<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIST FUND TWO WORLD TRADE CENTER, NEW
LETTER TO THE SHAREHOLDERS JULY 31, 1998 YORK, NEW YORK 10048
DEAR SHAREHOLDER:
We are pleased to present Morgan Stanley Dean Witter Strategist Fund's annual
report for the fiscal year ended July 31, 1998. This review covers the Fund's
performance for the year, the investment decisions that led to those returns,
and our outlook as we anticipate 1999.
FUND PERFORMANCE
Morgan Stanley Dean Witter Strategist Fund's Class B shares posted a total
return of 12.77 percent for the fiscal year. Over this same period, Class A
shares returned 13.48 percent, Class C shares 12.66 percent and Class D shares
13.80 percent. All figures compare favorably with the Lipper Flexible Portfolio
Funds Index, which returned 11.77 percent for the same period. In fact, the
Fund's Class B shares have outperformed the Lipper Index on a one-year,
three-year and five-year basis.
The broad market, as measured by the Standard & Poor's 500 Composite Stock Price
Index (S&P 500) returned 19.28 percent for the Fund's fiscal year ended July 31,
1998. Our portfolio's beta is 0.66, which indicates that these returns have been
achieved with considerably less volatility than that of the S&P 500. The Lehman
Brothers Government/Corporate Bond Index returned 8.06 percent for this same
period.
The accompanying chart illustrates the growth of a hypothetical $10,000
investment in the Fund's Class B shares from inception (October 31, 1988)
through the fiscal year ended July 31, 1998, versus similar investments in the
issues that comprise the S&P 500, the Lehman Brothers Government/Corporate Bond
Index and the Lipper Index.
INVESTMENT ANALYSIS
During the preceding fiscal year, stocks and bonds continued to provide returns
well in excess of cash equivalents, albeit with considerably higher volatility
than in recent years: the equity market, as measured
<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
LETTER TO THE SHAREHOLDERS JULY 31, 1998, CONTINUED
by the S&P 500, returned more than 19 percent and the 30-year U.S. government
bond saw its valuation climb as yields declined from 6.78 percent to 5.72
percent.
However, these powerful results masked a very uncertain global economic
environment -- one that was different from the "low inflation, low interest
rate" setting that most countries had been enjoying since the early 1990s. As
our fiscal year began July 1997, global currencies were shaken by the
devaluation of the Thai baht (later followed by other devaluations) and the
continued deterioration of the Japanese banking system. Fears further escalated
as the "Asian flu" spread to other emerging market currencies such as Latin
America and Russia. Many economists feared that spillover would jeopardize the
U.S. bull market.
At that time, we carefully scrutinized our asset allocation target of 70 percent
equities, 20 percent bonds and 10 percent cash in light of these international
and domestic events. Our decision to maintain our above-average weightings in
the U.S. equity market was based primarily on two critical factors that had led
to the market's advance in previous years: low inflation and a stable monetary
policy.
- Asian countries, finding their rapid-growth economies slowing, would as a
result need less oil, steel and other raw materials, thus prolonging a
gradual decline in commodity prices around the world, which would be a
disinflationary event for the United States.
- With changes in the global financial environment, the Federal Reserve
became concerned that higher interest rates could delay economic recovery
in Asia. Thus, the situation in Asia would, after a period of absorption,
further increase the life span of the U.S. economic advance, already the
longest since the end of World War II, by forcing commodity prices lower
and keeping the Fed on a stable course.
Our strategy of maintaining our allocation targets proved profitable for
shareholders, and the combined effect of the overweighting in equities and our
concentration on domestic, consumer-based companies translated into
above-average returns.
LOOKING AHEAD
As we enter fiscal 1999, our general view continues to be constructive for
stocks and bonds. We would caution shareholders that equity returns in this
period are not expected to match or exceed those of the past three years.
However, we believe that over the next five years the equity market should
provide returns in excess of cash equivalents and inflation, based on moderate
GDP growth, exports, and low to mid single-digit profit growth.
2
<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
LETTER TO THE SHAREHOLDERS JULY 31, 1998, CONTINUED
With the economic recovery maturing, profitability will be more difficult for
many U.S. companies to achieve. For one, the technology spending needs
associated with the year 2000 will affect many industries. Furthermore, in a low
inflation, moderate growth environment, earnings growth becomes a much more
critical ingredient in driving stock prices higher. Thus, slowing profit growth
is likely to lead to more moderate stock market returns.
However, we expect bonds to provide more competitive returns over the course of
the next five years than they have in recent years. In the United States, the
elimination of the federal budget deficit has led to a surplus that may exceed
$60 billion by year-end. Some have speculated that, barring a severe recession
or a major spending binge by Congress, the federal surplus could balloon to $300
billion by 2005. As a result, bond yields could fall further, because fewer debt
auctions would be needed to raise funds, and taxes could perhaps decline as the
federal government determined that tax revenues exceeded needs. This downward
pressure would keep interest rates in line and provide attractive returns for
fixed-income investors.
Given these expectations and barring any changes in the economic backdrop, we
intend to adjust our allocation more toward bonds and less toward equities over
the next six months.
We appreciate your continued support and interest in Morgan Stanley Dean Witter
Strategist Fund and look forward to serving your investment needs in the future.
Sincerely,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
3
<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
FUND PERFORMANCE JULY 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) Lehman(5) Lipper(6)
<S> <C> <C> <C> <C>
October-1988 $10,000 $10,000 $10,000 $10,000
July-1989 $12,376 $12,736 $11,061 $11,405
July-1990 $13,267 $13,558 $11,750 $11,957
July-1991 $15,346 $15,290 $12,953 $13,550
July-1992 $17,169 $17,243 $14,978 $15,311
July-1993 $18,472 $18,745 $16,630 $16,902
July-1994 $19,125 $19,712 $16,609 $17,459
July-1995 $22,195 $24,844 $18,291 $20,337
July-1996 $24,741 $28,946 $19,261 $22,128
July-1997 $32,097 $44,016 $21,340 $28,518
July-1998 $36,196(3) $52,502 $23,061 $31,875
</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 CHARGES AND EXPENSES.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS*
- -------------------------------------------------------------------------------------------------------------
CLASS B SHARES** CLASS A SHARES+
- -------------------------------------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year 12.77%(1) 7.77%(2) 1 Year 13.48%(1) 7.53%(2)
5 Years 14.40%(1) 14.17%(2) Since Inception (7/28/97) 15.52%(1) 9.50%(2)
Since Inception
(10/31/88) 14.11%(1) 14.11%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES++ CLASS D SHARES++
- ----------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year 12.66%(1) 11.66%(2) 1 Year 13.80 (1)
Since Inception (7/28/97) 14.69%(1) 14.69%(2) Since Inception (7/28/97) 15.84%(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 July 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 performance of the Index
does not include any expenses, fees or charges. The Index is unmanaged and
should not be considered an investment.
(5) The Lehman Brothers Government/Corporate Bond Index tracks the performance
of government and corporate obligations, including U.S. government agency
and U.S. Treasury securities and corporate and yankee bonds, with
maturities of one to ten years. The performance of the Index does not
include any expenses, fees or charges. The Index is unmanaged and should
not be considered an investment.
(6) The Lipper Flexible Portfolio Funds Index is an equally-weighted
performance index of the largest qualifying funds (based on net assets) in
the Lipper Flexible Portfolio Fund 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
represented in this Index.
* For periods of less than one year, the Fund quotes its total return on a
non-annualized basis.
** The maximum contingent deferred sales charge (CDSC) for Class B shares is
5.00%. The CDSC declines to 0% after six years.
+ The maximum front-end sales charge for Class A shares 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 STRATEGIST FUND
PORTFOLIO OF INVESTMENTS JULY 31, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (70.8%)
AEROSPACE & DEFENSE (3.1%)
400,000 Cordant Technologies Inc............................................................ $ 17,150,000
500,000 General Motors Corp. (Class H)...................................................... 21,312,500
194,000 Honeywell, Inc...................................................................... 16,259,625
--------------
54,722,125
--------------
ALUMINUM (1.0%)
250,000 Aluminum Co. of America............................................................. 17,328,125
--------------
APPLIANCES & HOUSEHOLD DURABLES (0.7%)
270,000 Maytag Corp......................................................................... 11,880,000
--------------
AUTOMOTIVE (2.6%)
440,000 Chrysler Corp....................................................................... 26,042,500
350,000 Ford Motor Co....................................................................... 19,928,125
--------------
45,970,625
--------------
BANKS - MONEY CENTER (1.8%)
200,000 Chase Manhattan Corp................................................................ 15,125,000
102,000 Citicorp............................................................................ 17,340,000
--------------
32,465,000
--------------
BANKS - REGIONAL (2.1%)
220,000 NationsBank Corp.................................................................... 17,545,000
55,000 Wells Fargo & Co.................................................................... 19,573,125
--------------
37,118,125
--------------
BEVERAGES - SOFT DRINKS (0.6%)
277,800 PepsiCo, Inc........................................................................ 10,782,112
--------------
BIOTECHNOLOGY (0.6%)
450,000 BioChem Pharma, Inc. (Canada)*...................................................... 10,771,875
5,250 Clinichem Development Inc. (Canada)*................................................ 28,219
--------------
10,800,094
--------------
CHEMICALS (2.9%)
170,000 Dow Chemical Co..................................................................... 15,427,500
220,000 Du Pont (E.I.) de Nemours & Co., Inc................................................ 13,640,000
170,000 Georgia Gulf Corp................................................................... 3,740,000
330,000 Monsanto Co......................................................................... 18,686,250
--------------
51,493,750
--------------
COMMUNICATIONS EQUIPMENT (3.4%)
150,000 Cisco Systems, Inc.*................................................................ 14,362,500
200,000 Lucent Technologies Inc............................................................. 18,487,500
280,000 PMC - Sierra, Inc. (Canada)*........................................................ 11,480,000
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
210,000 Tellabs, Inc.*...................................................................... $ 15,802,500
--------------
60,132,500
--------------
COMPUTER SOFTWARE (1.7%)
150,000 Microsoft Corp.*.................................................................... 16,490,625
270,000 Network Associates, Inc.*........................................................... 12,858,750
--------------
29,349,375
--------------
COMPUTERS (3.2%)
210,000 Dell Computer Corp.*................................................................ 22,798,125
350,000 Gateway 2000, Inc.*................................................................. 18,900,000
300,000 Sun Microsystems, Inc.*............................................................. 14,156,250
--------------
55,854,375
--------------
CONSUMER PRODUCTS (0.9%)
1,050,000 Oakley, Inc.*....................................................................... 15,290,625
--------------
ELECTRICAL EQUIPMENT (2.2%)
258,000 Emerson Electric Co................................................................. 15,334,875
258,000 General Electric Co................................................................. 23,042,625
--------------
38,377,500
--------------
ENTERTAINMENT (1.1%)
550,000 Walt Disney Co...................................................................... 18,940,625
--------------
FINANCIAL SERVICES (3.6%)
188,000 American Express Co................................................................. 20,750,500
290,000 Fannie Mae.......................................................................... 17,980,000
364,999 Travelers Group, Inc................................................................ 24,454,933
--------------
63,185,433
--------------
FOODS (1.2%)
363,000 Aurora Foods, Inc.*................................................................. 6,352,500
250,000 General Mills, Inc.................................................................. 15,484,375
--------------
21,836,875
--------------
HEALTHCARE - HMOS (1.3%)
150,000 United Healthcare Corp.............................................................. 8,475,000
250,000 Wellpoint Health Networks, Inc.*.................................................... 15,328,125
--------------
23,803,125
--------------
HOUSEHOLD PRODUCTS (2.1%)
241,000 Colgate-Palmolive Co................................................................ 22,277,438
450,000 Rubbermaid, Inc..................................................................... 14,990,625
--------------
37,268,063
--------------
INSURANCE (5.4%)
534,000 Ace, Ltd. (Bermuda)................................................................. 19,591,125
142,500 American International Group, Inc................................................... 21,490,781
200,000 Chubb Corp.......................................................................... 14,675,000
320,000 Conseco, Inc........................................................................ 13,440,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS JULY 31, 1998, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
350,000 Equitable Companies, Inc............................................................ $ 26,271,875
--------------
95,468,781
--------------
INTERNET (1.3%)
200,000 America Online, Inc.*............................................................... 23,400,000
--------------
MEDIA GROUP (2.4%)
200,000 Clear Channel Communications, Inc.*................................................. 11,237,500
637,000 MediaOne Group Inc.*................................................................ 30,775,063
--------------
42,012,563
--------------
MEDICAL EQUIPMENT (0.7%)
225,000 Perkin-Elmer Corp................................................................... 13,190,625
--------------
OIL - DOMESTIC (1.7%)
260,000 Amerada Hess Corp................................................................... 13,178,750
262,000 Atlantic Richfield Co............................................................... 17,750,500
--------------
30,929,250
--------------
OIL INTEGRATED - INTERNATIONAL (3.5%)
190,000 Chevron Corp........................................................................ 15,698,750
240,000 Exxon Corp.......................................................................... 16,830,000
198,000 Mobil Corp.......................................................................... 13,810,500
260,000 Texaco, Inc......................................................................... 15,811,250
--------------
62,150,500
--------------
PAPER PRODUCTS (0.9%)
380,000 Champion International Corp......................................................... 16,126,250
--------------
PHARMACEUTICALS (5.2%)
320,000 Abbott Laboratories................................................................. 13,300,000
416,800 American Home Products Corp......................................................... 21,465,200
194,744 Johnson & Johnson................................................................... 15,043,974
290,000 Lilly (Eli) & Co.................................................................... 19,502,500
300,000 Warner-Lambert Co................................................................... 22,668,750
--------------
91,980,424
--------------
POLLUTION CONTROL (0.9%)
290,000 Waste Management, Inc.*............................................................. 15,986,250
--------------
RETAIL - DEPARTMENT STORES (1.7%)
1,150,000 Kmart Corp.*........................................................................ 18,759,375
176,000 May Department Stores Co............................................................ 11,297,000
--------------
30,056,375
--------------
RETAIL - SPECIALTY (4.8%)
290,000 Bed Bath & Beyond, Inc.*............................................................ 12,506,250
350,000 Costco Companies, Inc.*............................................................. 19,862,500
372,000 Home Depot, Inc..................................................................... 15,577,500
<CAPTION>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
200,000 Payless ShoeSource, Inc.*........................................................... $ 11,300,000
930,000 Pier 1 Imports, Inc................................................................. 14,473,125
320,000 Williams-Sonoma, Inc.*.............................................................. 10,580,000
--------------
84,299,375
--------------
RETAIL - SPECIALTY APPAREL (1.5%)
440,000 Gap, Inc. (The)..................................................................... 26,235,000
--------------
SAVINGS & LOAN ASSOCIATIONS (1.6%)
150,000 Golden West Financial Corp.......................................................... 13,856,250
360,000 Washington Mutual, Inc.............................................................. 14,377,500
--------------
28,233,750
--------------
SEMICONDUCTORS (0.9%)
200,000 Intel Corp.......................................................................... 16,875,000
--------------
TELECOMMUNICATIONS - LONG DISTANCE (0.9%)
400,000 Qwest Communications International, Inc.*........................................... 16,150,000
--------------
TOBACCO (1.0%)
390,000 Philip Morris Companies, Inc........................................................ 17,086,875
--------------
TRANSPORTATION - MISCELLANEOUS (0.3%)
250,000 Airborne Freight Corp............................................................... 5,968,750
--------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $798,814,487)...................................................... 1,252,748,220
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- -----------
<C> <S> <C>
CORPORATE BONDS (10.4%)
AEROSPACE & DEFENSE (0.3%)
$ 4,000 Northrop-Grumman Corp.
7.875% due 03/01/26............................................................... 4,458,360
--------------
AIRLINES (0.2%)
3,000 Continental Airlines, Inc. (Series 981A)
6.648% due 03/15/19............................................................... 3,048,840
--------------
APPAREL MANUFACTURER (0.1%)
2,000 Fruit of the Loom, Inc.
7.375% due 11/15/23............................................................... 1,882,100
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS JULY 31, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
BANKS (2.5%)
$ 4,000 BB&T Corp.
6.375% due 06/30/05............................................................... $ 3,989,240
4,000 BCI US Funding Trust I - 144A**+
8.01% due 12/29/49................................................................ 3,983,240
6,900 Centura Capital Trust I - 144A**
8.845% due 06/01/27............................................................... 7,703,919
4,000 Compass Trust I (Series A)
8.23% due 01/15/27................................................................ 4,308,120
4,000 NationsBank Corp.
7.50% due 09/15/06................................................................ 4,293,040
5,000 North Fork Capital Trust I
8.70% due 12/15/26................................................................ 5,487,900
7,043 St. Paul Bancorp, Inc.
7.125% due 02/15/04............................................................... 7,255,346
6,000 Wachovia Corp.
6.25% due 08/04/08................................................................ 5,969,400
2,000 Wilmington Trust Corp.
6.625% due 05/01/08............................................................... 2,027,720
--------------
45,017,925
--------------
BANKS - THRIFT INSTITUTIONS (0.2%)
4,000 Long Island Savings Bank
6.20% due 04/02/01................................................................ 4,000,960
--------------
BROKERAGE (0.3%)
6,000 Paine Webber Group, Inc.
6.55% due 04/15/08................................................................ 5,995,140
--------------
BUILDING MATERIALS (0.3%)
4,800 Masco Corp.
7.125% due 08/15/13............................................................... 5,100,864
--------------
CABLE & TELECOMMUNICATIONS (0.4%)
5,000 Continental Cablevision, Inc.
9.50% due 08/01/13................................................................ 5,945,100
1,000 Cox Communications, Inc.
6.80% due 08/01/28................................................................ 991,570
--------------
6,936,670
--------------
CHEMICALS (0.2%)
4,000 Solutia, Inc.
7.375% due 10/15/27............................................................... 4,069,880
--------------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMPUTER SOFTWARE (0.1%)
$ 1,000 Computer Associates International - 144A**
6.375% due 04/15/05............................................................... $ 979,830
--------------
FINANCIAL SERVICES (0.8%)
5,000 Advanta Corp.
6.384% due 08/07/98............................................................... 4,999,050
3,500 Advanta Corp.
7.28% due 07/30/01................................................................ 3,262,035
4,900 MBNA Capital I (Series A)
8.278% due 12/01/26............................................................... 5,155,535
--------------
13,416,620
--------------
INSURANCE (2.1%)
5,000 Arkwright CSN Trust - 144A**
9.625% due 08/15/26............................................................... 5,921,850
4,000 Conseco, Inc.
6.80% due 06/15/05................................................................ 3,984,680
4,000 Farmers Exchange Capital - 144A**
7.20% due 07/15/48................................................................ 3,910,520
7,000 Markel Capital Trust I (Series B)
8.71% due 01/01/46................................................................ 7,590,170
7,800 Orion Capital Trust I
8.73% due 01/01/37................................................................ 8,216,910
4,000 Provident Companies Inc.
7.00% due 07/15/18................................................................ 3,942,160
4,000 Terra Nova Ins (U.K.) Holdings Ltd.
(United Kingdom)
7.00% due 05/15/08................................................................ 4,071,240
--------------
37,637,530
--------------
MANUFACTURING (0.3%)
5,900 Tyco International Group SA (Luxembourg)
6.375% due 06/15/05............................................................... 5,894,926
--------------
MEDIA GROUP (0.4%)
6,000 News America Inc. - 144A**
7.30% due 04/30/28................................................................ 6,097,140
--------------
OIL (0.2%)
4,000 Williams Companies, Inc.
6.50% due 08/01/06................................................................ 4,003,840
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS JULY 31, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
OIL DRILLING (0.2%)
$ 4,000 R & B Falcon Corp. - 144A**
7.375% due 04/15/18............................................................... $ 3,949,800
--------------
RAILROADS (0.1%)
983 Southern Pacific Co. (Series B)
7.28% due 04/30/15................................................................ 1,037,176
--------------
RETAIL (1.0%)
4,000 Neiman Marcus Group Inc.
7.125% due 06/01/28............................................................... 4,083,720
4,000 Penny (J.C.) Co., Inc.
7.625% due 03/01/97............................................................... 4,309,480
5,000 Shopko Stores, Inc.
9.00% due 11/15/04................................................................ 5,584,800
4,000 Tommy Hilfiger USA Inc.
6.50% due 06/01/03................................................................ 3,976,120
--------------
17,954,120
--------------
TELECOMMUNICATIONS (0.4%)
2,000 GTE Corp.
8.75% due 11/01/21................................................................ 2,434,020
4,000 GTE Corp.
6.84% due 04/15/18................................................................ 4,013,920
--------------
6,447,940
--------------
UTILITIES (0.3%)
1,500 Texas Utilities Co. (Series A)
6.20% due 10/01/02................................................................ 1,513,770
4,000 United Utilities Corp. (United Kingdom)
6.875% due 08/15/28............................................................... 3,924,320
--------------
5,438,090
--------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $180,548,230)...................................................... 183,367,751
--------------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS (10.8%)
Federal Home Loan Mortgage Corp.
$ 198 8.50% due 07/01/02................................................................ $ 200,099
97 9.00% due 08/01/02................................................................ 99,418
Federal National Mortgage Assoc.
4,000 5.75% due 04/15/03................................................................ 3,997,880
6,000 5.75% due 06/15/05................................................................ 5,976,420
6,000 5.75% due 02/15/08................................................................ 5,939,400
U.S. Treasury Bonds
2,000 6.00% due 02/15/26................................................................ 2,057,360
15,800 6.125% due 11/15/27............................................................... 16,711,028
900 6.375% due 08/15/27............................................................... 977,634
2,300 6.625% due 02/15/27............................................................... 2,570,296
U.S. Treasury Notes
35,000 5.625% due 11/30/98............................................................... 35,034,300
7,800 5.625% due 11/30/00............................................................... 7,821,372
5,000 5.625% due 02/28/01............................................................... 5,015,900
5,000 5.75% due 08/15/03................................................................ 5,046,150
5,000 5.875% due 02/28/99............................................................... 5,014,100
3,000 5.875% due 11/30/01............................................................... 3,030,690
5,000 6.00% due 08/15/99................................................................ 5,024,300
4,000 6.25% due 02/28/02................................................................ 4,090,560
6,900 6.25% due 02/15/03................................................................ 7,090,026
5,000 6.375% due 05/15/99............................................................... 5,033,400
12,050 6.50% due 04/30/99................................................................ 12,141,821
3,000 6.50% due 05/15/05................................................................ 3,158,520
6,400 6.50% due 08/15/05................................................................ 6,748,992
5,000 6.75% due 04/30/00................................................................ 5,100,700
6,900 6.875% due 08/31/99............................................................... 6,997,773
17,900 6.875% due 05/15/06............................................................... 19,338,265
5,000 7.25% due 05/15/04................................................................ 5,413,700
4,000 7.25% due 08/15/04................................................................ 4,344,120
7,000 7.50% due 11/15/01................................................................ 7,406,560
--------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(IDENTIFIED COST $190,867,391)...................................................... 191,380,784
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS JULY 31, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (a) (9.2%)
U.S. GOVERNMENT AGENCIES
$ 163,000 Federal Home Loan Mortgage Corp. 5.46%-5.56% due 08/03/98-08/06/98 (AMORTIZED COST
$162,915,943)..................................................................... $ 162,915,943
--------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $1,333,146,051) (b).................................................... 101.2 % 1,790,412,698
LIABILITIES IN EXCESS OF OTHER ASSETS................................................... (1.2) (20,826,353)
------ ---------------
NET ASSETS.............................................................................. 100.0 % $ 1,769,586,345
------ ---------------
------ ---------------
</TABLE>
- ---------------------
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
+ Floating rate security. Coupon rate shown is the rate in effect at July 31,
1998.
(a) Securities were purchased on a discount basis. The interest rates shown
have 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 $473,218,673 and the
aggregate gross unrealized depreciation is $15,952,026, resulting in net
unrealized appreciation of $457,266,647.
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,333,146,051).......................................................... $1,790,412,698
Receivable for:
Investments sold........................................................................ 6,615,746
Interest................................................................................ 6,253,350
Shares of beneficial interest sold...................................................... 3,333,064
Dividends............................................................................... 855,657
Principal paydowns...................................................................... 9,186
Prepaid expenses and other assets........................................................... 64,929
--------------
TOTAL ASSETS........................................................................... 1,807,544,630
--------------
LIABILITIES:
Payable for:
Investments purchased................................................................... 31,373,450
Shares of beneficial interest repurchased............................................... 1,902,196
Plan of distribution fee................................................................ 1,235,905
Investment management fee............................................................... 829,064
Payable to bank............................................................................. 2,410,966
Accrued expenses and other payables......................................................... 206,704
--------------
TOTAL LIABILITIES...................................................................... 37,958,285
--------------
NET ASSETS............................................................................. $1,769,586,345
--------------
--------------
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................. $1,234,069,015
Net unrealized appreciation................................................................. 457,266,647
Accumulated undistributed net investment income............................................. 1,540,461
Accumulated undistributed net realized gain................................................. 76,710,222
--------------
NET ASSETS............................................................................. $1,769,586,345
--------------
--------------
CLASS A SHARES:
Net Assets.................................................................................. $34,890,754
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 1,724,469
NET ASSET VALUE PER SHARE.............................................................. $20.23
--------------
--------------
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE)...................................... $21.35
--------------
--------------
CLASS B SHARES:
Net Assets.................................................................................. $1,659,037,380
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 82,006,594
NET ASSET VALUE PER SHARE.............................................................. $20.23
--------------
--------------
CLASS C SHARES:
Net Assets.................................................................................. $7,861,271
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 389,377
NET ASSET VALUE PER SHARE.............................................................. $20.19
--------------
--------------
CLASS D SHARES:
Net Assets.................................................................................. $67,796,940
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)................................... 3,348,286
NET ASSET VALUE PER SHARE.............................................................. $20.25
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1998
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest...................................................................................... $ 32,670,814
Dividends (net of $46,474 foreign withholding tax)............................................ 13,265,512
------------
TOTAL INCOME............................................................................. 45,936,326
------------
EXPENSES
Plan of distribution fee (Class A shares)..................................................... 47,227
Plan of distribution fee (Class B shares)..................................................... 13,861,548
Plan of distribution fee (Class C shares)..................................................... 35,673
Investment management fee..................................................................... 8,967,083
Transfer agent fees and expenses.............................................................. 1,463,434
Registration fees............................................................................. 130,733
Shareholder reports and notices............................................................... 127,033
Custodian fees................................................................................ 101,445
Professional fees............................................................................. 53,652
Trustees' fees and expenses................................................................... 11,948
Other......................................................................................... 20,170
------------
TOTAL EXPENSES........................................................................... 24,819,946
------------
NET INVESTMENT INCOME.................................................................... 21,116,380
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain............................................................................. 95,674,127
Net change in unrealized appreciation......................................................... 85,133,427
------------
NET GAIN................................................................................. 180,807,554
------------
NET INCREASE.................................................................................. $201,923,934
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JULY 31, 1998 JULY 31, 1997*
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................................... $ 21,116,380 $ 32,078,185
Net realized gain........................................................... 95,674,127 52,266,640
Net change in unrealized appreciation....................................... 85,133,427 285,799,377
-------------- --------------
NET INCREASE........................................................... 201,923,934 370,144,202
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares.......................................................... (449,337) --
Class B shares.......................................................... (25,042,434) (28,975,735)
Class C shares.......................................................... (58,652) --
Class D shares.......................................................... (1,476,955) --
Net realized gain
Class A shares.......................................................... (478,126) --
Class B shares.......................................................... (41,034,286) (109,339,056)
Class C shares.......................................................... (70,302) --
Class D shares.......................................................... (1,520,396) --
-------------- --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS...................................... (70,130,488) (138,314,791)
-------------- --------------
Net increase from transactions in shares of beneficial interest............. 38,781,752 107,876,963
-------------- --------------
NET INCREASE........................................................... 170,575,198 339,706,374
NET ASSETS:
Beginning of period......................................................... 1,599,011,147 1,259,304,773
-------------- --------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $1,540,461 AND
$7,448,690, RESPECTIVELY)............................................... $1,769,586,345 $1,599,011,147
-------------- --------------
-------------- --------------
</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 STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS JULY 31, 1998
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Strategist Fund (the "Fund"), formerly Dean Witter
Strategist Fund, is registered under the Investment Company Act of 1940, as
amended (the "Act"), as a non-diversified, open-end management investment
company. The Fund's investment objective is to maximize the total return of its
investments. The Fund seeks to achieve its objective by actively allocating its
assets among major asset categories of equity and fixed-income securities and
money market instruments. The Fund was organized as a Massachusetts business
trust on August 5, 1988 and commenced operations on October 31, 1988. On July
28, 1997, the Fund commenced offering three additional classes of shares, with
the then current shares, other than shares which were purchased prior to
November 8, 1989 (and with respect to such shares, certain shares acquired
through reinvestment of dividends and capital gains distributions (collectively
the "Old Shares")) and 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. The Old Shares and 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, 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 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
13
<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS JULY 31, 1998, CONTINUED
not readily available, including circumstances under which it is determined by
Morgan Stanley Dean Witter Advisors Inc. (the "Investment Manager"), formerly
Dean Witter InterCapital 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 accreted 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
14
<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS JULY 31, 1998, CONTINUED
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.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
following annual rates to the net assets of the Fund determined at the close of
each business day: 0.60% 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; 0.50% to the portion of daily net assets exceeding $1
billion but not exceeding $1.5 billion; and 0.475% to the portion of daily net
assets exceeding $1.5 billion but not exceeding $2 billion. Effective May 1,
1998, the Agreement was amended to reduce the annual rate to 0.45% of the
portion of daily net assets in excess of $2 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 implementation of the Plan on
15
<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS JULY 31, 1998, CONTINUED
November 8, 1989 (not including reinvestment of dividend or capital gain
distributions) less the average daily aggregate net asset value of the Class B
shares redeemed since the Fund's implementation of the Plan 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 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; printing and distribution of
prospectuses and reports used in connection with the offering of these shares to
other than current shareholders; and 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 $35,877,347 at July 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
16
<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS JULY 31, 1998, CONTINUED
other selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the year ended July 31, 1998, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.24% and
1.0%, respectively.
The Distributor has informed the Fund that for the year ended July 31, 1998, it
received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares and Class C shares of $1,336,873 and $3,852, respectively
and received $74,116 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. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JULY 31, 1998 JULY 31, 1997+*
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold............................................................. 1,964,326 $ 37,275,130 4,187 $ 77,553
Reinvestment of dividends and distributions...................... 34,015 615,503 -- --
Redeemed......................................................... (278,059) (5,243,404) -- --
----------- -------------- ----------- ------------
Net increase - Class A........................................... 1,720,282 32,647,229 4,187 77,553
----------- -------------- ----------- ------------
CLASS B SHARES
Sold............................................................. 12,852,199 244,390,491 21,462,833 362,673,259
Reinvestment of dividends and distributions...................... 3,284,472 59,496,655 7,689,886 125,001,968
Redeemed......................................................... (16,298,694) (309,691,698) (22,487,425) (380,152,637)
----------- -------------- ----------- ------------
Net increase (decrease) - Class B................................ (162,023) (5,804,552) 6,665,294 107,522,590
----------- -------------- ----------- ------------
CLASS C SHARES
Sold............................................................. 415,839 8,032,474 6,103 112,493
Reinvestment of dividends and distributions...................... 6,501 119,147 -- --
Redeemed......................................................... (39,066) (737,447) -- --
----------- -------------- ----------- ------------
Net increase - Class C........................................... 383,274 7,414,174 6,103 112,493
----------- -------------- ----------- ------------
CLASS D SHARES...................................................
Sold............................................................. 767,555 14,341,533 10,440 195,743
Reinvestment of dividends and distributions...................... 147,652 2,701,123 -- --
Redeemed......................................................... (656,253) (12,517,755) (1,699) (31,416)
----------- -------------- ----------- ------------
Net increase - Class D........................................... 258,954 4,524,901 8,741 164,327
----------- -------------- ----------- ------------
Net increase in Fund............................................. 2,200,487 $ 38,781,752 6,684,325 $107,876,963
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
- ---------------------
+ On July 28, 1997, 3,080,591 shares representing $56,682,871 were
transferred to Class D.
* For Class A, C and D, for the period July 28, 1997 (issue date) through
July 31, 1997.
17
<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS JULY 31, 1998, CONTINUED
5. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/maturities/prepayments of
portfolio securities, excluding short-term investments, for the year ended July
31, 1998 aggregated $1,335,282,642 and $1,315,626,874, respectively. Included in
the aforementioned are purchases and sales/maturities/ prepayments of U.S.
Government securities of $335,930,461 and $260,039,507, respectively.
For the year ended July 31, 1998, the Fund incurred brokerage commissions with
DWR of $69,060, for portfolio transactions executed on behalf of the Fund.
For the year ended July 31, 1998, the Fund incurred brokerage commissions of
$120,100 with Morgan Stanley & Co. Inc., an affiliate of the Investment Manager,
for portfolio transactions executed on behalf of the Fund. At July 31, 1998, the
Fund's payable for investments purchased included unsettled trades with Morgan
Stanley & Co. Inc. of $2,432,000.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At July 31, 1998, the Fund had
transfer agent fees and expenses payable of approximately $23,000.
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. At July 31, 1998, the Fund had an accrued pension liability of
$78,918 which is included in accrued expenses in the Statement of Assets and
Liabilities.
6. FEDERAL INCOME TAX STATUS
At July 31, 1998, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales.
7. SUBSEQUENT EVENTS
As of the close of business on September 11, 1998, the Fund acquired all the net
assets of Dean Witter Retirement Series -- Strategist Series ("Retirement
Strategist") pursuant to a plan of reorganization approved by shareholders of
Retirement Strategist on August 19, 1998. The acquisition was accomplished by a
tax-free exchange of 897,233 Class D shares of the Fund at a net asset value of
$18.60 per share for 1,340,444 shares of Retirement Strategist. The net assets
of the Fund and
18
<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS JULY 31, 1998, CONTINUED
Retirement Strategist immediately before the acquisition were $1,627,181,276 and
$16,687,220, respectively, including unrealized appreciation of $2,135,461 for
Retirement Strategist. Immediately after the acquisition, the combined net
assets of the Fund amounted to $1,643,868,496.
On August 19, 1998 the shareholders of Dean Witter Global Asset Allocation Fund
("Global") approved a reorganization plan (the "Plan") whereby Global would be
merged into the Fund. Under the terms of the Plan, the assets of Global would be
combined with the assets of the Fund and shareholders of Global would become
shareholders of the Fund, receiving shares of the corresponding class of the
Fund equal to the value of their holdings in Global. The merger is anticipated
to close as of the close of business on or about September 18, 1998.
19
<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
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 YEAR ENDED JULY 31 OCTOBER 31, 1988*
--------------------------------------------------------------------------------------- THROUGH
1998++ 1997**++ 1996 1995 1994 1993 1992 1991 1990 JULY 31, 1989
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period............... $ 18.75 $ 16.02 $ 15.87 $ 14.43 $ 14.59 $ 14.39 $ 13.09 $ 11.65 $ 11.37 $ 9.45
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Net investment
income............... 0.24 0.39 0.30 0.34 0.30 0.26 0.27 0.27 0.23 0.38
Net realized and
unrealized gain...... 2.06 4.10 1.43 1.86 0.22 0.81 1.27 1.50 0.55 1.84
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Total from investment
operations........... 2.30 4.49 1.73 2.20 0.52 1.07 1.54 1.77 0.78 2.22
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Less dividends and
distributions from:
Net investment
income............. (0.31) (0.36) (0.32) (0.29) (0.26) (0.31) (0.24) (0.26) (0.29) (0.30)
Net realized
gain............... (0.51) (1.40) (1.26) (0.47) (0.42) (0.56) -- (0.07) (0.21) --
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Total dividends and
distributions........ (0.82) (1.76) (1.58) (0.76) (0.68) (0.87) (0.24) (0.33) (0.50) (0.30)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Net asset value, end
of period............ $ 20.23 $ 18.75 $ 16.02 $ 15.87 $ 14.43 $ 14.59 $ 14.39 $ 13.09 $ 11.65 $11.37
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
TOTAL INVESTMENT
RETURN+............... 12.77% 29.73% 11.47% 16.05% 3.53% 7.59% 11.88% 15.67% 7.21% 23.76%(1)
RATIOS TO AVERAGE NET
ASSETS:
Expenses.............. 1.54% 1.56% 1.58% 1.63% 1.62% 1.62% 1.63% 1.59% 1.53% 0.97%(2)(3)
Net investment
income............... 1.24% 2.29% 1.88% 2.35% 2.03% 1.90% 2.19% 2.37% 2.39% 6.00%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of
period, in
millions............. $ 1,659 $ 1,541 $ 1,259 $ 878 $ 806 $ 783 $ 441 $ 238 $ 196 $ 48
Portfolio turnover
rate................. 92% 158% 174% 179% 90% 98% 79% 140% 101% 70%(1)
</TABLE>
- ---------------------
* Commencement of operations.
** 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 which were purchased
prior to November 8, 1989 (and with respect to such shares, certain shares
acquired through reinvestment of dividends and capital gains distributions
(collectively the "Old Shares")) and 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. The
Old Shares and 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) Not annualized.
(2) Annualized.
(3) If the Fund had borne all its expenses that were assumed or waived by the
Investment Manager, the above annualized expense and net investment income
ratios would have been 1.48% and 5.48%, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997 *
ENDED THROUGH
JULY 31, 1998++ JULY 31, 1997++
- ------------------------------------------------------------------------
<S> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period............................ $18.75 $ 18.40
------ ------
Net investment income.............. 0.36 0.01
Net realized and unrealized gain... 2.06 0.34
------ ------
Total from investment operations... 2.42 0.35
------ ------
Less dividends and distributions
from:
Net investment income........... (0.43) --
Net realized gain............... (0.51) --
------ ------
Total dividends and
distributions..................... (0.94) --
------ ------
Net asset value, end of period..... $20.23 $ 18.75
------ ------
------ ------
TOTAL INVESTMENT RETURN+........... 13.48% 1.90%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 0.91% 0.92%(2)
Net investment income.............. 1.85% 5.06%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands......................... $34,891 $79
Portfolio turnover rate............ 92% 158%
</TABLE>
<TABLE>
<S> <C> <C>
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period............................ $ 18.75 $ 18.40
------ ------
Net investment income.............. 0.21 0.01
Net realized and unrealized gain... 2.06 0.34
------ ------
Total from investment operations... 2.27 0.35
------ ------
Less dividends and distributions
from:
Net investment income........... (0.32) --
Net realized gain............... (0.51) --
------ ------
Total dividends and
distributions..................... (0.83) --
------ ------
Net asset value, end of period..... $ 20.19 $ 18.75
------ ------
------ ------
TOTAL INVESTMENT RETURN+........... 12.66% 1.90%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 1.66% 1.67%(2)
Net investment income.............. 1.08% 4.38%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands......................... $ 7,861 $114
Portfolio turnover rate............ 92% 158%
</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.
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
JULY 31, 1998++ JULY 31, 1997++
- ------------------------------------------------------------------------
<S> <C> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period............................ $18.75 $ 18.40
------ ------
Net investment income.............. 0.41 0.01
Net realized and unrealized gain... 2.06 0.34
------ ------
Total from investment operations... 2.47 0.35
------ ------
Less dividends and distributions
from:
Net investment income........... (0.46) --
Net realized gain............... (0.51) --
------ ------
Total dividends and
distributions..................... (0.97) --
------ ------
Net asset value, end of period..... $20.25 $ 18.75
------ ------
------ ------
TOTAL INVESTMENT RETURN+........... 13.80% 1.90%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 0.66% 0.67%(2)
Net investment income.............. 2.12% 5.40%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands......................... $67,797 $57,938
Portfolio turnover rate............ 92% 158%
</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.
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER STRATEGIST 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
Strategist Fund (the "Fund"), formerly Dean Witter Strategist Fund, at July 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 July 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
SEPTEMBER 11, 1998
1998 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended July 31, 1998, the Fund paid to its
shareholders $0.50 per share from long-term capital gains. Of this
$0.50 distribution, $0.17 is taxable as 28% rate gain and $0.33 is
taxable as 20% rate gain. For such period, 48.67% of the income
paid qualified for the dividends received deduction available to
corporations.
23
<PAGE>
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
Mark A. Bavoso
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of the
Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
MORGAN STANLEY
DEAN WITTER
STRATEGIST FUND
[GRAPHIC]
ANNUAL REPORT
JULY 31, 1998
