<PAGE> 1
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
Two World Trade Center, New York, New York 10048
LETTER TO THE SHAREHOLDERS January 31, 1999
DEAR SHAREHOLDER:
During the six-month period ended January 31, 1999, stocks and bonds traded in
one of their most volatile patterns in history. As the summer drew to a close,
concerns over currency devaluations sent global equity markets into a sharp
tailspin, while U.S. government bonds became the asset of choice for investors
seeking safety and yield. It seemed, at long last, that international influences
would have a significant negative impact on the U.S. profit machine, which had
produced three straight years of incredible returns.
Stocks, as measured by the Standard & Poor's 500 Composite Stock Price Index
(S&P 500), declined by nearly 20 percent from peak levels in July 1998 to the
market bottom on August 31. The yield on the 30-year Treasury bond, which moves
down as price levels appreciate, reacted in an unprecedented fashion. Moving
from a peak level of 5.67 percent in August to a low of 4.71 percent on October
5, bonds provided substantial returns to their holders in a very short period of
time.
As a result of both better than expected earnings reports for the third quarter
and a very aggressive lowering of interest rates by the Federal Reserve,
concerns dissipated and stocks began a long comeback rally, ultimately to new
highs as January came to a close. Bonds, on the other hand, settled into a
trading range, partially correcting from the extreme price levels achieved in
October. At the end of January, the S&P 500 stood at 1280, up more than
approximately 33 percent from the August 1998 low, while the 30-year Treasury
bond provided a yield of 5.10 percent, indicating that bond prices had slipped a
bit from their fall peak price levels.
<PAGE> 2
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
LETTER TO THE SHAREHOLDERS January 31, 1999, continued
FUND PERFORMANCE
Morgan Stanley Dean Witter Strategist Fund's Class B shares provided a six-month
total return of 3.65 percent versus 5.75 percent, 8.40 percent and 15.03
percent, respectively, for the Lehman Brothers Government/Corporate Bond Index,
the Lipper Flexible Portfolio Funds Index and the S&P 500. The Fund's Class A
shares returned 4.02 percent, Class C returned 3.63 percent and Class D returned
4.14 percent. The performance of the Fund's four share classes varies because of
differing expenses.
INVESTMENT ANALYSIS
The Fund's asset allocation remained unchanged throughout the period under
review as low inflation, an accommodative monetary policy and healthy profit
growth for corporate America bolstered our view that stocks would continue to
outperform both bonds and cash. On January 31, 1999, the Fund's allocation stood
at 70 percent equities, 20 percent bonds and 10 percent cash equivalents. (An
average balanced fund maintaining neutral exposures to these three asset classes
would be allocated 55 percent stocks, 35 percent bonds and 10 percent cash. This
means that the Fund held an overweighted position in stocks and an underweighted
position in bonds.)
Our equity portfolio benefited from its exposure to a number of industries that
posted profits well above those of the average U.S. corporation.
Technology-related companies and financial services corporations were two of our
largest overweighted sectors. Energy, basic raw materials and consumer staples
were also heavily represented in our equity portfolio.
The Fund's bond holdings consisted of a diversified mix of fixed-income
securities. On January 31, 1999, the Fund held 83 separate issues, made up of 36
government and 47 corporate bonds. On a market value basis, U.S. government
securities represented roughly half the total assets of the bond allocation. The
portfolio's average maturity (11.6 years) and its average yield (5.7 percent)
remained relatively unchanged from its mid-year levels.
LOOKING AHEAD
We continue to feel confident that the Fund's overweighting in U.S. equities
will provide shareholders with competitive returns during the first half of
1999. The second half of the year may prove more challenging, however, as Year
2000 technology concerns and potential disruptions in what has to date
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
LETTER TO THE SHAREHOLDERS January 31, 1999, continued
been a generally positive introduction of the euro in continental Europe begin
to be discounted in our markets.
We view this potential volatility as an ideal time for a flexible fund, such as
Morgan Stanley Dean Witter Strategist Fund, to take a more conservative stance.
We will monitor events carefully to establish what we believe to be the best
asset allocation going into the next millennium.
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,
/S/ CHARLES A. FIUMEFREDDO
CHARLES A. FIUMEFREDDO
Chairman of the Board
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS January 31, 1999 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (72.0%)
Advertising (0.3%)
100,000 Omnicom Group, Inc. ....... $ 6,400,000
--------------
Aerospace (1.2%)
426,900 Cordant Technologies,
Inc. ..................... 13,554,075
140,830 Honeywell, Inc. ........... 9,180,356
--------------
22,734,431
--------------
Airlines (0.0%)
6,101 British Airways PLC (United
Kingdom).................. 35,524
--------------
Alcoholic Beverages (0.0%)
12,700 Diageo PLC (United
Kingdom).................. 140,476
--------------
Aluminum (1.1%)
253,300 Alcoa Inc. ................ 21,182,212
--------------
Beverages - Non-Alcoholic (0.4%)
190,800 PepsiCo, Inc. ............. 7,453,125
--------------
Biotechnology (1.0%)
127,000 BioChem Pharma, Inc.
(Canada)*................. 3,643,312
350,000 Centocor, Inc.*............ 14,656,250
--------------
18,299,562
--------------
Broadcasting (0.2%)
3,200 Clear Channel
Communications, Inc.*..... 198,000
8,240 General Motors Corp. (Class
H)*....................... 405,820
42,100 Viacom, Inc. (Class B)*.... 3,578,500
--------------
4,182,320
--------------
Building Materials (0.0%)
33,157 Blue Circle Industries PLC
(United Kingdom).......... 162,638
--------------
Cable Television (1.6%)
542,000 MediaOne Group Inc.*....... 30,182,625
--------------
Casino/Gambling (0.1%)
150,000 Mirage Resorts, Inc.*...... 2,146,875
--------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Clothing/Shoe/Accessory Stores (0.0%)
2,200 Etablissements Economiques
du Casino Guichard-
Perrachon S.A. (France)... $ 213,663
--------------
Computer Communications (2.0%)
213,267 Cisco Systems, Inc.*....... 23,819,258
120,000 EMC Corp.*................. 13,065,000
--------------
36,884,258
--------------
Computer Hardware (5.9%)
100,000 Compaq Computer Corp. ..... 4,762,500
246,320 Dell Computer Corp.*....... 24,632,000
180,740 Gateway 2000, Inc.*........ 13,962,165
300,000 Hewlett-Packard Co. ....... 23,512,500
400,000 Quantum Corp.*............. 9,500,000
312,400 Sun Microsystems, Inc.*.... 34,910,700
--------------
111,279,865
--------------
Computer Software (3.1%)
100,000 Microsoft Corp.*........... 17,493,750
390,000 Network Associates,
Inc.*..................... 20,426,250
1,040,000 Novell, Inc.*.............. 21,190,000
--------------
59,110,000
--------------
Consumer Electronics/Appliances (0.6%)
173,600 Maytag Corp. .............. 10,969,350
--------------
Containers/Packaging (0.4%)
130,000 Temple-Inland, Inc. ....... 7,418,125
--------------
Department Stores (0.7%)
208,700 May Department Stores
Co. ...................... 12,600,262
--------------
Discount Chains (1.1%)
1,172,000 Kmart Corp.*............... 20,583,250
--------------
Diversified Financial Services (2.7%)
5,385 Allied Zurich PLC (United
Kingdom)*................. 83,097
260,000 American Express Co. ...... 26,747,500
245,000 Equitable Companies,
Inc. ..................... 17,088,750
107,490 Fannie Mae................. 7,833,334
4,818 ING Groep NV
(Netherlands)............. 280,753
--------------
52,033,434
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS January 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Diversified Manufacturing (0.4%)
100,000 Minnesota Mining &
Manufacturing Co. ........ $ 7,762,500
--------------
Electrical Products (0.8%)
259,800 Emerson Electric Co........ 15,117,112
4,420 Koninklijke (Royal) Philips
Electronics NV
(Netherlands)............. 321,323
9,900 Telefonaktiebolaget LM
Ericsson (B Shares)
(Sweden).................. 267,749
--------------
15,706,184
--------------
Electronic Production Equipment (0.3%)
80,000 Jabil Circuit, Inc.*....... 5,715,000
--------------
Energy (1.0%)
830,000 Diamond Offshore Drilling,
Inc. ..................... 19,090,000
1,030 Elf Aquitaine S.A.
(France).................. 111,616
--------------
19,201,616
--------------
Environmental Services (0.0%)
2,900 Waste Management, Inc. .... 144,819
--------------
Food Chains (0.0%)
4,749 Koninklijke Ahold NV
(Netherlands)............. 184,488
--------------
Foods & Beverages (0.0%)
246 Nestle S.A.
(Switzerland)............. 451,304
--------------
Home Furnishings (0.2%)
5,400 Industrie Natuzzi SpA (ADR)
(Italy)................... 114,750
106,250 Rubbermaid, Inc. .......... 3,426,562
--------------
3,541,312
--------------
Hotels/Resorts (0.6%)
1,500 Accor S.A.(France)......... 306,693
510,000 Hilton Hotels Corp. ....... 7,363,125
510,000 Park Place Entertainment
Corp.*.................... 3,474,375
--------------
11,144,193
--------------
Integrated Oil Companies (4.0%)
200,000 Amerada Hess Corp. ........ 9,500,000
263,730 Atlantic Richfield Co. .... 15,131,509
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
15,700 BP Amoco PLC (United
Kingdom).................. $ 212,423
90,830 Chevron Corp. ............. 6,789,543
132,290 Exxon Corp. ............... 9,318,177
300,000 Mobil Corp. ............... 26,306,250
4,535 Royal Dutch Petroleum Co.
(Netherlands)............. 182,099
168,330 Texaco, Inc. .............. 7,974,634
--------------
75,414,635
--------------
International Banks (0.1%)
11,100 Abbey National PLC (United
Kingdom).................. 218,151
5,400 Barclays PLC (United
Kingdom).................. 120,882
1,875 Credit Suisse Group
(Switzerland)............. 299,576
1,000 UBS AG (Switzerland)....... 324,496
--------------
963,105
--------------
Investment Bankers/Brokers/Services (0.4%)
100,000 Merrill Lynch & Co.,
Inc. ..................... 7,600,000
--------------
Life Insurance (0.0%)
4,746 AEGON NV (Netherlands)..... 521,308
--------------
Major Banks (2.1%)
105,700 Chase Manhattan Corp. ..... 8,132,294
236,225 Citigroup Inc. ............ 13,243,364
500,000 Wells Fargo & Co........... 17,468,750
--------------
38,844,408
--------------
Major Chemicals (1.9%)
271,750 Dow Chemical Co............ 23,930,984
220,880 Du Pont (E.I.) de Nemours &
Co., Inc. ................ 11,306,295
10,300 Georgia Gulf Corp. ........ 160,294
10,300 Monsanto Co................ 489,894
--------------
35,887,467
--------------
Major Pharmaceuticals (4.5%)
324,880 Abbott Laboratories........ 15,086,615
329,000 American Home Products
Corp. .................... 19,308,188
8,533 Astra AB (B Shares)
(Sweden).................. 182,654
14,424 Glaxo Wellcome PLC (United
Kingdom).................. 482,910
202,134 Johnson & Johnson.......... 17,181,390
142,300 Lilly (Eli) & Co........... 13,331,731
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS January 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
180 Novartis AG
(Switzerland)............. $ 337,985
1,260 Novo-Nordisk A/S (Series B)
(Denmark)................. 154,976
13 Roche Holdings AG
(Switzerland)............. 169,933
24,400 SmithKline Beecham PLC
(United Kingdom).......... 327,926
259,810 Warner-Lambert Co.......... 18,755,034
--------------
85,319,342
--------------
Major U.S. Telecommunications (2.0%)
250,000 AT&T Corp.................. 22,687,500
200,000 MCI WorldCom, Inc.* ....... 15,937,500
--------------
38,625,000
--------------
Managed Health Care (0.6%)
152,500 Wellpoint Health Networks,
Inc.*..................... 11,408,906
--------------
Medical Equipment & Supplies (1.0%)
230,000 Medtronic, Inc. ........... 18,328,125
--------------
Medical/Dental Distributors (1.0%)
250,000 McKesson HBOC, Inc. ....... 18,781,250
--------------
Motor Vehicles (3.0%)
280 Bayerische Motoren Werke
(BMW) AG (Germany)........ 198,464
84 Bayerische Motoren Werke
(BMW) AG (New)
(Germany)*................ 58,204
188,770 DaimlerChrysler AG
(Germany)*................ 19,549,493
360,650 Ford Motor Co.............. 22,157,434
330,000 Phelps Dodge Corp. ........ 14,334,375
3,100 Volkswagen AG (Germany).... 243,321
--------------
56,541,291
--------------
Movies/Entertainment (1.1%)
612,060 Walt Disney Co............. 20,197,980
--------------
Multi-Line Insurance (1.3%)
180 Allianz AG (Germany)....... 66,041
240,500 American International
Group, Inc. .............. 24,756,469
2,700 Axa (France)............... 391,954
--------------
25,214,464
--------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Multi-Sector Companies (0.6%)
104,720 General Electric Co........ $ 10,982,510
--------------
Office Equipment/Supplies (1.4%)
220,000 Xerox Corp. ............... 27,280,000
--------------
Office/Plant Automation (1.0%)
500,000 Newbridge Networks Corp.
(Canada)*................. 17,968,750
--------------
Oil Refining/Marketing (0.0%)
2,280 Total S.A. (B Shares)
(France).................. 231,792
--------------
Oilfield Services/Equipment (1.1%)
830,000 Smith International,
Inc.*..................... 21,009,375
--------------
Other Telecommunications (1.3%)
420,000 Qwest Communications
International, Inc.*...... 25,147,500
--------------
Packaged Goods/Cosmetics (0.8%)
193,100 Colgate-Palmolive Co....... 15,532,481
--------------
Packaged Foods (1.1%)
256,520 General Mills, Inc. ....... 21,531,648
12,600 Unilever PLC (United
Kingdom).................. 125,889
--------------
21,657,537
--------------
Paper (1.3%)
180,000 Boise Cascade Corp. ....... 5,411,250
387,990 Champion International
Corp. .................... 13,603,899
160,000 Willamette Industries,
Inc. ..................... 5,600,000
--------------
24,615,149
--------------
Precision Instruments (1.3%)
252,800 Perkin-Elmer Corp. ........ 24,031,800
--------------
Property - Casualty Insurers (0.6%)
196,600 Chubb Corp. ............... 11,550,250
--------------
Retail - Specialty (5.6%)
502,720 Bed Bath & Beyond, Inc.*... 16,181,300
60,000 Best Buy Co., Inc.*........ 5,445,000
203,520 Costco Companies, Inc.*.... 16,854,000
306,390 Gap, Inc. (The)............ 19,666,408
139,360 Home Depot, Inc. .......... 8,413,860
880,000 Oakley, Inc.*.............. 7,095,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS January 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
222,600 Payless ShoeSource,
Inc.*..................... $ 11,589,113
575,400 Williams-Sonoma, Inc.*..... 19,959,188
--------------
105,203,869
--------------
Savings & Loan Associations (2.2%)
184,140 Golden West Financial
Corp. .................... 17,286,143
570,425 Washington Mutual, Inc. ... 23,957,850
--------------
41,243,993
--------------
Semiconductors (2.6%)
202,040 Intel Corp................. 28,449,758
280,000 PMC - Sierra, Inc.
(Canada)*................. 20,790,000
2,930 STMicroelectronics NV
(Netherlands)*............ 306,526
--------------
49,546,284
--------------
Specialty Insurers (0.8%)
538,650 Ace, Ltd. (Bermuda)........ 15,082,200
--------------
Telecommunications (0.0%)
32,645 British Telecommunications
PLC (United Kingdom)...... 499,992
--------------
Telecommunications Equipment (0.6%)
100,000 Lucent Technologies
Inc. ..................... 11,256,250
2,800 Nokia Oyj (A Shares)
(Finland)................. 408,697
--------------
11,664,947
--------------
Tobacco (1.0%)
5,385 British American Tobacco
PLC (United Kingdom)...... 55,575
401,630 Philip Morris Companies,
Inc. ..................... 18,876,610
--------------
18,932,185
--------------
TOTAL COMMON STOCKS
(Identified Cost
$918,475,168)............. 1,363,691,306
--------------
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
CORPORATE BONDS (8.8%)
Airlines (0.2%)
$ 3,000 Continental Airlines, Inc.
(Series 981A)
6.648% due 03/15/19....... 3,069,540
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------
<C> <S> <C>
Apparel (0.1%)
$ 2,000 Fruit of the Loom, Inc.
7.375% due 11/15/23....... $ 1,691,360
--------------
Broadcasting (0.2%)
4,000 USA Networks, Inc.
- 144A**
6.75% due 11/15/05........ 4,062,720
--------------
Building Products (0.2%)
4,000 Masco Corp.
7.125% due 08/15/13....... 4,327,400
--------------
Cable Television (0.5%)
4,000 Comcast Cable
Communications
6.20% due 11/15/08........ 4,139,240
5,000 Continental Cablevision,
Inc.
9.50% due 08/01/13........ 5,996,700
--------------
10,135,940
--------------
Computers Software (0.1%)
1,000 Computer Associates
International (Series B)
6.375% due 04/15/05....... 1,006,530
--------------
Department Stores (0.8%)
3,000 Federated Department
Stores, Inc.
6.125% due 09/01/01....... 3,029,100
4,000 Neiman Marcus Group Inc.
7.125% due 06/01/28....... 3,948,760
4,000 Penney (J.C.) Co., Inc.
7.625% due 03/01/97....... 4,077,320
4,000 Saks, Inc.
8.25% due 11/15/08........ 4,421,160
--------------
15,476,340
--------------
Discount Chains (0.3%)
5,000 Shopko Stores, Inc.
9.00% due 11/15/04........ 5,570,300
--------------
Diversified Financial Services (0.0%)
100 Associates Corp. N.A.
6.375% due 08/15/99....... 100,623
100 MBNA Capital I (Series A)
8.278% due 12/01/26....... 97,320
--------------
197,943
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS January 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------
<C> <S> <C>
Electric Utilities (0.1%)
$ 1,500 Texas Utilities Co. (Series
A)
6.20% due 10/01/02........ $ 1,558,650
--------------
Extra Governmental Institutions - Banking
(0.1%)
2,500 Private Export Funding
5.25% due 05/15/05........ 2,491,325
--------------
Finance Companies (0.8%)
3,500 Advanta Corp.
7.28% due 07/30/01........ 3,248,630
2,000 Household Finance Corp.
5.875% due 02/01/09....... 2,000,000
3,430 Liberty Mutual Insurance
Co. - 144A**
7.875% due 10/15/26....... 3,826,508
5,000 National Rural Utilities
5.50% due 01/15/05........ 5,031,250
--------------
14,106,388
--------------
Investment Bankers/Brokers/Services (0.6%)
4,000 Merrill Lynch & Co., Inc.
6.875% due 11/15/18....... 4,151,840
6,000 Paine Webber Group, Inc.
6.55% due 04/15/08........ 6,036,720
--------------
10,188,560
--------------
Life Insurance (0.2%)
4,000 Conseco, Inc.
6.40% due 06/15/01........ 3,893,160
--------------
Major Banks (0.5%)
5,000 BankAmerica Corp.
7.125% due 03/01/09....... 5,476,400
4,000 Citicorp
7.125% due 03/15/04....... 4,252,640
--------------
9,729,040
--------------
Major U.S. Telecommunications (0.4%)
4,000 AT&T Capital Corp.
6.875% due 01/16/01....... 4,021,880
4,000 GTE California, Inc.
(Series G)
5.50% due 01/15/09........ 4,005,000
--------------
8,026,880
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------
<C> <S> <C>
Mid-Sized Banks (0.2%)
$ 4,100 Mercantile Bancorporation,
Inc.
7.30% due 06/15/07........ $ 4,486,015
--------------
Motor Vehicles (0.2%)
4,000 Ford Motor Co.
9.00% due 09/15/01........ 4,347,560
--------------
Oil & Gas Production (0.0%)
50 Occidental Petroleum Corp.
11.125% due 08/01/10...... 65,359
--------------
Oil/Gas Transmission (0.2%)
4,000 Williams Companies, Inc.
6.50% due 08/01/06........ 4,057,000
--------------
Other Consumer Services (0.2%)
4,000 Protection One, Inc.
7.375% due 08/15/05....... 4,053,840
--------------
Paper (0.3%)
6,000 Champion International
Corp.
6.40% due 02/15/26........ 6,023,160
--------------
Property - Casualty Insurers (0.5%)
4,000 Lumbermens Mutual
Casualty - 144A**
9.15% due 07/01/26........ 4,800,280
4,000 Orion Capital Trust I
8.73% due 01/01/37........ 3,913,320
--------------
8,713,600
--------------
Railroads (0.6%)
4,000 CSX Corp.
6.80% due 12/01/28........ 4,114,080
983 Southern Pacific
Transportation Co. (Series
B)
7.28% due 04/30/15........ 1,066,288
4,000 Union Pacific Corp.
6.34% due 11/25/03........ 4,080,440
2,000 Union Pacific Corp.
6.625% due 02/01/29....... 2,001,400
--------------
11,262,208
--------------
Recreational Products/Toys (0.0%)
100 Tyco International Group SA
(Luxembourg)
6.375% due 06/15/05....... 103,625
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS January 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------
<C> <S> <C>
Retail (0.2%)
$ 4,000 Tommy Hilfiger USA Inc.
6.50% due 06/01/03........ $ 3,999,880
--------------
Savings & Loan Associations (0.4%)
7,043 St. Paul Bancorp, Inc.
7.125% due 02/15/04....... 7,270,771
--------------
Smaller Banks (0.1%)
100 Centura Capital Trust I -
144A**
8.845% due 06/01/27....... 108,450
2,000 Wilmington Trust Corp.
6.625% due 05/01/08....... 2,093,420
--------------
2,201,870
--------------
Specialty Insurers (0.4%)
7,000 Markel Capital Trust I
(Series B)
8.71% due 01/01/46........ 7,144,200
--------------
Telecommunications Equipment (0.2%)
3,500 Lucent Technologies Inc.
5.50% due 11/15/08........ 3,534,335
--------------
Water Supply (0.2%)
4,000 Hyder PLC - 144A** (United
Kingdom)
6.50% due 12/15/08........ 4,095,000
--------------
TOTAL CORPORATE BONDS
(Identified Cost
$165,893,095)............. 166,890,499
--------------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS (11.6%)
Federal Home Loan Banks
5,000 5.515% due 04/13/04....... 5,002,150
10,000 5.80% due 09/02/08........ 10,372,400
Federal Home Loan Mortgage Corp.
157 8.50% due 07/01/02........ 159,951
77 9.00% due 08/01/02........ 79,401
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------
<C> <S> <C>
Federal National Mortgage Assoc.
$ 6,000 5.75% due 06/15/05........ $ 6,221,340
U.S. Treasury Bonds
11,200 5.50% due 08/15/28........ 11,739,616
16,000 6.00% due 02/15/26........ 17,577,920
8,000 6.125% due 11/15/27....... 8,996,480
10,000 6.25% due 08/15/23........ 11,233,300
100 6.375% due 08/15/27....... 115,655
2,500 6.625% due 02/15/27....... 2,975,400
1,565 6.875% due 08/15/25....... 1,907,422
150 7.625% due 02/15/25....... 198,298
U.S. Treasury Notes
5,800 4.75% due 11/15/08........ 5,840,774
6,300 5.625% due 11/30/00....... 6,406,659
1,000 5.625% due 02/28/01....... 1,019,520
3,100 5.75% due 08/15/03........ 3,239,097
5,000 5.875% due 02/28/99....... 5,003,900
38,450 5.875% due 11/15/99....... 38,806,816
3,000 5.875% due 11/30/01....... 3,097,740
5,000 6.00% due 08/15/99........ 5,035,250
11,250 6.125% due 08/15/07....... 12,297,375
4,000 6.25% due 01/31/02........ 4,176,760
1,140 6.25% due 02/15/03........ 1,206,006
10,000 6.25% due 02/15/07........ 10,972,900
1,000 6.375% due 05/15/99....... 1,004,800
3,000 6.375% due 08/15/02....... 3,164,130
12,225 6.50% due 04/30/99........ 12,281,724
3,900 6.50% due 05/15/05........ 4,279,119
2,600 6.50% due 08/15/05........ 2,858,752
1,150 6.625% due 06/30/01....... 1,201,187
7,630 6.875% due 08/31/99....... 7,723,544
3,000 6.875% due 05/15/06....... 3,389,580
1,100 7.25% due 05/15/04........ 1,232,792
2,000 7.25% due 08/15/04........ 2,248,840
7,075 7.50% due 11/15/01........ 7,577,113
--------------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Identified Cost
$217,832,979)............. 220,643,711
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS January 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (7.3%)
U.S. GOVERNMENT AGENCIES (a) (7.1%)
$ 60,000 Federal Home Loan Banks
4.62% due 02/01/99........ $ 60,000,000
75,000 Federal Home Loan Mortgage Corp.
4.76% due 02/12/99........ 74,890,917
--------------
TOTAL U.S. GOVERNMENT AGENCIES
(Amortized Cost
$134,890,917)............. 134,890,917
--------------
REPURCHASE AGREEMENT (0.2%)
2,739 The Bank of New York
4.688% due 02/01/99 (dated
01/29/99; proceeds
$2,740,526)(b)(Identified
Cost $2,739,456).......... 2,739,456
--------------
TOTAL SHORT-TERM
INVESTMENTS
(Identified Cost
$137,630,373)............. 137,630,373
--------------
TOTAL INVESTMENTS
(Identified Cost
$1,439,831,615) (c)............ 99.7% 1,888,855,889
OTHER ASSETS IN EXCESS OF
LIABILITIES...................... 0.3 5,897,804
---- --------------
NET ASSETS..................... 100.0% $1,894,753,693
===== ==============
</TABLE>
- ---------------------
<TABLE>
<C> <S>
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 $332,790 U.S. Treasury Bond
13.125% due 05/15/01 valued at $401,951 and
$2,234,641 U.S. Treasury Note 6.50% due 08/31/01
valued at $2,392,294.
(c) The aggregate cost for federal income tax purposes
approximates identified cost. The aggregate gross
unrealized appreciation is $472,663,647 and the
aggregate gross unrealized depreciation is
$23,639,373, resulting in net unrealized
appreciation of $449,024,274.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1999 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $1,439,831,615)....... $1,888,855,889
Receivable for:
Investments sold.................... 35,425,755
Interest............................ 7,238,786
Shares of beneficial interest
sold............................... 4,260,400
Dividends........................... 898,527
Prepaid expenses and other assets....... 149,081
--------------
TOTAL ASSETS........................ 1,936,828,438
--------------
LIABILITIES:
Payable for:
Investments purchased............... 38,181,133
Shares of beneficial interest
repurchased........................ 1,476,424
Plan of distribution fee............ 1,355,287
Investment management fee........... 848,847
Accrued expenses and other payables..... 213,054
--------------
TOTAL LIABILITIES................... 42,074,745
--------------
NET ASSETS.......................... $1,894,753,693
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital......................... $1,433,025,340
Net unrealized appreciation............. 449,024,892
Accumulated undistributed net investment
income................................. 572,469
Accumulated undistributed net realized
gain................................... 12,130,992
--------------
NET ASSETS.......................... $1,894,753,693
==============
CLASS A SHARES:
Net Assets.............................. $52,690,588
Shares Outstanding (unlimited
authorized, $.01 par value)............ 2,745,538
NET ASSET VALUE PER SHARE........... $19.19
==============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net
asset value)....................... $20.25
==============
CLASS B SHARES:
Net Assets.............................. $1,753,932,664
Shares Outstanding (unlimited
authorized, $.01 par value)............ 91,391,773
NET ASSET VALUE PER SHARE........... $19.19
==============
CLASS C SHARES:
Net Assets.............................. $10,721,481
Shares Outstanding (unlimited
authorized, $.01 par value)............ 559,949
NET ASSET VALUE PER SHARE........... $19.15
==============
CLASS D SHARES:
Net Assets.............................. $77,408,960
Shares Outstanding (unlimited
authorized, $.01 par value)............ 4,029,763
NET ASSET VALUE PER SHARE........... $19.21
==============
</TABLE>
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended January 31, 1999 (unaudited)
NET INVESTMENT INCOME:
INCOME
Interest................................. $ 17,868,644
Dividends (net of $24,487 foreign
withholding tax)........................ 6,600,664
------------
TOTAL INCOME......................... 24,469,308
------------
EXPENSES
Plan of distribution fee (Class A
shares)................................. 56,681
Plan of distribution fee (Class B
shares)................................. 7,682,426
Plan of distribution fee (Class C
shares)................................. 42,976
Investment management fee................ 4,752,327
Transfer agent fees and expenses......... 762,953
Registration fees........................ 88,119
Shareholder reports and notices.......... 70,116
Custodian fees........................... 52,183
Professional fees........................ 29,277
Trustees' fees and expenses.............. 6,531
Other.................................... 16,024
------------
TOTAL EXPENSES....................... 13,559,613
------------
NET INVESTMENT INCOME................ 10,909,695
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on:
Investments.......................... 75,736,725
Foreign exchange transactions........ 27,493
------------
NET GAIN............................. 75,764,218
------------
Net change in unrealized
appreciation/depreciation on:
Investments.......................... (14,945,114)
Translation of other assets and
liabilities denominated in foreign
currencies.......................... (22,608)
------------
NET DEPRECIATION..................... (14,967,722)
------------
NET GAIN............................. 60,796,496
------------
NET INCREASE............................. $ 71,706,191
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JANUARY 31, 1999 JULY 31, 1998
- ---------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................... $ 10,909,695 $ 21,116,380
Net realized gain........................... 75,764,218 95,674,127
Net change in unrealized appreciation....... (14,967,722) 85,133,427
-------------- --------------
NET INCREASE............................ 71,706,191 201,923,934
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income
Class A shares.......................... (463,213) (449,337)
Class B shares.......................... (10,560,595) (25,042,434)
Class C shares.......................... (52,037) (58,652)
Class D shares.......................... (820,901) (1,476,955)
Net realized gain
Class A shares.......................... (4,000,964) (478,126)
Class B shares.......................... (129,295,238) (41,034,286)
Class C shares.......................... (696,343) (70,302)
Class D shares.......................... (5,750,340) (1,520,396)
-------------- --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS....... (151,639,631) (70,130,488)
-------------- --------------
Net increase from transactions in shares of
beneficial interest........................ 205,100,788 38,781,752
-------------- --------------
NET INCREASE............................ 125,167,348 170,575,198
NET ASSETS:.................................
Beginning of period......................... 1,769,586,345 1,599,011,147
-------------- --------------
END OF PERIOD
(Including undistributed net investment
income of $572,469 and $1,540,461,
respectively)........................... $1,894,753,693 $1,769,586,345
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1999 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Strategist Fund (the "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 converted to a
multiple class share structure.
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 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") 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
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1999 (unaudited) continued
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 except for
certain dividends on foreign securities which are recorded as soon as the Fund
is informed after 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. FOREIGN CURRENCY TRANSLATION -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value of
investment securities, other assets and liabilities and forward foreign currency
contracts are translated at the exchange rates prevailing at the end of the
period; and (2) purchases, sales, income and expenses are translated at the
exchange rates prevailing on the respective dates of such transactions. The
resultant exchange gains and losses are included in the Statement of Operations
as realized and unrealized gain/loss on foreign exchange transactions. Pursuant
to U.S. Federal income tax regulations, certain foreign exchange gains/losses
included in realized and unrealized gain/loss are included in or are a reduction
of ordinary income for federal income tax purposes. The Fund does not isolate
that portion of the results of operations arising as a result of changes in the
foreign exchange rates from the changes in the market prices of the securities.
E. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund may enter into forward foreign
currency contracts which are valued daily at the appropriate exchange rates. The
resultant unrealized exchange
14
<PAGE> 15
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1999 (unaudited) continued
gains and losses are included in the Statement of Operations as unrealized
gain/loss on foreign exchange transactions. The Fund records realized gains or
losses on delivery of the currency or at the time the forward contract is
extinguished (compensated) by entering into a closing transaction prior to
delivery.
F. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
G. 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 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; 0.475% to the portion of daily net
assets exceeding $1.5 billion but not exceeding $2 billion; and 0.45% to the
portion of daily net assets exceeding $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
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1999 (unaudited) continued
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 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 (1) services provided and the
expenses borne by it and others in the distribution of the shares of these
Classes, including the payment of commissions for sales of these Classes and
incentive compensation to, and expenses of, Morgan Stanley Dean Witter Financial
Advisors and others who engage in or support distribution of the shares or who
service shareholder accounts, including overhead and telephone expenses; (2)
printing and distribution of prospectuses and reports used in connection with
the offering of these shares to other than current shareholders; and (3)
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may utilize fees paid pursuant to the
Plan, in the case of Class B shares, to compensate Dean Witter Reynolds Inc.
("DWR"), an affiliate of the Investment Manager and Distributor, and other
selected broker-dealers for their opportunity costs in advancing such amounts,
which compensation would be in the form of a carrying charge on any unreimbursed
expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of
16
<PAGE> 17
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1999 (unaudited) continued
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 $39,065,061
at January 31, 1999.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
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 six months ended January 31, 1999, the distribution fee
was accrued for Class A shares and Class C shares at the annual rate of 0.25%
and 1.0%, respectively.
The Distributor has informed the Fund that for the six months ended January 31,
1999, it received contingent deferred sales charges from certain redemptions of
the Fund's Class A shares, Class B shares and Class C shares of $557, $675,916
and $9,210, respectively and received $34,487 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/maturities/prepayments of
portfolio securities, excluding short-term investments, for the six months ended
January 31, 1999 aggregated $947,561,202 and $924,041,703, respectively.
Included in the aforementioned are purchases and sales/maturities/prepayments of
U.S. Government securities of $226,552,791 and $221,275,219, respectively.
At January 31, 1999, the Fund's payable for investments purchased and receivable
for investment sold included unsettled trades with DWR of $1,681,875 and $
480,299, respectively. For the six months ended January 31, 1999, the Fund
incurred brokerage commissions with DWR of $50,057, for portfolio transactions
executed on behalf of the Fund.
For the six months ended January 31, 1999, the Fund incurred brokerage
commissions of $114,648 with Morgan Stanley & Co., Inc., an affiliate of the
Investment Manager and Distributor, for portfolio
17
<PAGE> 18
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1999 (unaudited) continued
transactions executed on behalf of the Fund. At January 31, 1999, the Fund's
payable for investments purchased included unsettled trades with Morgan Stanley
& Co., Inc. of $8,378,158.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At January 31, 1999, the Fund had
transfer agent fees and expenses payable of approximately $2,200.
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 January 31, 1999, the Fund had an accrued pension liability of
$75,770 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. FEDERAL INCOME TAX STATUS
At July 31, 1998, the Fund had temporary book/tax differences which were
primarily attributable to capital loss deferrals on wash sales.
6. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into forward foreign currency contracts ("forward contracts")
to facilitate settlement of foreign currency denominated portfolio transactions
or to manage foreign currency exposure associated with foreign currency
denominated securities.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Fund bears the risk of
an unfavorable change in the foreign exchange rates underlying the forward
contracts. Risks may also arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their contracts.
At January 31, 1999, there were no outstanding forward contracts.
18
<PAGE> 19
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1999 (unaudited) continued
7. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JANUARY 31, 1999 JULY 31, 1998
------------------------- ---------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold........................................................ 1,187,532 $ 22,356,800 1,964,326 $ 37,275,130
Reinvestment of dividends and distributions................. 232,191 4,149,756 34,015 615,503
Acquisition of Dean Witter Global Asset Allocation Fund..... 15,373 288,931 -- --
Redeemed.................................................... (414,027) (7,855,381) (278,059) (5,243,404)
---------- ------------ ----------- -------------
Net increase - Class A...................................... 1,021,069 18,940,106 1,720,282 32,647,229
---------- ------------ ----------- -------------
CLASS B SHARES
Sold........................................................ 8,692,992 164,491,961 12,852,199 244,390,491
Reinvestment of dividends and distributions................. 7,061,277 126,374,543 3,284,472 59,496,655
Acquisition of Dean Witter Global Asset Allocation Fund..... 2,202,447 41,353,775 -- --
Redeemed.................................................... (8,571,537) (161,578,166) (16,298,694) (309,691,698)
---------- ------------ ----------- -------------
Net increase (decrease) - Class B........................... 9,385,179 170,642,113 (162,023) (5,804,552)
---------- ------------ ----------- -------------
CLASS C SHARES
Sold........................................................ 242,630 4,580,599 415,839 8,032,474
Reinvestment of dividends and distributions................. 40,061 715,072 6,501 119,147
Acquisition of Dean Witter Global Asset Allocation Fund..... 7,608 142,546 -- --
Redeemed.................................................... (119,727) (2,227,784) (39,066) (737,447)
---------- ------------ ----------- -------------
Net increase - Class C...................................... 170,572 3,210,433 383,274 7,414,174
---------- ------------ ----------- -------------
CLASS D SHARES
Sold........................................................ 284,829 5,321,784 767,555 14,341,533
Reinvestment of dividends and distributions................. 339,440 6,082,519 147,652 2,701,123
Acquisition of Dean Witter Global Asset Allocation Fund..... 667 12,537 -- --
Acquisition of Dean Witter Retirement Series -- Strategist
Series..................................................... 897,233 16,687,220 -- --
Redeemed.................................................... (840,692) (15,795,924) (656,253) (12,517,755)
---------- ------------ ----------- -------------
Net increase - Class D...................................... 681,477 12,308,136 258,954 4,524,901
---------- ------------ ----------- -------------
Net increase in Fund........................................ 11,258,297 $205,100,788 2,200,487 $ 38,781,752
========== ============ =========== =============
</TABLE>
8. FUND ACQUISITIONS
As of the close 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
19
<PAGE> 20
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1999 (unaudited) 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.
As of close business on September 18, 1998, the Fund acquired all the net assets
of Dean Witter Global Asset Allocation Fund ("Global") pursuant to a plan of
reorganization approved by the shareholders of Global on August 19, 1998. The
acquisition was accomplished by a tax-free exchange of 15,373 Class A shares of
the Fund at a net asset value of $18.79 per share for 25,295 Class A shares of
Global; 2,202,447 Class B shares of the Fund at a net asset value of $18.77 per
share for 3,610,474 Class B shares of Global; 7,608 Class C shares of the Fund
at a net asset value of $18.73 per share for 12,522 Class C shares of Global;
and 667 Class D shares of the Fund at a net asset value of $18.81 per share for
1,097 Class D shares of Global. The net assets of the Fund and Global
immediately before the acquisition were $1,661,862,178 and $41,797,789,
respectively, including unrealized appreciation of $4,590,506 for Global.
Immediately after the acquisition, the combined net assets of the Fund amounted
to $1,703,659,967.
20
<PAGE> 21
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 SIX FOR THE YEAR ENDED JULY 31
MONTHS ENDED ----------------------------------------------------
JANUARY 31, 1999++ 1998++ 1997*++ 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period.................. $20.23 $18.75 $16.02 $15.87 $14.43 $14.59
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income................................ 0.11 0.24 0.39 0.30 0.34 0.30
Net realized and unrealized gain..................... 0.51 2.06 4.10 1.43 1.86 0.22
------ ------ ------ ------ ------ ------
Total income from investment operations............... 0.62 2.30 4.49 1.73 2.20 0.52
------ ------ ------ ------ ------ ------
Less dividends and distributions from:
Net investment income................................ (0.13) (0.31) (0.36) (0.32) (0.29) (0.26)
Net realized gain.................................... (1.53) (0.51) (1.40) (1.26) (0.47) (0.42)
------ ------ ------ ------ ------ ------
Total dividends and distributions..................... (1.66) (0.82) (1.76) (1.58) (0.76) (0.68)
------ ------ ------ ------ ------ ------
Net asset value, end of period........................ $19.19 $20.23 $18.75 $16.02 $15.87 $14.43
====== ====== ====== ====== ====== ======
TOTAL RETURN+......................................... 3.65%(1) 12.77% 29.73% 11.47% 16.05% 3.53%
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................. 1.60%(2)(3) 1.54% 1.56% 1.58% 1.63% 1.62%
Net investment income................................. 1.18%(2)(3) 1.24% 2.29% 1.88% 2.35% 2.03%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions................ $1,754 $1,659 $1,541 $1,259 $878 $806
Portfolio turnover rate............................... 61%(1) 92% 158% 174% 179% 90%
</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 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) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE> 22
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
JANUARY 31, 1999 JULY 31, 1998 JULY 31, 1997
- ---------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $20.23 $18.75 $18.40
------ ------ ------
Income from investment operations:
Net investment income...................................... 0.18 0.36 0.01
Net realized and unrealized gain........................... 0.50 2.06 0.34
------ ------ ------
Total income from investment operations..................... 0.68 2.42 0.35
------ ------ ------
Less dividends and distributions from:
Net investment income...................................... (0.19) (0.43) --
Net realized gain.......................................... (1.53) (0.51) --
------ ------ ------
Total dividends and distributions........................... (1.72) (0.94) --
------ ------ ------
Net asset value, end of period.............................. $19.19 $20.23 $18.75
====== ====== ======
TOTAL RETURN+............................................... 4.02%(1) 13.48% 1.90%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.91%(2)(3) 0.91% 0.92%(2)
Net investment income....................................... 1.87%(2)(3) 1.85% 5.06%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $52,691 34,891 $79
Portfolio turnover rate..................................... 61%(1) 92% 158%
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $20.19 $18.75 $18.40
------ ------ ------
Income from investment operations:
Net investment income...................................... 0.10 0.21 0.01
Net realized and unrealized gain........................... 0.51 2.06 0.34
------ ------ ------
Total income from investment operations..................... 0.61 2.27 0.35
------ ------ ------
Less dividends and distributions from:
Net investment income...................................... (0.12) (0.32) --
Net realized gain.......................................... (1.53) (0.51) --
------ ------ ------
Total dividends and distributions........................... (1.65) (0.83) --
------ ------ ------
Net asset value, end of period.............................. $19.15 $20.19 $18.75
====== ====== ======
TOTAL RETURN+............................................... 3.63%(1) 12.66% 1.90%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.66%(2)(3) 1.66% 1.67%(2)
Net investment income....................................... 1.12%(2)(3) 1.08% 4.38%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $10,721 $7,861 $114
Portfolio turnover rate..................................... 61%(1) 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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE> 23
MORGAN STANLEY DEAN WITTER STRATEGIST FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
JANUARY 31, 1999 JULY 31, 1998 JULY 31, 1997
- ---------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $20.25 $18.75 $18.40
------ ------ ------
Income from investment operations:
Net investment income...................................... 0.20 0.41 0.01
Net realized and unrealized gain........................... 0.50 2.06 0.34
------ ------ ------
Total income from investment operations..................... 0.70 2.47 0.35
------ ------ ------
Less dividends and distributions from:
Net investment income...................................... (0.21) (0.46) --
Net realized gain.......................................... (1.53) (0.51) --
------ ------ ------
Total dividends and distributions........................... (1.74) (0.97) --
------ ------ ------
Net asset value, end of period.............................. $19.21 $20.25 $18.75
====== ====== ======
TOTAL RETURN+............................................... 4.14%(1) 13.80% 1.90%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.66%(2)(3) 0.66% 0.67%(2)
Net investment income....................................... 2.12%(2)(3) 2.12% 5.40%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $77,409 $67,797 $57,938
Portfolio turnover rate..................................... 61%(1) 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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE> 24
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne S. 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
The financial statements included herein have been taken from the records of the
Fund without examination by the independent accountants and accordingly they do
not express an opinion thereon.
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
[PHOTO]
SEMIANNUAL REPORT
JANUARY 31, 1999
