MORGAN STANLEY DEAN WITTER UTILITIES FUND, N-30D, 1999-03-03

MORGAN STANLEY DEAN WITTER UTILITIES FUND
N-30D, 1999-03-03

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<PAGE>

MORGAN STANLEY DEAN WITTER UTILITIES FUND TWO WORLD TRADE CENTER,
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1998 NEW YORK, NEW YORK 10048

DEAR SHAREHOLDER:

This past year proved to be positive for utility investors as they benefited
from mergers and acquisitions, joint ventures and alliances. In addition to the
attractive fundamentals evident across all utility segments, investors also
participated in the powerful "defensive" appeal and relative stability of this
sector as the broad market experienced waves of high volatility. Consequently,
utilities in general and Morgan Stanley Dean Witter Utilities Fund in particular
acted as safe havens offering solid returns during a year of persistent global
market uncertainty.

PERFORMANCE OVERVIEW

Against this backdrop, Morgan Stanley Dean Witter Utilities Fund's Class B
shares provided a total return of 21.95 percent for the calendar year compared
to 18.30 percent for the average Lipper Utility Funds and 28.58 percent for the
broad-based Standard & Poor's 500 Composite Stock Price Index. The Fund's Class
A, C and D shares posted total returns of 22.86 percent, 21.92 percent and 23.21
percent, respectively. The performance of the Fund's four share classes varies
because of differing expenses.

Amid a very unpredictable market, the Fund provided investors with current
income, safe-haven stability and a yield that was in line with competitive funds
and above that of the overall market. While the Fund's total return outperformed
many of its peer funds, it was surpassed by the broad market, which benefited
from a late-year burst of mergers and acquisitions within a wide array of
industries, coupled with a buying frenzy within the dominant
technology-affiliated sectors. The accompanying chart illustrates the growth of
a $10,000 investment in the Fund for the 10 years ended December 31, 1998,
versus the performance of similar hypothetical investments in the S&P 500 and
the Lipper Utilities Funds Average.

<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1998, CONTINUED

PORTFOLIO OVERVIEW

The Fund remained fully invested during 1998 in order to take advantage of
positive industry sentiment and strong overall fundamentals. In terms of asset
allocation, diversification was a key characteristic and strength of the
portfolio. At year-end, 87 percent of the Fund's net assets were allocated to
utility and utility-related equities. Within the equity component, 48 percent
were allocated to electric utilities, 40 percent telecommunications and 12
percent to natural gas. Enhancing overall Fund diversification were select
foreign securities focusing on the growth sector of telecommunications, which
accounted for 9 percent of net assets.

The Fund's high-quality fixed-income holdings represented 9 percent of the
portfolio while 4 percent was held in cash and cash equivalents. The
fixed-income portion of the Fund remained well diversified with a weighted
average credit rating of Baa1 and BBB+, as measured by Moody's Investors
Service, Inc. and Standard & Poor's Corporation, respectively.

Among the Fund's largest equity holdings on December 31, 1998, were MCI
Worldcom, SBC Communications and BellSouth Corp. (telecommunications), Duke
Energy, NIPSCO Industries and New Century Energies (electric utilities) and
Williams Companies and Enron Corporation (natural gas). Included among the
Fund's major foreign holdings were BCE Inc. of Canada and Telefonica de Espana
S.A. of Spain. New additions to the Fund during 1998 included Montana Power,
Qwest Communications, Telecommunications Inc. (TCI Group) and Columbia Energy.

SECTOR OVERVIEW

In terms of sector performance within the Fund, the portfolio's high-quality
electric utility holdings realized healthy gains, due in part to investor demand
for relatively low volatility and improving fundamentals. Another primary factor
underpinning this strong performance was the continuation of pro-competitive
state directives, which is enabling the industry to evolve smoothly from a
monopoly to a deregulated landscape. Additionally, a favorable interest-rate
environment played a key role in contributing to attractive returns in 1998.
Widespread consolidation continued to spotlight the utility industry including
the onset of proposed foreign takeovers of U.S. electric companies.

Turning to the increasingly dynamic telecommunications sector, performance was
truly a high point for the Fund, as the group was able to deliver strong
earnings gains despite an uneasy global economic environment. Shareholders were
afforded robust financial performance as telecom companies capitalized on strong
core business growth and immense demand for the rapidly emerging

2
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
LETTER TO THE SHAREHOLDERS DECEMBER 31, 1998, CONTINUED

"new wave" of broadband (Internet) and other advanced information/telecom
services. Moreover, this sector also enjoyed a multitude of merger and
acquisition activity, including the pending mammoth AT&T Corp./TCI Group and SBC
Communications/Ameritech combinations.

The Fund's well-diversified international telecom portfolio highlighted
well-established companies that were operating in strong economies and were
focused on the swiftly expanding European telecom market. This foreign segment
contributed meaningfully to Fund performance, as many overseas companies are
capitalizing on the brisk growth and globalization of worldwide telecom
infrastructure.

The Fund's natural gas segment turned in a mixed performance during the year.
Gas commodity prices and stocks came under pressure from low demand brought on
by unseasonably mild weather and an adequate supply of gas. However, certain
companies, as Enron for example, provided excellent returns, given their highly
successful diversified business performance. As of this update, the outlook for
this group is more positive, since seasonal temperatures have accelerated demand
and stabilized natural gas prices.

LOOKING AHEAD

During calendar year 1999 the Fund anticipates making a modest decrease in its
electric utility holdings in favor of selective telecommunication opportunities,
including a modest increase in global exposure. The portfolio is expected to
remain strategically positioned to benefit from the current economic environment
of steady growth, temperate inflation and low interest rates.

We appreciate your ongoing support of Morgan Stanley Dean Witter Utilities Fund
and look forward to serving your future needs and investment objectives.

Very truly yours,

[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD

3
<PAGE>

MORGAN STANLEY DEAN WITTER UTILITIES FUND
FUND PERFORMANCE DECEMBER 31, 1998

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
GROWTH OF $10,000--CLASS B SHARES
($ in Thousands)

FUND S&P 500(4) LIPPER(5)
<S> <C> <C> <C>
December 31, 1988 $10,000 $10,000 $10,000
December 31, 1989 $12,451 $13,164 $13,011
December 31, 1990 $12,418 $12,756 $12,653
December 31, 1991 $14,763 $16,635 $15,178
December 31, 1992 $16,056 $17,901 $16,648
December 31, 1993 $18,109 $19,703 $19,207
December 31, 1994 $16,317 $19,962 $17,473
December 31, 1995 $20,954 $27,457 $22,272
December 31, 1996 $22,001 $33,759 $24,591
December 31, 1997 $27,676 $45,017 $30,926
December 31, 1998 $33,750(3) $57,881 $36,545
</TABLE>

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

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------------------------------------------------------------------------------
CLASS B SHARES* CLASS A SHARES+
- ----------------------------------------------- -----------------------------------------------
PERIOD ENDED 12/31/98 PERIOD ENDED 12/31/98
- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1 Year 21.95%(1) 16.95%(2) 1 Year 22.86%(1) 16.41%(2)
5 Years 13.26(1) 13.02(2) From Inception (7/28/97) 29.79(1) 24.97(2)
10 Years 12.93(1) 12.93(2)
</TABLE>

<TABLE>
<CAPTION>
CLASS C SHARES++ CLASS D SHARES++
- ----------------------------------------------- -----------------------------------------------
PERIOD ENDED 12/31/98 PERIOD ENDED 12/31/98
- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1 Year 21.92%(1) 20.92%(2) 1 Year 23.21%(1)
From Inception (7/28/97) 28.79(1) 28.79(2) From Inception (7/28/97) 30.11(1)
</TABLE>

- ------------------------
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable sales charge. See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value assuming a complete redemption on December 31, 1998.
(4) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a
broad-based index, the performance of which is based on the average
performance of 500 widely held common stocks. The Index does not include
any expenses, fees or charges. The Index is unmanaged and should not be
considered an investment.
(5) The Lipper Utility Funds Average tracks the performance of funds which
invest 65% of their equity portfolio in utility shares, as reported by
Lipper Analytical Services.
* The maximum CDSC for Class B is 5.0%. The CDSC declines to 0% after six
years.
+ The maximum front-end sales charge for Class A is 5.25%.
++ The maximum CDSC for Class C shares is 1% for shares redeemed within one year
of purchase.
++ Class D shares have no sales charge.

4
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1998

<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (86.8%)
ELECTRIC UTILITIES (41.5%)
165,000 AES Corp.*.......................................................................... $ 7,816,875
900,000 Allegheny Energy, Inc............................................................... 31,050,000
845,000 Ameren Corp......................................................................... 36,070,937
610,000 American Electric Power Co., Inc.................................................... 28,708,125
795,000 Baltimore Gas & Electric Co......................................................... 24,545,625
540,000 BEC Energy.......................................................................... 22,241,250
270,000 Carolina Power & Light Co........................................................... 12,706,875
520,000 Central & South West Corp........................................................... 14,267,500
1,004,470 CINergy Corp........................................................................ 34,528,656
599,000 CMS Energy Corp..................................................................... 29,014,062
700,000 Consolidated Edison, Inc............................................................ 37,012,500
910,000 Dominion Resources, Inc............................................................. 42,542,500
1,390,750 DPL, Inc............................................................................ 30,074,969
539,000 DQE, Inc............................................................................ 23,682,312
625,000 DTE Energy Co....................................................................... 26,796,875
768,862 Duke Energy Corp.................................................................... 49,255,222
1,024,500 Edison International................................................................ 28,557,937
1,015,000 Endesa S.A. (ADR) (Spain)........................................................... 27,405,000
500,000 Energy East Corp.................................................................... 28,250,000
380,000 Entergy Corp........................................................................ 11,827,500
565,000 FirstEnergy Corp.................................................................... 18,397,812
595,000 Florida Progress Corp............................................................... 26,663,437
527,000 FPL Group, Inc...................................................................... 32,476,375
903,000 GPU, Inc............................................................................ 39,901,312
1,200,000 Houston Industries, Inc............................................................. 38,550,000
600,000 Illinova Corp....................................................................... 15,000,000
660,000 Kansas City Power & Light Co........................................................ 19,552,500
135,000 Montana Power Co.................................................................... 7,635,937
936,000 New Century Energies, Inc........................................................... 45,630,000
705,000 New England Electric System......................................................... 33,928,125
1,495,000 NIPSCO Industries, Inc.............................................................. 45,504,062
670,000 Northern States Power Co............................................................ 18,592,500
690,500 PacifiCorp.......................................................................... 14,543,656
395,000 Peco Energy Co...................................................................... 16,441,875
185,000 PG & E Corp......................................................................... 5,827,500
793,000 Pinnacle West Capital Corp.......................................................... 33,603,375
435,000 Potomac Electric Power Co........................................................... 11,445,937
390,000 PP&L Resources, Inc................................................................. 10,871,250
590,000 Public Service Enterprise Group, Inc................................................ 23,600,000
340,000 Rochester Gas & Electric Corp....................................................... 10,625,000
810,000 SCANA Corp.......................................................................... 26,122,500
1,205,000 Southern Co......................................................................... 35,020,312
481,000 TECO Energy, Inc.................................................................... 13,558,187
811,000 Texas Utilities Co.................................................................. 37,863,563
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1998, CONTINUED

<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
484,000 Utilicorp United, Inc............................................................... $ 17,756,750
640,000 Washington Water Power Co........................................................... 12,320,000
--------------
1,157,786,685
--------------
NATURAL GAS (10.5%)
660,000 AGL Resources, Inc.................................................................. 15,221,250
330,000 Burlington Resources, Inc........................................................... 11,818,125
780,000 Coastal Corp........................................................................ 27,251,250
150,000 Columbia Energy Group............................................................... 8,662,500
315,000 Consolidated Natural Gas Co......................................................... 17,010,000
1,020,670 El Paso Energy Corp................................................................. 35,532,074
1,087,137 Enron Corp.......................................................................... 62,034,755
70,000 Exxon Corp.......................................................................... 5,118,750
425,200 Keyspan Energy...................................................................... 13,181,200
240,000 New Jersey Resources Corp........................................................... 9,480,000
904,511 Sempra Energy....................................................................... 22,951,967
285,000 Washington Gas Light Co............................................................. 7,730,625
1,866,000 Williams Companies, Inc............................................................. 58,195,875
--------------
294,188,371
--------------
TELECOMMUNICATIONS (34.8%)
560,000 AirTouch Communications, Inc.*...................................................... 40,390,000
904,900 ALLTEL Corp......................................................................... 54,124,331
1,085,000 Ameritech Corp...................................................................... 68,761,875
360,000 AT&T Corp........................................................................... 27,090,000
939,000 BCE, Inc. (Canada).................................................................. 35,623,313
987,000 Bell Atlantic Corp.................................................................. 56,073,938
1,486,000 BellSouth Corp...................................................................... 74,114,250
115,000 British Telecommunications PLC (ADR) (United Kingdom)............................... 17,444,063
200,000 Cable & Wireless PLC (ADR) (United Kingdom)......................................... 7,350,000
742,500 Century Telephone Enterprises, Inc.................................................. 50,118,750
273,750 Cia de Telecomunicaciones de Chile S.A. (ADR) (Chile)............................... 5,663,203
500,000 Ericsson (L.M.) Telephone Co. (Class B) (ADR) (Sweden).............................. 11,937,500
152,500 France Telecom S.A. (ADR) (France).................................................. 12,037,969
590,000 Frontier Corp....................................................................... 20,060,000
688,000 GTE Corp............................................................................ 46,397,000
600,000 Hong Kong Telecommunications, Ltd. (ADR) (Hong Kong)................................ 10,537,500
258,810 Lucent Technologies Inc............................................................. 28,469,100
1,249,169 MCI WorldCom, Inc.*................................................................. 89,627,876
350,000 MediaOne Group, Inc.*............................................................... 16,450,000
278,901 Qwest Communications International, Inc.*........................................... 13,927,619
1,384,612 SBC Communications, Inc............................................................. 74,249,819
583,000 Sprint Corp. (FON Group)............................................................ 49,044,875
296,500 Sprint Corp. (PCS Group)*........................................................... 6,856,563
105,000 Tele-Communications, Inc. (Class A)*................................................ 5,807,813
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1998, CONTINUED

<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
455,000 Telecommunications Corp. New Zealand, Ltd. (ADR) (New Zealand)...................... $ 16,237,813
250,000 Telefonica de Argentina S.A. (ADR) (Argentina)...................................... 6,984,375
265,200 Telefonica de Espana S.A. (ADR) (Spain)............................................. 35,901,450
305,000 Telefonos de Mexico S.A. (Series L) (ADR) (Mexico).................................. 14,849,688
124,750 Telstra Corp. Ltd. (ADR) (Australia)*............................................... 11,570,563
645,241 U.S. West, Inc...................................................................... 41,698,700
145,000 Vodafone Group PLC (ADR) (United Kingdom)........................................... 23,363,125
--------------
972,763,071
--------------

TOTAL COMMON STOCKS
(IDENTIFIED COST $1,206,939,882).................................................... 2,424,738,127
--------------
</TABLE>

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- ------------ ------ --------
<C> <S> <C> <C> <C>
CORPORATE BONDS (8.5%)
ELECTRIC UTILITIES (5.0%)
$ 1,499 AEP Generating Co.............................................. 9.81% 12/07/22 1,970,449
5,000 Arizona Public Service Co...................................... 7.25 08/01/23 5,217,050
6,000 Chugach Electric Co............................................ 9.14 03/15/22 7,019,340
5,000 Cincinnati Gas & Electric Co................................... 7.20 10/01/23 5,243,650
5,000 Commonwealth Edison Co......................................... 8.375 02/15/23 5,520,050
5,000 Consolidated Edison Inc........................................ 7.10 02/01/28 5,328,250
5,000 Consumers Energy Co............................................ 7.375 09/15/23 5,194,400
5,757 DQU II Funding Corp............................................ 8.70 06/01/16 6,543,003
5,000 Gulf States Utilities Co....................................... 8.94 01/01/22 5,270,950
7,000 Indiantown Cogeneration LP..................................... 9.26 12/15/10 8,260,770
5,100 Long Island Lighting Co........................................ 8.20 03/15/23 5,639,529
5,250 National Rural Utilities Cooperative Finance Corp.............. 9.00 09/01/21 5,804,242
5,000 New York State Electric & Gas Corp............................. 8.875 11/01/21 5,448,650
5,000 Niagara Mohawk Power Corp...................................... 7.75 05/15/06 5,528,200
5,204 Niagara Mohawk Power Corp...................................... 8.77 01/01/18 5,532,268
5,000 Niagara Mohawk Power Corp...................................... 9.50 03/01/21 5,323,150
2,000 Northern States Power Co....................................... 6.50 03/01/28 2,111,180
10,250 Public Service Company of Colorado............................. 8.75 03/01/22 11,485,228
5,000 Public Service Electric & Gas Co............................... 7.00 09/01/24 5,095,850
5,000 Salton Sea Funding Corp. - 144A**.............................. 7.475 11/30/18 4,990,650
5,000 Selkirk Cogen Funding Corp..................................... 8.98 06/26/12 5,810,300
5,000 Texas Utilities Electric Co.................................... 7.375 10/01/25 5,325,900
5,000 Virginia Electric Power Co..................................... 8.625 10/01/24 5,711,450
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1998, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 3,000 Western Resources Inc.......................................... 7.125% 08/01/09 $ 3,258,360
5,000 Wisconsin Power & Light Co..................................... 8.60 03/15/27 5,653,150
--------------
138,286,019
--------------
NATURAL GAS (1.6%)
5,000 ANR Pipeline Co................................................ 9.625 11/01/21 6,477,450
10,000 Coastal Corp................................................... 9.625 05/15/12 12,853,300
5,000 Colorado Interstate Gas Co..................................... 10.00 06/15/05 6,045,450
4,750 Southwest Gas Corp............................................. 8.00 08/01/26 5,364,888
5,000 Transco Energy Co.............................................. 9.875 06/15/20 6,456,500
5,000 Williams Companies, Inc........................................ 9.375 11/15/21 6,216,700
--------------
43,414,288
--------------
TELECOMMUNICATIONS (1.9%)
4,000 Century Telephone Enterprises, Inc............................. 8.25 05/01/24 4,480,600
5,000 GTE Corp....................................................... 7.90 02/01/27 5,556,300
5,000 GTE Corp....................................................... 6.94 04/15/28 5,403,850
5,000 Southwestern Bell Telephone Co................................. 7.375 07/15/27 5,433,850
5,000 Sprint Capital Corp............................................ 6.125 11/15/08 5,104,650
5,000 Sprint Capital Corp............................................ 6.875 11/15/28 5,198,300
5,000 Sprint Corp.................................................... 9.25 04/15/22 6,499,150
5,000 Telephone & Data Systems, Inc.................................. 10.00 01/15/21 5,872,150
5,000 Telephone & Data Systems, Inc.................................. 9.58 11/19/21 5,487,450
5,000 WorldCom Inc................................................... 6.95 08/15/28 5,377,050
--------------
54,413,350
--------------

TOTAL CORPORATE BONDS
(IDENTIFIED COST $211,929,520).................................................... 236,113,657
--------------

U.S. GOVERNMENT & AGENCY OBLIGATIONS (0.4%)
5,000 Tennessee Valley Authority..................................... 6.875 12/15/43 5,225,200
5,000 U.S. Treasury Bond............................................. 5.25 11/15/28 5,116,800
--------------

TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(IDENTIFIED COST $9,980,378)...................................................... 10,342,000
--------------

SHORT-TERM INVESTMENTS (4.2%)
U.S. GOVERNMENT AGENCIES (a) (4.1%)
14,800 Federal Home Loan Mortgage Corp................................ 4.50 01/04/99 14,794,450
99,000 Federal Home Loan Mortgage Corp................................ 5.07 01/08/99 98,902,403
--------------

TOTAL U.S. GOVERNMENT AGENCIES
(AMORTIZED COST $113,696,853)..................................................... 113,696,853
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1998, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT (0.1%)
$ 4,828 The Bank of New York 4.00% due 01/04/99
(dated 12/31/98; proceeds $4,829,926) (b)
(IDENTIFIED COST $4,827,781)...................................................... $ 4,827,781
--------------

TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $118,524,634)...................................................... 118,524,634
--------------
</TABLE>

<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $1,547,374,414) (c)...................................... 99.9% 2,789,718,418

OTHER ASSETS IN EXCESS OF LIABILITIES..................................... 0.1 3,690,258
------ ---------------

NET ASSETS................................................................ 100.0% $ 2,793,408,676
------ ---------------
------ ---------------
</TABLE>

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

ADR American Depository Receipt.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(a) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $4,873,320 U.S. Treasury Note 6.75% due 06/30/99 valued
at $4,924,336.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $1,247,115,963 and the
aggregate gross unrealized depreciation is $4,771,959, resulting in net
unrealized appreciation of $1,242,344,004.

SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998

<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,547,374,414).......................................................... $2,789,718,418
Receivable for:
Dividends............................................................................... 5,736,633
Interest................................................................................ 4,605,090
Shares of beneficial interest sold...................................................... 2,182,881
Investments sold........................................................................ 1,095,014
Prepaid expenses and other assets........................................................... 166,864
--------------
TOTAL ASSETS........................................................................... 2,803,504,900
--------------
LIABILITIES:
Payable for:
Dividends and distributions to shareholders............................................. 4,683,992
Plan of distribution fee................................................................ 2,288,301
Shares of beneficial interest repurchased............................................... 1,687,178
Investment management fee............................................................... 1,248,612
Accrued expenses and other payables......................................................... 188,141
--------------
TOTAL LIABILITIES...................................................................... 10,096,224
--------------
NET ASSETS............................................................................. $2,793,408,676
--------------
--------------
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................. $1,537,603,914
Net unrealized appreciation................................................................. 1,242,344,004
Accumulated undistributed net investment income............................................. 1,584,446
Accumulated undistributed net realized gain................................................. 11,876,312
--------------
NET ASSETS............................................................................. $2,793,408,676
--------------
--------------
CLASS A SHARES:
Net Assets.................................................................................. $10,357,110
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 538,780
NET ASSET VALUE PER SHARE.............................................................. $19.22
--------------
--------------

MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE)...................................... $20.28
--------------
--------------
CLASS B SHARES:
Net Assets.................................................................................. $2,751,599,532
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 142,843,802
NET ASSET VALUE PER SHARE.............................................................. $19.26
--------------
--------------
CLASS C SHARES:
Net Assets.................................................................................. $6,532,279
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 339,079
NET ASSET VALUE PER SHARE.............................................................. $19.26
--------------
--------------
CLASS D SHARES:
Net Assets.................................................................................. $24,919,755
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 1,297,501
NET ASSET VALUE PER SHARE.............................................................. $19.21
--------------
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
FINANCIAL STATEMENTS, CONTINUED

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998

<TABLE>
<S> <C>
NET INVESTMENT INCOME

INCOME
Dividends (net of $898,864 foreign withholding tax)........................................... $ 76,740,673
Interest...................................................................................... 21,299,339
------------

TOTAL INCOME............................................................................. 98,040,012
------------

EXPENSES
Plan of distribution fee (Class A shares)..................................................... 14,369
Plan of distribution fee (Class B shares)..................................................... 24,988,369
Plan of distribution fee (Class C shares)..................................................... 33,092
Investment management fee..................................................................... 13,749,432
Transfer agent fees and expenses.............................................................. 2,169,256
Shareholder reports and notices............................................................... 150,741
Registration fees............................................................................. 127,325
Custodian fees................................................................................ 114,457
Professional fees............................................................................. 40,115
Trustees' fees and expenses................................................................... 19,917
Other......................................................................................... 37,409
------------

TOTAL EXPENSES........................................................................... 41,444,482
------------

NET INVESTMENT INCOME.................................................................... 56,595,530
------------

NET REALIZED AND UNREALIZED GAIN:
Net realized gain............................................................................. 132,906,441
Net change in unrealized appreciation......................................................... 323,997,946
------------

NET GAIN................................................................................. 456,904,387
------------

NET INCREASE.................................................................................. $513,499,917
------------
------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
FINANCIAL STATEMENTS, CONTINUED

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FOR THE YEAR
FOR THE YEAR ENDED
ENDED DECEMBER 31,
DECEMBER 31, 1998 1997*
- -----------------------------------------------------------------------------------------
<S> <C> <C>

INCREASE (DECREASE) IN NET ASSETS:

OPERATIONS:
Net investment income............................. $ 56,595,530 $ 75,091,782
Net realized gain................................. 132,906,441 199,367,128
Net change in unrealized appreciation............. 323,997,946 261,162,998
----------------- -----------------

NET INCREASE................................. 513,499,917 535,621,908
----------------- -----------------

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares................................ (195,162) (150,922)
Class B shares................................ (56,213,582) (73,193,086)
Class C shares................................ (82,276) (6,635)
Class D shares................................ (680,717) (344,827)
Net realized gain
Class A shares................................ (481,447) (252,328)
Class B shares................................ (139,042,766) (194,864,905)
Class C shares................................ (285,747) (57,955)
Class D shares................................ (1,268,629) (1,198,655)
----------------- -----------------

TOTAL DIVIDENDS AND DISTRIBUTIONS............ (198,250,326) (270,069,313)
----------------- -----------------

Net increase (decrease) from transactions in
shares of beneficial interest................... 25,796,333 (490,134,824)
----------------- -----------------

NET INCREASE (DECREASE)...................... 341,045,924 (224,582,229)

NET ASSETS:
Beginning of period............................... 2,452,362,752 2,676,944,981
----------------- -----------------

END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME
OF $1,584,446 AND $2,160,653, RESPECTIVELY)... $ 2,793,408,676 $2,452,362,752
----------------- -----------------
----------------- -----------------
</TABLE>

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

* Class A, Class C and Class D shares were issued July 28, 1997.

SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998

1. ORGANIZATION AND ACCOUNTING POLICIES

Morgan Stanley Dean Witter Utilities Fund (the "Fund"), formerly Dean Witter
Utilities Fund, is registered under the Investment Company Act of 1940, as
amended (the "Act"), as a diversified, open-end management investment company.
The Fund's investment objective is to provide current income and long-term
growth of income and capital. The Fund seeks to achieve its objective by
investing primarily in equity and fixed income securities of companies engaged
in the public utilities industry. The Fund was organized as a Massachusetts
business trust on December 8, 1987 and commenced operations on April 29, 1988.
On July 28, 1997, the Fund commenced offering three additional classes of
shares, with the then current shares, other than shares held by certain employee
benefit plans established by Dean Witter Reynolds Inc. and its affiliate, SPS
Transaction Services, Inc., designated as Class B shares. Shares held by those
employee benefit plans prior to July 28, 1997 have been designated Class D
shares.

The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.

The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.

The following is a summary of significant accounting policies:

A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price (in
cases where securities are traded on more than one exchange; the securities are
valued on the exchange designated as the primary market pursuant to the
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 Morgan Stanley Dean Witter Advisors, Inc. (the "Investment
Manager"), formerly Dean Witter InterCapital

13
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998, CONTINUED

Inc., that sale or bid prices are not reflective of a security's market value,
portfolio securities are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the
Trustees (valuation of debt securities for which market quotations are not
readily available may be based upon current market prices of securities which
are comparable in coupon, rating and maturity or an appropriate matrix utilizing
similar factors); (4) certain of the Fund's portfolio securities may be valued
by an outside pricing service approved by the Trustees. The pricing service may
utilize a matrix system incorporating security quality, maturity and coupon as
the evaluation model parameters, and/or research and evaluations by its staff,
including review of broker-dealer market price quotations, if available, in
determining what it believes is the fair valuation of the portfolio securities
valued by such pricing service; and (5) short-term debt securities having a
maturity date of more than sixty days at time of purchase are valued on a
mark-to-market basis until sixty days prior to maturity and thereafter at
amortized cost based on their value on the 61st day. Short-term debt securities
having a maturity date of sixty days or less at the time of purchase are valued
at amortized cost.

B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Discounts are amortized over the life of the respective securities. Dividend
income and other distributions are recorded on the ex-dividend date. Interest
income is accrued daily.

C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.

D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.

E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the record 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

14
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998, CONTINUED

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.

2. INVESTMENT MANAGEMENT AGREEMENT

Pursuant to an Investment Management Agreement with the Investment Manager, the
Fund pays the Investment Manager a management fee, accrued daily and payable
monthly, by applying the annual rate of 0.65% to the portion of daily net assets
not exceeding $500 million; 0.55% to the portion of daily net assets exceeding
$500 million but not exceeding $1 billion; 0.525% to the portion of daily net
assets exceeding $1 billion but not exceeding $1.5 billion; 0.50% to the portion
of daily net assets exceeding $1.5 billion but not exceeding $2.5 billion;
0.475% to the portion of daily net assets exceeding $2.5 billion but not
exceeding $3.5 billion; 0.45% to the portion of daily net assets exceeding $3.5
billion but not exceeding $5 billion; and 0.425% to the portion of daily net
assets exceeding $5 billion.

Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.

3. PLAN OF DISTRIBUTION

Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A -- up
to 0.25% of the average daily net assets of Class A; (ii) Class B -- 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Class B shares
since the inception of the Fund (not including reinvestment of dividend or
capital gain distributions) less the average daily aggregate net

15
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998, CONTINUED

asset value of the Class B shares redeemed since the Fund's inception upon which
a contingent deferred sales charge has been imposed or waived; or (b) 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, the Morgan Stanley Dean Witter Financial Advisors and others who
engage in or support distribution of the shares or who service shareholder
accounts, including overhead and telephone expenses; (2) printing and
distribution of prospectuses and reports used in connection with the offering of
these shares to other than current shareholders; and (3) preparation, printing
and distribution of sales literature and advertising materials. In addition, the
Distributor may utilize fees paid pursuant to the Plan, in the case of Class B
shares, to compensate Dean Witter Reynolds Inc. ("DWR"), an affiliate of the
Investment Manager and Distributor, and other selected broker-dealers for their
opportunity costs in advancing such amounts, which compensation would be in the
form of a carrying charge on any unreimbursed expenses.

In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts, including
carrying charges, totaled $53,504,895 at December 31, 1998.

In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the year ended December 31, 1998, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
1.0%, respectively.

16
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998, CONTINUED

The Distributor has informed the Fund that for the year ended December 31, 1998,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class A shares, Class B shares and Class C shares of $45, $1,585,359 and
$4,685, respectively and received $55,642 in front-end sales charges from sales
of the Fund's Class A shares. The respective shareholders pay such charges which
are not an expense of the Fund.

4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES

The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended December 31, 1998 aggregated
$156,377,720 and $374,661,253, respectively. Included in the aforementioned are
purchases and sales of U.S. Government securities of $22,804,464 and
$20,347,391, respectively.

For the year ended December 31, 1998, the Fund incurred $79,500 in brokerage
commissions with DWR for portfolio transactions executed on behalf of the Fund.

For the year ended December 31, 1998, the Fund incurred brokerage commissions of
$3,250 with Morgan Stanley & Co., Inc., an affiliate of the Investment Manager
and Distributor, for portfolio transactions executed on behalf of the Fund.

Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At December 31, 1998, the Fund had
transfer agent fees and expenses payable of approximately $15,000.

The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended December 31, 1998
included in Trustees' fees and expenses in the Statement of Operations amounted
to $6,162. At December 31, 1998, the Fund had an accrued pension liability of
$52,195 which is included in accrued expenses in the Statement of Assets and
Liabilities.

17
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998, CONTINUED

5. SHARES OF BENEFICIAL INTEREST

Transactions in shares of beneficial interest were as follows:

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997+*
---------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold............................................................. 471,524 $ 8,460,496 772,410 $ 12,186,174
Reinvestment of dividends and distributions...................... 33,328 613,355 16,570 271,414
Redeemed......................................................... (176,648) (3,093,414) (578,404) (9,675,382)
----------- -------------- ----------- -------------
Net increase - Class A........................................... 328,204 5,980,437 210,576 2,782,206
----------- -------------- ----------- -------------

CLASS B SHARES
Sold............................................................. 19,178,545 349,176,866 11,966,780 194,020,522
Reinvestment of dividends and distributions...................... 8,756,868 161,419,594 13,633,251 220,842,234
Redeemed......................................................... (27,729,620) (500,666,327) (57,908,671) (910,948,280)
----------- -------------- ----------- -------------
Net increase (decrease) - Class B................................ 205,793 9,930,133 (32,308,640) (496,085,524)
----------- -------------- ----------- -------------

CLASS C SHARES
Sold............................................................. 315,427 5,761,324 79,155 1,330,983
Reinvestment of dividends and distributions...................... 17,427 321,582 3,294 54,114
Redeemed......................................................... (76,154) (1,373,522) (70) (1,121)
----------- -------------- ----------- -------------
Net increase - Class C........................................... 256,700 4,709,384 82,379 1,383,976
----------- -------------- ----------- -------------

CLASS D SHARES
Sold............................................................. 442,423 8,058,763 128,367 2,102,719
Reinvestment of dividends and distributions...................... 103,737 1,906,622 94,075 1,539,246
Acquisition of Dean Witter Retirement Series - Utilities
Series.......................................................... 244,186 4,310,004 -- --
Redeemed......................................................... (499,814) (9,099,010) (113,508) (1,857,447)
----------- -------------- ----------- -------------
Net increase - Class D........................................... 290,532 5,176,379 108,934 1,784,518
----------- -------------- ----------- -------------
Net increase (decrease) in Fund.................................. 1,081,229 $ 25,796,333 (31,906,751) $(490,134,824)
----------- -------------- ----------- -------------
----------- -------------- ----------- -------------
</TABLE>

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

+ On July 28, 1997, 898,035 shares representing $14,269,769 were transferred
to Class D.
* For Class A, C and D shares, for the period July 28, 1997 (issue date)
through December 31, 1997.

6. FEDERAL INCOME TAX STATUS

As of December 31, 1998, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales.

7. ACQUISITION OF DEAN WITTER RETIREMENT SERIES -- UTILITIES SERIES

As of the close of business on September 11, 1998, the Fund acquired all the net
assets of Dean Witter Retirement Series -- Utilities Series ("Retirement
Utilities") pursuant to a plan of

18
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998, CONTINUED

reorganization (the "Plan") approved by the shareholders of Retirement Utilities
on August 19, 1998. The acquisition was accomplished by a tax-free exchange of
244,186 Class D shares of the Fund at a net asset value of $17.65 per share for
411,249 shares of Retirement Utilities. The net assets of the Fund and
Retirement Utilities immediately before the acquisition were $2,422,836,927 and
$4,310,004, respectively, including unrealized appreciation of $694,594 for
Retirement Utilities. Immediately after the acquisition, the combined net assets
of the Fund amounted to $2,427,146,931.

19
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
FINANCIAL HIGHLIGHTS

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

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1998++ 1997*++ 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------

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

SELECTED PER SHARE DATA:

Net asset value, beginning of period..................... $ 17.04 $ 15.22 $ 15.15 $ 12.30 $ 14.34
--------- --------- ---------- --------- ----------

Income (loss) from investment operations:
Net investment income................................. 0.40 0.50 0.56 0.58 0.63
Net realized and unrealized gain (loss)............... 3.25 3.28 0.16 2.85 (2.04)
--------- --------- ---------- --------- ----------

Total income (loss) from investment operations........... 3.65 3.78 0.72 3.43 (1.41)
--------- --------- ---------- --------- ----------

Less dividends and distributions from:
Net investment income................................. (0.41) (0.51) (0.58) (0.58) (0.61)
Net realized gain..................................... (1.02) (1.45) (0.07) -- (0.02)
--------- --------- ---------- --------- ----------

Total dividends and distributions........................ (1.43) (1.96) (0.65) (0.58) (0.63)
--------- --------- ---------- --------- ----------

Net asset value, end of period........................... $ 19.26 $ 17.04 $ 15.22 $ 15.15 $ 12.30
--------- --------- ---------- --------- ----------
--------- --------- ---------- --------- ----------

TOTAL RETURN+............................................ 21.95% 25.79% 4.99% 28.42% (9.90)%

RATIOS TO AVERAGE NET ASSETS:
Expenses................................................. 1.65%(1) 1.67% 1.64% 1.65% 1.64%

Net investment income.................................... 2.23%(1) 3.15% 3.63% 4.19% 4.67%

SUPPLEMENTAL DATA:
Net assets, end of period, in millions................... $2,752 $2,430 $2,677 $3,321 $2,827

Portfolio turnover rate.................................. 6% 6% 7% 9% 11%
</TABLE>

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

* Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date, other than shares held by certain
employee benefit plans established by Dean Witter Reynolds Inc. and its
affiliate, SPS Transaction Services, Inc., have been designated Class B
shares. Shares held by those employee benefit plans prior to July 28, 1997
have been designated Class D shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Reflects overall Fund ratios for investment income and non-class specific
expenses.

SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
FINANCIAL HIGHLIGHTS, CONTINUED

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
DECEMBER 31, 1998 DECEMBER 31, 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period..................... $ 17.01 $ 15.89
------ ------
Income from investment operations:
Net investment income................................. 0.54 0.27
Net realized and unrealized gain...................... 3.24 2.52
------ ------
Total income from investment operations.................. 3.78 2.79
------ ------
Less dividends and distributions from:
Net investment income................................. (0.55) (0.35)
Net realized gain..................................... (1.02) (1.32)
------ ------
Total dividends and distributions........................ (1.57) (1.67)
------ ------
Net asset value, end of period........................... $ 19.22 $ 17.01
------ ------
------ ------
TOTAL RETURN+............................................ 22.86% 18.06%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................. 0.90%(3) 0.92%(2)
Net investment income.................................... 2.98%(3) 4.05%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.................. $10,357 $3,581
Portfolio turnover rate.................................. 6% 6%
</TABLE>

<TABLE>
<S> <C> <C>
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period..................... $ 17.06 $ 15.89
------ ------
Income from investment operations:
Net investment income................................. 0.40 0.22
Net realized and unrealized gain...................... 3.25 2.51
------ ------
Total income from investment operations.................. 3.65 2.73
------ ------
Less dividends and distributions from:
Net investment income................................. (0.43) (0.24)
Net realized gain..................................... (1.02) (1.32)
------ ------
Total dividends and distributions........................ (1.45) (1.56)
------ ------
Net asset value, end of period........................... $ 19.26 $ 17.06
------ ------
------ ------
TOTAL RETURN+............................................ 21.92% 17.67%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................. 1.65%(3) 1.69%(2)
Net investment income.................................... 2.23%(3) 3.14%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.................. $ 6,532 $ 1,405
Portfolio turnover rate.................................. 6% 6%
</TABLE>

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

* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.

SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
FINANCIAL HIGHLIGHTS, CONTINUED

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

SELECTED PER SHARE DATA:

Net asset value, beginning of period..................... $ 16.99 $ 15.89
------ ------

Income from investment operations:
Net investment income................................. 0.58 0.22
Net realized and unrealized gain...................... 3.25 2.58
------ ------

Total income from investment operations.................. 3.83 2.80
------ ------

Less dividends and distributions from:
Net investment income................................. (0.59) (0.38)
Net realized gain..................................... (1.02) (1.32)
------ ------

Total dividends and distributions........................ (1.61) (1.70)
------ ------

Net asset value, end of period........................... $ 19.21 $ 16.99
------ ------
------ ------

TOTAL RETURN+............................................ 23.21% 18.13%(1)

RATIOS TO AVERAGE NET ASSETS:
Expenses................................................. 0.65%(3) 0.67%(2)

Net investment income.................................... 3.23%(3) 4.21%(2)

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.................. $24,920 $17,106

Portfolio turnover rate.................................. 6% 6%
</TABLE>

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

* The date shares were first issued. Shareholders who held shares of the Fund
prior to July 28, 1997 (the date the Fund converted to a multiple class
share structure) should refer to the Financial Highlights of Class B to
obtain the historical per share data and ratio information of their shares.
++ 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
22
<PAGE>

MORGAN STANLEY DEAN WITTER UTILITIES FUND
REPORT OF INDEPENDENT ACCOUNTANTS

TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER UTILITIES FUND

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
Utilities Fund (the "Fund"), formerly Dean Witter Utilities Fund, at December
31, 1998, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended and the
financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund'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 December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.

PricewaterhouseCoopers LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
FEBRUARY 5, 1999

1998 FEDERAL TAX NOTICE (UNAUDITED)

For the year ended December 31, 1998, the Fund paid to
shareholders $0.99 per share from long-term capital gains. For
such period, 100% of the income paid qualified for the dividends
received deduction available to corporations.

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TRUSTEES

Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder

OFFICERS

Charles A. Fiumefreddo
Chairman and Chief Executive Officer

Barry Fink
Vice President, Secretary and General Counsel

Edward F. Gaylor
Vice President

Thomas F. Caloia
Treasurer

TRANSFER AGENT

Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036

INVESTMENT MANAGER

Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048

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

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

MORGAN STANLEY DEAN WITTER
UTILITIES FUND

[PHOTO]

ANNUAL REPORT
DECEMBER 31, 1998