Best Ideas" List and the Competitive Edge List
are not compiled with any particular client or product in mind and
are not, and will not be, compiled with the Fund in mind. When
selecting the companies for the lists, MSDW Equity Research

2
<PAGE>
does not take into account country or currency risks, and country or
industry sector diversification concerns. MSDW publishes other lists
of recommended securities that could be appropriate for Portfolio
investors but which will not be used by the Investment Manager for
choosing securities for the Portfolio. MSDW Equity Research could at
any time cease publishing the Competitive Edge "Best Ideas" List or
the Competitive Edge List. In that event the Board of Trustees will
make a determination of how to proceed in the best interest of
shareholders of the Portfolio consistent with the Portfolio's
investment objective.

The activities of affiliates of the Investment Manager, including but
not limited to Dean Witter Reynolds Inc. or Morgan Stanley & Co.
Incorporated, may from time to time limit the Portfolio's ability to
purchase or sell securities on the Competitive Edge "Best Ideas"
List. In addition, the List is available to other clients of MSDW and
its affiliates, including the Investment Manager, as well as the
Portfolio. The list is also subject to restrictions related to MSDW's
other businesses, and particular securities may or may not be on the
list due to other business concerns of, or legal restrictions
applicable to, MSDW.

As a diversified financial services firm, with three primary
businesses -- securities, asset management and credit services --
MSDW provides a wide range of financial services to issuers of
securities and investors in securities. MSDW and others associated
with it may create markets or specialize in, have positions in and
affect transactions in, securities of companies included on its
research lists and may also perform or seek to perform investment
banking services for those companies. Within the last three years,
MSDW may have managed or co-managed public security offerings for
companies included on the research lists, and they or their employees
may have a long or short position on holdings in the securities, or
options on securities, or other related investments of companies
included on their research lists.

FOREIGN SECURITIES. The Portfolio may invest a substantial portion of
its assets in foreign securities (including depository receipts).
Foreign securities involve risks in addition to the risks associated
with domestic securities. One additional risk is currency risk. While
the price of Portfolio shares is quoted in U.S. dollars, the
Portfolio generally converts U.S. dollars to a foreign market's local
currency to purchase a security in that market. If the value of that
local currency falls relative to the U.S. dollar, the U.S. dollar
value of the foreign security will decrease. This is true even if the
foreign security's local price remains unchanged.

Foreign securities also have risks related to economic and political
developments abroad, including expropriations, confiscatory taxation,
exchange control regulation, limitations on the use or transfer of
Portfolio assets and any effects of foreign social, economic or
political instability. In particular, adverse political or economic
developments in a geographic region or a particular country in which
the Portfolio invests could cause a substantial decline in value of
the portfolio. Foreign companies, in general, are not subject to the
regulatory requirements of U.S. companies and, as such,

3
<PAGE>
there may be less publicly available information about these
companies. Moreover, foreign accounting, auditing and financial
reporting standards generally are different from those applicable to
U.S. companies. Finally, in the event of a default of any foreign
debt obligations, it may be more difficult for the Portfolio to
obtain or enforce a judgment against the issuers of the securities.

Securities of foreign issuers may be less liquid than comparable
securities of U.S. issuers and, as such, their price changes may be
more volatile. Furthermore, foreign exchanges and broker-dealers are
generally subject to less government and exchange scrutiny and
regulation than their U.S. counterparts.

The foreign securities in which the Portfolio may invest may be
issued by companies located in emerging market countries. Compared to
the United States and other developed countries, emerging market
countries may have relatively unstable governments, economies based
on only a few industries and securities markets that trade a small
number of securities. Prices of these securities tend to be
especially volatile and, in the past, securities in these countries
have offered greater potential loss (as well as gain) than securities
of companies located in developed countries.

Many European countries have adopted or are in the process of
adopting a single European currency, referred to as the "euro." The
consequences of the euro conversion for foreign exchange rates,
interest rates and the value of European securities the Portfolio may
purchase are presently unclear. The consequences may adversely affect
the value and/or increase the volatility of securities held by the
Portfolio.

OTHER RISKS. The performance of the Portfolio also will depend on
whether the Investment Manager is successful in pursuing the
Portfolio's investment strategy. The Portfolio is also subject to
other risks from its permissible investments. For more information
about these risks, see the "Additional Risk Information" section.

Shares of the Portfolio are not bank deposits and are not guaranteed
or insured by the FDIC or any other government agency.

4
<PAGE>
[Sidebar]
AVERAGE ANNUAL
TOTAL RETURNS

THIS TABLE COMPARES THE PORTFOLIO'S AVERAGE ANNUAL RETURNS WITH THOSE OF A BROAD
MEASURE OF MARKET PERFORMANCE OVER TIME, AS WELL AS WITH AN INDEX OF FUNDS WITH
SIMILAR INVESTMENT OBJECTIVES. THE PORTFOLIO'S RETURNS INCLUDES THE MAXIMUM
APPLICABLE SALES CHARGE FOR EACH CLASS AND ASSUMES YOU SOLD YOUR SHARES AT THE
END OF EACH PERIOD.

SHAREHOLDER FEES
THESE FEES ARE PAID DIRECTLY FROM YOUR INVESTMENT.
ANNUAL FUND
OPERATING EXPENSES
THESE EXPENSES ARE DEDUCTED FROM THE PORTFOLIO'S ASSETS AND ARE BASED ON
EXPENSES PAID FOR THE FISCAL YEAR ENDED MAY 31, 1999.
[End Sidebar]

[ICON] PAST PERFORMANCE
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The table below provides some indication of the risks of investing in
the Portfolio. The Portfolio's past performance does not indicate how
the Portfolio will perform in the future.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1998)
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LIFE OF
FUND
(SINCE
PAST 1 YEAR 2/25/98)
<S> <C> <C>
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Class A N/A 0.03%
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Class B N/A (0.09)%
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Class C N/A 3.89%
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Class D N/A 5.84%
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MSCI World Index(1) N/A 13.68%(3)
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Lipper Global Fund Index(2) N/A 7.49%
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</TABLE>

1 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.
2 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.
3 For the Period February 27, 1998 to December 31, 1998.

[ICON] FEES AND EXPENSES

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The table below briefly describes the fees and expenses that you may
pay if you buy and hold shares of the Portfolio. The Portfolio offers
four Classes of shares: Classes A, B, C and D. Each Class has a
different combination of fees, expenses and other features. The
Portfolio does not charge account or exchange fees. See the "Share
Class Arrangements" section for further fee and expense information.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES
- ------------------------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases (as a
percentage of offering price) 5.25%(1) None None None
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Maximum deferred sales charge (load) (as a percentage based
on the lesser of the offering price or net asset value at
redemption) None(2) 5.00%(3) 1.00%(4) None
- ------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- ------------------------------------------------------------------------------------------------------------
Management fee 0.64% 0.64% 0.64% 0.64%
- ------------------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.24% 1.00% 0.83% None
- ------------------------------------------------------------------------------------------------------------
Other expenses 0.22% 0.22% 0.22% 0.22%
- ------------------------------------------------------------------------------------------------------------
Total annual Fund operating expenses 1.10% 1.86% 1.69% 0.86%
- ------------------------------------------------------------------------------------------------------------
</TABLE>

1 Reduced for purchases of $25,000 and over.
2 Investments that are not subject to any sales charge at the time of
purchase are subject to a contingent deferred sales charge ("CDSC") of
1.00% that will be imposed if you sell your shares within one year after
purchase, except for certain specific circumstances.
3 The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter. See "Share Class Arrangements" for a complete discussion of the
CDSC.
4 Only applicable if you sell your shares within one year after purchase.

5
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in
the Portfolio with the cost of investing in other mutual funds.

This example shows what expenses you could pay over time. The example
assumes that you invest $10,000 in the Portfolio, your investment has
a 5% return each year, and the Portfolio's operating expenses remain
the same. Although your actual costs may be higher or lower, the
tables below show your costs at the end of each period based on these
assumptions depending upon whether or not you sell your shares at the
end of each period.

<TABLE>
<CAPTION>
IF YOU SOLD YOUR SHARES: IF YOU HELD YOUR SHARES:
----------------------------------------- -----------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------- -----------------------------------------
CLASS A $631 $856 $1099 $1795 $631 $856 $1099 $1795
- ---------------------------------------------------------- -----------------------------------------
CLASS B $689 $885 $1206 $2180 $189 $585 $1006 $2180
- ---------------------------------------------------------- -----------------------------------------
CLASS C $272 $533 $ 918 $1998 $172 $533 $ 918 $1998
- ---------------------------------------------------------- -----------------------------------------
CLASS D $ 88 $274 $ 477 $1061 $ 88 $274 $ 477 $1061
- ---------------------------------------------------------- -----------------------------------------
</TABLE>

Long-term shareholders of Class B and Class C may pay more in sales
charges, including distribution fees, than the economic equivalent of
the maximum front-end sales charges permitted by the National
Association of Securities Dealers.

[ICON] ADDITIONAL RISK INFORMATION
- --------------------------------------------------------------------------------
This section provides additional information relating to the
principal risks of investing in the Portfolio.

YEAR 2000. The Portfolio could be adversely affected if the computer
systems necessary for the efficient operation of the Investment
Manager, the Portfolio's other service providers and the markets and
corporate and governmental issuers in which the Portfolio invests do
not properly process and calculate date-related information from and
after January 1, 2000. While year 2000-related computer problems
could have a negative effect on the Portfolio, the Investment Manager
and its affiliates are working hard to avoid any problems and to
obtain assurances from their service providers that they are taking
similar steps.

In addition, it is possible that the markets for securities in which
the Portfolio invests may be detrimentally affected by computer
failures throughout the financial services industry beginning January
1, 2000. Improperly functioning trading systems may result in
settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors also may result in production
problems for individual companies and overall economic uncertainties.
Earnings of individual issuers will be affected by remediation costs,
which may be substantial and may be reported inconsistently in U.S.
and foreign financial statements. Accordingly, the Portfolio's
investments may be adversely affected.

6
<PAGE>

[Sidebar]
MORGAN STANLEY DEAN WITTER ADVISORS INC.
THE INVESTMENT MANAGER IS WIDELY RECOGNIZED AS A LEADER IN THE MUTUAL FUND
INDUSTRY AND TOGETHER WITH MORGAN STANLEY DEAN WITTER SERVICES COMPANY INC., ITS
WHOLLY-OWNED SUBSIDIARY, HAS MORE THAN $136.9 BILLION IN ASSETS UNDER MANAGEMENT
OR ADMINISTRATION AS OF JUNE 30, 1999.

[End Sidebar]

[ICON] MANAGEMENT OF THE PORTFOLIO
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The Portfolio has retained the Investment Manager - Morgan Stanley
Dean Witter Advisors Inc. - to provide administrative services,
manage its business affairs and invest its assets, including the
placing of orders for the purchase and sale of portfolio securities.
The Investment Manager is a wholly-owned subsidiary of Morgan Stanley
Dean Witter & Co., a preeminent global financial services firm that
maintains leading market positions in each of its three primary
businesses: securities, asset management and credit services. Its
main business office is located at Two World Trade Center, New York,
New York 10048.

The Portfolio is managed within the Investment Manager's Growth
Group. Mark Bavoso, a Senior Vice President of the Investment
Manager, has been the primary portfolio manager of the Portfolio
since it commenced operations in February 1998 and a portfolio
manager with the Investment Manager for over five years.

The Portfolio pays the Investment Manager a monthly management fee as
full compensation for the services and facilities furnished to the
Portfolio, and for Portfolio expenses assumed by the Investment
Manager. The fee is based on the Portfolio's average daily net
assets. For the fiscal year ended May 31, 1999, the Fund accrued
total compensation to the Investment Manager amounting to 0.64% of
the Portfolio's average daily net assets.

7
<PAGE>
[Sidebar]
CONTACTING A
FINANCIAL ADVISOR
IF YOU ARE NEW TO THE MORGAN STANLEY DEAN WITTER FAMILY OF FUNDS AND WOULD LIKE
TO CONTACT A FINANCIAL ADVISOR, CALL (800) THE-DEAN FOR THE TELEPHONE NUMBER OF
THE MORGAN STANLEY DEAN WITTER OFFICE NEAREST YOU. YOU MAY ALSO ACCESS OUR
OFFICE LOCATOR ON OUR INTERNET SITE AT:
www.deanwitter.com/funds
[End Sidebar]

SHAREHOLDER INFORMATION

[ICON] PRICING PORTFOLIO SHARES
- --------------------------------------------------------------------------------
The price of shares of the Portfolio (excluding sales charges),
called "net asset value," is based on the value of its portfolio
securities. While the assets of each Class are invested in a single
portfolio of securities, the net asset value of each Class will
differ because the Classes have different ongoing distribution fees.

The net asset value per share of the Portfolio is determined once
daily at 4:00 p.m. Eastern time, on each day that the New York Stock
Exchange is open (or, on days when the New York Stock Exchange closes
prior to 4:00 p.m. at such earlier time). Shares will not be priced
on days that the New York Stock Exchange is closed.

The value of the Portfolio's securities is based on the securities'
market price when available. When a market price is not readily
available, including circumstances under which the Investment Manager
determines that a security's market price is not accurate, a
portfolio security is valued at its fair value, as determined under
procedures established by the Fund's Board of Trustees. In these
cases, the Portfolio's net asset value will reflect certain portfolio
securities' fair value rather than their market price. In addition,
if the Portfolio holds securities primarily listed on foreign
exchanges, the value of its portfolio securities may change on days
when you will not be able to purchase or sell your shares.

An exception to the Portfolio's general policy of using market prices
concerns its short-term debt portfolio securities. Debt securities
with remaining maturities of sixty days or less at the time of
purchase are valued at amortized cost. However, if the cost does not
reflect the securities' market value, these securities will be valued
at their fair value.

[ICON] HOW TO BUY SHARES
- --------------------------------------------------------------------------------
You may open a new account to buy Portfolio shares or buy additional
Portfolio shares for an existing account by contacting your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative. Your Financial Advisor will assist you, step-by-step,
with the procedures to invest in the Portfolio. You may also purchase
shares directly by calling the Portfolio's transfer agent and
requesting an application.

Because every investor has different immediate financial needs and
long-term investment goals, the Portfolio offers investors four
Classes of shares: Classes A, B, C and D. Class D shares are only
offered to a limited group of investors. Each Class of shares offers
a distinct structure of sales charges, distribution and service fees,
and other features that are designed to address a variety of needs.
Your Financial Advisor or other authorized financial representative
can help you decide which Class may be most appropriate for you. When
purchasing Portfolio shares, you must specify which Class of shares
you wish to purchase.

8
<PAGE>
[Sidebar]
EASYINVEST-SM-
A PURCHASE PLAN THAT ALLOWS YOU TO TRANSFER MONEY AUTOMATICALLY FROM YOUR
CHECKING OR SAVINGS ACCOUNT OR FROM A MONEY MARKET FUND ON A SEMI-MONTHLY,
MONTHLY OR QUARTERLY BASIS. CONTACT YOUR MORGAN STANLEY DEAN WITTER FINANCIAL
ADVISOR FOR FURTHER INFORMATION ABOUT THIS SERVICE.
[End Sidebar]

When you buy Portfolio shares, the shares are purchased at the next
share price calculated (less any applicable front-end sales charge
for Class A shares) after we receive your purchase order. Your
payment is due on the third business day after you place your
purchase order. We reserve the right to reject any order for the
purchase of Portfolio shares.

<TABLE>
<CAPTION>
MINIMUM INVESTMENT AMOUNTS
- ------------------------------------------------------------------------------------------------
MINIMUM INVESTMENT
----------------------
INVESTMENT OPTIONS INITIAL ADDITIONAL
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Regular Accounts $ 1,000 $ 100
- ------------------------------------------------------------------------------------------------
Individual Retirement Accounts: Regular IRAs $ 1,000 $ 100
Education IRAs $500 $ 100
- ------------------------------------------------------------------------------------------------
EASYINVEST-SM- (Automatically from your checking
or savings account or Money Market
Fund) $100* $ 100*
- ------------------------------------------------------------------------------------------------
</TABLE>

* Provided your schedule of investments totals $1,000 in twelve months.

There is no minimum investment amount if you purchase Portfolio
shares through: (1) the Investment Manager's mutual fund asset
allocation plan, (2) a program, approved by the Portfolio's
distributor, in which you pay an asset-based fee for advisory,
administrative and/or brokerage services, or (3) employer-sponsored
employee benefit plan accounts.

INVESTMENT OPTIONS FOR CERTAIN INSTITUTIONAL AND OTHER
INVESTORS/CLASS D SHARES. To be eligible to purchase Class D shares,
you must qualify under one of the investor categories specified in
the "Share Class Arrangements" section of this PROSPECTUS.

SUBSEQUENT INVESTMENTS SENT DIRECTLY TO THE FUND. In addition to
buying additional Portfolio shares for an existing account by
contacting your Morgan Stanley Dean Witter Financial Advisor, you may
send a check directly to the Portfolio. To buy additional shares in
this manner:

- Write a "letter of instruction" to the Portfolio specifying the
name(s) on the account, the account number, the social security or
tax identification number, the Class of shares you wish to purchase
and the investment amount (which would include any applicable
front-end sales charge). The letter must be signed by the account
owner(s).

- Make out a check for the total amount payable to: Morgan Stanley
Dean Witter Competitive Edge Fund -- "Best Ideas" Portfolio.

- Mail the letter and check to Morgan Stanley Dean Witter Trust FSB
at P.O. Box 1040, Jersey City, NJ 07303.

9
<PAGE>
[ICON] HOW TO EXCHANGE SHARES
- --------------------------------------------------------------------------------

PERMISSIBLE FUND EXCHANGES. You may exchange shares of any Class of
the Portfolio for the same Class of any other continuously offered
Multi-Class Fund, or for shares of a No-Load Fund, Money Market Fund,
North American Government Income Trust or Short-Term U.S. Treasury
Trust, without the imposition of an exchange fee. See the inside back
cover of this PROSPECTUS for each Morgan Stanley Dean Witter Fund's
designation as a Multi-Class Fund, No-Load Fund or Money Market Fund.
If a Morgan Stanley Dean Witter Fund is not listed, consult the
inside back cover of that Fund's PROSPECTUS for its designation. For
purposes of exchanges, shares of FSC Funds (subject to a front-end
sales charge) are treated as Class A shares of a Multi-Class Fund.

Exchanges may be made after shares of the Portfolio acquired by
purchase have been held for thirty days. There is no waiting period
for exchanges of shares acquired by exchange or dividend
reinvestment. The current PROSPECTUS for each Fund describes its
investment objective(s), policies and investment minimums, and should
be read before investment.

EXCHANGE PROCEDURES. You can process an exchange by contacting your
Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative. Otherwise, you must forward an exchange
privilege authorization form to the Portfolio's transfer agent -
Morgan Stanley Dean Witter Trust FSB - and then write the transfer
agent or call (800) 869-NEWS to place an exchange order. You can
obtain an exchange privilege authorization form by contacting your
Financial Advisor or other authorized financial representative or by
calling (800) 869-NEWS. If you hold share certificates, no exchanges
may be processed until we have received all applicable share
certificates.

An exchange to any Morgan Stanley Dean Witter Fund (except a Money
Market Fund) is made on the basis of the next calculated net asset
values of the Funds involved after the exchange instructions are
accepted. When exchanging into a Money Market Fund, the Portfolio's
shares are sold at their next calculated net asset value and the
Money Market Fund's shares are purchased at their net asset value on
the following business day.

The Portfolio may terminate or revise the exchange privilege upon
required notice. Certain services normally available to shareholders
of Money Market Funds, including the check writing privilege, are not
available for Money Market Fund shares you acquire in an exchange.

TELEPHONE EXCHANGES. For your protection when calling Morgan Stanley
Dean Witter Trust FSB, we will employ reasonable procedures to
confirm that exchange instructions communicated over the telephone
are genuine. These procedures may include requiring various forms of
personal identification such as name, mailing address, social
security or other tax identification number. Telephone instructions
also may be recorded.

Telephone instructions will be accepted if received by the
Portfolio's transfer agent between 9:00 a.m. and 4:00 p.m. Eastern
time, on any day the New York Stock Exchange

10
<PAGE>
is open for business. During periods of drastic economic or market
changes, it is possible that the telephone exchange procedures may be
difficult to implement, although this has not been the case with the
Portfolio in the past.

MARGIN ACCOUNTS. If you have pledged your Portfolio shares in a
margin account, contact your Morgan Stanley Dean Witter Financial
Advisor or other authorized financial representative regarding
restrictions on the sale of such shares.

TAX CONSIDERATIONS OF EXCHANGES. If you exchange shares of the
Portfolio for shares of another Morgan Stanley Dean Witter Fund there
are important tax considerations. For tax purposes, the exchange out
of the Portfolio is considered a sale of Fund shares - and the
exchange into the other Fund is considered a purchase. As a result,
you may realize a capital gain or loss.

You should review the "Tax Consequences" section and consult your own
tax professional about the tax consequences of an exchange.

FREQUENT EXCHANGES. A pattern of frequent exchanges may result in the
Portfolio limiting or prohibiting, at its discretion, additional
purchases and/or exchanges. The Portfolio will notify you in advance
of limiting your exchange privileges.

CDSC CALCULATIONS ON EXCHANGES. See the "Share Class Arrangements"
section of this PROSPECTUS for a discussion of how applicable
contingent deferred sales charges (CDSCs) are calculated for shares
of one Morgan Stanley Dean Witter Fund that are exchanged for shares
of another.

For further information regarding exchange privileges, you should
contact your Morgan Stanley Dean Witter Financial Advisor or call
(800) 869-NEWS.

[ICON] HOW TO SELL SHARES
- --------------------------------------------------------------------------------
You can sell some or all of your Portfolio shares at any time. If you
sell Class A, Class B or Class C shares, your net sale proceeds are
reduced by the amount of any applicable CDSC. Your shares will be
sold at the next share price calculated after we receive your order
to sell as described below.

<TABLE>
<CAPTION>
OPTIONS PROCEDURES
<S> <C>
- --------------------------------------------------------------------------------
Contact your To sell your shares, simply call your Morgan Stanley Dean
Financial Advisor Witter Financial Advisor or other authorized financial
representative.
------------------------------------------------------------
Payment will be sent to the address to which the account is
registered or deposited in your brokerage account.
[ICON]
- --------------------------------------------------------------------------------
By Letter You can also sell your shares by writing a "letter of
instruction" that includes:
- your account number;
- the dollar amount or the number of shares you wish to
sell;
- the Class of shares you wish to sell; and
- the signature of each owner as it appears on the account.
------------------------------------------------------------
[ICON]
</TABLE>

11
<PAGE>
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
- --------------------------------------------------------------------------------
<S> <C>
By Letter, If you are requesting payment to anyone other than the
continued registered owner(s) or that payment be sent to any address
other than the address of the registered owner(s) or
pre-designated bank account, you will need a signature
guarantee. You can obtain a signature guarantee from an
eligible guarantor acceptable to Morgan Stanley Dean Witter
Trust FSB. (You should contact Morgan Stanley Dean Witter
Trust FSB at (800) 869-NEWS for a determination as to
whether a particular institution is an eligible guarantor.)
A notary public CANNOT provide a signature guarantee.
Additional documentation may be required for shares held by
a corporation, partnership, trustee or executor.
------------------------------------------------------------
Mail the letter to Morgan Stanley Dean Witter Trust FSB at
P.O. Box 983, Jersey City, New Jersey 07303. If you hold
share certificates, you must return the certificates, along
with the letter and any required additional documentation.
------------------------------------------------------------
A check will be mailed to the name(s) and address in which
the account is registered, or otherwise according to your
instructions.
- --------------------------------------------------------------------------------
Systematic If your investment in all of the Morgan Stanley Dean Witter
Withdrawal Plan Family of Funds has a total market value of at least
$10,000, you may elect to withdraw amounts of $25 or more,
or in any whole percentage of a Fund's balance (provided the
amount is at least $25), on a monthly, quarterly,
semi-annual or annual basis, from any Fund with a balance of
at least $1,000. Each time you add a Fund to the plan, you
must meet the plan requirements.
------------------------------------------------------------
[ICON]
Amounts withdrawn are subject to any applicable CDSC. A CDSC
may be waived under certain circumstances. See the Class B
waiver categories listed in the "Share Class Arrangements"
section of this PROSPECTUS.
------------------------------------------------------------
To sign up for the Systematic Withdrawal Plan, contact your
Morgan Stanley Dean Witter Financial Advisor or call (800)
869-NEWS. You may terminate or suspend your plan at any
time. Please remember that withdrawals from the plan are
sales of shares, not "distributions," and ultimately may
exhaust your account balance. The Portfolio may terminate or
revise the plan at any time.
- --------------------------------------------------------------------------------
</TABLE>

PAYMENT FOR SOLD SHARES. After we receive your complete instructions
to sell, as described above, a check will be mailed to you within
seven days, although we will attempt to make payment within one
business day. Payment may also be sent to your brokerage account.

Payment may be postponed or the right to sell your shares suspended
under unusual circumstances. If you request to sell shares that were
recently purchased by check, payment of the sale proceeds may be
delayed for the minimum time needed to verify that the check has been
honored (not more than fifteen days from the time we receive the
check).

TAX CONSIDERATIONS. Normally, your sale of Portfolio shares is
subject to federal and state income tax. You should review the "Tax
Consequences" section of this PROSPECTUS and consult your own tax
professional about the tax consequences of a sale.

REINSTATEMENT PRIVILEGE. If you sell Portfolio shares and have not
previously exercised the reinstatement privilege, you may, within 35
days after the date of sale, invest any portion of the proceeds in
the same Class of Portfolio shares at their net asset value and
receive a pro rata credit for any CDSC paid in connection with the
sale.

12
<PAGE>
[Sidebar]
TARGETED DIVIDENDS-SM-
YOU MAY SELECT TO HAVE YOUR PORTFOLIO DISTRIBUTIONS AUTOMATICALLY INVESTED IN
OTHER CLASSES OF PORTFOLIO SHARES OR CLASSES OF ANOTHER MORGAN STANLEY DEAN
WITTER FUND THAT YOU OWN. CONTACT YOUR MORGAN STANLEY DEAN WITTER FINANCIAL
ADVISOR FOR FURTHER INFORMATION ABOUT THIS SERVICE.
[End Sidebar]
INVOLUNTARY SALES. The Portfolio reserves the right, on sixty days'
notice, to sell the shares of any shareholder (other than shares held
in an IRA or 403(b) Custodial Account) whose shares, due to sales by
the shareholder, have a value below $100, or in the case of an
account opened through EASYINVEST -SM-, if after 12 months the
shareholder has invested less than $1,000 in the account.

However, before the Portfolio sells your shares in this manner, we
will notify you and allow you sixty days to make an additional
investment in an amount that will increase the value of your account
to at least the required amount before the sale is processed. No CDSC
will be imposed on any involuntary sale.

[ICON] DISTRIBUTIONS
- --------------------------------------------------------------------------------
The Portfolio passes substantially all of its earnings from income
and capital gains along to its investors as "distributions." The
Portfolio earns income from stocks and interest from fixed-income
investments. These amounts are passed along to Portfolio shareholders
as "income dividend distributions." The Portfolio realizes capital
gains whenever it sells securities for a higher price than it paid
for them. These amounts may be passed along as "capital gain
distributions."

The Portfolio declares income dividends separately for each Class.
Distributions paid on Class A and Class D shares will usually be
higher than for Class B and Class C because distribution fees that
Class B and Class C pay are higher. Normally, income dividends are
distributed to shareholders annually. Capital gains, if any, are
usually distributed in December. The Portfolio, however, may retain
and reinvest any long-term capital gains. The Portfolio may at times
make payments from sources other than income or capital gains that
represent a return of a portion of your investment.

Distributions are reinvested automatically in additional shares of
the same Class and automatically credited to your account, unless you
request in writing that all distributions be paid in cash. If you
elect the cash option, the Portfolio will mail a check to you no
later than seven business days after the distribution is declared. No
interest will accrue on uncashed checks. If you wish to change how
your distributions are paid, your request should be received by the
Portfolio's transfer agent, Morgan Stanley Dean Witter Trust FSB, at
least five business days prior to the record date of the
distributions.

13
<PAGE>
[ICON] TAX CONSEQUENCES
- --------------------------------------------------------------------------------
As with any investment, you should consider how your investment in
the Portfolio will be taxed. The tax information in this PROSPECTUS
is provided as general information. You should consult your own tax
professional about the tax consequences of an investment in the
Portfolio.

Unless your investment in the Portfolio is through a tax-deferred
retirement account, such as a 401(k) plan or IRA, you need to be
aware of the possible tax consequences when:

- The Portfolio makes distributions; and

- You sell Portfolio shares, including an exchange to another Morgan
Stanley Dean Witter Fund.

TAXES ON DISTRIBUTIONS. Your distributions are normally subject to
federal and state income tax when they are paid, whether you take
them in cash or reinvest them in Portfolio shares. A distribution
also may be subject to local income tax. Any income dividend
distributions and any short-term capital gain distributions are
taxable to you as ordinary income. Any long-term capital gain
distributions are taxable as long-term capital gains, no matter how
long you have owned shares in the Portfolio.

Every January, you will be sent a statement (IRS Form 1099-DIV)
showing the taxable distributions paid to you in the previous year.
The statement provides full information on your dividends and capital
gains for tax purposes.

TAXES ON SALES. Your sale of Portfolio shares normally is subject to
federal and state income tax and may result in a taxable gain or loss
to you. A sale also may be subject to local income tax. Your exchange
of Portfolio shares for shares of another Morgan Stanley Dean Witter
Fund is treated for tax purposes like a sale of your original shares
and a purchase of your new shares. Thus, the exchange may, like a
sale, result in a taxable gain or loss to you and will give you a new
tax basis for your new shares.

When you open your Portfolio account, you should provide your social
security or tax identification number on your investment application.
By providing this information, you will avoid being subject to a
federal backup withholding tax of 31% on taxable distributions and
redemption proceeds. Any withheld amount would be sent to the IRS as
an advance tax payment.

[ICON] SHARE CLASS ARRANGEMENTS
- --------------------------------------------------------------------------------
The Portfolio offers several Classes of shares having different
distribution arrangements designed to provide you with different
purchase options according to your investment needs. Your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative can help you decide which Class may be appropriate for
you.

14
<PAGE>
The general public is offered three Classes: Class A shares, Class B
shares and Class C shares, which differ principally in terms of sales
charges and ongoing expenses. A fourth Class, Class D shares, is
offered only to a limited category of investors. Shares that you
acquire through reinvested distributions will not be subject to any
front-end sales charge or CDSC -- contingent deferred sales charge.
Sales personnel may receive different compensation for selling each
Class of shares. The sales charges applicable to each Class provide
for the distribution financing of shares of that Class.

The chart below compares the sales charge and maximum annual 12b-1
fee applicable to each Class:

<TABLE>
<CAPTION>
CLASS SALES CHARGE MAXIMUM ANNUAL 12b-1 FEE
<S> <C> <C>
- --------------------------------------------------------------------------
A Maximum 5.25% initial sales charge
reduced for purchase of $25,000 or more;
shares sold without an initial sales
charge are generally subject to a 1.0%
CDSC during the first year 0.25%
- --------------------------------------------------------------------------
B Maximum 5.0% CDSC during the first year
decreasing to 0% after six years 1.00%
- --------------------------------------------------------------------------
C 1.0% CDSC during the first year 1.00%
- --------------------------------------------------------------------------
D None None
- --------------------------------------------------------------------------
</TABLE>

[Sidebar]
FRONT-END SALES CHARGE OR FSC
AN INITIAL SALES CHARGE YOU PAY WHEN PURCHASING CLASS A SHARES THAT IS BASED ON
A PERCENTAGE OF THE OFFERING PRICE. THE PERCENTAGE DECLINES BASED UPON THE
DOLLAR VALUE OF CLASS A SHARES YOU PURCHASE. WE OFFER THREE WAYS TO REDUCE YOUR
CLASS A SALES CHARGES - THE COMBINED PURCHASE PRIVILEGE, RIGHT OF ACCUMULATION
AND LETTER OF INTENT.
[End Sidebar]

CLASS A SHARES Class A shares are sold at net asset value plus an
initial sales charge of up to 5.25%. The initial sales charge is
reduced for purchases of $25,000 or more according to the schedule
below. Investments of $1 million or more are not subject to an initial
sales charge, but are generally subject to a contingent deferred sales
charge, or CDSC, of 1.0% on sales made within one year after the last
day of the month of purchase. The CDSC will be assessed in the same
manner and with the same CDSC waivers as with Class B shares. Class A
shares are also subject to a distribution (12b-1) fee of up to 0.25% of
the average daily net assets of the Class.

The offering price of Class A shares includes a sales charge (expressed as a
percentage of the offering price) on a single transaction as shown in the
following table:

<TABLE>
<CAPTION>
FRONT-END SALES CHARGE
---------------------------------------------
PERCENTAGE OF PUBLIC APPROXIMATE PERCENTAGE
AMOUNT OF SINGLE TRANSACTION OFFERING PRICE OF AMOUNT INVESTED
<S> <C> <C>
- ---------------------------------------------------------------------------------------
Less than $25,000 5.25% 5.54%
- ---------------------------------------------------------------------------------------
$25,000 but less than $50,000 4.75% 4.99%
- ---------------------------------------------------------------------------------------
$50,000 but less than $100,000 4.00% 4.17%
- ---------------------------------------------------------------------------------------
$100,000 but less than $250,000 3.00% 3.09%
- ---------------------------------------------------------------------------------------
$250,000 but less than $1 million 2.00% 2.04%
- ---------------------------------------------------------------------------------------
$1 million and over 0 0
- ---------------------------------------------------------------------------------------
</TABLE>

15
<PAGE>
The reduced sales charge schedule is applicable to purchases of Class
A shares in a single transaction by:

- A single account (including an individual, trust or fiduciary
account).

- Family member accounts (limited to husband, wife and children under
the age of 21).

- Pension, profit sharing or other employee benefit plans of
companies and their affiliates.

- Tax-exempt organizations.

- Groups organized for a purpose other than to buy mutual fund
shares.

COMBINED PURCHASE PRIVILEGE. You also will have the benefit of
reduced sales charges by combining purchases of Class A shares of the
Portfolio in a single transaction with purchases of Class A shares of
other Multi-Class Funds and shares of FSC Funds.

RIGHT OF ACCUMULATION. You also may benefit from a reduction of sales
charges if the cumulative net asset value of Class A shares of the
Portfolio purchased in a single transaction, together with shares of
other Funds you currently own which were previously purchased at a
price including a front-end sales charge (including shares acquired
through reinvestment of distributions), amounts to $25,000 or more.
Also, if you have a cumulative net asset value of all your Class A
and Class D shares equal to at least $5 million (or $25 million for
certain employee benefit plans), you are eligible to purchase Class D
shares of any Fund subject to the Fund's minimum initial investment
requirement.

You must notify your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative (or Morgan Stanley Dean
Witter Trust FSB if you purchase directly through the Morgan Stanley
Dean Witter Competitive Edge Fund -- "Best Ideas" Portfolio), at the
time a purchase order is placed, that the purchase qualifies for the
reduced charge under the Right of Accumulation. Similar notification
must be made in writing when an order is placed by mail. The reduced
sales charge will not be granted if: (i) notification is not
furnished at the time of the order; or (ii) a review of the records
of Dean Witter Reynolds or other authorized dealer of Portfolio
shares or the Portfolio's transfer agent does not confirm your
represented holdings.

LETTER OF INTENT. The schedule of reduced sales charges for larger
purchases also will be available to you if you enter into a written
"letter of intent." A letter of intent provides for the purchase of
Class A shares of the Portfolio or other Multi-Class Funds or shares
of FSC Funds within a thirteen-month period. The initial purchase
under a letter of intent must be at least 5% of the stated investment
goal. To determine the applicable sales charge reduction, you may
also include: (1) the cost of shares of other Morgan Stanley Dean
Witter Funds which were previously purchased at a price including a
front-end sales charge during the 90-day period prior to the
distributor receiving the letter of intent, and (2) the cost of
shares of other Funds you currently own acquired in

16
<PAGE>
exchange for shares of Funds purchased during that period at a price
including a front-end sales charge. You can obtain a letter of intent
by contacting your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative or by calling (800)
869-NEWS. If you do not achieve the stated investment goal within the
thirteen-month period, you are required to pay the difference between
the sales charges otherwise applicable and sales charges actually
paid, which may be deducted from your investment.

OTHER SALES CHARGE WAIVERS. In addition to investments of $1 million
or more, your purchase of Class A shares is not subject to a
front-end sales charge (or CDSC upon sale) if your account qualifies
under one of the following categories:

- A trust for which Morgan Stanley Dean Witter Trust FSB provides
discretionary trustee services.

- Persons participating in a fee-based investment program (subject to
all of its terms and conditions, including mandatory sale or
transfer restrictions on termination) approved by the Portfolio's
distributor pursuant to which they pay an asset-based fee for
investment advisory, administrative and/or brokerage services.

- Employer-sponsored employee benefit plans, whether or not qualified
under the Internal Revenue Code, for which Morgan Stanley Dean
Witter Trust FSB serves as trustee or Dean Witter Reynolds'
Retirement Plan Services serves as recordkeeper under a written
Recordkeeping Services Agreement ("MSDW Eligible Plans") which have
at least 200 eligible employees.

- A MSDW Eligible Plan whose Class B shares have converted to Class A
shares, regardless of the plan's asset size or number of eligible
employees.

- A client of a Morgan Stanley Dean Witter Financial Advisor who
joined us from another investment firm within six months prior to
the date of purchase of Portfolio shares, and you used the proceeds
from the sale of shares of a proprietary mutual fund of that
Financial Advisor's previous firm that imposed either a front-end
or deferred sales charge to purchase Class A shares, provided that:
(1) you sold the shares not more than 60 days prior to the purchase
of Portfolio shares, and (2) the sale proceeds were maintained in
the interim in cash or a money market fund.

- Current or retired Directors/Trustees of the Morgan Stanley Dean
Witter Funds, such persons' spouses and children under the age of
21, and trust accounts for which any of such persons is a
beneficiary.

- Current or retired directors, officers and employees of Morgan
Stanley Dean Witter & Co. and any of its subsidiaries, such
persons' spouses and children under the age of 21, and trust
accounts for which any of such persons is a beneficiary.

17
<PAGE>
[Sidebar]
CONTINGENT DEFERRED SALES
CHARGE OR CDSC
A FEE YOU PAY WHEN YOU SELL SHARES OF CERTAIN MORGAN STANLEY DEAN WITTER FUNDS
PURCHASED WITHOUT AN INITIAL SALES CHARGE. THIS FEE DECLINES THE LONGER YOU HOLD
YOUR SHARES AS SET FORTH IN THE TABLE.
[End Sidebar]

CLASS B SHARES Class B shares are offered at net asset value with no
initial sales charge but are subject to a contingent deferred sales
charge, or CDSC, as set forth in the table below. For the purpose of
calculating the CDSC, shares are deemed to have been purchased on the
last day of the month during which they were purchased.

<TABLE>
<CAPTION>
CDSC AS A PERCENTAGE
YEAR SINCE PURCHASE PAYMENT MADE OF AMOUNT REDEEMED
<S> <C>
- ---------------------------------------------------------------
First 5.0%
- ---------------------------------------------------------------
Second 4.0%
- ---------------------------------------------------------------
Third 3.0%
- ---------------------------------------------------------------
Fourth 2.0%
- ---------------------------------------------------------------
Fifth 2.0%
- ---------------------------------------------------------------
Sixth 1.0%
- ---------------------------------------------------------------
Seventh and thereafter None
- ---------------------------------------------------------------
</TABLE>

Each time you place an order to sell or exchange shares, shares with
no CDSC will be sold or exchanged first, then shares with the lowest
CDSC will be sold or exchanged next. For any shares subject to a
CDSC, the CDSC will be assessed on an amount equal to the lesser of
the current market value or the cost of the shares being sold.

CDSC WAIVERS. A CDSC, if otherwise applicable, will be waived in the
case of:

- Sales of shares held at the time you die or become disabled (within
the definition in Section 72(m)(7) of the Internal Revenue Code
which relates to the ability to engage in gainful employment), if
the shares are: (i) registered either in your name (not a trust) or
in the names of you and your spouse as joint tenants with right of
survivorship; or (ii) held in a qualified corporate or
self-employed retirement plan, IRA or 403(b) Custodial Account,
provided in either case that the sale is requested within one year
of your death or initial determination of disability.

- Sales in connection with the following retirement plan
"distributions": (i) lump-sum or other distributions from a
qualified corporate or self-employed retirement plan following
retirement (or, in the case of a "key employee" of a "top heavy"
plan, following attainment of age 59 1/2); (ii) distributions from
an IRA or 403(b) Custodial Account following attainment of age
59 1/2; or (iii) a tax-free return of an excess IRA contribution (a
"distribution" does not include a direct transfer of IRA, 403(b)
Custodial Account or retirement plan assets to a successor
custodian or trustee).

- Sales of shares held for you as a participant in a MSDW Eligible
Plan.

- Sales of shares in connection with the Systematic Withdrawal Plan
of up to 12% annually of the value of each Fund from which plan
sales are made. The percentage is determined on the date you
establish the Systematic Withdrawal Plan and based on the next
calculated share price. You may have this CDSC waiver applied in
amounts up to

18
<PAGE>
1% per month, 3% per quarter, 6% semi-annually or 12% annually.
Shares with no CDSC will be sold first, followed by those with the
lowest CDSC. As such, the waiver benefit will be reduced by the
amount of your shares that are not subject to a CDSC. If you
suspend your participation in the plan, you may later resume plan
payments without requiring a new determination of the account value
for the 12% CDSC waiver.

All waivers will be granted only following the Distributor receiving
confirmation of your entitlement. If you believe you are eligible for
a CDSC waiver, please contact your Financial Advisor or call
(800) 869-NEWS.

DISTRIBUTION FEE. Class B shares are subject to an annual 12b-1 fee
of 1.0% of the average daily net assets of Class B.

CONVERSION FEATURE. After ten (10) years, Class B shares will convert
automatically to Class A shares of the Portfolio with no initial
sales charge. The ten year period runs from the last day of the month
in which the shares were purchased, or in the case of Class B shares
acquired through an exchange, from the last day of the month in which
the original Class B shares were purchased; the shares will convert
to Class A shares based on their relative net asset values in the
month following the ten year period. At the same time, an equal
proportion of Class B shares acquired through automatically
reinvested distributions will convert to Class A shares on the same
basis. (Class B shares acquired in exchange for shares of another
Morgan Stanley Dean Witter Fund originally purchased before May 1,
1997, however, will convert to Class A shares in May 2007.)

In the case of Class B shares held in a MSDW Eligible Plan, the plan
is treated as a single investor and all Class B shares will convert
to Class A shares on the conversion date of the Class B shares of a
Morgan Stanley Dean Witter Fund purchased by that plan.

Currently, the Class B share conversion is not a taxable event; the
conversion feature may be cancelled if it is deemed a taxable event
in the future by the Internal Revenue Service.

If you exchange your Class B shares for shares of a Money Market
Fund, a No-Load Fund, North American Government Income Trust or
Short-Term U.S. Treasury Trust, the holding period for conversion is
frozen as of the last day of the month of the exchange and resumes on
the last day of the month you exchange back into Class B shares.

EXCHANGING SHARES SUBJECT TO A CDSC. There are special considerations
when you exchange Portfolio shares that are subject to a CDSC. When
determining the length of time you held the shares and the
corresponding CDSC rate, any period (starting at the end of the
month) during which you held shares of a fund that does NOT charge a
CDSC WILL NOT BE COUNTED. Thus, in effect the "holding period" for
purposes of calculating the CDSC is frozen upon exchanging into a
fund that does not charge a CDSC.

For example, if you held Class B shares of the Portfolio for one
year, exchanged to Class B of another Morgan Stanley Dean Witter
Multi-Class Fund for another year, then

19
<PAGE>
sold your shares, a CDSC rate of 4% would be imposed on the shares
based on a two year holding period - one year for each Fund. However,
if you had exchanged the shares of the Portfolio for a Money Market
Fund (which does not charge a CDSC) instead of the Multi-Class Fund,
then sold your shares, a CDSC rate of 5% would be imposed on the
shares based on a one year holding period. The one year in the Money
Market Fund would not be counted. Nevertheless, if shares subject to
a CDSC are exchanged for a Fund that does not charge a CDSC, you will
receive a credit when you sell the shares equal to the distribution
(12b-1) fees, if any, you paid on those shares while in that Fund up
to the amount of any applicable CDSC.

In addition, shares that are exchanged into or from a Morgan Stanley
Dean Witter Fund subject to a higher CDSC rate will be subject to the
higher rate, even if the shares are re-exchanged into a Fund with a
lower CDSC rate.

CLASS C SHARES Class C shares are sold at net asset value with no
initial sales charge but are subject to a CDSC of 1.0% on sales made
within one year after the last day of the month of purchase. The CDSC
will be assessed in the same manner and with the same CDSC waivers as
with Class B shares.

DISTRIBUTION FEE. Class C shares are subject to an annual
distribution (12b-1) fee of up to 1.0% of the average daily net
assets of that Class. The Class C shares' distribution fee may cause
that Class to have higher expenses and pay lower dividends than Class
A or Class D shares. Unlike Class B shares, Class C shares have no
conversion feature and, accordingly, an investor that purchases Class
C shares may be subject to distribution (12b-1) fees applicable to
Class C shares for an indefinite period.

CLASS D SHARES Class D shares are offered without any sales charge on
purchases or sales and without any distribution (12b-1) fee. Class D
shares are offered only to investors meeting an initial investment
minimum of $5 million ($25 million for MSDW Eligible Plans) and the
following investor categories:

- Investors participating in the Investment Manager's mutual fund
asset allocation program (subject to all of its terms and
conditions, including mandatory sale or transfer restrictions on
termination) pursuant to which they pay an asset-based fee.

- Employee benefit plans maintained by Morgan Stanley Dean Witter &
Co. or any of its subsidiaries for the benefit of certain employees
of Morgan Stanley Dean Witter & Co. and its subsidiaries.

20
<PAGE>
- Certain unit investment trusts sponsored by Dean Witter Reynolds.

- Certain other open-end investment companies whose shares are
distributed by the Portfolio's distributor.

- Investors who were shareholders of the Dean Witter Retirement
Series on September 11, 1998 for additional purchases for their
former Dean Witter Retirement Series accounts.

MEETING CLASS D ELIGIBILITY MINIMUMS. To meet the $5 million ($25
million for certain MSDW Eligible Plans) initial investment to
qualify to purchase Class D shares you may combine: (1) purchases in
a single transaction of Class D shares of the Portfolio and other
Morgan Stanley Dean Witter Multi-Class Funds and/or (2) previous
purchases of Class A and Class D shares of Multi-Class Funds and
shares of FSC Funds you currently own, along with shares of Morgan
Stanley Dean Witter Funds you currently own that you acquired in
exchange for those shares.

NO SALES CHARGES FOR REINVESTED CASH DISTRIBUTIONS If you receive a
cash payment representing an income dividend or capital gain and you
reinvest that amount in the applicable Class of shares by returning the
check within 30 days of the payment date, the purchased shares would
not be subject to an initial sales charge or CDSC.

PLAN OF DISTRIBUTION (RULE 12b-1 FEES) The Portfolio has adopted a
Plan of Distribution in accordance with Rule 12b-1 under the Investment
Company Act of 1940 with respect to the distribution of Class A, Class
B and Class C shares of the Portfolio. The Plan allows the Portfolio to
pay distribution fees for the sale and distribution of these shares. It
also allows the Portfolio to pay for services to shareholders of Class
A, Class B and Class C shares. Because these fees are paid out of the
Portfolio's assets on an ongoing basis, over time these fees will
increase the cost of your investment in these Classes and may cost you
more than paying other types of sales charges.

21
<PAGE>
FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the
Portfolio's financial performance for the past fiscal year of the Portfolio.
Certain information reflects financial results for a single Portfolio share. The
total return in the table represents the rate an investor would have earned or
lost on an investment in the Portfolio (assuming reinvestment of all dividends
and distributions).

This information has been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Portfolio's financial statements, is
included in the annual report, which is available upon request.

<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 25,
FOR THE YEAR 1998*
ENDED THROUGH MAY 31,
MAY 31, 1999 1998
<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 Portfolio ratios for investment income and non-class
specific expenses.

<PAGE>

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

<PAGE>

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

<PAGE>

<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 25,
1998*
FOR THE YEAR ENDED THROUGH MAY 31,
MAY 31, 1999 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 Portfolio ratios for investment income and non-class
specific expenses.

<PAGE>
NOTES

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

26
<PAGE>
MORGAN STANLEY DEAN WITTER
FAMILY OF FUNDS
The Morgan Stanley Dean Witter Family of Funds offers
investors a wide range of investment choices. Come on
in and meet the family!
- --------------------------------------------------------------------------------
GROWTH FUNDS
- ---------------------------------
GROWTH FUNDS
Aggressive Equity Fund
American Opportunities Fund
Capital Growth Securities
Developing Growth Securities
Equity Fund
Growth Fund
Market Leader Trust
Mid-Cap Equity Trust
Special Value Fund
Value Fund
THEME FUNDS
Financial Services Trust
Health Sciences Trust
Information Fund
Natural Resource Development Securities
Precious Metals and Minerals Trust
SmallCap Growth Fund
GLOBAL/INTERNATIONAL FUNDS
Competitive Edge Fund - "Best Ideas"
Portfolio
European Growth Fund
Fund of Funds - International Portfolio
International Fund
International SmallCap Fund
Latin American Growth Fund
Japan Fund
Pacific Growth Fund
- --------------------------------------------------------------------------------
GROWTH AND INCOME FUNDS
- ---------------------------------
Balanced Growth Fund
Balanced Income Fund
Convertible Securities Trust
Dividend Growth Securities
Fund of Funds - Domestic Portfolio
Income Builder Fund
Mid-Cap Dividend Growth Securities
S&P 500 Index Fund
S&P 500 Select Fund
Strategist Fund
Total Return Trust
Value-Added Market Series/Equity Portfolio
THEME FUNDS
Global Utilities Fund
Real Estate Fund
Utilities Fund
GLOBAL FUNDS
Global Dividend Growth Securities
- --------------------------------------------------------------------------------
INCOME FUNDS
- ---------------------------------
GOVERNMENT INCOME FUNDS
Federal Securities Trust
Short-Term U.S. Treasury Trust
U.S. Government Securities Trust
DIVERSIFIED INCOME FUNDS
Diversified Income Trust
CORPORATE INCOME FUNDS
High Yield Securities
Intermediate Income Securities
Short-Term Bond Fund (NL)
GLOBAL INCOME FUNDS
North American Government Income Trust
World Wide Income Trust
TAX-FREE INCOME FUNDS
California Tax-Free Income Fund
Hawaii Municipal Trust (FSC)
Limited Term Municipal Trust (NL)
Multi-State Municipal Series Trust (FSC)
New York Tax-Free Income Fund
Tax-Exempt Securities Trust
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS
- ---------------------------------
TAXABLE MONEY MARKET FUNDS
Liquid Asset Fund (MM)
U.S. Government Money Market Trust (MM)
TAX-FREE MONEY MARKET FUNDS
California Tax-Free Daily Income Trust (MM)
N.Y. Municipal Money Market Trust (MM)
Tax-Free Daily Income Trust (MM)

There may be Funds created after this PROSPECTUS was published. Please consult
the inside back cover of a new Fund's prospectus for its designation, e.g.,
Multi-Class Fund or Money Market Fund.

Unless otherwise noted, each listed Morgan Stanley Dean Witter Fund, except for
Short-Term U.S. Treasury Trust, is a Multi-Class Fund. A Multi-Class Fund is a
mutual fund offering multiple Classes of shares. The other types of funds are:
NL - No-Load (Mutual) Fund; MM - Money Market Fund; FSC - A mutual fund sold
with a front-end sales charge and a distribution (12b-1) fee.
<PAGE>

PROSPECTUS - JULY , 1999

Additional information about the Morgan Stanley Dean Witter Competitive Edge
Fund - "Best Ideas" Portfolio's investments is available in the Portfolio's
ANNUAL AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS. In the Portfolio's ANNUAL
REPORT, you will find a discussion of the market conditions and investment
strategies that significantly affected the Portfolio's performance during its
last fiscal year. The Portfolio's Statement of Additional Information also
provides additional information about the Portfolio. The Statement of Additional
Information is incorporated herein by reference (legally is part of this
PROSPECTUS). For a free copy of any of these documents, to request other
information about the Portfolio, or to make shareholder inquiries, please call:

(800) 869-NEWS

You also may obtain information about the Portfolio by calling your Morgan
Stanley Dean Witter Financial Advisor or by visiting our Internet site at:

www.deanwitter.com/funds

Information about the Portfolio (including the STATEMENT OF ADDITIONAL
INFORMATION) can be viewed and copied at the Securities and Exchange
Commission's Public Reference Room in Washington, DC. Information about the
Reference Room's operations may be obtained by calling the SEC at (800)
SEC-0330. Reports and other information about the Portfolio are available on the
SEC's Internet site (www.sec.gov), and copies of this information may be
obtained, upon payment of a duplicating fee, by writing the Public Reference
Section of the SEC, Washington, DC 20549-6009.

TICKER SYMBOLS:

CLASS A: EDGAX CLASS C: EDGCX
- -------------------- --------------------

CLASS B: EDGBX CLASS D: EDGDX
- -------------------- --------------------

(THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-8455)

Morgan Stanley Dean Witter
COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO

[BACK COVER PHOTO]

A STOCK MUTUAL FUND
THAT SEEKS LONG-TERM
CAPITAL GROWTH
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION MORGAN STANLEY
JULY , 1999 DEAN WITTER COMPETITIVE EDGE FUND

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

This STATEMENT OF ADDITIONAL INFORMATION is not a PROSPECTUS. The PROSPECTUS
(dated July , 1999) for the Morgan Stanley Dean Witter Competitive Edge Fund
may be obtained without charge from the Fund at its address or telephone number
listed below or from Dean Witter Reynolds at any of its branch offices.

This STATEMENT OF ADDITIONAL INFORMATION relates to the "Best Ideas"
Portfolio of the Fund which is currently the only Portfolio offered by the Fund.

Morgan Stanley Dean Witter
Competitive Edge Fund
Two World Trade Center
New York, New York 10048
(800) 869-NEWS
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------

I. Fund History........................................... 4

II. Description of the Portfolio and Its Investments and
Risks.................................................. 4

A. Classification...................................... 4

B. Investment Strategies and Risks..................... 4

C. Portfolio Policies/Investment Restrictions.......... 12

III. Management of the Fund................................. 14

A. Board of Trustees................................... 14

B. Management Information.............................. 14

C. Compensation........................................ 18

IV. Control Persons and Principal Holders of Securities.... 20

V. Investment Management and Other Services............... 20

A. Investment Manager.................................. 20

B. Principal Underwriter............................... 21

C. Services Provided by the Investment Manager and
Portfolio Expenses Paid................................ 21

D. Dealer Reallowances................................. 22

E. Rule 12b-1 Plan..................................... 22

F. Other Service Providers............................. 26

VI. Brokerage Allocation and Other Practices............... 26

A. Brokerage Transactions.............................. 26

B. Commissions......................................... 27

C. Brokerage Selection................................. 27

D. Directed Brokerage.................................. 28

E. Regular Broker-Dealers.............................. 28

VII. Capital Stock and Other Securities..................... 29

VIII. Purchase, Redemption and Pricing of Shares............. 29

A. Purchase/Redemption of Shares....................... 29

B. Offering Price...................................... 30

IX. Taxation of the Portfolio and Shareholders............. 31

X. Underwriters........................................... 33

XI. Calculation of Performance Data........................ 33

XII. Financial Statements................................... 34

2
<PAGE>
GLOSSARY OF SELECTED DEFINED TERMS
- --------------------------------------------------------------------------------

The terms defined in this glossary are frequently used in this STATEMENT OF
ADDITIONAL INFORMATION (other terms used occasionally are defined in the text of
the document).

"CUSTODIAN"--The Bank of New York.

"DEAN WITTER REYNOLDS"--Dean Witter Reynolds Inc., a wholly-owned broker-dealer
subsidiary of MSDW.

"DISTRIBUTOR"--Morgan Stanley Dean Witter Distributors Inc., a wholly-owned
broker-dealer subsidiary of MSDW.

"FINANCIAL ADVISORS"--Morgan Stanley Dean Witter authorized financial services
representatives.

"FUND"--Morgan Stanley Dean Witter Competitive Edge Fund, a registered open-end
investment company.

"INVESTMENT MANAGER"--Morgan Stanley Dean Witter Advisors Inc., a wholly-owned
investment advisor subsidiary of MSDW.

"INDEPENDENT TRUSTEES"--Trustees who are not "interested persons" (as defined by
the Investment Company Act) of the Fund.

"MORGAN STANLEY & CO."--Morgan Stanley & Co. Incorporated, a wholly-owned
broker-dealer subsidiary of MSDW.

"MORGAN STANLEY DEAN WITTER FUNDS"--Registered investment companies (i) for
which the Investment Manager serves as the investment advisor and (ii) that hold
themselves out to investors as related companies for investment and investor
services.

"MSDW"--Morgan Stanley Dean Witter & Co., a preeminent global financial services
firm.

"MSDW SERVICES COMPANY"--Morgan Stanley Dean Witter Services Company Inc., a
wholly-owned fund services subsidiary of the Investment Manager.

"PORTFOLIO"--"Best Ideas" Portfolio of the Fund.

"TRANSFER AGENT"--Morgan Stanley Dean Witter Trust FSB, a wholly-owned transfer
agent subsidiary of MSDW.

"TRUSTEES"--The Board of Trustees of the Fund.

3
<PAGE>
I. FUND HISTORY
- --------------------------------------------------------------------------------

The Fund was organized as a "Massachusetts business trust" under the laws of
the Commonwealth of Massachusetts on October 16, 1997 under the name Dean Witter
"Competitive Edge" Fund. Effective December 18, 1997, the Fund's name was
changed to Morgan Stanley Dean Witter Competitive Edge Fund.

II. DESCRIPTION OF THE PORTFOLIO AND ITS INVESTMENTS AND RISKS
- --------------------------------------------------------------------------------

A. CLASSIFICATION

The Portfolio is an open-end, diversified management investment company
whose investment objective is to seek long-term capital growth.

B. INVESTMENT STRATEGIES AND RISKS

The following discussion of the Portfolio's investment strategies and risks
should be read with the sections of its PROSPECTUS titled "Principal Investment
Strategies," "Principal Risks," "Additional Investment Strategy Information" and
"Additional Risk Information."

COMPETITIVE EDGE "BEST IDEAS" PORTFOLIO: "BEST IDEAS" LIST. As of July ,
1999, the companies in the "Best Ideas" subgroup of "Global Investing: The
Competitive Edge" were as follows:

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Portfolio may enter into
forward U.S. dollar and foreign currency exchange contracts ("FORWARD
CONTRACTS") as a hedge against fluctuations in future foreign exchange rates.
The Portfolio may conduct its currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through entering into forward contracts to purchase or sell foreign
currencies. A forward contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded in the interbank market conducted
directly between currency traders (usually large, commercial and investment
banks) and their customers. Forward contracts only will be entered into with
United States banks and their foreign branches, insurance companies and other
dealers whose assets total $1 billion or more, or foreign banks whose assets
total $1 billion or more. A forward contract generally has no deposit
requirement, and no commissions are charged at any stage for trades.

The Portfolio may enter into forward contracts under various circumstances.
The typical use of a forward contract is to "lock in" the price of a security in
U.S. dollars or some other foreign currency which the Portfolio is holding in
its portfolio. By entering into a forward contract for the purchase or sale, for
a fixed amount of dollars or other currency, of the amount of foreign currency
involved in the underlying security transactions, the Portfolio may be able to
protect itself against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar or other currency which is being used for
the security purchase and the foreign currency in which the security is
denominated during the period between the date on which the security is
purchased or sold and the date on which payment is made or received.

The Investment Manager also may from time to time utilize forward contracts
for other purposes. For example, they may be used to hedge a foreign security
held in the portfolio or a security which pays out principal tied to an exchange
rate between the U.S. dollar and a foreign currency, against a decline in value
of the applicable foreign currency. They also may be used to lock in the current
exchange rate of the currency in which those securities anticipated to be
purchased are denominated. At times, the Portfolio may enter into
"cross-currency" hedging transactions involving currencies other than those in
which securities are held or proposed to be purchased are denominated.

The Portfolio will not enter into forward currency contracts or maintain a
net exposure to these contracts where the consummation of the contracts would
obligate the Portfolio to deliver an amount of currency in excess of the value
of the Portfolio's portfolio securities.

4
<PAGE>
Although the Portfolio values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. It will, however, do so from time to time, and investors
should be aware of the costs of currency conversion. Although foreign exchange
dealers do not charge a fee for conversion, they do realize a profit based on
the spread between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Portfolio
at one rate, while offering a lesser rate of exchange should the Portfolio
desire to resell that currency to the dealer.

The Portfolio may be limited in its ability to enter into hedging
transactions involving forward contracts by the Internal Revenue Code
requirements relating to qualification as a regulated investment company.

Forward currency contracts may limit gains on portfolio securities that
could otherwise be realized had they not been utilized and could result in
losses. The contracts also may increase the Portfolio's volatility and may
involve a significant amount of risk relative to the investment of cash.

OPTION AND FUTURES TRANSACTIONS. The Portfolio may engage in transactions
in listed and OTC options on eligible portfolio securities and stock indexes.
Listed options are issued or guaranteed by the exchange on which they are traded
or by a clearing corporation such as the Options Clearing Corporation ("OCC").
Ownership of a listed call option gives the Portfolio the right to buy from the
OCC (in the U.S.) or other clearing corporation or exchange, the underlying
security or currency covered by the option at the stated exercise price (the
price per unit of the underlying security) by filing an exercise notice prior to
the expiration date of the option. The writer (seller) of the option would then
have the obligation to sell to the OCC (in the U.S.) or other clearing
corporation or exchange, the underlying security or currency at that exercise
price prior to the expiration date of the option, regardless of its then current
market price. Ownership of a listed put option would give the Portfolio the
right to sell the underlying security or currency to the OCC (in the U.S.) or
other clearing corporation or exchange, at the stated exercise price. Upon
notice of exercise of the put option, the writer of the put would have the
obligation to purchase the underlying security or currency from the OCC (in the
U.S.) or other clearing corporation or exchange, at the exercise price.

COVERED CALL WRITING. The Portfolio is permitted to write covered call
options on portfolio securities and the U.S. dollar and foreign currencies,
without limit.

The Portfolio will receive from the purchaser, in return for a call it has
written, a "premium;" i.e., the price of the option. Receipt of these premiums
may better enable the Portfolio to earn a higher level of current income than it
would earn from holding the underlying securities (or currencies) alone.
Moreover, the premium received will offset a portion of the potential loss
incurred by the Portfolio if the securities underlying the option decline in
value.

The Portfolio may be required, at any time during the option period, to
deliver the underlying security (or currency) against payment of the exercise
price on any calls it has written. This obligation is terminated upon the
expiration of the option period or at such earlier time when the writer effects
a closing purchase transaction. A closing purchase transaction is accomplished
by purchasing an option of the same series as the option previously written.
However, once the Portfolio has been assigned an exercise notice, the Portfolio
will be unable to effect a closing purchase transaction.

A call option is "covered" if the Portfolio owns the underlying security
subject to the option or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional consideration
(in cash, Treasury bills or other liquid portfolio securities) held in a
segregated account on the Portfolio's books) upon conversion or exchange of
other securities held in its portfolio. A call option is also covered if the
Portfolio holds a call on the same security as the call written where the
exercise price of the call held is (i) equal to or less than the exercise price
of the call written or (ii) greater than the exercise price of the call written
if the difference is maintained by the Portfolio in cash, Treasury bills or
other liquid portfolio securities in a segregated account on the Portfolio's
books.

5
<PAGE>
Options written by the Portfolio normally have expiration dates of from up
to eighteen months from the date written. The exercise price of a call option
may be below, equal to or above the current market value of the underlying
security (or currency) at the time the option is written.

COVERED PUT WRITING. A writer of a covered put option incurs an obligation
to buy the security underlying the option from the purchaser of the put, at the
option's exercise price at any time during the option period, at the purchaser's
election. Through the writing of a put option, the Portfolio would receive
income from the premium paid by purchasers. The potential gain on a covered put
option is limited to the premium received on the option (less the commissions
paid on the transaction). During the option period, the Portfolio may be
required, at any time, to make payment of the exercise price against delivery of
the underlying security. A put option is "covered" if the Portfolio maintains
cash, Treasury bills or other liquid portfolio securities with a value equal to
the exercise price in a segregated account on the Portfolio's books, or holds a
put on the same security as the put written where the exercise price of the put
held is equal to or greater than the exercise price of the put written. The
operation of and limitations on covered put options in other respects are
substantially identical to those of call options.

PURCHASING CALL AND PUT OPTIONS. The Portfolio may purchase listed and OTC
call and put options in amounts equaling up to 5% of its total assets. The
purchase of a call option would enable the Portfolio, in return for the premium
paid to lock in a purchase price for a security or currency during the term of
the option. The purchase of a put option would enable the Portfolio, in return
for a premium paid, to lock in a price at which it may sell a security or
currency during the term of the option.

OPTIONS ON FOREIGN CURRENCIES. The Portfolio may purchase and write options
on foreign currencies for purposes similar to those involved with investing in
forward foreign currency exchange contracts.

OTC OPTIONS. OTC options are purchased from or sold (written) to dealers or
financial institutions which have entered into direct agreements with the
Portfolio. With OTC options, such variables as expiration date, exercise price
and premium will be agreed upon between the Portfolio and the transacting
dealer, without the intermediation of a third party such as the OCC. The
Portfolio will engage in OTC option transactions only with member banks of the
Federal Reserve Bank System or primary dealers in U.S. Government securities or
with affiliates of such banks or dealers.

RISKS OF OPTIONS TRANSACTIONS. The successful use of options depends on the
ability of the Investment Manager to forecast correctly interest rates and/or
market movements. If the market value of the portfolio securities (or
currencies) upon which call options have been written increases, the Portfolio
may receive a lower total return from the portion of its portfolio upon which
calls have been written than it would have had such calls not been written.
During the option period, the covered call writer has, in return for the premium
on the option, given up the opportunity for capital appreciation above the
exercise price should the market price of the underlying security (or currency)
increase, but has retained the risk of loss should the price of the underlying
security (or currency) decline. The covered put writer also retains the risk of
loss should the market value of the underlying security (or currency) decline
below the exercise price of the option less the premium received on the sale of
the option. In both cases, the writer has no control over the time when it may
be required to fulfill its obligation as a writer of the option. Prior to
exercise or expiration, an option position can only be terminated by entering
into a closing purchase or sale transaction. Once an option writer has received
an exercise notice, it cannot effect a closing purchase transaction in order to
terminate its obligation under the option and must deliver or receive the
underlying securities (or currencies) at the exercise price.

The Portfolio's ability to close out its position as a writer of an option
is dependent upon the existence of a liquid secondary market on option
exchanges. There is no assurance that such a market will exist, particularly in
the case of OTC options.

In the event of the bankruptcy of a broker through which the Portfolio
engages in transactions in options, the Portfolio could experience delays and/or
losses in liquidating open positions purchased or sold through the broker and/or
incur a loss of all or part of its margin deposits with the broker. In the case
of OTC options, if the transacting dealer fails to make or take delivery of the
securities (or currencies)

6
<PAGE>
underlying an option it has written, in accordance with the terms of that
option, due to insolvency or otherwise, the Portfolio would lose the premium
paid for the option as well as any anticipated benefit of the transaction.

Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security which may be
written by a single investor, whether acting alone or in concert with others
(regardless of whether such options are written on the same or different
exchanges or are held or written on one or more accounts or through one or more
brokers). An exchange may order the liquidation of positions found to be in
violation of these limits and it may impose other sanctions or restrictions.
These position limits may restrict the number of listed options which the
Portfolio may write.

The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the option markets.

The markets in foreign currency options are relatively new and the
Portfolio's ability to establish and close out positions on such options is
subject to the maintenance of a liquid secondary market. There can be no
assurance that a liquid secondary market will exist for a particular option at
any specific time.

The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of the
option position may vary with changes in the value of either or both currencies
and have no relationship to the investment merits of a foreign security. Because
foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.

There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information available is generally representative of very large transactions in
the interbank market and thus may not reflect relatively smaller transactions
(i.e., less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To the extent
that the U.S. options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that are not reflected in the options market.

STOCK INDEX OPTIONS. The Portfolio may invest in options on broadly based
indexes. Options on stock indexes are similar to options on stock except that,
rather than the right to take or make delivery of stock at a specified price, an
option on a stock index gives the holder the right to receive, upon exercise of
the option, an amount of cash if the closing level of the stock index upon which
the option is based is greater than, in the case of a call, or less than, in the
case of a put, the exercise price of the option. This amount of cash is equal to
such difference between the closing price of the index and the exercise price of
the option expressed in dollars times a specified multiple. The writer of the
option is obligated, in return for the premium received, to make delivery of
this amount.

RISKS OF OPTIONS ON INDEXES. Because exercises of stock index options are
settled in cash, the Portfolio could not, if it wrote a call option, provide in
advance for its potential settlement obligations by acquiring and holding the
underlying securities. A call writer can offset some of the risk of its writing
position by holding a diversified portfolio of stocks similar to those on which
the underlying index is based. However, most investors cannot, as a practical
matter, acquire and hold a portfolio containing exactly the same stocks as the
underlying index, and, as a result, bear a risk that the value of the securities
held will vary from the value of the index. Even if an index call writer could
assemble a stock portfolio that exactly reproduced the composition of the
underlying index, the writer still would not be fully covered from a risk
standpoint because of the "timing risk" inherent in writing index options.

7
<PAGE>
When an index option is exercised, the amount of cash that the holder is
entitled to receive is determined by the difference between the exercise price
and the closing index level on the date when the option is exercised. As with
other kinds of options, the writer will not learn that it had been assigned
until the next business day, at the earliest. The time lag between exercise and
notice of assignment poses no risk for the writer of a covered call on a
specific underlying security, such as a common stock, because there the writer's
obligation is to deliver the underlying security, not to pay its value as of a
fixed time in the past. So long as the writer already owns the underlying
security, it can satisfy its settlement obligations by simply delivering it, and
the risk that its value may have declined since the exercise date is borne by
the exercising holder. In contrast, even if the writer of an index call holds
stocks that exactly match the composition of the underlying index, it will not
be able to satisfy its assignment obligations by delivering those stocks against
payment of the exercise price. Instead, it will be required to pay cash in an
amount based on the closing index value on the exercise date; and by the time it
learns that it has been assigned, the index may have declined, with a
corresponding decrease in the value of its stock portfolio. This "timing risk"
is an inherent limitation on the ability of index call writers to cover their
risk exposure by holding stock positions.

A holder of an index option who exercises it before the closing index value
for that day is available runs the risk that the level of the underlying index
may subsequently change. If a change causes the exercised option to fall
out-of-the-money, the exercising holder will be required to pay the difference
between the closing index value and the exercise price of the option (times the
applicable multiplier) to the assigned writer.

If dissemination of the current level of an underlying index is interrupted,
or if trading is interrupted in stocks accounting for a substantial portion of
the value of an index, the trading of options on that index will ordinarily be
halted. If the trading of options on an underlying index is halted, an exchange
may impose restrictions prohibiting the exercise of such options.

FUTURES CONTRACTS. The Portfolio may purchase and sell interest rate and
index futures contracts that are traded on U.S. and foreign commodity exchanges
on such underlying securities as U.S. Treasury bonds, notes, bills and GNMA
Certificates and/or any foreign government fixed-income security, on the U.S.
dollar and foreign currencies, and on such indexes of U.S. and foreign
securities as may exist or come into existence.

A futures contract purchaser incurs an obligation to take delivery of a
specified amount of the obligation underlying the contract at a specified time
in the future for a specified price. A seller of a futures contract incurs an
obligation to deliver the specified amount of the underlying obligation at a
specified time in return for an agreed upon price. The purchase of a futures
contract enables the Portfolio, during the term of the contract, to lock in a
price at which it may purchase a security and protect against a rise in prices
pending purchase of portfolio securities. The sale of a futures contract enables
the Portfolio to lock in a price at which it may sell a security and protect
against declines in the value of portfolio securities.

Although most futures contracts call for actual delivery or acceptance of
securities, the contracts usually are closed out before the settlement date
without the making or taking of delivery. Index futures contracts provide for
the delivery of an amount of cash equal to a specified dollar amount times the
difference between the index value at the open or close of the last trading day
of the contract and the futures contract price. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of the specific type of security (currency) and the same delivery date.
If the sale price exceeds the offsetting purchase price, the seller would be
paid the difference and would realize a gain. If the offsetting purchase price
exceeds the sale price, the seller would pay the difference and would realize a
loss. Similarly, a futures contract purchase is closed out by effecting a
futures contract sale for the same aggregate amount of the specific type of
security (currency) and the same delivery date. If the offsetting sale price
exceeds the purchase price, the purchaser would realize a gain, whereas if the
purchase price exceeds the offsetting sale price, the purchaser would realize a
loss. There is no assurance that the Portfolio will be able to enter into a
closing transaction.

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<PAGE>
MARGIN. If the Portfolio enters into a futures contract, it is initially
required to deposit an "initial margin" of cash or U.S. Government securities or
other liquid portfolio securities ranging from approximately 2% to 5% of the
contract amount. Initial margin requirements are established by the exchanges on
which futures contracts trade and may, from time to time, change. In addition,
brokers may establish margin deposit requirements in excess of those required by
the exchanges.

Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing of
funds by a broker's client but is, rather, a good faith deposit on the futures
contract which will be returned to the Portfolio upon the proper termination of
the futures contract. The margin deposits made are marked to market daily and
the Portfolio may be required to make subsequent deposits of cash or U.S.
Government securities, called "variation margin," which are reflective of price
fluctuations in the futures contract.

OPTIONS ON FUTURES CONTRACTS. The Portfolio may purchase and write call and
put options on futures contracts and enter into closing transactions with
respect to such options to terminate an existing position. An option on a
futures contract gives the purchaser the right (in return for the premium paid),
and the writer the obligation, to assume a position in a futures contract (a
long position if the option is a call and a short position if the option is a
put) at a specified exercise price at any time during the term of the option.
Upon exercise of the option, the delivery of the futures position by the writer
of the option to the holder of the option is accompanied by delivery of the
accumulated balance in the writer's futures margin account, which represents the
amount by which the market price of the futures contract at the time of exercise
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option on the futures contract.

The writer of an option on a futures contract is required to deposit initial
and variation margin pursuant to requirements similar to those applicable to
futures contracts. Premiums received from the writing of an option on a futures
contract are included in initial margin deposits.

LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Portfolio may
not enter into futures contracts or purchase related options thereon if,
immediately thereafter, the amount committed to margin plus the amount paid for
premiums for unexpired options on futures contracts exceeds 5% of the value of
the Portfolio's total assets, after taking into account unrealized gains and
unrealized losses on such contracts it has entered into, provided, however, that
in the case of an option that is in-the-money (the exercise price of the call
(put) option is less (more) than the market price of the underlying security) at
the time of purchase, the in-the-money amount may be excluded in calculating the
5%. However, there is no overall limitation on the percentage of the Portfolio's
net assets which may be subject to a hedge position.

RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. The prices
of securities and indexes subject to futures contracts (and thereby the futures
contract prices) may correlate imperfectly with the behavior of the cash prices
of the Portfolio's portfolio securities. Also, prices of futures contracts may
not move in tandem with the changes in prevailing interest rates and/or market
movements against which the Portfolio seeks a hedge. A correlation may also be
distorted (a) temporarily, by short-term traders' seeking to profit from the
difference between a contract or security price objective and their cost of
borrowed funds; (b) by investors in futures contracts electing to close out
their contracts through offsetting transactions rather than meet margin deposit
requirements; (c) by investors in futures contracts opting to make or take
delivery of underlying securities rather than engage in closing transactions,
thereby reducing liquidity of the futures market; and (d) temporarily, by
speculators who view the deposit requirements in the futures markets as less
onerous than margin requirements in the cash market. Due to the possibility of
price distortion in the futures market and because of the possible imperfect
correlation between movements in the prices of securities and movements in the
prices of futures contracts, a correct forecast of interest rate, currency
exchange rate and/or market movement trends by the Investment Manager may still
not result in a successful hedging transaction.

There is no assurance that a liquid secondary market will exist for futures
contracts and related options in which the Portfolio may invest. In the event a
liquid market does not exist, it may not be

9
<PAGE>
possible to close out a futures position and, in the event of adverse price
movements, the Portfolio would continue to be required to make daily cash
payments of variation margin. The absence of a liquid market in futures
contracts might cause the Portfolio to make or take delivery of the underlying
securities at a time when it may be disadvantageous to do so.

Exchanges also limit the amount by which the price of a futures contract may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased. In the event of adverse price movements, the Portfolio
would continue to be required to make daily cash payments of variation margin on
open futures positions. In these situations, if the Portfolio has insufficient
cash, it may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. In addition, the
Portfolio may be required to take or make delivery of the instruments underlying
interest rate futures contracts it holds at a time when it is disadvantageous to
do so. The inability to close out options and futures positions could also have
an adverse impact on the Portfolio's ability to effectively hedge its portfolio.

Futures contracts and options thereon which are purchased or sold on foreign
commodities exchanges may have greater price volatility than their U.S.
counterparts. Furthermore, foreign commodities exchanges may be less regulated
and under less governmental scrutiny than U.S. exchanges. Brokerage commissions,
clearing costs and other transaction costs may be higher on foreign exchanges.
Greater margin requirements may limit the Portfolio's ability to enter into
certain commodity transactions on foreign exchanges. Moreover, differences in
clearance and delivery requirements on foreign exchanges may occasion delays in
the settlement of the Portfolio's transactions effected on foreign exchanges.

In the event of the bankruptcy of a broker through which the Portfolio
engages in transactions in futures or options thereon, the Portfolio could
experience delays and/or losses in liquidating open positions purchased or sold
through the broker and/or incur a loss of all or part of its margin deposits
with the broker.

MONEY MARKET SECURITIES. The Portfolio may invest in various money market
securities for cash management purposes, which among others may include
commercial paper, bank acceptances, bank obligations, corporate debt securities
certificates of deposit, U.S. Government securities and obligations of savings
institutions. Such securities are limited to:

U.S. GOVERNMENT SECURITIES. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as the
Federal Home Loan Bank), including Treasury bills, notes and bonds;

BANK OBLIGATIONS. Obligations (including certificates of deposit, time
deposits and bankers' acceptances) of banks subject to regulation by the U.S.
Government and having total assets of $1 billion or more, and instruments
secured by such obligations, not including obligations of foreign branches of
domestic banks except to the extent below;

EURODOLLAR CERTIFICATES OF DEPOSIT. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1 billion
or more;

OBLIGATIONS OF SAVINGS INSTITUTIONS. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more;

FULLY INSURED CERTIFICATES OF DEPOSIT. Certificates of deposit of banks and
savings institutions, having total assets of less than $1 billion. If the
principal amount of the obligation is federally insured by the Bank Insurance
Fund or the Savings Association Insurance Fund (each of which is administered by
the FDIC), limited to $100,000 principal amount per certificate and to 10% or
less of the Portfolio's total assets in all such obligations and in all illiquid
assets, in the aggregate;

10
<PAGE>
COMMERCIAL PAPER. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation ("S&P") or the two highest grades by Moody's
Investors Service, Inc. ("Moody's") or, if not rated, issued by a company having
an outstanding debt issue rated at least AA by S&P or Aa by Moody's; and

REPURCHASE AGREEMENTS. The Portfolio may invest in repurchase agreements.
When cash may be available for only a few days, it may be invested by the
Portfolio in repurchase agreements until such time as it may otherwise be
invested or used for payments of obligations of the Portfolio. These agreements,
which may be viewed as a type of secured lending by the Portfolio, typically
involve the acquisition by the Portfolio of debt securities from a selling
financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Portfolio will sell back to the
institution, and that the institution will repurchase, the underlying security
serving as collateral at a specified price and at a fixed time in the future,
usually not more than seven days from the date of purchase. The collateral will
be marked-to-market daily to determine that the value of the collateral, as
specified in the agreement, does not decrease below the purchase price plus
accrued interest. If such decrease occurs, additional collateral will be
requested and, when received, added to the account to maintain full
collateralization. The Portfolio will accrue interest from the institution until
the time when the repurchase is to occur. Although this date is deemed by the
Portfolio to be the maturity date of a repurchase agreement, the maturities of
securities subject to repurchase agreements are not subject to any limits.

While repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Portfolio follows procedures designed to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions
whose financial condition will be continually monitored by the Investment
Manager subject to procedures established by the Trustees. In addition, as
described above, the value of the collateral underlying the repurchase agreement
will be at least equal to the repurchase price, including any accrued interest
earned on the repurchase agreement. In the event of a default or bankruptcy by a
selling financial institution, the Portfolio will seek to liquidate such
collateral. However, the exercising of the Portfolio's right to liquidate such
collateral could involve certain costs or delays and, to the extent that
proceeds from any sale upon a default of the obligation to repurchase were less
than the repurchase price, the Portfolio could suffer a loss.

LENDING PORTFOLIO SECURITIES. The Portfolio may lend its portfolio
securities to brokers, dealers and other financial institutions, provided that
the loans are callable at any time by the Portfolio, and are at all times
secured by cash or cash equivalents, which are maintained in a segregated
account pursuant to applicable regulations and that are equal to at least 100%
of the market value, determined daily, of the loaned securities. The advantage
of these loans is that the Portfolio continues to receive the income on the
loaned securities while at the same time earning interest on the cash amounts
deposited as collateral, which will be invested in short-term obligations. The
Portfolio will not lend more than 25% of the value of its total assets.

As with any extensions of credit, there are risks of delay in recovery and,
in some cases, even loss of rights in the collateral should the borrower of the
securities fail financially. However, these loans of portfolio securities will
only be made to firms deemed by the Portfolio's management to be creditworthy
and when the income which can be earned from such loans justifies the attendant
risks. Upon termination of the loan, the borrower is required to return the
securities to the Portfolio. Any gain or loss in the market price during the
loan period would inure to the Portfolio.

When voting or consent rights which accompany loaned securities pass to the
borrower, the Portfolio will follow the policy of calling the loaned securities,
to be delivered within one day after notice, to permit the exercise of the
rights if the matters involved would have a material effect on the Portfolio's
investment in the loaned securities. The Portfolio will pay reasonable finder's,
administrative and custodial fees in connection with a loan of its securities.

11
<PAGE>
PRIVATE PLACEMENTS. The Portfolio may invest up to 15% of its net assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933 (the "SECURITIES ACT"), or
which are otherwise not readily marketable. (Securities eligible for resale
pursuant to Rule 144A under the Securities Act, and determined to be liquid
pursuant to the procedures discussed in the following paragraph, are not subject
to the foregoing restriction.) These securities are generally referred to as
private placements or restricted securities. Limitations on the resale of these
securities may have an adverse effect on their marketability, and may prevent
the Portfolio from disposing of them promptly at reasonable prices. The
Portfolio may have to bear the expense of registering the securities for resale
and the risk of substantial delays in effecting the registration.

Rule 144A permits the Portfolio to sell restricted securities to qualified
institutional buyers without limitation. The Investment Manager, pursuant to
procedures adopted by the Trustees, will make a determination as to the
liquidity of each restricted security purchased by the Portfolio. If a
restricted security is determined to be "liquid," the security will not be
included within the category "illiquid securities," which may not exceed 15% of
the Portfolio's net assets. However, investing in Rule 144A securities could
have the effect of increasing the level of Fund illiquidity to the extent the
Fund, at a particular point in time, may be unable to find qualified
institutional buyers interested in purchasing such securities.

WARRANTS AND SUBSCRIPTION RIGHTS. The Portfolio may acquire warrants and
subscription rights. A warrant is, in effect, an option to purchase equity
securities at a specific price, generally valid for a specific period of time,
and has no voting rights, pays no dividends and has no rights with respect to
the corporation issuing it.

A subscription right is a privilege granted to existing shareholders of a
corporation to subscribe to shares of a new issue of common stock before it is
offered to the public. A subscription right normally has a life of two to four
weeks and a subscription price lower than the current market value of the common
stock. A subscription right is freely transferable.

NEW INSTRUMENTS. New financial products and various combinations thereof
continue to be developed. The Fund may invest in any such products as may be
developed, to the extent consistent with its investment objective and applicable
regulatory requirements.

YEAR 2000. The investment management services provided to the Portfolio by
the Investment Manager and the services provided to shareholders by the
Distributor and the Transfer Agent depend on the smooth functioning of their
computer systems. Many computer software systems in use today cannot recognize
the year 2000, but revert to 1900 or some other date, due to the manner in which
dates were encoded and calculated. That failure could have a negative impact on
the handling of securities trades, pricing and account services. The Investment
Manager, the Distributor and the Transfer Agent have been actively working on
necessary changes to their own computer systems to prepare for the year 2000 and
expect that their systems will be adapted before that date, but there can be no
assurance that they will be successful, or that interaction with other
non-complying computer systems will not impair their services at that time.

In addition, it is possible that the markets for securities in which the
Portfolio invests may be detrimentally affected by computer failures throughout
the financial services industry beginning January 1, 2000. Improperly
functioning trading systems may result in settlement problems and liquidity
issues. In addition, corporate and governmental data processing errors may
result in production problems for individual companies and overall economic
uncertainties. Earnings of individual issuers will be affected by remediation
costs, which may be substantial and may be reported inconsistently in U.S. and
foreign financial statements. Accordingly, the Portfolio's investments may be
adversely affected.

C. PORTFOLIO POLICIES/INVESTMENT RESTRICTIONS

The investment objective, policies and restrictions listed below have been
adopted by the Portfolio as fundamental policies. Under the Investment Company
Act of 1940 (the "INVESTMENT COMPANY ACT"), a

12
<PAGE>
fundamental policy may not be changed with respect to the Portfolio without the
vote of a majority of the outstanding voting securities of the Portfolio. The
Investment Company Act defines a majority as the lesser of (a) 67% or more of
the shares present at a meeting of shareholders, if the holders of 50% of the
outstanding shares of the Portfolio are present or represented by proxy; or (b)
more than 50% of the outstanding shares of the Portfolio. For purposes of the
following restrictions: (i) all percentage limitations apply immediately after a
purchase or initial investment; and (ii) any subsequent change in any applicable
percentage resulting from market fluctuations or other changes in total or net
assets does not require elimination of any security from the portfolio.

The Portfolio will:

1. Seek long-term capital growth.

The Portfolio MAY NOT:

1. As to 75% of its total assets, invest more than 5% of the value of its
total assets in the securities of any one issuer (other than obligations issued
or guaranteed by the United States government, its agencies or
instrumentalities), except that the Portfolio may invest all or substantially
all of its assets in another registered investment company having the same
investment objective and policies and substantially the same investment
restrictions as the Portfolio (a "Qualifying Portfolio").

2. As to 75% of its total assets, purchase more than 10% of all outstanding
voting securities or any class of securities of any one issuer, except that the
Portfolio may invest all or substantially all of its assets in a Qualifying
Portfolio.

3. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to obligations
issued or guaranteed by the United States government, its agencies or
instrumentalities.

4. Purchase or sell real estate or interests therein (including limited
partnership interests), although the Portfolio may purchase securities of
issuers which engage in real estate operations and securities secured by real
estate or interests therein.

5. Borrow money, except that the Portfolio may borrow from a bank for
temporary or emergency purposes in an amount not exceeding 5% (taken at the
lower of cost or current value) of its total assets (not including the amount
borrowed).

6. Pledge its assets or assign or otherwise encumber them except to secure
permitted borrowings. For the purpose of this restriction, collateral
arrangements with respect to the writing of options by the Portfolio and
collateral arrangements with respect to initial or variation margin for futures
by the Portfolio are not deemed to be pledges of assets.

7. Issue senior securities as defined in the Investment Company Act, except
for permitted borrowings and except insofar as the Portfolio may be deemed to
have issued a senior security by reason of entering into repurchase agreements.

8. Make loans of money or securities, except by investment in repurchase
agreements. For the purpose of this restriction, lending of Portfolio securities
by the Portfolio are not deemed to be loans.

9. Make short sales of securities.

10. Purchase securities on margin, except for such short-term loans as are
necessary for the clearance of portfolio securities. The deposit or payment by
the Portfolio of initial or variation margin in connection with futures
contracts or related options thereon is not considered the purchase of a
security on margin.

13
<PAGE>
11. Engage in the underwriting of securities, except insofar as the
Portfolio may be deemed an underwriter under the Securities Act in disposing of
a portfolio security.

12. Invest for the purpose of exercising control or management of any one
issuer.

13. Purchase or sell commodities or commodities contracts except that the
Portfolio may purchase or write interest rate, currency and stock and bond index
futures contracts and related options thereon.

Notwithstanding any other investment policy or restriction, the Portfolio
may seek to achieve its investment objective by investing all or substantially
all of its assets in another investment company having substantially the same
investment objective and policies as the Portfolio.

III. MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------

A. BOARD OF TRUSTEES

The Board of Trustees of the Fund oversees the management of the Portfolio
but does not itself manage the Portfolio. The Trustees review various services
provided by or under the direction of the Investment Manager to ensure that the
Portfolio's general investment policies and programs are properly carried out.
The Trustees also conduct their review to ensure that administrative services
are provided to the Portfolio of the Fund in a satisfactory manner.

Under state law, the duties of the Trustees are generally characterized as a
duty of loyalty and a duty of care. The duty of loyalty requires a Trustee to
exercise his or her powers in the interest of the Portfolio of the Fund and not
the Trustee's own interest or the interest of another person or organization. A
Trustee satisfies his or her duty of care by acting in good faith with the care
of an ordinarily prudent person and in a manner the Trustee reasonably believes
to be in the best interest of the Portfolio and its shareholders.

B. MANAGEMENT INFORMATION

TRUSTEES AND OFFICERS. The Board of the Fund consists of eight (8)
Trustees. These same individuals also serve as directors or trustees for all of
the Morgan Stanley Dean Witter Funds. Six Trustees (75% of the total number)
have no affiliation or business connection with the Investment Manager or any of
its affiliated persons and do not own any stock or other securities issued by
the Investment Manager's parent company, MSDW. These are the "non-interested" or
"independent" Trustees. The other two Trustees (the "MANAGEMENT TRUSTEES") are
affiliated with the Investment Manager. All of the Trustees also serve as
Trustees of "DISCOVER BROKERAGE INDEX SERIES," a mutual fund for which the
Investment Manager is the investment advisor.

The Trustees and executive officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with the
Investment Manager, and with the 90 Morgan Stanley Dean Witter Funds and
Discover Brokerage Index Series, are shown below.

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<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Charles A. Fiumefreddo* (66) ......................... Chairman, Director or Trustee and Chief Executive Officer
Chairman of the Board of the Morgan Stanley Dean Witter Funds and Discover
Chief Executive Officer and Trustee Brokerage Index Series; formerly Chairman, Chief Executive
Two World Trade Center Officer and Director of the Investment Manager, the
New York, New York Distributor and MSDW Services Company; Executive Vice
President and Director of Dean Witter Reynolds; Chairman
and Director of the Transfer Agent; formerly Director
and/or officer of various MSDW subsidiaries (until June,
1998).
Edwin J. Garn (67) ................................... Director or Trustee of the Morgan Stanley Dean Witter
Trustee Funds and Discover Brokerage Index Series; formerly United
c/o Huntsman Corporation States Senator (R-Utah)(1974-1992) and Chairman, Senate
500 Huntsman Way Banking Committee (1980-1986); formerly Mayor of Salt Lake
Salt Lake City, Utah City, Utah (1971-1974); formerly Astronaut, Space Shuttle
Discovery (April 12-19, 1985); Vice Chairman, Huntsman
Corporation (chemical company); Director of Franklin Covey
(time management systems), BMW Bank of North America, Inc.
(industrial loan corporation), United Space Alliance
(joint venture between Lockheed Martin and the Boeing
Company) and Nuskin Asia Pacific (multilevel marketing);
member of the board of various civic and charitable
organizations.
Wayne E. Hedien (65) ................................. Retired; Director or Trustee of the Morgan Stanley Dean
Trustee Witter Funds and Discover Brokerage Index Series; Director
c/o Mayer, Brown & Platt of The PMI Group, Inc. (private mortgage insurance);
Counsel to the Independent Trustees Trustee and Vice Chairman of The Field Museum of Natural
1675 Broadway History; formerly associated with the Allstate Companies
New York, New York (1966-1994), most recently as Chairman of The Allstate
Corporation (March, 1993-December, 1994) and Chairman and
Chief Executive Officer of its wholly-owned subsidiary,
Allstate Insurance Company (July, 1989-December, 1994);
director of various other business and charitable
organizations.
Dr. Manuel H. Johnson (50) ........................... Senior Partner, Johnson Smick International, Inc., a
Trustee consulting firm; Co-Chairman and a founder of the Group of
c/o Johnson Smick International, Inc. Seven Council (G7C), an international economic commission;
1133 Connecticut Avenue, N.W. Chairman of the Audit Committee and Director or Trustee of
Washington, D.C. the Morgan Stanley Dean Witter Funds and Discover
Brokerage Index Series; Director of Greenwich Capital
Markets, Inc. (broker-dealer) and NVR, Inc. (home
construction); Chairman and Trustee of the Financial
Accounting Foundation (oversight organization of the
Financial Accounting Standards Board); formerly Vice
Chairman of the Board of Governors of the Federal Reserve
System (1986-1990) and Assistant Secretary of the U.S.
Treasury.
</TABLE>

15
<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Michael E. Nugent (63) ............................... General Partner, Triumph Capital, L.P., a private
Trustee investment partnership; Chairman of the Insurance
c/o Triumph Capital, L.P. Committee and Director or Trustee of the Morgan Stanley
237 Park Avenue Dean Witter Funds and Discover Brokerage Index Series;
New York, New York formerly Vice President, Bankers Trust Company and BT
Capital Corporation (1984-1988); director of various
business organizations.
Philip J. Purcell* (56) .............................. Chairman of the Board of Directors and Chief Executive
Trustee Officer of MSDW, Dean Witter Reynolds and Novus Credit
1585 Broadway Services Inc.; Director of the Distributor; Director or
New York, New York Trustee of the Morgan Stanley Dean Witter Funds and
Discover Brokerage Index Series; Director and/or officer
of various MSDW subsidiaries.
John L. Schroeder (69) ............................... Retired; Chairman of the Derivatives Committee and
Trustee Director or Trustee of the Morgan Stanley Dean Witter
c/o Mayer, Brown & Platt Funds and Discover Brokerage Index Series; Director of
Counsel to the Independent Trustees Citizens Utilities Company (telecommunications, gas,
1675 Broadway electric and water utilities company); formerly Executive
New York, New York Vice President and Chief Investment Officer of the Home
Insurance Company (August, 1991-September, 1995).
Mitchell M. Merin (46) ............................... President and Chief Operating Officer of Asset Management
President of MSDW (since December, 1998); President and Director
Two World Trade Center (since April, 1997) and Chief Executive Officer (since
New York, New York June, 1998) of the Investment Manager and MSDW Services
Company; Chairman, Chief Executive Officer and Director of
the Distributor (since June, 1998); Chairman and Chief
Executive Officer (since June, 1998) and Director (since
January, 1998) of the Transfer Agent; Director of various
MSDW subsidiaries; President of the Morgan Stanley Dean
Witter Funds and Discover Brokerage Index Series (since
May, 1999); previously Chief Strategic Officer of the
Investment Manager and MSDW Services Company and Executive
Vice President of the Distributor (April, 1997-June,
1998), Vice President of the Morgan Stanley Dean Witter
Funds and Discover Brokerage Index Series (May,
1997-April, 1999), and Executive Vice President of Dean
Witter, Discover & Co.
</TABLE>

16
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Barry Fink (44) ...................................... Senior Vice President (since March, 1997) and Secretary
Vice President, and General Counsel (since February, 1997) and Director
Secretary and General Counsel (since July, 1998) of the Investment Manager and MSDW
Two World Trade Center Services Company; Senior Vice President (since March,
New York, New York 1997) and Assistant Secretary and Assistant General
Counsel (since February, 1997) of the Distributor;
Assistant Secretary of Dean Witter Reynolds (since August,
1996); Vice President, Secretary and General Counsel of
the Morgan Stanley Dean Witter Funds (since February,
1997); Vice President, Secretary and General Counsel of
Discover Brokerage Index Series; previously First Vice
President (June, 1993-February, 1997), Vice President and
Assistant Secretary and Assistant General Counsel of the
Investment Manager and MSDW Services Company and Assistant
Secretary of the Morgan Stanley Dean Witter Funds.
Mark Bavoso (38) ..................................... Senior Vice President of the Investment Manager; Vice
Vice President President of several of the Morgan Stanley Dean Witter
Two World Trade Center Funds.
New York, New York
Thomas F. Caloia (53) ................................ First Vice President and Assistant Treasurer of the
Treasurer Investment Manager, the Distributor and MSDW Services
Two World Trade Center Company; Treasurer of the Morgan Stanley Dean Witter Funds
New York, New York and Discover Brokerage Index Series.
</TABLE>

- ------------------------
* Denotes Trustees who are "interested persons" of the Fund as defined in the
Investment Company Act.

In addition, RONALD E. ROBISON, Executive Vice President, Chief
Administrative Officer and Director of the Investment Manager and MSDW Services
Company, ROBERT S. GIAMBRONE, Senior Vice President of the Investment Manager,
MSDW Services Company, the Distributor and the Transfer Agent and Director of
the Transfer Agent, and JOSEPH J. MCALINDEN, Executive Vice President and Chief
Investment Officer of the Investment Manager and Director of the Transfer Agent,
and KENTON J. HINCHLIFFE, and GUY D. RUTHERFORD, JR., Senior Vice Presidents of
the Investment Manager, and ROBERT ROSSETTI, Vice President of the Investment
Manager, are Vice Presidents of the Fund, and STEVEN MACNAMARA, Vice President
of the Investment Manager is an Assistant Vice President of the Fund.

In addition, FRANK BRUTTOMESSO, MARILYN K. CRANNEY, LOU ANNE D. MCINNIS,
CARSTEN OTTO and RUTH ROSSI, First Vice Presidents and Assistant General
Counsels of the Investment Manager and MSDW Services Company, and TODD LEBO, a
Vice President and Assistant General Counsel of the Investment Manager and MSDW
Services Company, are Assistant Secretaries of the Fund.

INDEPENDENT TRUSTEES AND THE COMMITTEES. Law and regulation establish both
general guidelines and specific duties for the independent trustees. The Morgan
Stanley Dean Witter Funds seek as independent trustees individuals of
distinction and experience in business and finance, government service or
academia; these are people whose advice and counsel are in demand by others and
for whom there is often competition. To accept a position on the Funds' boards,
such individuals may reject other attractive assignments because the Funds make
substantial demands on their time. All of the independent trustees serve as
members of the Audit Committee. In addition, three of the trustees, including
two independent trustees, serve as members of the Derivatives Committee and the
Insurance Committee.

17
<PAGE>
The independent trustees are charged with recommending to the full board
approval of management, advisory and administration contracts, Rule 12b-1 plans
and distribution and underwriting agreements; continually reviewing Fund
performance; checking on the pricing of portfolio securities, brokerage
commissions, transfer agent costs and performance, and trading among Funds in
the same complex; and approving fidelity bond and related insurance coverage and
allocations, as well as other matters that arise from time to time. The
independent trustees are required to select and nominate individuals to fill any
independent trustee vacancy on the board of any Fund that has a Rule 12b-1 plan
of distribution. Most of the Morgan Stanley Dean Witter Funds have a Rule 12b-1
plan.

The Audit Committee is charged with recommending to the full board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of the services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
board.

The board of each Fund has a Derivatives Committee to approve parameters for
and monitor the activities of the Fund with respect to derivative investments,
if any, made by the Fund.

Finally, the board of each Fund has formed an Insurance Committee to review
and monitor the insurance coverage maintained by the Fund.

ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL MORGAN
STANLEY DEAN WITTER FUNDS. The independent trustees and the Funds' management
believe that having the same independent trustees for each of the Morgan Stanley
Dean Witter Funds avoids the duplication of effort that would arise from having
different groups of individuals serving as independent trustees for each of the
Funds or even of sub-groups of Funds. They believe that having the same
individuals serve as independent trustees of all the Funds tends to increase
their knowledge and expertise regarding matters which affect the Fund complex
generally and enhances their ability to negotiate on behalf of each Fund with
the Fund's service providers. This arrangement also precludes the possibility of
separate groups of independent trustees arriving at conflicting decisions
regarding operations and management of the Funds and avoids the cost and
confusion that would likely ensue. Finally, having the same independent trustees
serve on all Fund Boards enhances the ability of each Fund to obtain, at modest
cost to each separate Fund, the services of independent trustees, of the
caliber, experience and business acumen of the individuals who serve as
independent directors/trustees of the Morgan Stanley Dean Witter Funds.

C. COMPENSATION

The Fund pays each Independent Trustee an annual fee of $800 plus a per
meeting fee of $50 for meetings of the Board of Trustees, the Independent
Trustees or Committees of the Board of Trustees attended by the Trustee (the
Fund pays the Chairman of the Audit Committee an additional annual fee of $750,
and the Chairmen of the Derivatives and Insurance Committees additional annual
fees of $500). If a Board meeting and a meeting of the Independent Trustees or a
Committee meeting, or a meeting of the Independent Trustees and/or more than one
Committee meeting, take place on a single day, the Trustees are paid a single
meeting fee by the Fund. The Fund also reimburses such Trustees for travel and
other out-of-pocket expenses incurred by them in connection with attending such
meetings. Trustees and officers of the Fund who are or have been employed by the
Investment Manager or an affiliated company receive no compensation or expense
reimbursement from the Fund for their services as Trustee.

18
<PAGE>
The following table illustrates the compensation that the Fund paid to its
Independent Trustees for the fiscal year ended May 31, 1999.

FUND COMPENSATION

<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- -------------------------------------------------------------- ---------------
<S> <C>
Michael Bozic................................................. $1,400
Edwin J. Garn................................................. 1,600
Wayne E. Hedien............................................... 1,650
Dr. Manuel H. Johnson......................................... 1,600
Michael E. Nugent............................................. 1,600
John L. Schroeder............................................. 1,600
</TABLE>

The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1998 for services
to the 90 Morgan Stanley Dean Witter Funds that were in operation at December
31, 1998. No compensation was paid to the Fund's Independent Trustees by
Discover Brokerage Index Series for the calendar year ended December 31, 1998.

CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS

<TABLE>
<CAPTION>
TOTAL CASH
COMPENSATION
FOR SERVICES
TO 90 MORGAN
STANLEY DEAN
NAME OF INDEPENDENT TRUSTEE WITTER FUNDS
- -------------------------------------------------------------- -------------
<S> <C>
Michael Bozic................................................. $120,150
Edwin J. Garn................................................. 132,450
Wayne E. Hedien............................................... 132,350
Dr. Manuel H. Johnson......................................... 155,681
Michael E. Nugent............................................. 159,731
John L. Schroeder............................................. 160,731
</TABLE>

As of the date of this STATEMENT OF ADDITIONAL INFORMATION, 55 of the Morgan
Stanley Dean Witter Funds, not including the Fund, have adopted a retirement
program under which an independent trustee who retires after serving for at
least five years (or such lesser period as may be determined by the Board) as an
independent trustee of any Morgan Stanley Dean Witter Fund that has adopted the
retirement program (each such Fund referred to as an "ADOPTING FUND" and each
such trustee referred to as an "ELIGIBLE TRUSTEE") is entitled to retirement
payments upon reaching the eligible retirement age (normally, after attaining
age 72). Annual payments are based upon length of service.

Currently, upon retirement, each Eligible Trustee is entitled to receive
from the Adopting Fund, commencing as of his or her retirement date and
continuing for the remainder of his or her life, an annual retirement benefit
(the "REGULAR BENEFIT") equal to 30.22% of his or her Eligible Compensation plus
0.5036667% of such Eligible Compensation for each full month of service as an
Independent Director or Trustee of any Adopting Fund in excess of five years up
to a maximum of 60.44% after ten years of service. The foregoing percentages may
be changed by the Board.(1) "ELIGIBLE COMPENSATION" is one-fifth

- ------------------------
1 An Eligible Trustee may elect alternative payments of his or her retirement
benefits based upon the combined life expectancy of the Eligible Trustee and
his or her spouse on the date of such Eligible Trustee's retirement. The
amount estimated to be payable under this method, through the remainder of
the later of the lives of the Eligible Trustee and spouse, will be the
actuarial equivalent of the Regular Benefit. In addition, the Eligible
Trustee may elect that the surviving spouse's periodic payment of benefits
will be equal to either 50% or 100% of the previous periodic amount, an
election that, respectively, increases or decreases the previous periodic
amounts so that the resulting payments will be the actuarial equivalent of
the Regular Benefit.

19
<PAGE>
of the total compensation earned by such Eligible Trustee for service to the
Adopting Fund in the five year period prior to the date of the Eligible
Trustee's retirement. Benefits under the retirement program are accrued as
expenses on the books of the Adopting Funds. Such benefits are not secured or
funded by the Adopting Funds.

The following table illustrates the retirement benefits accrued to the
Independent Trustees by the 55 Morgan Stanley Dean Witter Funds (not including
the Fund) for the calendar year ended December 31, 1998, and the estimated
retirement benefits for the Independent Trustees, to commence upon their
retirement, from the 55 Morgan Stanley Dean Witter Funds as of the calendar year
ended December 31, 1998.

RETIREMENT BENEFITS FROM
ALL MORGAN STANLEY DEAN WITTER FUNDS

<TABLE>
<CAPTION>
RETIREMENT ESTIMATED ANNUAL
FOR ALL ADOPTING FUNDS BENEFITS BENEFITS
------------------------------------ ACCRUED AS UPON
ESTIMATED CREDITED ESTIMATED EXPENSES RETIREMENT(1)
YEARS OF SERVICE AT PERCENTAGE OF BY ALL FROM ALL
RETIREMENT (MAXIMUM ELIGIBLE ADOPTING ADOPTING
NAME OF INDEPENDENT TRUSTEE 10) COMPENSATION FUNDS FUNDS
- ------------------------------------------------ ------------------- --------------- ----------- -----------------
<S> <C> <C> <C> <C>
Michael Bozic................................... 10 60.44% $ 22,377 $ 52,250
Edwin J. Garn................................... 10 60.44 35,225 52,250
Wayne E. Hedien................................. 9 51.37 41,979 44,413
Dr. Manuel H. Johnson........................... 10 60.44 14,047 52,250
Michael E. Nugent............................... 10 60.44 25,336 52,250
John L. Schroeder............................... 8 50.37 45,117 44,343
</TABLE>

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

1 Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote 1 on page
19.

IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- --------------------------------------------------------------------------------

The following owned more than 5% of the outstanding shares of Class D of the
Fund on July 14, 1999: Hare & Co. c/o The Bank of New York, P.O. Box 11203, New
York, New York 10286--73.2%.

As of the date of this STATEMENT OF ADDITIONAL INFORMATION, the aggregate
number of shares of beneficial interest of the Portfolio owned by the
Portfolio's officers and Trustees as a group was less than 1% of the Portfolio's
shares of beneficial interest outstanding.

V. INVESTMENT MANAGEMENT AND OTHER SERVICES
- --------------------------------------------------------------------------------

A. INVESTMENT MANAGER

The Investment Manager to the Portfolio is Morgan Stanley Dean Witter
Advisors Inc., a Delaware corporation, whose address is Two World Trade Center,
New York, New York 10048. The Investment Manager is a wholly-owned subsidiary of
MSDW, a Delaware corporation. MSDW is a preeminent global financial services
firm that maintains leading market positions in each of its three primary
businesses: securities, asset management and credit services.

Pursuant to an Investment Management Agreement (the "MANAGEMENT AGREEMENT")
with the Investment Manager, the Portfolio has retained the Investment Manager
to provide administrative services, manage its business affairs and supervise
the investment of the Portfolio's assets. The Portfolio pays the Investment
Manager monthly compensation calculated daily by applying the following annual
rates to the net assets of the Portfolio determined as of the close of each
business day: 0.65% of the portion of such daily net assets not exceeding $1.5
billion; and 0.625% of the portion of such daily net assets exceeding $1.5
billion. The management fee is allocated among the Classes pro rata based on the
net

20
<PAGE>

assets of the Portfolio attributable to each Class. The Portfolio accrued total
compensation to the Investment Manager of $2,943,814 and $12,794,605, during the
period February 25, 1998 (commencement of operations) through May 31, 1998 and
during the fiscal year ended May 31, 1999, respectively.

The Investment Manager has retained its wholly-owned subsidiary, MSDW
Services Company, to perform administrative services for the Portfolio.

B. PRINCIPAL UNDERWRITER

The Fund's principal underwriter is the Distributor (which has the same
address as the Investment Manager). In this capacity, the shares of the
Portfolio are distributed by the Distributor. The Distributor has entered into a
selected dealer agreement with Dean Witter Reynolds, which through its own sales
organization sells shares of the Portfolio. In addition, the Distributor may
enter into similar agreements with other selected broker-dealers. The
Distributor, a Delaware corporation, is a wholly-owned subsidiary of MSDW.

The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. These expenses include the payment of commissions
for sales of the Portfolio's shares and incentive compensation to Financial
Advisors. The Distributor also pays certain expenses in connection with the
distribution of the Portfolio's shares, including the costs of preparing,
printing and distributing advertising or promotional materials, and the costs of
printing and distributing prospectuses and supplements thereto used in
connection with the offering and sale of the Portfolio's shares. The Portfolio
bears the costs of initial typesetting, printing and distribution of
prospectuses and supplements thereto to shareholders. The Portfolio also bears
the costs of registering the Portfolio and its shares under federal and state
securities laws and pays filing fees in accordance with state securities laws.

The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act. Under the
Distribution Agreement, the Distributor uses its best efforts in rendering
services to the Portfolio of the Fund, but in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations, the Distributor is not liable to the Fund or any of the Portfolio's
shareholders for any error of judgment or mistake of law or for any act or
omission or for any losses sustained by the Fund or the Portfolio's
shareholders.

C. SERVICES PROVIDED BY THE INVESTMENT MANAGER AND PORTFOLIO EXPENSES PAID BY
THIRD PARTIES

The Investment Manager supervises the investment of the Portfolio's assets.
The Investment Manager obtains and evaluates the information and advice relating
to the economy, securities markets, and specific securities as it considers
necessary or useful to continuously oversee the management of the assets of the
Portfolio in a manner consistent with its investment objective.

Under the terms of the Management Agreement, the Investment Manager also
maintains certain of the Portfolio's books and records and furnishes, at its own
expense, the office space, facilities, equipment, clerical help, bookkeeping and
certain legal services as the Portfolio may reasonably require in the conduct of
its business, including the preparation of prospectuses, proxy statements and
reports required to be filed with federal and state securities commissions
(except insofar as the participation or assistance of independent accountants
and attorneys is, in the opinion of the Investment Manager, necessary or
desirable). In addition, the Investment Manager 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
service, heat, light, power and other utilities provided to the Portfolio.

Expenses not expressly assumed by the Investment Manager under the
Management Agreement or by the Distributor, will be paid by the Portfolio. These
expenses will be allocated among the four Classes of shares pro rata based on
the net assets of the Portfolio attributable to each Class, except as described
below. Such expenses include, but are not limited to: expenses of the Plan of
Distribution pursuant to Rule 12b-1; charges and expenses of any registrar,
custodian, stock transfer and dividend disbursing agent; brokerage commissions;
taxes; engraving and printing share certificates; registration costs of the
Portfolio and its shares under federal and state securities laws; the cost and
expense of printing, including typesetting, and distributing prospectuses of the
Portfolio and supplements thereto to the

21
<PAGE>
Portfolio's shareholders; all expenses of shareholders' and Trustees' meetings
and of preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of Trustees or members of any advisory
board or committee who are not employees of the Investment Manager or any
corporate affiliate of the Investment Manager; all expenses incident to any
dividend, withdrawal or redemption options; charges and expenses of any outside
service used for pricing of the Portfolio's shares; fees and expenses of legal
counsel, including counsel to the Trustees who are not interested persons of the
Fund or of the Investment Manager (not including compensation or expenses of
attorneys who are employees of the Investment Manager); fees and expenses of the
Portfolio's independent accountants; membership dues of industry associations;
interest on Portfolio borrowings; postage; insurance premiums on property or
personnel (including officers and Trustees) of the Fund which inure to its
benefit; extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification relating thereto); and
all other costs of the Portfolio's operation. The 12b-1 fees relating to a
particular Class will be allocated directly to that Class. In addition, other
expenses associated with a particular Class (except advisory or custodial fees)
may be allocated directly to that Class, provided that such expenses are
reasonably identified as specifically attributable to that Class and the direct
allocation to that Class is approved by the Trustees.

The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Investment Manager is not liable to the Fund or any
of the Portfolio's investors for any act or omission by the Investment Manager
or for any losses sustained by the Fund or the Portfolio's investors.

The Management Agreement will remain in effect from year to year provided
continuance of the Management Agreement is approved at least annually by the
vote of the holders of a majority, as defined in the Investment Company Act, of
the outstanding shares of the Portfolio, or by the Trustees; provided that in
either event such continuance is approved annually by the vote of a majority of
the Trustees who are not parties to the Management Agreement or are "Independent
Trustees," which votes must be cast in person at a meeting called for the
purpose of voting on such approval.

D. DEALER REALLOWANCES

Upon notice to selected broker-dealers, the Distributor may reallow up to
the full applicable front-end sales charge during periods specified in such
notice. During periods when 90% or more of the sales charge is reallowed, such
selected broker-dealers may be deemed to be underwriters as that term is defined
in the Securities Act.

E. RULE 12b-1 PLAN

The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Investment Company Act (the "PLAN") pursuant to which each Class of the
Portfolio, other than Class D, pays the Distributor compensation accrued daily
and payable monthly at the following annual rates: 0.25%, 1.0% and 1.0% of the
average daily net assets of Class A, Class B and Class C, respectively.

The Distributor also receives the proceeds of front-end sales charges
("FSCS") and of contingent deferred sales charges ("CDSCS") imposed on certain
redemptions of shares, which are separate and apart from payments made pursuant
to the Plan. The Distributor has informed the Fund that it and/or Dean Witter
Reynolds received the proceeds of CDSCs and FSCs, for the period February 25,
1998 (commencement of operations) through May 31, 1998 and for the fiscal year
ended May 31, 1999, in approximate amounts as provided in the table below (the
Distributor did not retain any of these amounts).

<TABLE>
<CAPTION>
FISCAL YEAR
ENDED 5/31/99 2/25/98 -- 5/31/98
------------------------ -------------------
<S> <C> <C> <C> <C>
Class A............................ FSCs:(1) $ 285,119 FSCs: $ 2,815,924
CDSCs: $ 31,943 CDSCs: $ 1,917
Class B............................ CDSCs: $ 7,118,234 CDSCs: $ 380,966
Class C............................ CDSCs: $ 316,659 CDSCs: $ 16,983
</TABLE>

- ------------------------------
1 FSCs apply to Class A only.

22
<PAGE>
The Distributor has informed the Fund that the entire fee payable by Class A
and a portion of the fees payable by each of Class B and Class C each year
pursuant to the Plan equal to 0.25% of such Class' average daily net assets are
currently each characterized as a "service fee" under the Rules of the National
Association of Securities Dealers, Inc. (of which the Distributor is a member).
The "service fee" is a payment made for personal service and/or the maintenance
of shareholder accounts. The remaining portion of the Plan fees payable by a
Class, if any, is characterized as an "asset-based sales charge" as such is
defined by the Rules of the Association.

Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each calendar quarter a written report provided
by the Distributor of the amounts expended under the Plan and the purpose for
which such expenditures were made. For the fiscal year ended May 31, 1999, Class
A, Class B and Class C shares of the Portfolio accrued payments under the Plan
amounting to $269,275, $17,044,208 and $1,351,991, respectively, which amounts
are equal to 0.24%, 1.00% and 0.83% of the average daily net assets of Class A,
Class B and Class C, respectively, for the fiscal year.

The Plan was adopted in order to permit the implementation of the
Portfolio's method of distribution. Under this distribution method the Portfolio
offers four Classes, each with a different distribution arrangement.

With respect to Class A shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from proceeds of the FSC, commissions for the
sale of Class A shares, currently a gross sales credit of up to 5.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.25% of the current value of
the respective accounts for which they are the Financial Advisors or dealers of
record in all cases. On orders of $1 million or more (for which no sales charge
was paid) or net asset value purchases by employer-sponsored employee benefit
plans, whether or not qualified under the Internal Revenue Code, for which the
Transfer Agent serves as Trustee or Dean Witter Reynolds Retirement Plan
Services serves as recordkeeper pursuant to a written Recordkeeping Services
Agreement ("MSDW ELIGIBLE PLANS"), the Investment Manager compensates Financial
Advisors by paying them, from its own funds, a gross sales credit of 1.0% of the
amount sold.

With respect to Class B shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class B shares, currently a gross sales credit of up to 5.0% of the amount
sold (except as provided in the following sentence) and an annual residual
commission, currently a residual of up to 0.25% of the current value (not
including reinvested dividends or distributions) of the amount sold in all
cases. In the case of Class B shares purchased by MSDW Eligible Plans, Dean
Witter Reynolds compensates its Financial Advisors by paying them, from its own
funds, a gross sales credit of 3.0% of the amount sold.

With respect to Class C shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class C shares, currently a gross sales credit of up to 1.0% of the amount
sold and an annual residual commission, currently up to 1.0% of the current
value of the respective accounts for which they are the Financial Advisors of
record.

With respect to Class D shares other than shares held by participants in the
Investment Manager's mutual fund asset allocation program, the Investment
Manager compensates Dean Witter Reynolds's Financial Advisors by paying them,
from its own funds, commissions for the sale of Class D shares, currently a
gross sales credit of up to 1.0% of the amount sold. There is a chargeback of
100% of the amount paid if the Class D shares are redeemed in the first year and
a chargeback of 50% of the amount paid if the Class D shares are redeemed in the
second year after purchase. The Investment Manager also compensates Dean Witter
Reynolds's Financial Advisors by paying them, from its own funds, an annual
residual commission, currently up to 0.10% of the current value of the
respective accounts for which they are the Financial Advisors of record (not
including accounts of participants in the Investment Manager's mutual fund asset
allocation program).

23
<PAGE>
The gross sales credit is a charge which reflects commissions paid by Dean
Witter Reynolds to its Financial Advisors and Dean Witter Reynolds's
Fund-associated distribution-related expenses, including sales compensation, and
overhead and other branch office distribution-related expenses including (a) the
expenses operating Dean Witter Reynolds's branch offices in connection with the
sale of shares of the Portfolio, including lease costs, the salaries and
employee benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies; (b) the costs of
client sales seminars; (c) travel expenses of mutual fund sales coordinators to
promote the sale of shares of the Portfolio; and (d) other expenses relating to
branch promotion of Portfolio sales.

The distribution fee that the Distributor receives from the Portfolio under
the Plan, in effect, offsets distribution expenses incurred under the Plan on
behalf of the Portfolio and, in the case of Class B shares, opportunity costs,
such as the gross sales credit and an assumed interest charge thereon ("CARRYING
CHARGE"). In the Distributor's reporting of the distribution expenses to the
Portfolio, in the case of Class B shares, such assumed interest (computed at the
"BROKER'S CALL RATE") has been calculated on the gross credit as it is reduced
by amounts received by the Distributor under the Plan and any contingent
deferred sales charges received by the Distributor upon redemption of shares of
the Portfolio. No other interest charge is included as a distribution expense in
the Distributor's calculation of its distribution costs for this purpose. The
broker's call rate is the interest rate charged to securities brokers on loans
secured by exchange-listed securities.

The Portfolio is authorized to reimburse expenses incurred or to be incurred
in promoting the distribution of the Portfolio's Class A and Class C shares and
in servicing shareholder accounts. Reimbursement will be made through payments
at the end of each month. The amount of each monthly payment may in no event
exceed an amount equal to a payment at the annual rate of 0.25%, in the case of
Class A, and 1.0%, in the case of Class C, of the average net assets of the
respective Class of the Portfolio during the month. No interest or other
financing charges, if any, incurred on any distribution expenses on behalf of
Class A and Class C will be reimbursable under the Plan. With respect to Class
A, in the case of all expenses other than expenses representing the service fee,
and, with respect to Class C, in the case of all expenses other than expenses
representing a gross sales credit or a residual to Financial Advisors and other
authorized financial representatives, such amounts shall be determined at the
beginning of each calendar quarter by the Trustees, including, a majority of the
Independent Trustees. Expenses representing the service fee (for Class A) or a
gross sales credit or a residual to Financial Advisors and other authorized
financial representatives (for Class C) may be reimbursed without prior
determination. In the event that the Distributor proposes that monies shall be
reimbursed for other than such expenses, then in making quarterly determinations
of the amounts that may be reimbursed by the Portfolio, the Distributor will
provide and the Trustees will review a quarterly budget of projected
distribution expenses to be incurred on behalf of the Portfolio, together with a
report explaining the purposes and anticipated benefits of incurring such
expenses. The Trustees will determine which particular expenses, and the
portions thereof, that may be borne by the Portfolio, and in making such a
determination shall consider the scope of the Distributor's commitment to
promoting the distribution of the Portfolio's Class A and Class C shares.

Each Class of the Portfolio paid 100% of the amounts accrued under the Plan
with respect to that Class for the fiscal year ended May 31, 1999 to the
Distributor. The Distributor and Dean Witter Reynolds estimate that they have
spent, pursuant to the Plan, $108,376,768 on behalf of Class B since the
inception of the Portfolio. It is estimated that this amount was spent in
approximately the following ways: (i) 4.05% ($4,386,311) advertising and
promotional expenses; (ii) 0.35% ($374,892)--printing of prospectuses for
distribution to other than current shareholders; and (iii) 95.60%
($103,615,565)--other expenses, including the gross sales credit and the
carrying charge, of which 4.89% ($5,065,735) represents carrying charges, 39.38%
($40,799,630) represents commission credits to Dean Witter Reynolds branch
offices and other selected broker-dealers for payments of commissions to
Financial Advisors and other selected broker-dealer representatives, and 55.73%
($57,750,200) represents overhead and other branch office distribution-related
expenses. The amounts accrued by Class A and a

24
<PAGE>
portion of the amounts accrued by Class C under the Plan were service fees
during the fiscal year ended May 31, 1999. The remainder of the amounts accrued
by Class C were for expenses which relate to compensation of sales personnel and
associated overhead expenses.

In the case of Class B shares, at any given time, the expenses of
distributing shares of the Portfolio may be more or less than the total of (i)
the payments made by the Portfolio pursuant to the Plan; and (ii) the proceeds
of CDSCs paid by investors upon redemption of shares. For example, if $1 million
in expenses in distributing Class B shares of the Portfolio had been incurred
and $750,000 had been received as described in (i) and (ii) above, the excess
expense would amount to $250,000. The Distributor has advised the Portfolio that
in the case of Class B shares the excess distribution expenses, including the
carrying charge designed to approximate the opportunity costs incurred by Dean
Witter Reynolds which arise from it having advanced monies without having
received the amount of any sales charges imposed at the time of sale of the
Portfolio's Class B shares, totaled $80,089,580 as of May 31, 1999 (the end of
the Portfolio's fiscal year), which was equal to 4.96% of the net assets of
Class B on such date. Because there is no requirement under the Plan that the
Distributor be reimbursed for all distribution expenses with respect to Class B
shares or any requirement that the Plan be continued from year to year, this
excess amount does not constitute a liability of the Portfolio. 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 CDSCs 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. Any cumulative expenses incurred, but not yet recovered through
distribution fees or CDSCs, may or may not be recovered through future
distribution fees or CDSCs.

In the case of Class A 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 commission credited to Morgan Stanley Dean Witter
Financial Advisors and other authorized broker-dealer representatives at the
time of sale may be reimbursed in the subsequent calendar year. The Distributor
has advised the Portfolio that unreimbursed expenses representing a gross sales
commission credited to Morgan Stanley Dean Witter Financial Advisors and other
authorized broker-dealer representatives at the time of sale totaled $638,273 in
the case of Class C at December 31, 1998 (end of the calendar year), which
amount was equal to 0.36% of the net assets of Class C on such date, and that
there were no such expenses that may be reimbursed in the subsequent year in the
case of Class A on such date. No interest or other financing charges will be
incurred on any Class A or Class C distribution expenses incurred by the
Distributor under the Plan or on any unreimbursed expenses due to the
Distributor pursuant to the Plan.

No interested person of the Fund nor any Independent Trustee has any direct
financial interest in the operation of the Plan except to the extent that the
Distributor, the Investment Manager, Dean Witter Reynolds, MSDW Services Company
or certain of their employees may be deemed to have such an interest as a result
of benefits derived from the successful operation of the Plan or as a result of
receiving a portion of the amounts expended thereunder by the Portfolio.

On an annual basis, the Trustees, including a majority of the Independent
Trustees, consider whether the Plan should be continued. Prior to approving the
last continuation of the Plan, the Trustees requested and received from the
Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to continue
the Plan, the Trustees considered: (1) the Portfolio's experience under the Plan
and whether such experience indicates that the Plan is operating as anticipated;
(2) the benefits the Portfolio had obtained, was obtaining and would be likely
to obtain under the Plan, including that: (a) the Plan is essential in order to
give Portfolio investors a choice of alternatives for payment of distribution
and service charges and to enable the Portfolio to continue to grow and avoid a
pattern of net redemptions which, in turn, are essential for effective
investment management; and (b) without the compensation to individual brokers
and the reimbursement of distribution and account maintenance expenses of Dean
Witter Reynolds's branch offices made possible by the 12b-1 fees, Dean Witter
Reynolds could not establish and maintain an

25
<PAGE>
effective system for distribution, servicing of Portfolio shareholders and
maintenance of shareholder accounts; and (3) what services had been provided and
were continuing to be provided under the Plan to the Portfolio and its
shareholders. Based upon their review, the Trustees, including each of the
Independent Trustees, determined that continuation of the Plan would be in the
best interest of the Portfolio and would have a reasonable likelihood of
continuing to benefit the Portfolio and its shareholders. In the Trustees'
quarterly review of the Plan, they will consider its continued appropriateness
and the level of compensation provided therein.

The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of the
affected Class or Classes of the Portfolio, and all material amendments to the
Plan must also be approved by the Trustees in the manner described above. The
Plan may be terminated at any time, without payment of any penalty, by vote of a
majority of the Independent Trustees or by a vote of a majority of the
outstanding voting securities of the Portfolio (as defined in the Investment
Company Act) on not more than thirty days' written notice to any other party to
the Plan. So long as the Plan is in effect, the election and nomination of
Independent Trustees shall be committed to the discretion of the Independent
Trustees.

F. OTHER SERVICE PROVIDERS

(1) TRANSFER AGENT/DIVIDEND-PAYING AGENT

Morgan Stanley Dean Witter Trust FSB is the Transfer Agent for the
Portfolio's shares and the Dividend Disbursing Agent for payment of dividends
and distributions on Portfolio shares and Agent for shareholders under various
investment plans. The principal business address of the Transfer Agent is
Harborside Financial Center, Plaza Two, Jersey City, New Jersey 07311.

(2) CUSTODIAN AND INDEPENDENT ACCOUNTANTS

The Bank of New York, 90 Washington Street, New York, New York 10286 is the
Custodian of the Portfolio's assets. The Custodian has contracted with various
foreign banks and depositaries to hold portfolio securities of non-U.S. issuers
on behalf of the Portfolio. Any of the Portfolio's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
These balances may, at times, be substantial.

PricewaterhouseCoopers LLP serves as the independent accountants of the
Portfolio. The independent accountants are responsible for auditing the annual
financial statements of the Portfolio.

(3) AFFILIATED PERSONS

The Transfer Agent is an affiliate of the Investment Manager, and of the
Distributor. As Transfer Agent and Dividend Disbursing Agent, the Transfer
Agent's responsibilities include maintaining shareholder accounts, disbursing
cash dividends and reinvesting dividends, processing account registration
changes, handling purchase and redemption transactions, mailing prospectuses and
reports, mailing and tabulating proxies, processing share certificate
transactions, and maintaining shareholder records and lists. For these services,
the Transfer Agent receives a per shareholder account fee from the Portfolio and
is reimbursed for its out-of-pocket expenses in connection with such services.

VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
- --------------------------------------------------------------------------------

A. BROKERAGE TRANSACTIONS

Subject to the general supervision of the Trustees, the Investment Manager
is responsible for decisions to buy and sell securities for the Portfolio, the
selection of brokers and dealers to effect the transactions, and the negotiation
of brokerage commissions, if any. Purchases and sales of securities on a stock
exchange are effected through brokers who charge a commission for their
services. In the over-the-counter market, securities are generally traded on a
"net" basis with non-affiliated dealers acting as principal for their own
accounts without a stated commission, although the price of the security usually
includes a profit to the dealer. The Portfolio also expects that securities will
be purchased at times in underwritten offerings where the price includes a fixed
amount of compensation, generally referred to as

26
<PAGE>
the underwriter's concession or discount. Options and futures transactions will
usually be effected through a broker and a commission will be charged. On
occasion, the Portfolio may also purchase certain money market instruments
directly from an issuer, in which case no commissions or discounts are paid.

During the period February 25, 1998 (commencement of operations) through May
31, 1998, and for the fiscal year ended May 31, 1999, the Portfolio paid a total
of $1,566,636 and $3,219,595, respectively, in brokerage commissions.

B. COMMISSIONS

Pursuant to an order of the SEC, the Fund may effect principal transactions
in certain money market instruments with Dean Witter Reynolds. The Fund will
limit its transactions with Dean Witter Reynolds to U.S. Government and
government agency securities, bank money instruments (i.e., certificates of
deposit and bankers' acceptances) and commercial paper. The transactions will be
effected with Dean Witter Reynolds only when the price available from Dean
Witter Reynolds is better than that available from other dealers.

During the period February 25, 1998 (commencement of operations) through May
31, 1998, and for the fiscal year ended May 31, 1999, the Portfolio did not
effect any principal transactions with Dean Witter Reynolds.

Brokerage transactions in securities listed on exchanges or admitted to
unlisted trading privileges may be effected through Dean Witter Reynolds, Morgan
Stanley & Co. and other affiliated brokers and dealers. In order for an
affiliated broker or dealer to effect any portfolio transactions on an exchange
for the Portfolio, the commissions, fees or other remuneration received by the
affiliated broker or dealer must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
an exchange during a comparable period of time. This standard would allow the
affiliated broker or dealer to receive no more than the remuneration which would
be expected to be received by an unaffiliated broker in a commensurate
arm's-length transaction. Furthermore, the Trustees, including the Independent
Trustees, have adopted procedures which are reasonably designed to provide that
any commissions, fees or other remuneration paid to an affiliated broker or
dealer are consistent with the foregoing standard. The Portfolio does not reduce
the management fee it pays to the Investment Manager by any amount of the
brokerage commissions it may pay to an affiliated broker or dealer.

During the period February 25, 1998 (commencement of operations) through May
31, 1998, and for the fiscal year ended May 31, 1999, the Portfolio paid a total
of $0 and $0, respectively, in brokerage commissions to Dean Witter Reynolds.
During the fiscal year ended May 31, 1999, the brokerage commissions paid to
Dean Witter Reynolds represented approximately 0% of the total brokerage
commissions paid by the Portfolio during the year and were paid on account of
transactions having an aggregate dollar value equal to approximately 0% of the
aggregate dollar value of all portfolio transactions of the Portfolio during the
year for which commissions were paid.

During the period February 25, 1998 (commencement of operations) through May
31, 1998 and during the fiscal year ended May 31, 1999, the Portfolio paid a
total of $1,046,737 and $2,226,782, respectively, in brokerage commissions to
Morgan Stanley & Co. During the fiscal year ended May 31, 1999, the brokerage
commissions paid to Morgan Stanley & Co. represented approximately 69.16% of the
total brokerage commissions paid by the Portfolio for this period and were paid
on account of transactions having an aggregate dollar value equal to
approximately 87.72% of the aggregate dollar value of all portfolio transactions
of the Portfolio during the year for which commissions were paid.

C. BROKERAGE SELECTION

The policy of the Fund regarding purchases and sales of securities for the
Portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Portfolio's policy is to pay commissions which are considered fair and
reasonable without necessarily

27
<PAGE>
determining that the lowest possible commissions are paid in all circumstances.
The Fund believes that a requirement always to seek the lowest possible
commission cost could impede effective portfolio management and preclude the
Portfolio and the Investment Manager from obtaining a high quality of brokerage
and research services. In seeking to determine the reasonableness of brokerage
commissions paid in any transaction, the Investment Manager relies upon its
experience and knowledge regarding commissions generally charged by various
brokers and on its judgment in evaluating the brokerage and research services
received from the broker effecting the transaction. These determinations are
necessarily subjective and imprecise, as in most cases an exact dollar value for
those services is not ascertainable.

The Portfolio anticipates that certain of its transactions involving foreign
securities will be effected on foreign securities exchanges. Fixed commissions
on such transactions are generally higher than negotiated commissions on
domestic transactions. There is also generally less government supervision and
regulation of foreign securities exchanges and brokers than in the United
States.

In seeking to implement the Fund's policies, the Investment Manager effects
transactions with those brokers and dealers who the Investment Manager believes
provide the most favorable prices and are capable of providing efficient
executions. If the Investment Manager believes the prices and executions are
obtainable from more than one broker or dealer, it may give consideration to
placing portfolio transactions with those brokers and dealers who also furnish
research and other services to the Fund or the Investment Manager. The services
may include, but are not limited to, any one or more of the following:
information as to the availability of securities for purchase or sale;
statistical or factual information or opinions pertaining to investment; wire
services; and appraisals or evaluations of portfolio securities. The information
and services received by the Investment Manager from brokers and dealers may be
of benefit to the Investment Manager in the management of accounts of some of
its other clients and may not in all cases benefit the Fund directly.

The Investment Manager currently serves as advisor to a number of clients,
including other investment companies, and may in the future act as investment
manager or advisor to others. It is the practice of the Investment Manager to
cause purchase and sale transactions to be allocated among the Portfolio and
others whose assets it manages in such manner as it deems equitable. In making
such allocations among the Portfolio and other client accounts, various factors
may be considered, including the respective investment objectives, the relative
size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held and the opinions of the persons responsible for managing the
Portfolio and other client accounts. In the case of certain initial and
secondary public offerings, the Investment Manager utilizes a pro rata
allocation process based on the size of the Morgan Stanley Dean Witter Funds
involved and the number of shares available from the public offering.

D. DIRECTED BROKERAGE

During the fiscal year ended May 31, 1999, the Portfolio paid $880,766 in
brokerage commissions in connection with transactions in the aggregate amount of
$400,769,582 to brokers because of research services provided.

E. REGULAR BROKER-DEALERS

During the fiscal year ended May 31, 1999, the Portfolio purchased stock
issued by The Bank of New York, which was among the ten brokers or the ten
dealers which executed transactions for or with the Portfolio in the largest
dollar amounts during the year. At May 31, 1999, the Portfolio held stock issued
by The Bank of New York with a market value of $44,090,475.

28
<PAGE>
VII. CAPITAL STOCK AND OTHER SECURITIES
- --------------------------------------------------------------------------------

The shareholders of the Portfolio are entitled to a full vote for each full
share of beneficial interest held. The Fund is authorized to issue an unlimited
number of shares of beneficial interest of the Portfolio. All shares of
beneficial interest of the Portfolio are of $0.01 par value and are equal as to
earnings, assets and voting privileges.

The Fund's Declaration of Trust permits the Trustees to authorize the
creation of additional series of shares (the proceeds of which would be invested
in separate, independently managed portfolios) and additional Classes of shares
within any series.

The Fund is not required to hold annual meetings of shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call special meetings of shareholders for action by shareholder
vote as may be required by the Investment Company Act or the Declaration of
Trust. Under certain circumstances the Trustees may be removed by action of the
Trustees. In addition, under certain circumstances, the Shareholders may call a
meeting to remove Trustees and the Fund is required to provide assistance in
communicating with shareholders about such a meeting. The voting rights of
shareholders are not cumulative, so that holders of more than 50 percent of the
shares voting can, if they choose, elect all Trustees being selected, while the
holders of the remaining share would be unable to elect any Trustees.

Under Massachusetts law, shareholders of a business trust may, under certain
limited circumstances, be held personally liable as partners for the obligations
of the Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund, requires that notice
of such Fund obligations include such disclaimer, and provides for
indemnification out of the Fund's property for any shareholder held personally
liable for the obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations.
Given the above limitations on shareholder personal liability, and the nature of
the Fund's assets and operations, the possibility of the Fund being unable to
meet its obligations is remote and thus, in the opinion of Massachusetts counsel
to the Fund, the risk to Portfolio shareholders of personal liability is remote.

All of the Trustees have been elected by the shareholders of the Portfolio.
The Trustees themselves have the power to alter the number and the terms of
office of the Trustees (as provided for in the Declaration of Trust), and they
may at any time lengthen or shorten their own terms or make their terms of
unlimited duration and appoint their own successors, provided that always at
least a majority of the Trustees has been elected by the shareholders of the
Portfolio.

VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
- --------------------------------------------------------------------------------

A. PURCHASE OF SHARES

Information concerning how Portfolio shares are offered to the public (and
how they are redeemed and exchanged) is provided in the Portfolio's PROSPECTUS.

TRANSFER AGENT AS AGENT. With respect to the redemption or repurchase of
Fund shares, the application of proceeds to the purchase of new shares in the
Fund or any other Morgan Stanley Dean Witter Funds and the general
administration of the exchange privilege, the Transfer Agent acts as agent for
the Distributor and for the shareholder's authorized broker-dealer, if any, in
the performance of such functions. With respect to exchanges, redemptions or
repurchases, the Transfer Agent shall be liable for its own negligence and not
for the default or negligence of its correspondents or for losses in transit.
The Fund shall not be liable for any default or negligence of the Transfer
Agent, the Distributor or any authorized broker-dealer.

The Distributor and any authorized broker-dealer have appointed the Transfer
Agent to act as their agent in connection with the application of proceeds of
any redemption of Fund shares to the purchase

29
<PAGE>
of shares of any other Morgan Stanley Dean Witter Fund and the general
administration of the exchange privilege. No commission or discounts will be
paid to the Distributor or any authorized broker-dealer for any transaction
pursuant to the exchange privilege.

TRANSFERS OF SHARES. In the event a shareholder requests a transfer of
Portfolio shares to a new registration, the shares will be transferred without
sales charge at the time of transfer. With regard to the status of shares which
are either subject to the CDSC or free of such charge (and with regard to the
length of time shares subject to the charge have been held), any transfer
involving less than all of the shares in an account will be made on a pro rata
basis (that is, by transferring shares in the same proportion that the
transferred shares bear to the total shares in the account immediately prior to
the transfer). The transferred shares will continue to be subject to any
applicable CDSC as if they had not been so transferred.

B. OFFERING PRICE

The Portfolio's Class B, Class C and Class D shares are offered at net asset
value per share and the Class A shares are offered at net asset value per share
plus any applicable FSC which is distributed among the Portfolio's Distributor,
Dean Witter Reynolds, and other authorized dealers as described in Section "V.
Investment Management and Other Services -- E. Rule 12b-1 Plan."

The price of Portfolio shares, called "NET ASSET VALUE," is based on the
value of the Portfolio's securities. Net asset value per share of each Class is
calculated by dividing the value of the portion of the Portfolio's securities
and other assets attributable to that Class, less the liabilities attributable
to that Class, by the number of shares of that Class outstanding. The assets of
each Class of shares are invested in a single portfolio. The net asset value of
each Class, however, will differ because the Classes have different ongoing
fees.

In the calculation of the Portfolio's net asset value: (1) an equity
portfolio security listed or traded on the New York or American Stock Exchange
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); and (2) all
other portfolio securities for which over-the-counter market quotations are
readily available are valued at the latest bid price. 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 Portfolio's Trustees. For valuation purposes, quotations of
foreign portfolio securities, other assets and liabilities and forward contracts
stated in foreign currency are translated into U.S. dollar equivalents at the
prevailing market rates prior to the close of the New York Stock Exchange.

Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.

Futures are valued at the latest sale price on the commodities exchange on
which they trade unless the Trustees determine such price does not reflect their
market value, in which case they will be valued at their fair value as
determined in good faith under procedures established by and under the
supervision of the Trustees.

Generally, trading in foreign securities, as well as corporate bonds, U.S.
Government securities and money market instruments, is substantially completed
each day at various times prior to the close of the New York Stock Exchange. The
values of such securities used in computing the net asset value of the
Portfolio's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the New York Stock
Exchange. Occasionally, events which may affect the values of such securities
and such exchange rates may occur between the times at which they are determined
and the close of the New York Stock Exchange and will therefore not be reflected
in the

30
<PAGE>
computation of the Portfolio's net asset value. If events that may affect the
value of such securities occur during such period, then these securities may be
valued at their fair value as determined in good faith under procedures
established by and under the supervision of the Trustees.

IX. TAXATION OF THE PORTFOLIOS AND SHAREHOLDERS
- --------------------------------------------------------------------------------

The Portfolio generally will make two basic types of distributions: ordinary
dividends and long-term capital gain distributions. These two types of
distributions are reported differently on a shareholder's income tax return and
they are also subject to different rates of tax. The tax treatment of the
investment activities of the Portfolio will affect the amount and timing and
character of the distributions made by the Portfolio. Tax issues relating to the
Portfolio are not generally a consideration for shareholders such as tax exempt
entities and tax-advantaged retirement vehicles such as an IRA or 401(k) plan.
Shareholders are urged to consult their own tax professionals regarding specific
questions as to federal, state or local taxes.

INVESTMENT COMPANY TAXATION. The Portfolio intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986. As such, the Portfolio will not be subject to federal income tax on its
net investment income and capital gains, if any, to the extent that it
distributes such income and capital gains to its shareholders.

The Portfolio generally intends to distribute sufficient income and gains so
that the Portfolio will not pay corporate income tax on its earnings. The
Portfolio also generally intends to distribute to its shareholders in each
calendar year a sufficient amount of ordinary income and capital gains to avoid
the imposition of a 4% excise tax. However, the Portfolio may instead determine
to retain all or part of any net long-term capital gains in any year for
reinvestment. In such event, the Portfolio will pay federal income tax (and
possibly excise tax) on such retained gains.

Gains or losses on sales of securities by the Portfolio will be long-term
capital gains or losses if the securities have a tax holding period of more than
one year. Gains or losses on the sale of securities with a tax holding period of
one year or less will be short-term gains or losses.

Gains or losses on the Portfolio's transactions in listed non-equity
options, futures and options on futures generally are treated as 60% long-term
and 40% short-term. When the Portfolio engages in options and futures
transactions, various tax rules may accelerate or defer recognition of certain
gains and losses, change the character of certain gains or losses, or alter the
holding period of other investments held by the Portfolio. The application of
these rules would therefore also affect the amount, timing and character of
distributions made by the Portfolio.

Under certain tax rules, the Portfolio may be required to accrue a portion
of any discount at which certain securities are purchased as income each year
even though the Portfolio receives no payments in cash on the security during
the year. To the extent that the Portfolio invests in such securities, it would
be required to pay out such accrued discount as an income distribution in each
year in order to avoid taxation at the Portfolio level. Such distributions will
be made from the available cash of the Portfolio or by liquidation of portfolio
securities if necessary. If a distribution of cash necessitates the liquidation
of portfolio securities, the Investment Manager will select which securities to
sell. The Portfolio may realize a gain or loss from such sales. In the event the
Portfolio realizes net capital gains from such transactions, its shareholders
may receive a larger capital gain distribution, if any, than they would in the
absence of such transactions.

TAXATION OF DIVIDENDS AND DISTRIBUTIONS. Shareholders normally will have to
pay federal income taxes, and any state and/or local income taxes, on the
dividends and other distributions they receive from the Portfolio. Such
dividends and distributions, to the extent that they are derived from net
investment income or short-term capital gains, are taxable to the shareholder as
ordinary income regardless of whether the shareholder receives such payments in
additional shares or in cash.

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<PAGE>
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Portfolio's shares and regardless of whether the distribution is
received in additional shares or in cash. The Taxpayer Relief Act of 1997
reduced the maximum tax on long-term capital gains applicable to individuals
from 28% to 20%.

Shareholders are generally taxed on any ordinary dividend or capital gain
distributions from the Portfolio in the year they are actually distributed.
However, if any such dividends or distributions are declared in October,
November or December and paid in January then such amounts will be treated for
tax purposes as received by the shareholders on December 31, to shareholders of
record of such month.

Shareholders who are not citizens or residents of the United States and
certain foreign entities may be subject to withholding of United States tax on
distributions made by the Portfolio of investment income and short term capital
gains.

After the end of each calendar year, shareholders will be sent full
information on their dividends and capital gain distributions for tax purposes,
including the portion taxable as ordinary income, the portion taxable as
long-term capital gains and the amount of any dividends eligible for the federal
dividends received deduction for corporations.

PURCHASES AND REDEMPTIONS AND EXCHANGES OF FUND SHARES. Any dividend or
capital gains distribution received by a shareholder from any investment company
will have the effect of reducing the net asset value of the shareholder's stock
in that company by the exact amount of the dividend or capital gains
distribution. Furthermore, such dividends and capital gains distributions are
subject to federal income taxes. If the net asset value of the shares should be
reduced below a shareholder's cost as a result of the payment of dividends or
the distribution of realized long-term capital gains, such payment or
distribution would be in part a return of the shareholder's investment but
nonetheless would be taxable to the shareholder. Therefore, an investor should
consider the tax implications of purchasing Portfolio shares immediately prior
to a distribution record date.

In general, a sale of shares results in capital gain or loss, and for
individual shareholders, is taxable at a federal rate dependent upon the length
of time the shares were held. A redemption of a shareholder's Portfolio shares
is normally treated as a sale for tax purposes. Portfolio shares held for a
period of one year or less will, for tax purposes, generally result in
short-term gains or losses and those held for more than one year generally
result in long-term gain or loss. Any loss realized by shareholders upon a
redemption of shares within six months of the date of their purchase will be
treated as a long-term capital loss to the extent of any distributions of net
long-term capital gains with respect to such shares during the six-month period.

Gain or loss on the sale or redemption of shares in the Portfolio is
measured by the difference between the amount received and the tax basis of the
shares. Shareholders should keep records of investments made (including shares
acquired through reinvestment of dividends and distributions) so they can
compute the tax basis of their shares. Under certain circumstances a shareholder
may compute and use an average cost basis in determining the gain or loss on the
sale or redemption of shares.

Exchanges of Portfolio shares for shares of another fund, including shares
of other Morgan Stanley Dean Witter Funds, are also subject to similar tax
treatment. Such an exchange is treated for tax purposes as a sale of the
original shares in the first fund, followed by the purchase of shares in the
second fund.

If a shareholder realizes a loss on the redemption or exchange of a fund's
shares and reinvests in that fund's shares within 30 days before or after the
redemption or exchange, the transactions may be subject to the "wash sale"
rules, resulting in a postponement of the recognition of such loss for tax
purposes.

32
<PAGE>
X. UNDERWRITERS
- --------------------------------------------------------------------------------

The Portfolio's shares are offered to the public on a continuous basis. The
Distributor, as the principal underwriter of the shares, has certain obligations
under the Distribution Agreement concerning the distribution of the shares.
These obligations and the compensation the Distributor receives are described
above in the sections titled "Principal Underwriter" and "Rule 12b-1 Plans."

XI. CALCULATION OF PERFORMANCE DATA
- --------------------------------------------------------------------------------

From time to time, the Portfolio may quote its "total return" in
advertisements and sales literature. These figures are computed separately for
Class A, Class B, Class C and Class D shares. The Portfolio's "average annual
total return" represents an annualization of the Portfolio's total return over a
particular period and is computed by finding the annual percentage rate which
will result in the ending redeemable value of a hypothetical $1,000 investment
made at the beginning of a one, five or ten year period, or for the period from
the date of commencement of operations, if shorter than any of the foregoing.
The ending redeemable value is reduced by any contingent deferred sales charge
("CDSC") at the end of the one, five, ten year or other period. For the purpose
of this calculation, it is assumed that all dividends and distributions are
reinvested. The formula for computing the average annual total return involves a
percentage obtained by dividing the ending redeemable value by the amount of the
initial investment (which in the case of Class A shares is reduced by the Class
A initial sales charge), taking a root of the quotient (where the root is
equivalent to the number of years in the period) and subtracting 1 from the
result. The annual total returns of Class A, Class B, Class C and Class D for
the one year period ended May 31, 1999 and for the period February 25, 1998
(commencement of operations) through May 31, 1999 were as follows: Class A:
- -0.51% and 2.51%, respectively; Class B: -0.73% and 3.10%, respectively; Class
C: 3.44% and 6.38%, respectively; and Class D: 5.26% and 7.29%, respectively.

In addition, the Portfolio may advertise its total return for each Class
over different periods of time by means of aggregate, average, year-by-year or
other types of total return figures. These calculations may or may not reflect
the imposition of the maximum front-end sales charge for Class A or the
deduction of the CDSC for each of Class B and Class C which, if reflected, would
reduce the performance quoted. For example, the average annual total return of
the Portfolio may be calculated in the manner described above, but without
deduction for any applicable sales charge. Based on this calculation, The annual
total returns of Class A, Class B, Class C and Class D for the one year period
ended May 31, 1999 and for the period February 25, 1998 (commencement of
operations) through May 31, 1999 were as follows: Class A: 5.01% and 7.00%,
respectively; Class B: 4.27% and 6.24%, respectively; Class C: 4.44% and 6.38%,
respectively; and Class D: 5.26% and 7.29%, respectively.

In addition, the Portfolio may compute its aggregate total return for each
Class for specified periods by determining the aggregate percentage rate which
will result in the ending value of a hypothetical $1,000 investment made at the
beginning of the period. For the purpose of this calculation, it is assumed that
all dividends and distributions are reinvested. The formula for computing
aggregate total return involves a percentage obtained by dividing the ending
value (without reduction for any sales charge) by the initial $1,000 investment
and subtracting 1 from the result. Based on the foregoing calculation, the total
returns of Class A, Class B, Class C and Class D for the one year period ended
May 31 1999 and for the period February 25, 1998 (commencement of operations)
through May 31, 1999 were as follows: Class A: 5.01% and 8.89%, respectively;
Class B: 4.27% and 7.92%, respectively; Class C: 4.44% and 8.10%, respectively;
and Class D: 5.26% and 9.26%, respectively.

The Portfolio may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in each Class of shares of the Portfolio by adding
1 to the Portfolio's aggregate total return to date (expressed as a decimal and
without taking into account the effect of any applicable CDSC) and multiplying
by $9,475, $48,000 and $97,000 in the case of Class A (investments of $10,000,
$50,000 and

33
<PAGE>
$100,000 adjusted for the initial sales charge) or by $10,000, $50,000 and
$100,000 in the case of each of Class B, Class C and Class D, as the case may
be. Investments of $10,000, $50,000 and $100,000 in each Class at inception of
the Class would have grown to the following amounts at May 31, 1999:

<TABLE>
<CAPTION>
INVESTMENT AT INCEPTION OF:
INCEPTION ---------------------------------
CLASS DATE: $10,000 $50,000 $100,000
- ----------------------------------- -------- ------- -------- --------
<S> <C> <C> <C> <C>
Class A............................ 2/25/98 $10,317 $ 52,267 $105,623
Class B............................ 2/25/98 10,792 53,960 107,920
Class C............................ 2/25/98 10,810 54,050 108,100
Class D............................ 2/25/98 10,926 54,630 109,260
</TABLE>

The Portfolio from time to time may also advertise its performance relative
to certain performance rankings and indexes compiled by recognized
organizations.

XII. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

EXPERTS. The financial statements of the Portfolio for the fiscal year
ended May 31, 1999 included in this STATEMENT OF ADDITIONAL INFORMATION and
incorporated by reference in the PROSPECTUS have been so included and
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.

*****

This STATEMENT OF ADDITIONAL INFORMATION and the PROSPECTUS do not contain
all of the information set forth in the REGISTRATION STATEMENT the Portfolio has
filed with the SEC. The complete REGISTRATION STATEMENT may be obtained from the
SEC.

34
<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
35
<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
36
<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
37
<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
38
<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
39
<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
40
<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

41
<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

42
<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

43
<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

44
<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.

45
<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 YEAR
ENDED
MAY 31, 1999
-------------------------------------
SHARES AMOUNT
---------------- -------------------
<S> <C> <C>
CLASS A
Sold............................................................................. 1,703,197 $ 16,901,264
Reinvestment of dividends........................................................ 49,227 485,379
Redeemed......................................................................... (3,997,606) (41,066,748)
---------------- -------------------
Net increase (decrease) - Class A................................................ (2,245,182) (23,680,105)
---------------- -------------------

CLASS B
Sold............................................................................. 36,363,867 364,351,913
Reinvestment of dividends........................................................ 485,760 4,770,136
Redeemed......................................................................... (52,155,178) (526,365,062)
---------------- -------------------
Net increase (decrease) - Class B................................................ (15,305,551) (157,243,013)
---------------- -------------------

CLASS C
Sold............................................................................. 3,595,166 35,695,226
Reinvestment of dividends........................................................ 44,094 432,997
Redeemed......................................................................... (7,517,956) (76,432,043)
---------------- -------------------
Net increase (decrease) - Class C................................................ (3,878,696) (40,303,820)
---------------- -------------------

CLASS D
Sold............................................................................. 368,735 3,798,090
Reinvestment of dividends........................................................ 2,677 26,448
Redeemed......................................................................... (560,154) (5,686,482)
---------------- -------------------
Net increase (decrease) - Class D................................................ (188,742) (1,861,944)
---------------- -------------------
Net increase (decrease) in Fund.................................................. (21,618,171) $ (223,088,882)
---------------- -------------------
---------------- -------------------

<CAPTION>
FOR THE PERIOD
FEBRUARY 25, 1998*

THROUGH
MAY 31, 1998
----------------------------------------

SHARES AMOUNT

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

<S> <C> <C>
CLASS A
Sold............................................................................. 11,592,880 $ 116,824,084

Reinvestment of dividends........................................................ -- --

Redeemed......................................................................... (238,135) (2,486,285)

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

Net increase (decrease) - Class A................................................ 11,354,745 114,337,799

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

CLASS B
Sold............................................................................. 167,749,918 1,699,075,476

Reinvestment of dividends........................................................ -- --

Redeemed......................................................................... (2,377,063) (24,804,561)

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

Net increase (decrease) - Class B................................................ 165,372,855 1,674,270,915

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

CLASS C
Sold............................................................................. 17,653,992 178,479,819

Reinvestment of dividends........................................................ -- --

Redeemed......................................................................... (600,572) (6,271,272)

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

Net increase (decrease) - Class C................................................ 17,053,420 172,208,547

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

CLASS D
Sold............................................................................. 519,814 5,520,699

Reinvestment of dividends........................................................ -- --

Redeemed......................................................................... -- --

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

Net increase (decrease) - Class D................................................ 519,814 5,520,699

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

Net increase (decrease) in Fund.................................................. 194,300,834 $ 1,966,337,960

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

</TABLE>

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

* Commencement of operations.

46
<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.

47
<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:

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

<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
48
<PAGE>
MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO
FINANCIAL HIGHLIGHTS, CONTINUED

<TABLE>
<CAPTION>
FOR THE
PERIOD
FOR THE FEBRUARY
YEAR 25, 1998*
ENDED THROUGH
MAY 31, MAY 31,
1999 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
49
<PAGE>
MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND
"BEST IDEAS" PORTFOLIO
FINANCIAL HIGHLIGHTS, CONTINUED

<TABLE>
<CAPTION>
FOR THE
PERIOD
FEBRUARY 25,
FOR THE YEAR 1998*
ENDED THROUGH
MAY 31, 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
50
<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.

51
<PAGE>

MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND

PART C OTHER INFORMATION

<TABLE>
<CAPTION>
ITEM 23. EXHIBITS
<S> <C>
1(a). Declaration of Trust of the Registrant, dated October 16, 1997, is
incorporated by reference to Exhibit 1 to the Registration Statement
on Form N-1A, filed on October 20, 1997.

1(b). Amendment dated October 28, 1997 to the Declaration of Trust of the
Registrant is incorporated by reference to Exhibit 1(c) of
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A, filed on December 4, 1997.

1(c). Amendment dated November 5, 1997 to the Declaration of Trust of the
Registrant is incorporated by reference to Exhibit 1(b) of
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A, filed on December 4, 1997.

2. Amended and Restated By-Laws of the Registrant, dated May 1, 1999 is
incorporated by reference to Exhibit 2 of Post-Effective Amendment No.
2 to the Registration Statement on Form N-1A, filed on June 11, 1999.

3. Not Applicable.

4. Amended Investment Management Agreement between the Registrant and
Morgan Stanley Dean Witter Advisors Inc., dated May 1, 1998 is
incorporated by reference to Exhibit 5 of Post-Effective Amendment No.
1 to the Registration Statement on Form N-1A, filed on July 30, 1998.

5(a). Amended Distribution Agreement between Morgan Stanley Dean Witter
Advisors Inc. and Morgan Stanley Dean Witter Distributors Inc., dated
June 22, 1998 is incorporated by reference to Exhibit 6 of
Post-Effective Amendment No. 1 to the Registration Statement on Form
N-1A, filed on July 30, 1998.

5(b). Selected Dealer Agreement between Morgan Stanley Dean Witter
Distributors Inc. and Dean Witter Reynolds Inc., dated November 6,
1998 is incorporated by reference to Exhibit 6(b) of Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A, filed on
December 4, 1997.

5(c). Omnibus Selected Dealer Agreement between Morgan Stanley Dean Witter
Distributors Inc. and National Financial Services Corporation, dated
October 17, 1998 is incorporated by reference to Exhibit 5 of Post
Effective Amendment No. 2 to the Registration Statement on Form N-1A,
filed on June 11, 1999.

6. Not Applicable.

7. Custody Agreement between the Registrant and The Bank of New York,
dated November 6, 1997, is incorporated by reference to Exhibit 8(a)
of Pre-Effective
</TABLE>
1
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
Amendment No. 1 to the Registration Statement on Form
N-1A, filed on December 4, 1997.

8(a). Amended and Restated Transfer Agency and Service Agreement between the
Registrant and Morgan Stanley Dean Witter Trust FSB, dated June 22,
1998 is incorporated by reference to Exhibit 8 of Post-Effective
Amendment No. 1 to the Registration Statement on Form N-1A, filed on
July 30, 1998.

8(b). Amended Services Agreement between Morgan Stanley Dean Witter Advisors
and Morgan Stanley Dean Witter Services Company Inc., dated
June 22, 1998 is incorporated by reference to Exhibit 9 of
Post-Effective Amendment No. 1 to the Registration Statement filed on
Form N-1A, filed on July 30, 1998.

9(a). Opinion of Barry Fink, Esq., dated December 3, 1997, is incorporated
by reference to Exhibit 10(a) to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A, filed on December 4, 1997.

9(b). Opinion of Lane, Altman & Owens LLP, Massachusetts Counsel, dated
December 3, 1997, is incorporated by reference to Exhibit 10(b) to
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A, filed on December 4, 1997.

10. Consent of Independent Accountants, filed herein.

11. Not Applicable.

12. Not Applicable.

13. Plan of Distribution pursuant to Rule 12b-1 is incorporated by
reference to Exhibit 15 of Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A, filed on December 4, 1997.

14. Amended Multi-Class Plan pursuant to Rule 18f-3 is incorporated by
reference to Exhibit 18 of Post-Effective Amendment No. 1 to the
Registration Statement on Form N-1A, filed on July 30, 1998.

Other Powers of Attorney of Trustees are incorporated by reference to
Exhibit (Other) of Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A, filed on December 4, 1997.
</TABLE>

Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND.

None

Item 25. INDEMNIFICATION.

Pursuant to Section 5.3 of the Registrant's Declaration of Trust and under
Section 4.8 of the Registrant's By-Laws, the indemnification of the Registrant's
trustees, officers, employees and agents is permitted if it is determined that
they acted under the belief that their actions were in or not opposed to the
best interest of the Registrant, and, with respect to any criminal proceeding,
they had reasonable cause to believe their conduct was not unlawful. In
addition,

2
<PAGE>

indemnification is permitted only if it is determined that the actions in
question did not render them liable by reason of willful misfeasance, bad faith
or gross negligence in the performance of their duties or by reason of reckless
disregard of their obligations and duties to the Registrant. Trustees, officers,
employees and agents will be indemnified for the expense of litigation if it is
determined that they are entitled to indemnification against any liability
established in such litigation. The Registrant may also advance money for these
expenses provided that they give their undertakings to repay the Registrant
unless their conduct is later determined to permit indemnification.

Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the Registrant
shall be liable for any action or failure to act, except in the case of bad
faith, willful misfeasance, gross negligence or reckless disregard of duties to
the Registrant.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer, or controlling person of the Registrant
in connection with the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such trustee, officer or controlling person
in connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.

The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.

Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.

Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR

See "The Fund and Its Management" in the Prospectus regarding the business
of the investment advisor. The following information is given regarding officers
of Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"). MSDW Advisors is
a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.

3
<PAGE>

The term "Morgan Stanley Dean Witter Funds" refers to the following
registered investment companies:

CLOSED-END INVESTMENT COMPANIES
(1) Morgan Stanley Dean Witter California Insured Municipal Income Trust
(2) Morgan Stanley Dean Witter California Quality Municipal Securities
(3) Morgan Stanley Dean Witter Government Income Trust
(4) Morgan Stanley Dean Witter High Income Advantage Trust
(5) Morgan Stanley Dean Witter High Income Advantage Trust II
(6) Morgan Stanley Dean Witter High Income Advantage Trust III
(7) Morgan Stanley Dean Witter Income Securities Inc.
(8) Morgan Stanley Dean Witter Insured California Municipal Securities
(9) Morgan Stanley Dean Witter Insured Municipal Bond Trust
(10) Morgan Stanley Dean Witter Insured Municipal Income Trust
(11) Morgan Stanley Dean Witter Insured Municipal Securities
(12) Morgan Stanley Dean Witter Insured Municipal Trust
(13) Morgan Stanley Dean Witter Municipal Income Opportunities Trust
(14) Morgan Stanley Dean Witter Municipal Income Opportunities Trust II
(15) Morgan Stanley Dean Witter Municipal Income Opportunities Trust III
(16) Morgan Stanley Dean Witter Municipal Income Trust
(17) Morgan Stanley Dean Witter Municipal Income Trust II
(18) Morgan Stanley Dean Witter Municipal Income Trust III
(19) Morgan Stanley Dean Witter Municipal Premium Income Trust
(20) Morgan Stanley Dean Witter New York Quality Municipal Securities
(21) Morgan Stanley Dean Witter Prime Income Trust
(22) Morgan Stanley Dean Witter Quality Municipal Income Trust
(23) Morgan Stanley Dean Witter Quality Municipal Investment Trust
(24) Morgan Stanley Dean Witter Quality Municipal Securities

OPEN-END INVESTMENT COMPANIES
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter Aggressive Equity Fund
(6) Morgan Stanley Dean Witter American Opportunities Fund
(7) Morgan Stanley Dean Witter Balanced Growth Fund
(8) Morgan Stanley Dean Witter Balanced Income Fund
(9) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(10) Morgan Stanley Dean Witter California Tax-Free Income Fund
(11) Morgan Stanley Dean Witter Capital Growth Securities
(12) Morgan Stanley Dean Witter Competitive Edge Fund, "BEST IDEAS PORTFOLIO"
(13) Morgan Stanley Dean Witter Convertible Securities Trust
(14) Morgan Stanley Dean Witter Developing Growth Securities Trust
(15) Morgan Stanley Dean Witter Diversified Income Trust
(16) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(17) Morgan Stanley Dean Witter Equity Fund
(18) Morgan Stanley Dean Witter European Growth Fund Inc.
(19) Morgan Stanley Dean Witter Federal Securities Trust
(20) Morgan Stanley Dean Witter Financial Services Trust
(21) Morgan Stanley Dean Witter Fund of Funds

4
<PAGE>

(22) Morgan Stanley Dean Witter Global Dividend Growth Securities
(23) Morgan Stanley Dean Witter Global Utilities Fund
(24) Morgan Stanley Dean Witter Growth Fund
(25) Morgan Stanley Dean Witter Hawaii Municipal Trust
(26) Morgan Stanley Dean Witter Health Sciences Trust
(27) Morgan Stanley Dean Witter High Yield Securities Inc.
(28) Morgan Stanley Dean Witter Income Builder Fund
(29) Morgan Stanley Dean Witter Information Fund
(30) Morgan Stanley Dean Witter Intermediate Income Securities
(31) Morgan Stanley Dean Witter International Fund
(32) Morgan Stanley Dean Witter International SmallCap Fund
(33) Morgan Stanley Dean Witter Japan Fund
(34) Morgan Stanley Dean Witter Latin American Growth Fund
(35) Morgan Stanley Dean Witter Limited Term Municipal Trust
(36) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(37) Morgan Stanley Dean Witter Market Leader Trust
(38) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(39) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(40) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(41) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(42) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(43) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(44) Morgan Stanley Dean Witter North American Government Income Trust
(45) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(46) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(47) Morgan Stanley Dean Witter Real Estate Fund
(48) Morgan Stanley Dean Witter S&P 500 Index Fund
(49) Morgan Stanley Dean Witter S&P 500 Select Fund
(50) Morgan Stanley Dean Witter Select Dimensions Investment Series
(51) Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
(52) Morgan Stanley Dean Witter Short-Term Bond Fund
(53) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(54) Morgan Stanley Dean Witter Small Cap Growth Fund
(55) Morgan Stanley Dean Witter Special Value Fund
(56) Morgan Stanley Dean Witter Strategist Fund
(57) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(58) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(59) Morgan Stanley Dean Witter Total Return Trust
(60) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(61) Morgan Stanley Dean Witter U.S. Government Securities Trust
(62) Morgan Stanley Dean Witter Utilities Fund
(63) Morgan Stanley Dean Witter Value-Added Market Series
(64) Morgan Stanley Dean Witter Value Fund
(65) Morgan Stanley Dean Witter Variable Investment Series
(66) Morgan Stanley Dean Witter World Wide Income Trust

5
<PAGE>

<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
- ---------------------- -------------------------------------------------
<S> <C>
Mitchell M. Merin President and Chief Operating Officer of Asset
President, Chief Management of Morgan Stanley Dean Witter & Co.
Executive Officer and ("MSDW); Chairman, Chief Executive Officer and Director
Director of Morgan Stanley Dean Witter Distributors Inc. ("MSDW
Distributors") and Morgan Stanley Dean Witter Trust FSB
("MSDW Trust"); President, Chief Executive Officer and
Director of Morgan Stanley Dean Witter Services
Company Inc. ("MSDW Services"); President of the Morgan
Stanley Dean Witter Funds and Discover Brokerage Index
Series; Executive Vice President and Director of Dean
Witter Reynolds Inc. ("DWR"); Director of various MSDW
subsidiaries.

Joseph J. McAlinden Vice President of the Morgan Stanley Dean Witter Funds
Executive Vice President and Discover Brokerage Index Series; Director of MSDW
and Chief Investment Trust.
Officer

Ronald E. Robison President MSDW Trust; Executive Vice President, Chief
Executive Vice President, Administrative Officer and Director of MSDW Services;
Chief Administrative Vice President of the Morgan Stanley Dean Witter Funds
Officer and Director and Discover Brokerage Index Series.

Edward C. Oelsner, III
Executive Vice President

Barry Fink Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary, General Counsel and Director of MSDW
Secretary, General Services; Senior Vice President, Assistant Secretary and
Counsel and Director Assistant General Counsel of MSDW Distributors; Vice
President, Secretary and General Counsel of the Morgan
Stanley Dean Witter Funds and Discover Brokerage Index
Series.

Peter M. Avelar Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the High
Yield Group

Mark Bavoso Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.

Douglas Brown
Senior Vice President
</TABLE>

6
<PAGE>

Richard Felegy
Senior Vice President

Edward F. Gaylor Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.

Robert S. Giambrone Senior Vice President of MSDW Services, MSDW
Senior Vice President Distributors and MSDW Trust and Director of MSDW Trust;
Vice President of the Morgan Stanley Dean Witter Funds
and Discover Brokerage Index Series.

Rajesh K. Gupta Vice President of various Morgan Stanley Dean Witter
Senior Vice President, Funds.
Director of the Taxable
Fixed Income Group and
Chief Administrative Officer -
Investments

Kenton J. Hinchliffe Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds and Discover Brokerage Index Series.

Kevin Hurley Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.

Jenny Beth Jones Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.

Michelle Kaufman Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.

John B. Kemp, III President of MSDW Distributors.
Senior Vice President

Anita H. Kolleeny Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of Sector
Rotation

Jonathan R. Page Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the Money
Market Group
</TABLE>

7
<PAGE>

Guy G. Rutherfurd, Jr. Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the Growth
Group

Rochelle G. Siegel Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.

James Solloway
Senior Vice President

Paul D. Vance Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the Growth
and Income Group

Elizabeth A. Vetell
Senior Vice President
and Director of Shareholder
Communication

James F. Willison Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the
Tax-Exempt Fixed
Income Group

Frank Bruttomesso First Vice President and Assistant Secretary of MSDW
First Vice President and Services; Assistant Secretary of MSDW Distributors, the
Assistant Secretary Morgan Stanley Dean Witter Funds and Discover
Brokerage Index Series.

Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President MSDW Services; Assistant Treasurer of MSDW
and Assistant Distributors; Treasurer and Chief Financial and Accounting
Treasurer Officer of the Morgan Stanley Dean Witter Funds and
Discover Brokerage Index Series.

Thomas Chronert
First Vice President
</TABLE>

8
<PAGE>

Salvatore DeSteno First Vice President of MSDW Services.
First Vice President

Peter W. Gurman
First Vice President

Michael Interrante First Vice President and Controller of MSDW Services;
First Vice President Assistant Treasurer of MSDW Distributors; First Vice
and Controller President and Treasurer of MSDW Trust.

David Johnson
First Vice President

Stanley Kapica
First Vice President

Lou Anne D. McInnis First Vice President and Assistant Secretary of MSDW
First Vice President and Services; Assistant Secretary of MSDW Distributors, the
Assistant Secretary Morgan Stanley Dean Witter Funds and Discover
Brokerage Index Series.

Carsten Otto First Vice President and Assistant Secretary of MSDW
First Vice President Services; Assistant Secretary of MSDW Distributors, the
and Assistant Secretary Morgan Stanley Dean Witter Funds and Discover
Brokerage Index Series.

Ruth Rossi First Vice President and Assistant Secretary of MSDW
First Vice President and Services; Assistant Secretary of MSDW Distributors, the
Assistant Secretary Morgan Stanley Dean Witter Funds and Discover
Brokerage Index Series.

James P. Wallin
First Vice President

Robert Abreu
Vice President

Dale Albright
Vice President

Joan G. Allman
Vice President
</TABLE>

9
<PAGE>

Joseph Arcieri Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

Armon Bar-Tur Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

Raymond Basile
Vice President

Nancy Belza
Vice President

Maurice Bendrihem
Vice President and
Assistant Controller

Dale Boettcher
Vice President

Ronald Caldwell
Vice President

Joseph Cardwell
Vice President

Liam Carroll
Vice President

Philip Casparius
Vice President

Aaron Clark
Vice President

William Connerly
Vice President

David Dineen
Vice President

Sheila Finnerty Vice President of Morgan Stanley Dean Witter Prime
Vice President Income Trust
</TABLE>

10
<PAGE>

Sandra Gelpieryn
Vice President

Charmaine George
Vice President

Michael Geringer
Vice President

Gail Gerrity
Vice President

Ellen Gold
Vice President

Stephen Greenhut
Vice President

Trey Hancock
Vice President

Matthew Haynes Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

Peter Hermann Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

David T. Hoffman
Vice President

Kevin Jung Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

Carol Espejo-Kane
Vice President

Nancy Karole-Kennedy
Vice President

Doug Ketterer
Vice President

Paula LaCosta Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
</TABLE>

11
<PAGE>

Thomas Lawlor
Vice President

Todd Lebo Vice President and Assistant Secretary of MSDW
Vice President and Services; Assistant Secretary of MSDW Distributors, the
Assistant Secretary Morgan Stanley Dean Witter Funds and Discover
Brokerage Index Series.

Gerard J. Lian Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

Nancy Login
Vice President

Sharon Loguercio
Vice President

Steven MacNamara
Vice President

Catherine Maniscalco Vice President of Morgan Stanley Dean Witter Natural
Vice President Resource Development Securities Inc.

Albert McGarity
Vice President

Teresa McRoberts Vice President of Morgan Stanley Dean Witter S&P 500
Vice President Select Fund.

Mark Mitchell
Vice President

Julie Morrone
Vice President

Mary Beth Mueller
Vice President

David Myers Vice President of Morgan Stanley Dean Witter Natural
Vice President Resource Development Securities Inc.

James Nash
Vice President
</TABLE>

12
<PAGE>

Anne Pickrell Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

Dawn Rorke
Vice President

John Roscoe Vice President of Morgan Stanley Dean Witter
Vice President Real Estate Fund

Hugh Rose
Vice President

Robert Rossetti Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

Carl F. Sadler
Vice President

Deborah Santaniello
Vice President

Patrice Saunders
Vice President

Howard A. Schloss Vice President of Morgan Stanley Dean Witter Federal
Vice President Securities Trust.

Peter J. Seeley Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

Robert Stearns
Vice President

Naomi Stein
Vice President

Michael Strayhorn
Vice President

Kathleen H. Stromberg Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

Marybeth Swisher
Vice President
</TABLE>

13
<PAGE>

Robert Vanden Assem
Vice President

David Walsh
Vice President

Alice Weiss Vice President of various Morgan Stanley Dean Witter
Vice President Funds.

John Wong
Vice President
</TABLE>

The principal address of MSDW Advisors, MSDW Services, MSDW
Distributors, DWR, the Morgan Stanley Dean Witter Funds and Discover Brokerage
Index Series is Two World Trade Center, New York, New York 10048. The principal
address of MSDW is 1585 Broadway, New York, New York 10036. The principal
address of MSDW Trust is 2 Harborside Financial Center, Jersey City, New Jersey
07311.

Item 27. PRINCIPAL UNDERWRITERS

(a) Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors"), a
Delaware corporation, is the principal underwriter of the Registrant. MSDW
Distributors is also the principal underwriter of the following investment
companies:

(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter Aggressive Equity Fund
(6) Morgan Stanley Dean Witter American Opportunities Fund
(7) Morgan Stanley Dean Witter Balanced Growth Fund
(8) Morgan Stanley Dean Witter Balanced Income Fund
(9) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(10) Morgan Stanley Dean Witter California Tax-Free Income Fund
(11) Morgan Stanley Dean Witter Capital Growth Securities
(12) Morgan Stanley Dean Witter Competitive Edge Fund, "BEST IDEAS PORTFOLIO"
(13) Morgan Stanley Dean Witter Convertible Securities Trust
(14) Morgan Stanley Dean Witter Developing Growth Securities Trust
(15) Morgan Stanley Dean Witter Diversified Income Trust
(16) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(17) Morgan Stanley Dean Witter Equity Fund
(18) Morgan Stanley Dean Witter European Growth Fund Inc.
(19) Morgan Stanley Dean Witter Federal Securities Trust
(20) Morgan Stanley Dean Witter Financial Services Trust

14
<PAGE>

(21) Morgan Stanley Dean Witter Fund of Funds
(22) Morgan Stanley Dean Witter Global Dividend Growth Securities
(23) Morgan Stanley Dean Witter Global Utilities Fund
(24) Morgan Stanley Dean Witter Growth Fund
(25) Morgan Stanley Dean Witter Hawaii Municipal Trust
(26) Morgan Stanley Dean Witter Health Sciences Trust
(27) Morgan Stanley Dean Witter High Yield Securities Inc.
(28) Morgan Stanley Dean Witter Income Builder Fund
(29) Morgan Stanley Dean Witter Information Fund
(30) Morgan Stanley Dean Witter Intermediate Income Securities
(31) Morgan Stanley Dean Witter International Fund
(32) Morgan Stanley Dean Witter International SmallCap Fund
(33) Morgan Stanley Dean Witter Japan Fund
(34) Morgan Stanley Dean Witter Latin American Growth Fund
(35) Morgan Stanley Dean Witter Limited Term Municipal Trust
(36) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(37) Morgan Stanley Dean Witter Market Leader Trust
(38) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(39) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(40) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(41) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(42) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(43) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(44) Morgan Stanley Dean Witter North American Government Income Trust
(45) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(46) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(47) Morgan Stanley Dean Witter Prime Income Trust
(48) Morgan Stanley Dean Witter Real Estate Fund
(49) Morgan Stanley Dean Witter S&P 500 Index Fund
(50) Morgan Stanley Dean Witter S&P 500 Select Fund
(51) Morgan Stanley Dean Witter Short-Term Bond Fund
(52) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(53) Morgan Stanley Dean Witter Small Cap Growth Fund
(54) Morgan Stanley Dean Witter Special Value Fund
(55) Morgan Stanley Dean Witter Strategist Fund
(56) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(57) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(58) Morgan Stanley Dean Witter Total Return Trust
(59) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(60) Morgan Stanley Dean Witter U.S. Government Securities Trust
(61) Morgan Stanley Dean Witter Utilities Fund
(62) Morgan Stanley Dean Witter Value-Added Market Series
(63) Morgan Stanley Dean Witter Value Fund
(64) Morgan Stanley Dean Witter Variable Investment Series
(65) Morgan Stanley Dean Witter World Wide Income Trust

(b) The following information is given regarding directors and officers of MSDW
Distributors not listed in Item 26 above. The principal address of MSDW
Distributors is Two World Trade Center, New York, New York 10048. Other than Mr.
Purcell, who is a Trustee of the Registrant, none of the following persons has
any position or office with the Registrant.

15
<PAGE>

NAME POSITIONS AND OFFICE WITH MSDW DISTRIBUTORS

Michael T. Gregg Vice President and Assistant Secretary.

James F. Higgins Director

Fredrick K. Kubler Senior Vice President, Assistant Secretary
and Chief Compliance Officer.

Philip J. Purcell Director

John Schaeffer Director

Charles Vadala Senior Vice President and Financial
Principal.

Item 28. LOCATION OF ACCOUNTS AND RECORDS

All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained by the Investment Manager at its offices, except records relating to
holders of shares issued by the Registrant, which are maintained by the
Registrant's Transfer Agent, at its place of business as shown in the
prospectus.

Item 29. MANAGEMENT SERVICES

Registrant is not a party to any such management-related service contract.

Item 30. UNDERTAKINGS

Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.

16
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 15th day of July, 1999.

MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND

By /s/ Barry Fink
----------------------
Barry Fink
Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 3 has been signed below by the following persons in
the capacities and on the dates indicated.

Signatures Title Date
---------- ----- ----

(1) Principal Executive Officer Chief Executive
Officer, Trustee
and Chairman
By /s/ Charles A. Fiumefreddo 07/15/99
---------------------------
Charles A. Fiumefreddo

(2) Principal Financial Officer Treasurer and Principal
Accounting Officer

By /s/ Thomas F. Caloia 07/15/99
---------------------------
Thomas F. Caloia

(3) Majority of the Trustees

Charles A. Fiumefreddo (Chairman)
Philip J. Purcell

By /s/ Barry Fink 07/15/99
---------------------------
Barry Fink
Attorney-in-Fact

Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
Wayne E. Hedien John L. Schroeder

By /s/ David M. Butowsky 07/15/99
---------------------------
David M. Butowsky
Attorney-in-Fact

<PAGE>

MORGAN STANLEY DEAN WITTER COMPETITIVE EDGE FUND

EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C>
10. Consent of Independent Accountants
</TABLE>

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 3 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
July 6, 1999, relating to the financial statements and financial highlights
of Morgan Stanley Dean Witter Competitive Edge Fund - "Best Ideas" Portfolio,
which appears in such Statement of Additional Information, and to the
incorporation by reference of our report into the Prospectus which
constitutes part of this Registration Statement. We also consent to the
references to us under the headings "Custodian and Independent Accountants"
and "Experts" in such Statement of Additional Information and to the
reference to us under the heading "Financial Highlights" in such Prospectus.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
July 13, 1999