UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-05634

Morgan Stanley Strategist Fund
(Exact name of registrant as specified in charter)

522 Fifth Avenue, New York, New York 10036
(Address of principal executive offices) (Zip code)

Ronald E. Robison
522 Fifth Avenue, New York, New York 10036
(Name and address of agent for service)

Registrant's telephone number, including area code: 212-296-6990

Date of fiscal year end: July 31, 2008

Date of reporting period: January 31, 2008

Item 1 - Report to Shareholders

Welcome, Shareholder:
In this report, you'll learn about how your investment in Morgan Stanley
Strategist Fund performed during the semiannual period. We will provide an
overview of the market conditions, and discuss some of the factors that affected
performance during the reporting period. In addition, this report includes the
Fund's financial statements and a list of Fund investments.

THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE FUND BEING
OFFERED.

MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE
IS NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. THE FUND IS
SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT MARKET VALUES OF
SECURITIES OWNED BY THE FUND WILL DECLINE AND, THEREFORE, THE VALUE OF THE
FUND'S SHARES MAY BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE
MONEY INVESTING IN THIS FUND. PLEASE SEE THE PROSPECTUS FOR MORE COMPLETE
INFORMATION ON INVESTMENT RISKS.

FUND REPORT

For the six months ended January 31, 2008

TOTAL RETURN FOR THE 6 MONTHS ENDED JANUARY 31, 2008

<Table>
<Caption>
LEHMAN
BROTHERS LIPPER
U.S. FLEXIBLE
GOVERNMENT PORTFOLIO
S&P /CREDIT FUNDS
CLASS A CLASS B CLASS C CLASS D 500(R)(1) INDEX(2) INDEX(3)

-0.53% -0.92% -0.89% -0.40% -4.32% 7.15% 0.29%

</Table>

The performance of the Fund's four share classes varies because each has
different expenses. The Fund's total returns assume the reinvestment of all
distributions but do not reflect the deduction of any applicable sales charges.
Such costs would lower performance. See Performance Summary for standardized
performance and benchmark information.

MARKET CONDITIONS

Global economic growth slowed markedly throughout the six-month period under
review. Hindered by a depressed housing market, job insecurity, rising costs of
goods, and reduced credit availability, the U.S. consumer began to shift
spending patterns and adopt a more disciplined approach to expenditures. At the
same time, and for some of the same reasons, the corporate spending outlook also
became less predictable, although corporations maintained investment plans for
strong overseas markets. In this period, it was clear that the heady days of low
credit costs, "no collateral" borrowing, double-digit year-over-year increases
in home values and subdued inflation are behind us, and uncertainty surrounds
the future direction of global economies and thus, equity and fixed income
markets.

Outside of the U.S., the picture was also mixed, as developed regions such as
Europe and Japan appeared mired in a similar slowing condition, while developing
regions, such as China, India, Latin America, Russia, the Middle East and
Eastern Europe continued to post impressive growth rates. As globalization and
the improvement of trading logistics helped spark a great deal of this growth on
the upside, it is logical to expect that some of the issues currently impacting
developed markets may have a negative effect on the developing world as well. In
other words, developing markets are not fully decoupled from developed markets.
By the period's end, however, it seems that the U.S. and Europe would have to
slow considerably to truly derail the impressive development of the overseas
growth economies.

PERFORMANCE ANALYSIS

All share classes of Morgan Stanley Strategist Fund outperformed the S&P 500(R),
but underperformed the Lehman Brothers U.S. Government/Credit Index and the
Lipper Flexible Portfolio Funds Index for the six months ended January 31, 2008,
assuming no deduction of applicable sales charges.

Within our investment framework, three factors influence our core portfolio
positions: the rate of inflation, the direction and magnitude of corporate
profits, and shifts in interest rates. On the inflation front, rising input cost
pressures were partially offset by benign labor and wage costs; however, year-
over-year inflation rates rose. Corporate profits, excluding asset writedowns
taken by financial institutions, continued to grow, albeit at a slower organic
rate and with the help of the weak U.S. dollar. In addition, the target federal
funds rate, as set by the

Federal Open Market Committee, was reduced in an attempt to offset slowing
consumer spending tied to falling housing values. Taken together, our indicators
continued to support our generally defensive view of long-dated financial assets
throughout the period under review.

Our equity portfolio, roughly 60 percent of the Fund's total assets, was
diversified throughout the 10 broad sectors which make up the S&P 500. Our
largest sector exposures included information technology, health care and
consumer staples. During the period under review, we further reduced our
exposures to the financial services and telecommunication services sectors, and
increased our exposures to the consumer discretionary and basic materials
sectors.

The fixed income portion of the Fund, roughly 20 percent of the Fund's total
assets, maintained diversified holdings throughout the period under review. At
the period's end, the fixed income portfolio held approximately 18 percent of
its assets in long U.S. government securities, 18 percent in mortgage-backed
securities and 23 percent in non-government corporate instruments. The balance
of the portfolio was held in short-term, cash equivalents, most of which were
short duration,* non-money market securities.

In summary, as of January 31, 2008, the Fund's strategic asset allocation target
stood at 60 percent equity (versus a neutral benchmark weight of 55 percent**),
20 percent fixed income (versus a neutral benchmark weight of 35 percent), and
20 percent cash and short-term investments (versus a neutral benchmark weight of
10 percent).

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

There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the Fund in
the future.

* A measure of the sensitivity of a bond's price to changes in interest rates,
expressed in years. Each year of duration represents an expected 1 percent
change in the price of a bond for every 1 percent change in interest rates. The
longer a bond's duration, the greater the effect of interest-rate movements on
its price. Typically, funds with shorter durations perform better in rising-
interest-rate environments, while funds with longer durations perform better
when rates decline.

** Source: Morgan Stanley Investment Management. The "neutral weight" reflects
the average allocation held by U.S. pension funds.

<Table>
<Caption>
TOP 10 HOLDINGS

Fed. Natl. Mtge. Assoc. 3.7%
U.S. Treasury Securities 3.5
Microsoft Corp. 1.7
Oracle Corp. 1.6
Apple Inc. 1.5
Kraft Foods Inc. (Class A) 1.4
Altria Group, Inc. 1.4
International Business Machines
Corp. 1.4
Sybase, Inc. 1.4
Schwab Charles Corp. 1.4
</Table>

<Table>
<Caption>
PORTFOLIO COMPOSITION

Common Stocks 59.9%
Short-Term Paper 21.2
U.S. Government Agencies &
Obligations 7.3
Corp Notes/Bonds 4.9
Coll Mortgage Obl 4.2
Asset-Backed 2.5
</Table>

Does not include open long/short futures contracts with an underlying face value
of $94,894,887 with unrealized appreciation of $766,451 and open swap contracts
with net unrealized appreciation of $4,677,478.

Data as of January 31, 2008. Subject to change daily. All percentages for top 10
holdings are as a percentage of net assets and all percentages for portfolio
composition are as a percentage of total investments. These data are provided
for informational purposes only and should not be deemed a recommendation to buy
or sell the securities mentioned. Morgan Stanley is a full-service securities
firm engaged in securities trading and brokerage activities, investment banking,
research and analysis, financing and financial advisory services.

INVESTMENT STRATEGY

THE FUND'S "INVESTMENT ADVISER," MORGAN STANLEY INVESTMENT ADVISORS INC.,
ACTIVELY ALLOCATES THE FUND'S ASSETS AMONG THE MAJOR ASSET CATEGORIES OF EQUITY
SECURITIES (INCLUDING DEPOSITARY RECEIPTS), FIXED-INCOME SECURITIES AND MONEY
MARKET INSTRUMENTS. IN DETERMINING WHICH SECURITIES TO BUY, HOLD OR SELL FOR THE
FUND, THE INVESTMENT ADVISER ALLOCATES THE FUND'S ASSETS BASED ON, AMONG OTHER
THINGS, ITS ASSESSMENT OF THE EFFECTS OF ECONOMIC AND MARKET TRENDS ON DIFFERENT
SECTORS OF THE MARKET. THERE IS NO LIMIT AS TO THE PERCENTAGE OF ASSETS THAT MAY
BE ALLOCATED TO ANY ONE ASSET CLASS.

FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS

EACH MORGAN STANLEY FUND PROVIDES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS IN
ITS SEMIANNUAL AND ANNUAL REPORTS WITHIN 60 DAYS OF THE END OF THE FUND'S SECOND
AND FOURTH FISCAL QUARTERS. THE SEMIANNUAL REPORTS AND THE ANNUAL REPORTS ARE
FILED ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION (SEC) ON FORM
N-CSRS AND FORM N-CSR, RESPECTIVELY. MORGAN STANLEY ALSO DELIVERS THE SEMIANNUAL
AND ANNUAL REPORTS TO FUND SHAREHOLDERS AND MAKES THESE REPORTS AVAILABLE ON ITS
PUBLIC WEB SITE, WWW.MORGANSTANLEY.COM. EACH MORGAN STANLEY FUND ALSO FILES A
COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SEC FOR THE FUND'S FIRST AND
THIRD FISCAL QUARTERS ON FORM N-Q.

MORGAN STANLEY DOES NOT DELIVER THE REPORTS FOR THE FIRST AND THIRD FISCAL
QUARTERS TO SHAREHOLDERS, NOR ARE THE REPORTS POSTED TO THE MORGAN STANLEY
PUBLIC WEB SITE. YOU MAY, HOWEVER, OBTAIN THE FORM N-Q FILINGS (AS WELL AS THE
FORM N-CSR AND N-CSRS FILINGS) BY ACCESSING THE SEC'S WEB SITE,
HTTP://WWW.SEC.GOV. YOU MAY ALSO REVIEW AND COPY THEM AT THE SEC'S PUBLIC
REFERENCE

ROOM IN WASHINGTON, DC. INFORMATION ON THE OPERATION OF THE SEC'S PUBLIC
REFERENCE ROOM MAY BE OBTAINED BY CALLING THE SEC AT (800) SEC-0330. YOU CAN
ALSO REQUEST COPIES OF THESE MATERIALS, UPON PAYMENT OF A DUPLICATING FEE, BY
ELECTRONIC REQUEST AT THE SEC'S E-MAIL ADDRESS (PUBLICINFO@SEC.GOV) OR BY
WRITING THE PUBLIC REFERENCE SECTION OF THE SEC, WASHINGTON, DC 20549-0102.

PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD

YOU MAY OBTAIN A COPY OF THE FUND'S PROXY VOTING POLICY AND PROCEDURES WITHOUT
CHARGE, UPON REQUEST, BY CALLING TOLL FREE (800) 869-NEWS OR BY VISITING THE
MUTUAL FUND CENTER ON OUR WEB SITE AT WWW.MORGANSTANLEY.COM. IT IS ALSO
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.

YOU MAY OBTAIN INFORMATION REGARDING HOW THE FUND VOTED PROXIES RELATING TO
PORTFOLIO SECURITIES DURING THE MOST RECENT TWELVE-MONTH PERIOD ENDED JUNE 30
WITHOUT CHARGE BY VISITING THE MUTUAL FUND CENTER ON OUR WEB SITE AT
WWW.MORGANSTANLEY.COM. THIS INFORMATION IS ALSO AVAILABLE ON THE SECURITIES AND
EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.

HOUSEHOLDING NOTICE

TO REDUCE PRINTING AND MAILING COSTS, THE FUND ATTEMPTS TO ELIMINATE DUPLICATE
MAILINGS TO THE SAME ADDRESS. THE FUND DELIVERS A SINGLE COPY OF CERTAIN
SHAREHOLDER DOCUMENTS, INCLUDING SHAREHOLDER REPORTS, PROSPECTUSES AND PROXY
MATERIALS, TO INVESTORS WITH THE SAME LAST NAME WHO RESIDE AT THE SAME ADDRESS.
YOUR PARTICIPATION IN THIS PROGRAM WILL CONTINUE FOR AN UNLIMITED PERIOD OF TIME
UNLESS YOU INSTRUCT US OTHERWISE. YOU CAN REQUEST MULTIPLE COPIES OF THESE
DOCUMENTS BY CALLING (800) 869-NEWS, 8:00 A.M. TO 8:00 P.M., ET. ONCE OUR
CUSTOMER SERVICE CENTER HAS RECEIVED YOUR INSTRUCTIONS, WE WILL BEGIN SENDING
INDIVIDUAL COPIES FOR EACH ACCOUNT WITHIN 30 DAYS.

PERFORMANCE SUMMARY

AVERAGE ANNUAL TOTAL RETURNS -- PERIOD ENDED JANUARY 31, 2008

CLASS A SHARES* CLASS B SHARES** CLASS C SHARES(+) CLASS D SHARES(++)
(since 07/28/97) (since 10/31/88) (since 07/28/97) (since 07/28/97)
SYMBOL SRTAX SRTBX SRTCX SRTDX
1 YEAR 2.46%(4) 1.70%(4) 1.73%(4) 2.72%(4)
(2.92)(5) (3.01)(5) 0.79 (5) --

5 YEARS 12.63 (4) 11.77 (4) 11.79 (4) 12.89 (4)
11.42 (5) 11.51 (5) 11.79 (5) --

10 YEARS 6.83 (4) 6.20 (4) 6.02 (4) 7.08 (4)
6.26 (5) 6.20 (5) 6.02 (5) --

SINCE INCEPTION 6.70 (4) 9.64 (4) 5.89 (4) 6.95 (4)
6.15 (5) 9.64 (5) 5.89 (5) --

Performance data quoted represents past performance, which is no guarantee of
future results and current performance may be lower or higher than the figures
shown. For most recent month-end performance figures, please visit
www.morganstanley.com/msim or speak with your Financial Advisor. Investment
returns and principal value will fluctuate and fund shares, when redeemed, may
be worth more or less than their original cost. The table does not reflect the
deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares. Performance for Class A, Class B, Class C, and Class
D shares will vary due to differences in sales charges and expenses.

* The maximum front-end sales charge for Class A is 5.25%.

** The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%.
The CDSC declines to 0% after six years. Effective April 2005, Class B
shares will generally convert to Class A shares approximately eight years
after the end of the calendar month in which the shares were purchased.
Performance for periods greater than eight years reflects this conversion
(beginning April 2005).

(+) The maximum contingent deferred sales charge for Class C is 1.0% for
shares redeemed within one year of purchase.

(++) Class D has no sales charge.

(1) The Standard & Poor's 500(R) Index (S&P 500 (R)) is a broad-based index, the
performance of which is based on the performance of 500 widely-held common
stocks chosen for market size, liquidity and industry group representation.
The Index is unmanaged and its returns do not include any sales charges or
fees. Such costs would lower performance. It is not possible to invest
directly in an index.

(2) The Lehman Brothers U.S. Government/Credit Index tracks the performance of
government and corporate obligations, including U.S. government agency and
Treasury securities and corporate and Yankee bonds. The Index is unmanaged
and its returns do not include any sales charges or fees. Such costs would
lower performance. It is not possible to invest directly in an index.

(3) 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 Funds classification. 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. The Fund is in the Lipper Flexible Portfolio Funds
classification as of the date of this report.

(4) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.

(5) 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.

EXPENSE EXAMPLE

As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments and redemption fees;
and (2) ongoing costs, including advisory fees; distribution and service (12b-1)
fees; and other Fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 08/01/07 - 01/31/08.

ACTUAL EXPENSES

The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The second line of the table below provides information about hypothetical
expenses based on the Fund's actual expense ratio and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing cost of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) and redemption fees. Therefore, the second line of the table is
useful in comparing ongoing costs, and will not help you determine the relative
total cost of owning different funds. In addition, if these transactional costs
were included, your costs would have been higher.

<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD*
------------- ------------- --------------
08/01/07 -
08/01/07 01/31/08 01/31/08
------------- ------------- --------------

CLASS A
Actual (-0.53% return)......................... $1,000.00 $ 994.70 $4.46
Hypothetical (5% annual return before
expenses).................................... $1,000.00 $1,020.66 $4.52
CLASS B
Actual (-0.92% return)......................... $1,000.00 $ 990.80 $8.21
Hypothetical (5% annual return before
expenses).................................... $1,000.00 $1,016.89 $8.31
CLASS C
Actual (-0.89% return)......................... $1,000.00 $ 991.10 $8.11
Hypothetical (5% annual return before
expenses).................................... $1,000.00 $1,016.99 $8.21
CLASS D
Actual (-0.40% return)......................... $1,000.00 $ 996.00 $3.21
Hypothetical (5% annual return before
expenses).................................... $1,000.00 $1,021.92 $3.25
</Table>

- ---------
* Expenses are equal to the Fund's annualized expense ratios of 0.89%, 1.64%,
1.62% and 0.64% for Class A, Class B, Class C and Class D shares,
respectively, multiplied by the average account value over the period,
multiplied by 184/366 (to reflect the one-half year period). If the Fund had
borne all its expenses, the annualized expense ratios would have been 0.91%,
1.66%, 1.64% and 0.66% for Class A, Class B, Class C and Class D,
respectively.

Morgan Stanley Strategist Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2008 (UNAUDITED)

NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------

Common Stocks (62.0%)
Advertising/Marketing Services (0.6%)
106,720 Omnicom Group, Inc. .................................................. $ 4,841,886
------------

Aerospace & Defense (2.6%)
141,310 Northrop Grumman Corp. ............................................... 11,214,362
162,400 Raytheon Co. ......................................................... 10,578,736
------------
21,793,098
------------
Aluminum (0.4%)
108,460 Alcoa, Inc. .......................................................... 3,590,026
------------

Biotechnology (1.5%)
114,665 Celgene Corp.*........................................................ 6,433,853
139,860 Gilead Sciences, Inc.*................................................ 6,390,203
------------
12,824,056
------------
Chemicals: Major Diversified (0.3%)
63,480 Dow Chemical Co. (The)................................................ 2,454,137
------------

Computer Communications (0.8%)
287,610 Cisco Systems, Inc.*.................................................. 7,046,445
------------

Computer Peripherals (0.8%)
422,490 EMC Corp.*............................................................ 6,704,916
------------

Computer Processing Hardware (2.2%)
90,140 Apple Inc.*........................................................... 12,201,350
323,760 Dell Inc.*............................................................ 6,488,150
------------
18,689,500
------------
Data Processing Services (0.3%)
93,072 Metavante Technologies Inc.*.......................................... 2,061,536
------------

Department Stores (0.5%)
83,715 Kohl's Corp.*......................................................... 3,820,753
------------

Discount Stores (0.8%)
102,600 Costco Wholesale Corp. ............................................... 6,970,644
------------
</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2008 (UNAUDITED) continued

NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------

Electric Utilities (0.3%)
65,000 American Electric Power Co., Inc. .................................... $ 2,783,950
------------

Electrical Products (0.7%)
118,640 Emerson Electric Co. ................................................. 6,031,658
------------

Electronics/Appliances (1.2%)
202,240 Sony Corp. (ADR) (Japan).............................................. 9,604,378
------------

Financial Conglomerates (1.7%)
121,070 American Express Co. ................................................. 5,971,172
103,230 Citigroup, Inc. ...................................................... 2,913,151
106,420 JPMorgan Chase & Co. ................................................. 5,060,271
------------
13,944,594
------------
Food: Major Diversified (2.7%)
219,170 Kellogg Co. .......................................................... 10,498,243
411,374 Kraft Foods Inc. (Class A)............................................ 12,036,803
------------
22,535,046
------------
Forest Products (1.2%)
145,680 Weyerhaeuser Co. ..................................................... 9,865,450
------------

Home Building (0.4%)
102,000 Gafisa S.A. (ADR) (Brazil) (a)........................................ 3,552,660
------------

Home Improvement Chains (0.6%)
200,000 Lowe's Companies, Inc. ............................................... 5,288,000
------------

Household/Personal Care (1.3%)
145,495 Colgate-Palmolive Co. ................................................ 11,203,115
------------

Information Technology Services (1.4%)
111,500 International Business Machines Corp. ................................ 11,968,410
------------

Integrated Oil (2.5%)
120,295 Exxon Mobil Corp. .................................................... 10,393,488
119,620 Hess Corp. ........................................................... 10,865,085
------------
21,258,573
------------
</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2008 (UNAUDITED) continued

NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------

Internet Software/Services (1.3%)
10,330 Google Inc. (Class A)*................................................ $ 5,829,219
280,000 Yahoo! Inc.*.......................................................... 5,370,400
------------
11,199,619
------------
Investment Banks/Brokers (3.6%)
40,000 Bear Stearns Companies, Inc. (The).................................... 3,612,000
527,970 Charles Schwab Corp. (The)............................................ 11,773,731
34,000 Goldman Sachs Group, Inc. (The)....................................... 6,826,180
100,000 NYSE Euronext......................................................... 7,865,000
------------
30,076,911
------------
Major Banks (1.1%)
102,950 Bank of America Corp. ................................................ 4,565,833
147,480 Wells Fargo & Co. .................................................... 5,015,795
------------
9,581,628
------------
Marine Shipping (0.6%)
97,454 Tidewater, Inc. ...................................................... 5,161,164
------------

Media Conglomerates (0.5%)
256,510 Time Warner, Inc. .................................................... 4,037,467
------------

Medical Specialties (5.7%)
235,000 Applera Corp. - Celera Genomics Group*................................ 3,600,200
116,055 Bard (C.R.), Inc. .................................................... 11,207,431
119,000 Covidien Ltd. ........................................................ 5,310,970
262,050 St. Jude Medical, Inc.*............................................... 10,615,645
189,480 Thermo Fisher Scientific, Inc.*....................................... 9,756,325
94,000 Zimmer Holdings, Inc.*................................................ 7,357,380
------------
47,847,951
------------
Motor Vehicles (0.9%)
226,170 Honda Motor Co., Ltd. (ADR) (Japan)................................... 7,133,402
------------

Oilfield Services/Equipment (1.4%)
201,970 Halliburton Co. ...................................................... 6,699,345
99,150 Smith International, Inc. ............................................ 5,374,922
------------
12,074,267
------------
</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2008 (UNAUDITED) continued

NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------

Packaged Software (4.8%)
436,610 Microsoft Corp. ...................................................... $ 14,233,486
662,630 Oracle Corp.*......................................................... 13,617,046
423,510 Sybase, Inc.*......................................................... 11,951,452
------------
39,801,984
------------
Pharmaceuticals: Major (1.9%)
156,370 Johnson & Johnson..................................................... 9,891,966
241,650 Pfizer, Inc. ......................................................... 5,652,194
------------
15,544,160
------------
Precious Metals (1.2%)
197,650 Barrick Gold Corp. (Canada)........................................... 10,176,999
------------

Property - Casualty Insurers (0.5%)
87,440 Allstate Corp. (The).................................................. 4,308,169
------------

Pulp & Paper (2.2%)
437,000 AbitibiBowater, Inc. (a).............................................. 10,824,490
86,000 International Paper Co. .............................................. 2,773,500
179,100 MeadWestvaco Corp. ................................................... 5,014,800
------------
18,612,790
------------
Recreational Products (0.7%)
263,540 Mattel, Inc. ......................................................... 5,536,975
------------

Restaurants (1.0%)
150,000 McDonald's Corp. ..................................................... 8,032,500
------------

Semiconductors (1.7%)
401,230 Intel Corp. .......................................................... 8,506,076
593,265 Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) (Taiwan)........... 5,505,499
------------
14,011,575
------------
Specialty Telecommunications (1.8%)
532,140 Citizens Communications Co. .......................................... 6,103,646
752,715 Windstream Corp. ..................................................... 8,739,021
------------
14,842,667
------------
Steel (1.0%)
85,010 United States Steel Corp. ............................................ 8,680,371
------------
</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2008 (UNAUDITED) continued

NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------

Telecommunication Equipment (1.0%)
233,855 Nokia Corp. (ADR) (Finland)........................................... $ 8,640,942
------------

Tobacco (2.7%)
158,410 Altria Group, Inc. ................................................... 12,010,646
202,335 UST, Inc. ............................................................ 10,513,327
------------
22,523,973
------------
Trucks/Construction/Farm Machinery (1.1%)
124,490 Caterpillar Inc. ..................................................... 8,856,219
------------

Wireless Telecommunications (0.5%)
238,240 Metropcs Communications Inc.*......................................... 4,304,997
------------
Total Common Stocks (Cost $364,643,436)............................... 519,819,561
------------

</Table>

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- --------- ------- -------------------

Corporate Bonds (5.1%)
Aerospace & Defense (0.1%)
$ 613 Systems 2001 Asset Trust - 144A**
(Cayman Islands)................... 6.664 % 09/15/13 621,797
-----------

Airlines (0.1%)
774 America West Airlines, Inc. (Series
01-1).............................. 7.10 04/02/21 765,909
-----------

Beverages: Alcoholic (0.1%)
475 FBG Finance Ltd. - 144A**
(Australia)........................ 5.125 06/15/15 473,933
470 Miller Brewing Co. - 144A**.......... 4.25 08/15/08 471,894
-----------
945,827
-----------
Cable/Satellite TV (0.1%)
135 Comcast Cable Communications, Inc. .. 6.75 01/30/11 142,311
145 Comcast Cable Communications, Inc. .. 7.125 06/15/13 157,112
125 Comcast Corp. ....................... 6.50 01/15/15 131,094
60 Comcast LCI Holdings................. 7.625 02/15/08 60,047
-----------
490,564
-----------
Chemicals: Major Diversified (0.0%)
310 ICI Wilmington Inc. ................. 4.375 12/01/08 311,829
-----------
</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2008 (UNAUDITED) continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------

Department Stores (0.1%)
$ 980 May Department Stores Co. ........... 5.95 % 11/01/08 $ 989,822
-----------

Drugstore Chains (0.1%)
75 CVS Caremark Corp. .................. 5.75 06/01/17 77,646
130 CVS Caremark Corp. .................. 5.75 08/15/11 136,180
459 CVS Lease Pass Through - 144A**...... 6.036 12/10/28 440,005
-----------
653,831
-----------
Electric Utilities (0.5%)
55 Appalachian Power Co. ............... 5.65 08/15/12 57,262
485 Arizona Public Service Co. .......... 5.80 06/30/14 495,066
450 Carolina Power & Light Co. .......... 5.125 09/15/13 468,724
145 CenterPoint Energy Resources,
Corp. ............................. 6.25 02/01/37 138,894
85 CenterPoint Energy Resources, Corp.
(Series B)......................... 7.875 04/01/13 96,051
45 Columbus Southern Power Co. (Series
E)................................. 4.40 12/01/10 45,905
190 Consolidated Natural Gas Co. (Series
C)................................. 6.25 11/01/11 201,766
345 Consumers Energy Co. (Series H)...... 4.80 02/17/09 347,268
275 Detroit Edison Co. (The)............. 6.125 10/01/10 291,046
140 Entergy Gulf States, Inc. ........... 3.60 06/01/08 139,341
340 Entergy Gulf States, Inc. ........... 5.524++ 12/01/09 332,506
220 Ohio Edison Co. ..................... 6.40 07/15/16 232,296
415 Ohio Power Company (Series K)........ 6.00 06/01/16 429,762
270 Public Service Electric & Gas Co.
(Series B)......................... 5.00 01/01/13 277,283
240 Texas Eastern Transmission........... 7.00 07/15/32 266,427
-----------
3,819,597
-----------
Electrical Products (0.0%)
415 Cooper Industries, Inc. ............. 5.25 11/15/12 431,200
-----------

Electronics/Appliances (0.0%)
310 LG Electronics Inc. - 144A** (South
Korea)............................. 5.00 06/17/10 308,603
-----------

Finance/Rental/Leasing (0.2%)
440 Capmark Financial Group
Inc. - 144A**...................... 5.875 05/10/12 322,181
180 Capmark Financial Group
Inc. - 144A**...................... 6.30 05/10/17 126,302
310 CIT Group Inc. (Series MTN).......... 4.75 08/15/08 309,015
375 Countrywide Home Loans, Inc. (Series
L) (a)............................. 3.25 05/21/08 362,488
630 Nationwide Building Society - 144A**
(United Kingdom)................... 4.25 02/01/10 639,185
-----------
1,759,171
-----------
</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2008 (UNAUDITED) continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------

Financial Conglomerates (0.2%)
$ 155 Brookfield Asset Management Inc.
(Canada)........................... 5.80 % 04/25/17 $ 153,774
725 Chase Manhattan Corp. ............... 6.00 02/15/09 739,140
315 Citigroup Inc. ...................... 5.875 05/29/37 297,767
180 General Electric Capital Corp.
(Series A)......................... 4.25 12/01/10 183,323
55 General Electric Capital Corp.
(Series A)......................... 4.75 09/15/14 55,704
150 Prudential Financial Inc. ........... 6.625 12/01/37 152,738
-----------
1,582,446
-----------
Food Retail (0.0%)
365 Fred Meyer, Inc. .................... 7.45 03/01/08 365,904
-----------

Food: Major Diversified (0.1%)
210 ConAgra Foods, Inc. ................. 7.00 10/01/28 223,679
215 ConAgra Foods, Inc. ................. 8.25 09/15/30 258,506
-----------
482,185
-----------
Gas Distributors (0.0%)
325 NiSource Finance Corp. .............. 5.585++ 11/23/09 317,201
-----------

Home Improvement Chains (0.1%)
710 Home Depot Inc. ..................... 5.116++ 12/16/09 695,083
-----------

Industrial Conglomerates (0.3%)
1,470 General Electric Co. ................ 5.25 12/06/17 1,485,772
330 Textron Financial Corp. ............. 4.125 03/03/08 330,243
395 Textron Financial Corp. (Series
MTN)............................... 5.125 02/03/11 406,152
-----------
2,222,167
-----------
Insurance Brokers/Services (0.2%)
585 Catlin Insurance Co., Ltd. - 144A**
(Bahamas).......................... 7.249 # 525,816
900 Farmers Exchange Capital - 144A**.... 7.05 07/15/28 852,527
-----------
1,378,343
-----------
Investment Banks/Brokers (0.2%)
280 Bear Stearns Co. Inc. ............... 6.40 10/02/17 266,271
370 Bear Stearns Co. Inc. ............... 7.25 02/01/18 370,636
605 Goldman Sachs Group Inc. ............ 6.75 10/01/37 595,410
695 Lehman Brothers Holdings, Inc. ...... 6.875 07/17/37 678,305
-----------
1,910,622
-----------
</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2008 (UNAUDITED) continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------

Major Banks (0.5%)
$ 360 Bank of America Corp. ............... 5.75 % 12/01/17 $ 371,090
250 Bank of New York Co., Inc. (The)
(Series T)......................... 3.80 02/01/08 250,000
280 HSBC Finance Corp. .................. 6.75 05/15/11 294,933
325 Huntington National Bank (Series T).. 4.375 01/15/10 328,730
100 MBNA Capital I (Series A)............ 8.278 12/01/26 104,086
630 MBNA Corp. (Series F)................ 5.308++ 05/05/08 630,827
295 Popular North America, Inc. (Series
F)................................. 5.65 04/15/09 293,233
880 Unicredit Luxembourg Finance
S.A. - 144A** (Luxembourg)......... 3.768++ 10/24/08 878,657
975 Wachovia Capital Trust III........... 5.80++ ## 770,766
620 Wells Fargo Co. ..................... 5.625 12/11/17 638,361
-----------
4,560,683
-----------
Major Telecommunications (0.4%)
175 AT&T Corp. .......................... 8.00 11/15/31 211,218
565 AT&T Inc. ........................... 6.30 01/15/38 562,935
525 France Telecom S.A. (France)......... 8.50 03/01/31 670,799
305 SBC Communications, Inc. ............ 6.15 09/15/34 298,069
380 Sprint Capital Corp. ................ 8.75 03/15/32 373,689
270 Telecom Italia Capital SA
(Luxembourg)....................... 4.00 11/15/08 268,574
310 Telecom Italia Capital SA
(Luxembourg)....................... 4.00 01/15/10 306,616
80 Telecom Italia Capital SA
(Luxembourg)....................... 4.875 10/01/10 81,054
540 Telefonica Europe BV (Netherlands)... 8.25 09/15/30 663,933
-----------
3,436,887
-----------
Managed Health Care (0.1%)
350 United Healthcare Group Inc. ........ 5.204++ 03/02/09 347,610
250 UnitedHealth Group Inc. ............. 4.125 08/15/09 251,123
-----------
598,733
-----------
Media Conglomerates (0.2%)
895 Time Warner, Inc. ................... 5.109++ 11/13/09 869,076
470 Viacom, Inc. ........................ 6.875 04/30/36 460,646
-----------
1,329,722
-----------
Motor Vehicles (0.0%)
250 DaimlerChrysler North American
Holdings Co. ...................... 8.50 01/18/31 313,583
-----------
</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2008 (UNAUDITED) continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------

Multi-Line Insurance (0.4%)
$ 1,165 AIG SunAmerica Global Financing
VI - 144A**........................ 6.30 % 05/10/11 $ 1,234,427
575 American General Finance Corp.
(Series H)......................... 4.625 09/01/10 581,049
910 Equitable Co. ....................... 6.50 04/01/08 914,960
405 Two-Rock Pass Through - 144A**
(Bahamas).......................... 5.827++ # 162,000
-----------
2,892,436
-----------
Oil & Gas Pipelines (0.1%)
485 Plains All American Pipeline LP/PAA
Finance Corp. ..................... 6.70 05/15/36 485,853
-----------

Oil Refining/Marketing (0.0%)
365 Valero Energy Corp. ................. 3.50 04/01/09 365,157
-----------

Other Metals/Minerals (0.1%)
565 Brascan Corp. (Canada)............... 7.125 06/15/12 575,335
-----------

Property-Casualty Insurers (0.2%)
760 Mantis Reef Ltd. - 144A** (Cayman
Islands)........................... 4.692 11/14/08 764,093
215 Platinum Underwriters Finance Inc.
(Series B)......................... 7.50 06/01/17 230,371
630 Xlliac Global Funding - 144A**....... 4.80 08/10/10 627,922
-----------
1,622,386
-----------
Railroads (0.0%)
255 Burlington Santa Fe Corp. ........... 6.125 03/15/09 260,484
110 Union Pacific Corp. ................. 6.625 02/01/08 110,000
-----------
370,484
-----------
Real Estate Development (0.1%)
1,010 World Financial Properties - 144A**.. 6.91 09/01/13 1,037,917
-----------

Real Estate Investment Trusts (0.1%)
720 iStar Financial Inc. ................ 5.496++ 03/09/10 641,342
-----------

Regional Banks (0.1%)
800 Marshall & Ilsley Bank (Series T).... 3.80 02/08/08 799,999
-----------

Restaurants (0.1%)
385 Tricon Global Restaurants, Inc. ..... 8.875 04/15/11 428,946
-----------
</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2008 (UNAUDITED) continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------

Savings Banks (0.3%)
$ 200 Household Finance Corp. ............. 4.125 % 12/15/08 $ 200,647
230 Household Finance Corp. ............. 5.875 02/01/09 234,540
355 Household Finance Corp. ............. 6.375 10/15/11 372,124
295 Household Finance Corp. ............. 6.40 06/17/08 297,756
895 Sovereign Bancorp, Inc. ............. 5.114++ 03/23/10 856,558
100 Sovereign Bank (Series CD)........... 4.00 02/01/08 100,000
470 Washington Mutual Bank............... 5.50 01/15/13 436,397
260 Washington Mutual Inc. .............. 8.25 04/01/10 247,367
300 Washington Mutual Preferred Funding
II................................. 6.665++ ## 208,817
-----------
2,954,206
-----------
Total Corporate Bonds (Cost $43,119,954)............................. 42,465,770
-----------

U.S. Government Obligations (3.4%)
U.S. Treasury Bond
250 ..................................... 4.50 02/15/36 255,645
250 ..................................... 5.50 08/15/28 288,223
10,475 ..................................... 6.125 08/15/29 13,045,471

U.S. Treasury Note
2,000 (a).................................. 3.50 08/15/09 2,040,938
4,250 ..................................... 5.375 02/15/31 4,871,898
2,000 ..................................... 6.00 08/15/09 2,116,408
2,500 (a).................................. 5.75 08/15/10 2,717,970
750 ..................................... 4.625 02/29/12 807,582
2,420 +.................................... 4.25 08/15/13 2,583,117
-----------
Total U.S. Government Obligations (Cost $28,030,090)................. 28,727,252
-----------

</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2008 (UNAUDITED) continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------

U.S. Government Agencies - Mortgage-
Backed Securities (4.1%)
$ 601 Federal Home Loan Mortgage Corp...... 7.50 % 11/01/29 - 03/01/32 $ 650,716
Federal Home Loan Mortgage Corp. ARM
860 ..................................... 5.613 04/01/37 883,906
1,233 ..................................... 5.718 01/01/37 1,258,207

Federal Home Loan Mortgage Corp. PC
Gold
494 ..................................... 6.50 07/01/29 - 05/01/32 515,870
310 ..................................... 7.50 01/01/30 - 08/01/32 335,123
2 ..................................... 8.00 07/01/30 2,664

Federal National Mortgage Assoc
185 ..................................... 6.50 12/01/29 194,386
2,457 ..................................... 6.766 01/01/36 2,504,626
1,139 ..................................... 6.782 03/01/36 1,161,405
1,056 ..................................... 6.861 03/01/36 1,076,277
3,398 ..................................... 7.00 12/01/17 - 11/01/34 3,630,627
1,165 ..................................... 7.24 05/01/36 1,202,507
1,261 ..................................... 7.259 05/01/36 1,292,811
1,117 ..................................... 7.251 05/01/36 1,142,927
2,158 ..................................... 7.50 07/01/29 - 09/01/35 2,334,311
1,794 ..................................... 8.00 02/01/25 - 02/01/32 1,951,384

Federal National Mortgage Assoc. ARM
853 ..................................... 5.97 04/01/37 883,065
223 ..................................... 6.801 07/01/33 226,914
2,395 ..................................... 6.774 01/01/36 2,441,486
1,661 ..................................... 6.824 12/01/35 1,720,240
3,101 ..................................... 6.829 11/01/35 3,210,593
2,398 ..................................... 7.247 04/01/36 2,454,205
1,225 ..................................... 7.283 07/01/36 1,261,278
1,441 ..................................... 7.293 04/01/36 1,475,495
769 ..................................... 7.298 07/01/36 787,803
-----------
Total U.S. Government Agencies - Mortgage-Backed Securities (Cost
$34,383,918)......................................................... 34,598,826
-----------

Asset-Backed Securities (2.6%)
Finance/Rental/Leasing
1,082 Alliance Bancorp Trust 2007-0A1 A1... 3.616++ 07/25/37 1,019,092
244 Banc of America Securities Auto Trust
2005-WF1 A3........................ 3.99 08/18/09 244,743
219 Capital Auto Receivables Asset Trust
2005-1 A4.......................... 4.05 07/15/09 219,646
1,450 Capital Auto Receivables Asset Trust
2006-2 A3A......................... 4.98 05/15/11 1,470,596
</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2008 (UNAUDITED) continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------

$ 1,100 Capital Auto Receivables Asset Trust
2006-SN1A A3....................... 5.31 % 10/20/09 $ 1,106,279
1,350 Capital Auto Receivables Assets Trust
2007-SN1 Class A3B................. 5.088++ 07/15/10 1,338,730
736 Capital One Auto Finance Trust 2006-C
A3A................................ 5.07 07/15/11 726,634
1,032 Caterpillar Financial Asset Trust
2006-A A3.......................... 5.57 05/25/10 1,044,739
1,000 CIT Equipment Collateral 2006-VT2
A3................................. 5.07 02/20/10 1,010,068
1,275 Citibank Credit Card Issuance Trust
2007-A1 A1......................... 4.874++ 03/22/12 1,264,587
850 Citibank Credit Card Issuance Trust
2007-A8 A1 A8...................... 5.65 09/20/19 864,344
12 CNH Equipment Trust 2005-A A3........ 4.02 04/15/09 12,447
172 DaimlerChrysler Auto Trust 2005-B
A3................................. 4.04 09/08/09 172,280
449 Ford Credit Auto Owner Trust 2006-A
A3................................. 5.05 03/15/10 452,734
383 GE Equipment Small Ticket LLC 2005-2A
A3 - 144A**........................ 4.88 10/22/09 385,136
1,125 GS Auto Loan Trust 2006-1 A3......... 5.37 12/15/10 1,138,939
950 Harley Davidson Motorcycle Trust
2005-3 A2.......................... 4.41 06/15/12 959,282
1,191 Harley-Davidson Motorcycle Trust
2005-1 A2.......................... 3.76 12/17/12 1,195,235
703 Harley-Davidson Motorcycle Trust
2005-2 A2.......................... 4.07 02/15/12 707,209
700 Hertz Vehicle Financing LLC 2005-2A
A2 - 144A**........................ 4.93 02/25/10 689,055
18 Honda Auto Receivables Owner Trust
2005-2 A3.......................... 3.93 01/15/09 18,456
263 Hyundai Auto Receivables Trust 2005-A
A3................................. 3.98 11/16/09 263,595
225 Lehman XS Trust 2006-16N M2.......... 5.265++ 11/25/46 155,347
1,475 MBNA Credit Card Master Note Trust
2003-A3 A3......................... 5.148++ 08/16/10 1,475,818
1,550 MBNA Master Credit Card Trust 1999-B
A.................................. 5.90 08/15/11 1,595,814
242 Merrill Auto Trust Securitization
2005-1 A3.......................... 4.10 08/25/09 242,203
366 National City Auto Receivables Trust
2004-A A4.......................... 2.88 05/15/11 365,387
275 TXU Electric Delivery Transition Bond
Co. LLC 2004-1 A2.................. 4.81 11/17/14 280,075
584 USAA Auto Owner Trust 2004-2 A4...... 3.58 02/15/11 583,945
81 USAA Auto Owner Trust 2005-1 A3...... 3.90 07/15/09 80,680
271 Volkswagen Auto Loan Enhanced Trust
2005-1 A3.......................... 4.80 07/20/09 271,995
144 Wachovia Auto Owner Trust 2005-A A3.. 4.06 09/21/09 144,069
497 Wachovia Auto Owner Trust 2005-B A3.. 4.79 04/20/10 498,563
-----------
Total Asset-Backed Securities (Cost $21,962,900)..................... 21,997,722
-----------
</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2008 (UNAUDITED) continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------

Collateralized Mortgage Obligations
(4.4%)
U.S. Government Agencies (0.5%)
$ 2,427 Federal National Mortgage Assoc.
2005-68 XI (IO).................... 6.00 % 08/25/35 $ 537,901
11,167 Federal National Mortgage Assoc.
2006-28 1P (IO).................... 3.003++ 03/25/36 300,111
1,454 Federal National Mortgage Assoc.
2006-118 A2........................ 3.436++ 12/25/36 1,423,180
969 Federal National Mortgage Assoc.
2006-28 1A1........................ 3.486++ 03/25/36 961,046
652 Federal Home Loan Mortgage Corp.
Whole Loan 2005-S001 2A2........... 3.526++ 09/25/45 644,819
-----------
Total U.S. Government Agencies ...................................... 3,867,057
-----------
Private Issues (3.9%)
742 Adjustable Rate Mortgage
Trust - 2005-6A 2A1................ 3.686++ 11/25/35 704,586
571 American Home Mortgage Assets 2007-5
A3................................. 3.676++ 06/25/47 435,484
1,288 American Home Mortgage Investment
Trust - 2007-1 GA1C................ 4.979++ 05/25/47 1,199,743
1,476 American Home Mortgage Assets 2007-5
A2................................. 3.616++ 06/25/47 1,252,055
555 American Home Mortgage Investment
Trust 2006-1 1A2................... 3.566++ 03/25/46 502,471
450 American Home Mortgage Investment
2006-1 1M1......................... 3.756++ 03/25/46 317,387
932 Bear Stearns Mortgage Funding Trust
2006-AR5 1A1....................... 3.536++ 12/25/36 884,720
1,146 Bear Stearns Mortgage Funding Trust
2007-AR1 1A2....................... 3.586++ 01/25/37 1,039,908
515 Countrywide Alternative Loan Trust
2006-0A18 A3....................... 3.646++ 12/25/46 396,183
1,390 Countrywide Alternative Loan Trust
2007-0A8 2A2....................... 3.606++ 06/25/47 1,252,570
854 Countrywide Alternative Loan Trust
2005-56 2A3........................ 6.288++ 11/25/35 835,391
565 Countrywide Alternative Loan Trust
2006-0A17 1A3...................... 4.234++ 12/20/46 433,348
415 Countrywide Alternative Loan Trust
2006-0A21 A3....................... 4.214++ 03/20/47 324,199
7,789 Countrywide Alternative Loan Trust
2006-OA17 1XP...................... 1.276 12/20/46 416,905
1,020 Countrywide Alternative Loan Trust
2006-0A2 A3........................ 4.204++ 05/20/46 903,699
7,513 Countrywide Alternative Loan Trust
2006-0A21 X (IO)................... 1.53 03/20/47 427,943
9,542 Countrywide Alternative Loan Trust
2007-0A3 X (IO).................... 2.00 04/25/47 407,027
927 Countrywide Alternative Loan Trust
2006-OA1 2A2....................... 5.259++ 03/20/46 848,343
932 DSLA Mortgage Loan Trust 2007-AR1
2A1A............................... 4.074++ 04/19/38 870,518
1,271 Greenpoint Mortgage Funding Trust
2006-0H1 A1........................ 5.50++ 01/25/37 1,187,214
1,294 Greenpoint Mortgage Funding Trust
2006-0H1 A2........................ 5.095++ 01/25/37 1,176,025
1,288 Harborview Mortgage Loan
Trust - 2006-AR1 2A1A.............. 4.114++ 11/19/36 1,213,030
1,297 Harborview Mortgage Loan Trust 2006-
14 2A1A............................ 5.115++ 03/19/38 1,209,254
221 Harborview Mortgage Loan Trust 2005-
16 B2.............................. 5.721++ 01/19/36 159,154
350 Harborview Mortgage Loan 2006-SB1
M1................................. 4.339++ 12/19/36 210,000
964 Luminent Mortgage Trust 2006-4 A1B... 3.606++ 05/25/46 884,905
500 Mastr Adjustable Rate Mortgages Trust
2007-3 1M1......................... 4.226++ 05/25/47 204,570
524 Residential Accredit Loans, Inc.
2007-Q04 A1........................ 3.576++ 05/25/47 490,430
810 Residential Accredit Loans, Inc.
2007-Q04 A2........................ 3.636++ 05/25/47 737,691
500 Residential Accredit Loans, Inc.
2007-Q04 A3........................ 3.676++ 05/25/47 389,899
1,835 Residential Accredit Loans, Inc.
2006-Q010 A1....................... 5.025++ 01/25/37 1,713,439
</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2008 (UNAUDITED) continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------

$ 1,039 Residential Accredit Loans, Inc.
2007-Q03 A3........................ 3.636++% 03/25/47 $ 792,946
1,555 Residential Accredit Loans, Inc.
2007-QH1 A2........................ 3.566++ 02/25/37 1,407,078
1,503 Structured Asset Mortgage Investments
Inc. 2007-AR1 2A2.................. 3.586++ 01/25/37 1,364,250
1,000 Structured Asset Mortgage Investments
Inc. 2006-AR6 2A2.................. 3.606++ 07/25/36 887,159
350 Structured Asset Mortgage Investments
Inc. 2006-AR7 B1................... 3.746++ 08/25/36 249,860
19,776 Wamu Mortgage Pass-Through
Certificates 2005-AR6 X (IO)....... 1.166 04/25/45 395,513
1,249 Wamu Mortgage Pass-Through
Certificates 2007-0A1 A1B.......... 3.576++ 02/25/47 1,132,058
1,441 Wamu Mortgage Pass-Through
Certificates 2007-OA6 CA1B......... 3.606++ 07/25/47 1,307,949
661 Wamu Mortgage Pass-Through
Certificates 2005-AR13 A1A2........ 6.313++ 10/25/45 638,960
175 Wamu Mortgage Pass-Through
Certificates 2006-AR5 A1B2......... 3.726++ 06/25/46 133,119
1,088 Washington Mutual Mortgage Pass-
Through Certificates 2007-0A1
CA1B............................... 3.576++ 12/25/46 990,228
40,644 Wamu Mortgage Pass-Through
Certificates 2007-OA2 1XPP (IO).... .255 03/25/47 590,596
-----------
Total Private Issues ................................................ 32,917,807
-----------
Total Collateralized Mortgage Obligations (Cost $40,166,365)......... 36,784,864
-----------

</Table>

NUMBER OF
CONTRACTS
- ---------

Put Options Purchased (0.0%)

90 day Euro $
121 March/2008 @ $94.50................................................... 0
115 March/2008 @ $94.75................................................... 0
--
Total Put Options Purchased (Cost $44,337)............................ 0
--

</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2008 (UNAUDITED) continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------

Short-Term Investments (22.0%)
U.S. Government Obligation (b) (0.0%)
$ 350 U.S. Treasury Bill*** (Cost $347,887).................. 3.15% 04/10/08 $ 347,887
-----------
Security Purchased From Securities Lending Collateral
(c) (2.4%)
Repurchase Agreement
19,618 Bear Stearns & Co. Inc. (dated 01/31/08; proceeds
$19,618,948) (Cost $19,617,981)...................... 1.80 02/01/08 19,617,981
-----------

</Table>

NUMBER OF
SHARES (000)
- ------------

Investment Company (d) (19.6%)
164,139 Morgan Stanley Institutional Liquidity Money Market
Portfolio - Institutional Class (Cost $164,139,395).......... 164,139,395
------------
Total Short-Term Investments (Cost $184,105,263)............... 184,105,263
------------

Total Investments (Cost $716,456,263) (e)(f).................... 103.6% 868,499,258

Liabilities in Excess of Other Assets .......................... (3.6) (30,631,569)
------ ------------

Net Assets ..................................................... 100.0% $837,867,689
===== ============

</Table>

- ----------

<Table>

ADR American Depositary Receipt.
ARM Adjustable Rate Mortgage.
IO Interest Only Security.
MTN Medium Term Note.
PC Participation Certificate.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
*** A portion of this security has been physically segregated in connection with open futures
contracts in an amount equal to $115,555.
+ Security was purchased on a forward commitment basis.
++ Variable rate security. Rate shown is the rate in effect at January 31, 2008.
# Foreign issued security with perpetual maturity.
## Security issued with perpetual maturity.
(a) All or portion of this security was on loan on January 31, 2008.
(b) Purchased on a discount basis. The interest rate shown has been adjusted to reflect a
money market equivalent yield.
(c) Collateralized by federal agency and U.S. Treasury obligations.
(d) See Note 4 of the financial statement for investments in Morgan Stanley Institutional
Liquidity Money Market Portfolio-Institutional Class.
(e) Securities have been designated as collateral in an amount equal to $108,685,973 in
connection with securities purchased on a forward commitment basis, open futures and swap
contracts.
(f) The aggregate cost for federal income tax purposes approximates the aggregate cost for
book purposes. The aggregate gross unrealized appreciation is $165,468,696 and the
aggregate gross unrealized depreciation is $13,425,701, resulting in net unrealized
appreciation of $152,042,995.
</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2008 (UNAUDITED) continued

FUTURES CONTRACTS OPEN AT JANUARY 31, 2008:

<Table>
<Caption>
UNREALIZED
NUMBER OF DESCRIPTION, DELIVERY UNDERLYING FACE APPRECIATION
CONTRACTS LONG/SHORT MONTH AND YEAR AMOUNT AT VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------------------

252 Long U.S. Treasury Notes 5 Year, $ 28,476,000 $ 741,692
March 2008
29 Long 90 Day Euro$ 7,039,387 113,239
March 2008
20 Long 90 Day Euro$ 4,853,250 73,658
June 2009
13 Long 90 Day Euro$ 3,161,113 70,448
March 2009
28 Long U.S. Treasury Notes 5 Year, 3,152,188 (3,643)
June 2008
12 Long 90 Day Euro$ 2,923,050 68,779
December 2008
25 Long Swap Future 10 Year, 2,845,703 114,844
March 2008
13 Long U.S. Treasury Notes 2 Year, 2,771,844 34,452
March 2008
11 Long 90 Day Euro$ 2,682,763 65,798
September 2008
9 Long 90 Day Euro$ 2,193,975 53,272
June 2008
1 Short 90 Day Euro$ (240,725) (2,937)
September 2010
3 Short 90 Day Euro$ (723,225) (9,375)
June 2010
4 Short 90 Day Euro$ (965,850) (13,350)
March 2010
5 Short 90 Day Euro$ (1,209,188) (17,704)
December 2009
5 Short 90 Day Euro$ (1,211,188) (18,508)
September 2009
83 Short U.S. Treasury Bonds 20 Year, (9,902,938) (166,883)
March 2008
176 Short U.S. Treasury Notes 10 Year, (20,542,500) (337,331)
March 2008
---------
Net Unrealized Appreciation.................................. $ 766,451
=========

</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2008 (UNAUDITED) continued

CREDIT DEFAULT SWAP CONTRACTS OPEN AT JANUARY 31, 2008:

<Table>
<Caption>
NOTIONAL UNREALIZED
SWAP COUNTERPARTY & BUY/SELL AMOUNT INTEREST TERMINATION APPRECIATION
REFERENCE OBLIGATION PROTECTION (000'S) RATE DATE (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------

Goldman Sachs International
Hartford Financial
Services Group Inc. Buy $1,000 0.12 % December 20, 2011 $18,012

Goldman Sachs International
Motorola, Inc. Buy 330 0.15 December 20, 2011 15,265

Goldman Sachs International
Motorola, Inc. Buy 670 0.157 December 20, 2011 30,824

Goldman Sachs International
Union Pacific Corp. Buy 500 0.20 December 20, 2011 6,331

Goldman Sachs International
Chubb Corp. Buy 950 0.10 March 20, 2012 11,998

Goldman Sachs International
Dell Inc. Buy 495 0.22 March 20, 2012 5,439

Citibank, NA, New York
Covidien Ltd. Buy 386 0.43 March 20, 2012 (1,061)

Citibank, NA, New York
Covidien Ltd. Buy 200 0.43 March 20, 2012 (549)

Citibank, NA, New York
Tyco Electronics Ltd. Buy 386 0.43 March 20, 2012 4,489

Citibank, NA, New York
Tyco Electronics Ltd. Buy 200 0.43 March 20, 2012 2,322

Citibank, NA, New York
Tyco International Ltd Buy 387 0.43 March 20, 2012 4,490

Citibank, NA, New York
Tyco International Ltd Buy 200 0.43 March 20, 2012 2,323

Bank of America N.A.
Yum Brands Inc. Buy 385 1.18 March 20, 2013 (5,512)

Citibank, NA, New York
Arrow Electronics Inc. Buy 430 1.00 March 20, 2015 (1,123)

Lehman Co.
Goodrich Co., Buy 165 0.46 March 20, 2018 (110)

Lehman Co.
Goodrich Co., Buy 230 0.45 March 20, 2018 36

JPMorgan Chase
Nordstrom Inc Buy 210 1.07 March 20, 2018 (1,260)
</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2008 (UNAUDITED) continued

JPMorgan Chase
Nordstrom Inc Buy $ 210 1.15 % March 20, 2018 $(2,593)

Bank of America
Nordstrom Inc Buy 250 1.03 March 20, 2018 (706)

Goldman Sachs International
Sealed Air Corp. Buy 80 1.24 March 20, 2018 (1,180)

Goldman Sachs International
Sealed Air Corp. Buy 165 1.08 March 20, 2018 (347)

Bank of America
Sealed Air Corp. Buy 280 1.12 March 20, 2018 --

Bank of America
Sealed Air Corp. Buy 140 1.08 March 20, 2018 --

Goldman Sachs International
Goodrich Co., Buy 240 0.47 March 20, 2018 --

Lehman Co.,
Dow Jones Sell 725 0.60 December 20, 2012 --

Lehman Co.,
Dow Jones Sell 360 0.60 December 20, 2012 (200)

Goldman Sachs International
Dow Jones Sell 360 0.60 December 20, 2012 (107)
-------

Net Unrealized Appreciation............................ $86,781
=======

</Table>

INTEREST RATE SWAP CONTRACTS OPEN AT JANUARY 31, 2008:

<Table>
<Caption>
NOTIONAL PAYMENTS PAYMENTS
AMOUNT RECEIVED MADE TERMINATION UNREALIZED
COUNTERPARTY (000'S) BY FUND BY FUND + DATE APPRECIATION
- ---------------------------------------------------------------------------------------------------------------------------

Citibank N.A. New York $ 7,000 Fixed Rate 5.337% Floating Rate 5.498% May 24, 2017 $ 617,960
JPMorgan Chase N.A. New York 13,000 Fixed Rate 5.34 Floating Rate 5.498 May 24, 2017 1,150,240
Deutsche Bank AG, New York 5,500 Fixed Rate 5.388 Floating Rate 5.05 May 25, 2017 507,540
JPMorgan Chase N.A. New York 7,200 Fixed Rate 5.448 Floating Rate 5.061 May 29, 2017 695,880
Citibank N.A. New York 5,500 Fixed Rate 5.448 Floating Rate 5.36 August 9, 2017 536,195
JPMorgan Chase N.A. New York 6,200 Fixed Rate 5.088 Floating Rate 5.725 September 11, 2017 415,462
Citibank N.A. New York 8,500 Fixed Rate 5.238 Floating Rate 5.20 September 27, 2017 667,420
----------
Total Unrealized Appreciation.............................................. $4,590,697
==========

</Table>

- ----------

<Table>

+ Floating rate represents USD-3 months LIBOR
</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
FINANCIAL STATEMENTS

Statement of Assets and Liabilities
January 31, 2008 (unaudited)

<Table>

Assets:
Investments in securities, at value (cost $552,316,868)
(including $19,498,546 for securities loaned)................ $704,359,863
Investment in affiliate, at value (cost $164,139,395).......... 164,139,395
Unrealized appreciation on open swap contracts................. 4,692,226
Receivable for:
Interest.................................................... 1,393,272
Periodic interest on swap contracts......................... 750,385
Dividends from affiliate.................................... 497,183
Dividends................................................... 381,368
Shares of beneficial interest sold.......................... 376,575
Principal paydowns.......................................... 25,045
Foreign withholding taxes reclaimed......................... 22,837
Prepaid expenses and other assets.............................. 157,915
------------
Total Assets................................................ 876,796,064
------------
Liabilities:
Collateral on securities loaned at value....................... 19,617,981
Swap contracts collateral due to brokers....................... 5,466,309
Unrealized depreciation on open swap contracts................. 14,748
Payable for:
Investments purchased....................................... 11,496,777
Shares of beneficial interest redeemed...................... 878,697
Periodic interest on swap contracts......................... 499,139
Distribution fee............................................ 323,812
Investment advisory fee..................................... 274,673
Variation margin............................................ 57,705
Administration fee.......................................... 57,267
Transfer agent fee.......................................... 807
Accrued expenses and other payables............................ 240,460
------------
Total Liabilities........................................... 38,928,375
------------
Net Assets.................................................. $837,867,689
============
Composition of Net Assets:
Paid-in-capital................................................ $688,500,887
Net unrealized appreciation.................................... 157,485,162
Accumulated undistributed net investment income................ 3,676,307
Accumulated net realized loss.................................. (11,794,667)
------------
Net Assets.................................................. $837,867,689
============
Class A Shares:
Net Assets..................................................... $528,213,925
Shares Outstanding (unlimited authorized, $.01 par value)...... 27,798,483
Net Asset Value Per Share................................... $19.00
======
Maximum Offering Price Per Share,
(net asset value plus 5.54% of net asset value)............. $20.05
======
Class B Shares:
Net Assets..................................................... $226,306,201
Shares Outstanding (unlimited authorized, $.01 par value)...... 11,867,896
Net Asset Value Per Share................................... $19.07
======
Class C Shares:
Net Assets..................................................... $ 46,649,222
Shares Outstanding (unlimited authorized, $.01 par value)...... 2,466,198
Net Asset Value Per Share................................... $18.92
======
Class D Shares:
Net Assets..................................................... $ 36,698,341
Shares Outstanding (unlimited authorized, $.01 par value)...... 1,928,465
Net Asset Value Per Share................................... $19.03
======

</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
FINANCIAL STATEMENTS continued

Statement of Operations
For the six months ended January 31, 2008 (unaudited)

<Table>

Net Investment Income:
Income
Dividends (net of $15,460 foreign withholding tax).............. $ 5,821,843
Interest........................................................ 5,627,463
Dividends from affiliate........................................ 3,997,708
Income from securities loaned -- net............................ 162,543
------------
Total Income................................................. 15,609,557
------------
Expenses
Investment advisory fee......................................... 1,942,599
Distribution fee (Class A shares)............................... 687,352
Distribution fee (Class B shares)............................... 1,296,655
Distribution fee (Class C shares)............................... 239,546
Transfer agent fees and expenses................................ 516,787
Administration fee.............................................. 370,019
Shareholder reports and notices................................. 91,017
Custodian fees.................................................. 49,077
Professional fees............................................... 31,898
Registration fees............................................... 18,774
Trustees' fees and expenses..................................... 7,882
Other........................................................... 51,057
------------
Total Expenses............................................... 5,302,663
Less: amounts waived/reimbursed................................. (99,809)
Less: expense offset............................................ (3,235)
------------
Net Expenses................................................. 5,199,619
------------
Net Investment Income........................................ 10,409,938
------------
Net Realized and Unrealized Gain (Loss):
Net Realized Gain on:
Investments..................................................... 30,328,085
Futures contracts............................................... 793,450
Option contracts................................................ 12,302
Swap contract................................................... 237,719
------------
Net Realized Gain............................................ 31,371,556
------------
Net Change in Unrealized Appreciation/Depreciation on:
Investments..................................................... (50,950,042)
Futures contracts............................................... 487,317
Swap contract................................................... 5,182,756
Option contracts................................................ (21,697)
------------
Net Change in Unrealized Appreciation/ Depreciation.......... (45,301,666)
------------
Net Loss..................................................... (13,930,110)
------------
Net Decrease.................................................... $ (3,520,172)
============

</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
FINANCIAL STATEMENTS continued

Statements of Changes in Net Assets

<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JANUARY 31, 2008 JULY 31, 2007
---------------- -------------
(unaudited)

Increase (Decrease) in Net Assets:
Operations:
Net investment income............................... $ 10,409,938 $ 21,101,645
Net realized gain................................... 31,371,556 53,008,977
Net change in unrealized appreciation/depreciation.. (45,301,666) 43,560,541
------------- ------------
Net Increase (Decrease).......................... (3,520,172) 117,671,163
------------- ------------
Dividends and Distributions to Shareholders from:
Net investment income
Class A shares................................... (7,083,832) (13,305,019)
Class B shares................................... (2,287,067) (5,310,954)
Class C shares................................... (454,527) (816,602)
Class D shares................................... (936,291) (1,770,149)
Net realized gain
Class A shares................................... (32,415,834) (31,756,812)
Class B shares................................... (14,658,763) (19,641,389)
Class C shares................................... (2,856,966) (2,774,086)
Class D shares................................... (3,877,507) (3,865,849)
------------- ------------
Total Dividends and Distributions................ (64,570,787) (79,240,860)
------------- ------------
Net increase (decrease) from transactions in shares
of beneficial interest............................ (38,709,523) 21,575,852
------------- ------------
Net Increase (Decrease).......................... (106,800,482) 60,006,155
Net Assets:
Beginning of period................................. 944,668,171 884,662,016
------------- ------------
End of Period
(Including accumulated undistributed net investment
income of $3,676,307 and $4,028,086, respectively).. $ 837,867,689 $944,668,171
============= ============

</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2008 (UNAUDITED)

1. Organization and Accounting Policies
Morgan Stanley Strategist Fund (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a diversified, open-end
management investment company. The Fund's investment objective is to maximize
the total return of its investments. 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 eighteen
months, 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 Fund will assess a 2% redemption fee, on Class A shares, Class B shares,
Class C shares, and Class D shares, which is paid directly to the Fund, for
shares redeemed or exchanged within seven days of purchase, subject to certain
exceptions. The redemption fee is designed to protect the Fund and its remaining
shareholders from the effects of short-term trading.

The following is a summary of significant accounting policies:

A. Valuation of Investments -- (1) an equity portfolio security listed or traded
on the New York Stock Exchange ("NYSE") or American Stock Exchange or other
exchange is valued at its latest sale price prior to the time when assets are
valued; if there were no sales that day, the security is valued at the mean
between the last reported bid and asked price; (2) an equity portfolio security
listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price;
if there were no sales that day, the security is valued at the mean between the
last reported bid and asked price; (3) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the mean
between the last reported bid and asked price. In cases where a security is
traded on more than one exchange, the security is valued on the exchange
designated as the primary market; (4) listed options are valued at the latest
sale price on the exchange on which they are listed unless no sales of such
options have taken place that day, in which case they are valued at the mean
between their latest bid asked price; (5) futures are valued at the latest price
published by the commodities exchange on which they trade; (6) credit
default/interest rate swaps are marked-to-market daily based upon quotations
from market makers; (7) when market quotations are not readily available
including circumstances under which Morgan Stanley Investment Advisors Inc. (the
"Investment Adviser"), determines that the latest sale price, the bid price or
the mean between the last reported bid and

Morgan Stanley Strategist Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2008 (UNAUDITED) continued

asked price do not reflect 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 Fund's Trustees.
Occasionally, developments affecting the closing prices of securities and other
assets may occur between the times at which valuations of such securities are
determined (that is, close of the foreign market on which the securities trade)
and the close of business on the NYSE. If developments occur during such periods
that are expected to materially affect the value of such securities, such
valuations may be adjusted to reflect the estimated fair value of such
securities as of the close of the NYSE, as determined in good faith by the
Fund's Trustees or by the Investment Adviser using a pricing service and/or
procedures approved by the Trustees of the Fund; (8) certain portfolio
securities may be valued by an outside pricing service approved by the Fund's
Trustees; (9) investments in open-end mutual funds, including the Morgan Stanley
Institutional Liquidity Funds, are valued at the net asset value as of the close
of each business day; and (10) short-term debt securities having a maturity date
of more than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a maturity date
of sixty days or less at the time of purchase are valued at amortized cost.

B. Accounting for Investments -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted and premiums are amortized over the life of the
respective securities and are included in interest income. 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. Futures Contracts -- A futures contract is an agreement between two parties
to buy and sell financial instruments or contracts based on financial indices at
a set price on a future date. Upon entering into such a contract, the Fund is
required to pledge to the broker cash, U.S. Government securities or other
liquid portfolio securities equal to the minimum initial margin requirements of
the applicable futures exchange. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments known as
variation margin are recorded by the Fund as unrealized gains and losses. Upon
closing of the contract, the Fund realizes a gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed.

Morgan Stanley Strategist Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2008 (UNAUDITED) continued

E. Options -- When the Fund writes a call or put option, an amount equal to the
premium received is included in the Fund's Statement of Assets and Liabilities a
liability which is subsequently marked-to-market to reflect the current market
value of the option written. If a written option either expires or the Fund
enters into a closing purchase transaction, the Fund realizes a gain or loss
without regard to any unrealized gain or loss on the underlying security or
currency and the liability related to such option is extinguished. If a written
call option is exercised, the Fund realizes a gain or loss from the sale of the
underlying security and the proceeds from such sale are increased by the premium
originally received. If a written put option is exercised, the amount of the
premium originally received reduces the cost of the security, which the Fund
purchases upon exercise of the option.

When the Fund purchases a call or put option, the premium paid is recorded as an
investment which and is subsequently marked-to-market to reflect the current
market value. If a purchased option expires, the Fund will realize a loss to the
extent of the premium paid. If the Fund enters into a closing sale transaction,
a gain or loss is realized for the difference between the proceeds from the sale
and the cost of the option. If a put option is exercised, the cost of the
security or currency sold upon exercise will be increased by the premium
originally paid. If a call option is exercised, the cost of the security
purchased upon exercise will be increased by the premium originally paid.

F. Credit Default Swaps -- A credit default swap is an agreement between two
parties to exchange the credit risk of an issuer. The Fund may purchase credit
protection on the referenced obligation of the credit default swap ("Buy
Contract"), or provide credit protection on the referenced obligation of the
credit default swap ("Sale Contract"). A buyer of a credit default swap is said
to buy protection by paying periodic fees in return for a contingent payment
from the seller if the issuer has a credit event such as bankruptcy, failure to
pay outstanding obligations or deteriorating credit while the swap is
outstanding. A seller of a credit default swap is said to sell protection and
thus collects the periodic fees and profits if the credit of the issuer remains
stable or improves while the swap is outstanding. If a credit event occurs, the
seller pays to the buyer the maximum payout amount limited to the notional
amount of the swap contract as disclosed in the table following the Portfolio of
Investments. During the term of the swap agreement, the Fund receives or pays
periodic fixed payments from or to the respective counterparty calculated at the
agreed upon interest rate applied to the notional amount. These periodic
payments are accrued daily and recorded as realized gains or losses in the
Statement of Operations. In addition, upon termination of the swap contract,
gains and losses are also realized. Any upfront payment received or paid by the
Fund is recorded as assets/liabilities on the Fund's books. The Fund may pay or
receive cash to collateralize credit default swap contracts. This cash
collateral is recorded as assets/liabilities on the Fund's books. Any cash
received may be invested in Morgan Stanley Institutional Liquidity Fund.

Morgan Stanley Strategist Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2008 (UNAUDITED) continued

G. Interest Rate Swaps -- Interest rate swaps involve the exchange of
commitments to pay and receive interest based on a notional principal amount.
Net periodic interest payments to be received or paid are accrued daily and are
recorded as realized gains or losses in the Statement of Operations. The Fund
may pay or receive cash to collateralize interest rate swap contracts. This cash
collateral is recorded as assets/liabilities on the Fund's books. Any cash
received may be invested in Morgan Stanley Institutional Liquidity Fund.

H. Securities Lending -- Fund may lend securities to qualified financial
institutions, such as broker-dealers, to earn additional income. Any increase or
decrease in the fair value of the securities loaned that might occur and any
interest earned or dividends declared on those securities during the term of the
loan would remain in the Fund. The Fund receives cash or securities as
collateral in an amount equal to or exceeding 100% of the current fair value of
the loaned securities. The collateral is marked-to-market daily, by the
securities lending agent, to ensure that a minimum of 100% collateral coverage
is maintained.

Based on pre-established guidelines, the securities lending agent invests any
cash collateral that is received in high-quality short-term investments.
Securities lending income is generated from the earnings on the invested
collateral and borrowing fees, less any rebates owed to the borrowers and
compensation to the lending agent.

The value of loaned securities and related collateral outstanding at January 31,
2008 were $19,498,546 and $19,617,981, respectively. The Fund received cash
collateral which was subsequently invested in a Repurchase Agreement as reported
in the Portfolio of Investments. The Fund has the right under the lending
agreement to recover the securities from the borrower on demand.

I. Federal Income Tax Policy -- It is the Fund's policy to comply with the
requirements of the Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no provision for federal income
taxes is required. The Fund files tax returns with the U.S. Internal Revenue
Service, New York State and New York City. The Fund adopted the provisions of
the Financial Accounting Standards Board ("FASB") Interpretation No. 48 ("FIN
48") Accounting for Uncertainty in Income Taxes on June 29, 2007. FIN 48 sets
forth a minimum threshold for financial statement recognition of the benefit of
a tax position taken or expected to be taken in a tax return. The implementation
of FIN 48 did not result in any unrecognized tax benefits in the accompanying
financial statements. If applicable, the Fund recognizes interest accrued
related to unrecognized tax benefits in interest expense and penalties in other
expenses in the Statement of Operations. Each of the tax years in the four year
period ended January 31, 2008, remains subject to examination by taxing
authorities.

Morgan Stanley Strategist Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2008 (UNAUDITED) continued

J. Dividends and Distributions to Shareholders -- Dividends and distributions to
shareholders are recorded on the ex-dividend date.

K. Use of Estimates -- 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.

2. Investment Advisory/Administration Agreement
Pursuant to an Investment Advisory Agreement with the Investment Adviser, the
Fund pays an advisory fee, accrued daily and payable monthly, by applying the
following annual rates to the net assets of the Fund determined as of the close
of each business day: 0.42% to the portion of the daily net assets not exceeding
$1.5 billion; and 0.395% to the portion of the daily net assets exceeding $1.5
billion.

Pursuant to an Administration Agreement with Morgan Stanley Services Company
Inc. (the "Administrator"), an affiliate of the Investment Adviser, the Fund
pays an administration fee, accrued daily and payable monthly, by applying the
annual rate of 0.08% to the Fund's daily net assets.

Under an agreement between the Administrator and State Street Bank and Trust
Company ("State Street"), State Street provides certain administrative services
to the Fund. For such services, the Administrator pays State Street a portion of
the fee the Administrator receives from the Fund.

Effective October 23, 2006, the Investment Adviser has agreed to cap the Fund's
total operating expenses, to the extent that such total operating expenses
exceed 0.92%, 1.67%, 1.64% and 0.67% for Class A, Class B, Class C and Class D,
respectively, for a period of two years.

3. Plan of Distribution
Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the
"Distributor"), an affiliate of the Investment Adviser and Administrator. 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 shares; (ii) Class
B -- up to 1.0% of the lesser of: (a) the average daily aggregate gross sales of
the Class B shares since the inception 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
Plan's inception upon which a contingent deferred sales charge has been imposed
or waived; or (b) the average daily

Morgan Stanley Strategist Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2008 (UNAUDITED) continued

net assets of Class B attributable to shares issued, net of related shares
redeemed, since the Plan's inception; and (iii) Class C -- up to 1.0% of the
average daily net assets of Class C shares.

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 totaled
$13,855,728 at January 31, 2008.

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 Financial Advisors and other authorized
financial representatives at the time of sale may be reimbursed in the
subsequent calendar year. For the six months ended January 31, 2008, the
distribution fee was accrued for Class A shares and Class C shares at the annual
rate of 0.25% and 0.98%, respectively.

The Distributor has informed the Fund that for the six months ended January 31,
2008, it received contingent deferred sales charges from certain redemptions of
the Fund's Class A shares, Class B shares and Class C shares of $1,105, $122,598
and $2,756, respectively and received $74,419 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 Fund invests in Morgan Stanley Institutional Liquidity Money Market
Portfolio - Institutional Class, an open-end management investment company
managed by the Investment Adviser. Investment advisory fees paid by the Fund are
reduced by an amount equal to the advisory and administrative service fees paid
by Morgan Stanley Institutional Liquidity Money Market Portfolio - Institutional
Class with respect to assets invested by the Fund in Morgan Stanley
Institutional Liquidity Money Market Portfolio - Institutional Class. For the
six months ended January 31, 2008, advisory fees paid were reduced by $99,809
relating to the Fund's investment in Morgan Stanley Institutional Liquidity
Money Market Portfolio - Institutional Class. Income distributions earned by the
Fund are recorded as dividends from affiliate in the Statement of Operations and
totaled $3,997,708 for the six months

Morgan Stanley Strategist Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2008 (UNAUDITED) continued

ended January 31, 2008. During the six months ended January 31, 2008, cost of
purchases and sales of investments in Morgan Stanley Institutional Liquidity
Money Market Portfolio - Institutional Class aggregated $304,868,564 and
$140,729,169, respectively.

The cost of purchases and proceeds from sales/maturities/prepayments of
portfolio securities, excluding short-term investments, for the six months ended
January 31, 2008 aggregated $169,465,962, and $269,240,502, respectively.
Included in the aforementioned are purchases and sales/maturities/prepayments of
U.S. Government securities of $32,233,908 and $81,689,738,

For the six months ended January 31, 2008, the Fund incurred brokerage
commissions of $60,859 with Morgan Stanley & Co., Inc. an affiliate of the
Investment Adviser, Administrator and Distributor, for portfolio transactions
executed on behalf of the Fund.

Morgan Stanley Trust, an affiliate of the Investment Adviser, Administrator and
Distributor, is the Fund's transfer agent.

The Fund has an unfunded noncontributory defined benefit pension plan covering
certain 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 factors which include years of service and compensation. The
Trustees voted to close the plan to new participants and eliminate the future
benefits growth due to increases to compensation after July 31, 2003. Aggregate
pension costs for the six months ended January 31, 2008, included in Trustees'
fees and expenses in the Statement of Operations amounted to $4,199. At January
31, 2008, the Fund had an accrued pension liability of $74,418, which is
included in accrued expenses in the Statement of Assets and Liabilities.

The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan")
which allows each independent Trustee to defer payment of all, or a portion, of
the fees he or she receives for serving on the Board of Trustees. Each eligible
Trustee generally may elect to have the deferred amounts credited with a return
equal to the total return on one or more of the Morgan Stanley funds that are
offered as investment options under the Compensation Plan.
Appreciation/depreciation and distributions received from these investments are
recorded with an offsetting increase/decrease in the deferred compensation
obligation and do not affect the net asset value of the Fund.

5. Expense Offset
The expense offset represents a reduction of the fees and expenses for interest
earned on cash balances maintained by the Fund with the transfer agent.

Morgan Stanley Strategist Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2008 (UNAUDITED) continued

6. Shares of Beneficial Interest
Transactions in shares of beneficial interest were as follows:

<Table>
<Caption>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
JANUARY 31, 2008 ENDED
------------------------- JULY 31, 2007
(unaudited) --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -------------

CLASS A SHARES
Sold................................... 322,386 $ 6,592,257 1,494,411 $ 30,597,552
Conversion from Class B................ 1,211,487 24,765,647 2,399,784 49,119,583
Shares issued in connection with the
acquisition of Morgan Stanley Total
Return Trust......................... -- -- 2,069,354 42,587,852
Reinvestment of dividends and
distributions........................ 1,797,984 35,480,468 2,015,755 40,461,442
Redeemed............................... (2,441,811) (49,858,996) (5,568,276) (114,112,196)
---------- ------------ ---------- -------------
Net increase - Class A................. 890,046 16,979,376 2,411,028 48,654,233
---------- ------------ ---------- -------------
CLASS B SHARES
Sold................................... 401,113 8,204,866 1,037,429 21,297,748
Conversion to Class A.................. (1,207,403) (24,765,647) (2,392,595) (49,119,583)
Shares issued in connection with the
acquisition of Morgan Stanley Total
Return Trust......................... -- -- 2,493,343 51,452,964
Reinvestment of dividends and
distributions........................ 747,511 14,797,544 1,086,761 21,872,588
Redeemed............................... (1,468,279) (29,976,673) (4,124,820) (84,802,154)
---------- ------------ ---------- -------------
Net decrease - Class B................. (1,527,058) (31,739,910) (1,899,882) (39,298,437)
---------- ------------ ---------- -------------
CLASS C SHARES
Sold................................... 165,590 3,352,404 328,572 6,694,874
Shares issued in connection with the
acquisition of Morgan Stanley Total
Return Trust......................... -- -- 259,866 5,327,801
Reinvestment of dividends and
distributions........................ 153,733 3,018,945 161,615 3,230,255
Redeemed............................... (206,076) (4,210,986) (425,849) (8,685,707)
---------- ------------ ---------- -------------
Net increase - Class C................. 113,247 2,160,363 324,204 6,567,223
---------- ------------ ---------- -------------
CLASS D SHARES
Sold................................... 231,852 4,700,869 449,278 9,204,592
Shares issued in connection with the
acquisition of Morgan Stanley Total
Return Trust......................... -- -- 234,923 4,839,680
Reinvestment of dividends and
distributions........................ 228,619 4,519,041 255,674 5,139,017
Redeemed............................... (1,773,398) (35,329,262) (659,448) (13,530,456)
---------- ------------ ---------- -------------
Net increase (decrease) - Class D...... (1,312,927) (26,109,352) 280,427 5,652,833
---------- ------------ ---------- -------------
Net increase (decrease) in Fund........ (1,836,594) $(38,709,523) 1,115,777 $ 21,575,852
========== ============ ========== =============

</Table>

Morgan Stanley Strategist Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2008 (UNAUDITED) continued

7. Purposes of and Risks Relating to Certain Financial Instruments
For hedging and investment purposes, the Fund may engage in transactions in
listed and over-the counter options and interest rate futures or in the case of
forward contracts, to facilitate settlement of foreign currency denominated
portfolio transactions or to manage foreign currency exposure associated with
foreign currency denominated securities ("derivative instruments").

These derivative instruments involve elements of market risk in excess of the
amounts reflected in the Statement of Asset and Liabilities. The Fund bears the
risk of an unfavorable change in the value of underlying securities or
currencies. Risks may also arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their contracts.

The Fund may enter into credit default swaps for hedging purposes to add
leverage to its portfolio or to gain exposure to a credit in which the Fund may
otherwise invest. Credit default swaps may involve greater risks than if a Fund
had invested in the issuer directly. Credit default swaps are subject to general
market risk, counterparty risk and credit risk. If the Fund is a buyer and no
credit event occurs, it will lose its investment. In addition, if the Fund is a
seller and a credit event occurs, the value of the referenced obligation
received by the Fund coupled with the periodic payments previously received may
be less than the maximum payout amount it pays to the buyer, resulting in a loss
to the Fund.

The Fund may enter into interest rate swaps and may purchase or sell interest
rate caps, floors and collars. The Fund expects to enter into these transactions
primarily to manage interest rate risk, hedge portfolio positions and preserve a
return or spread on a particular investment or portion of its portfolio. The
Fund may also enter into these transactions to protect against any increase in
the price of securities the Fund anticipates purchasing at a later date.
Interest rate swap transactions are subject to market risk, risk of default by
the other party to the transaction, risk of imperfect correlation and manager
risk. Such risks may exceed the related amounts shown in the Statement of Assets
and Liabilities

The Fund may lend securities to qualified financial institutions, such as
broker-dealers, to earn additional income. Risks in securities lending
transactions are that a borrower may not provide additional collateral when
required or return the securities when due, and that the value of the short-term
investments will be less than the amount of cash collateral plus any rebate that
is required to be returned to the borrower.

The Fund may invest in mortgage securities. These are fixed income securities
that derive their value from or represent interests in a pool of mortgages or
mortgage securities. An unexpectedly high rate of defaults on the mortgages held
by a mortgage pool may adversely affect the value of a mortgage

Morgan Stanley Strategist Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2008 (UNAUDITED) continued

backed security and could result in losses to a Fund. The risk of such defaults
is generally higher in the case of mortgage pools that include subprime
mortgages. Subprime mortgages refer to loans made to borrowers with weakened
credit histories or with a lower capacity to make timely payments on their
mortgages.

8. Federal Income Tax Status
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 tax purposes are reported as distributions of paid-in-capital.

As of July 31, 2007, the Fund had a net capital loss carryforward of $21,695,764
of which $16,985,549 will expire on July 31, 2009 and $4,710,215 will expire on
July 31, 2010 to offset future capital gains to the extent provided by
regulations.

As part of the Fund's acquisition of the assets of Morgan Stanley Total Return
Trust ("Total Return"), the fund obtained a net capital loss carryforward of
$249,441,388 from Total Return. Utilization of this carryforward is subject to
limitations imposed by the Internal Revenue Code and Treasury Regulations,
reducing the total carryforward available.

As of July 31, 2007, the Fund had temporary book/tax differences primarily
attributable to mark-to-market of open futures contracts, capital loss deferrals
on straddles and wash sales and book amortization of premiums on debt
securities.

9. Accounting Pronouncement
In September 2006, Statement of Financial Accounting Standards No. 157, Fair
Value Measurements (SFAS 157), was issued and is effective for fiscal years
beginning after November 15, 2007. SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. Management is currently evaluating the impact the adoption of SFAS
157 will have on the Fund's financial statement disclosures.

Morgan Stanley Strategist Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2008 (UNAUDITED) continued

10. Fund Acquisition
On October 23, 2006, the Fund acquired all the net assets of Morgan Stanley
Total Return based on the respective valuations as of the close of business on
October 20, 2006 pursuant to a Plan of Reorganization approved by the
shareholders of Total Return on September 27, 2006. The acquisition was
accomplished by a tax-free exchange of 2,069,354 Class A shares of the Fund at a
net asset value of $20.58 per share for 2,243,799 Class A shares of Total
Return; 2,493,343 Class B shares of the Fund at a net asset value of $20.64 per
share for 2,896,038 Class B shares of Total Return; 259,866 Class C shares of
the Fund at a net asset value of $20.50 per share for 300,296 Class C shares of
Total Return; and 234,923 Class D shares of the Fund at a net asset value of
$20.60 per share for 249,583 Class D shares of Total Return . The net assets of
the Fund and Total Return immediately before the acquisition were $892,922,870
and $104,208,298, respectively, including unrealized appreciation of $13,712,685
for Total Return. Immediately after the acquisition, the combined net assets of
the Fund amounted to $997,131,168.

Morgan Stanley 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, 2008 2007 2006 2005 2004 2003
---------------- -------- -------- -------- ------- -------
(unaudited)

Class A Shares
Selected Per Share Data:

Net asset value, beginning of period......... $20.57 $19.74 $18.31 $16.28 $14.72 $13.53
------ ------ ------ ------ ------ ------

Income (loss) from investment operations:
Net investment income++................... 0.26 0.50 0.34 0.27 0.20 0.14
Net realized and unrealized gains (loss).. (0.33) 2.07 1.40 2.03 1.58 1.21
------ ----- ----- ----- ----- -----

Total income (loss) from investment
operations.................................. (0.07) 2.57 1.74 2.30 1.78 1.35
------- ----- ----- ----- ----- -----

Less dividends and distributions from:
Net investment income..................... (0.27) (0.51) (0.31) (0.27) (0.22) (0.16)
Net realized gain......................... (1.23) (1.23) -- -- -- --
------ ------ ----- ----- ----- -----

Total dividends and distributions............ (1.50) (1.74) (0.31) (0.27) (0.22) (0.16)
------ ------ ------ ------ ------ ------

Net asset value, end of period............... $19.00 $20.57 $19.74 $18.31 $16.28 $14.72
====== ====== ====== ====== ====== ======

Total Return+................................ (0.53)%(1) 13.30% 9.60% 14.23% 12.10% 10.11%

Ratios to Average Net Assets(3):
Total expenses (before expense offset)....... 0.89 %(2)(4) 0.92% 0.93% 0.93% 0.95% 0.93%

Net investment income........................ 2.48 %(2)(4) 2.44% 1.78% 1.48% 1.24% 0.95%

Supplemental Data:
Net assets, end of period, in thousands...... $528,214 $553,395 $483,553 $510,016 $58,968 $53,951

Portfolio turnover rate...................... 24 %(1) 42% 43% 48% 42% 124%
</Table>

- ----------

<Table>

++ 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.
(4) Reflects waivers of certain Fund expenses in connection with the
investments in Morgan Stanley Institutional Liquidity Money Market
Portfolio - Institutional Class during the period. As a result of such
waivers the expenses as a percentage of its net assets had an effect of
0.02%.
</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
FINANCIAL HIGHLIGHTS continued

<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED JULY 31,
MONTHS ENDED ------------------------------------------------------
JANUARY 31, 2008 2007 2006 2005 2004 2003
---------------- ------ ------ ------ ------ ------
(unaudited)

Class B Shares
Selected Per Share Data:

Net asset value, beginning of period......... $20.63 $19.79 $18.36 $16.29 $14.73 $13.54
------ ------ ------ ------ ------ ------

Income (loss) from investment operations:
Net investment income++................... 0.18 0.35 0.19 0.11 0.08 0.02
Net realized and unrealized gain (loss)... (0.32) 2.07 1.41 2.08 1.58 1.22
------ ------ ------ ------ ------ ------

Total income (loss) from investment
operations.................................. (0.14) 2.42 1.60 2.19 1.66 1.24
------ ------ ------ ------ ------ ------

Less dividends and distributions from:
Net investment income..................... (0.19) (0.35) (0.17) (0.12) (0.10) (0.05)
Net realized gain......................... (1.23) (1.23) -- -- -- --
------ ------ ------ ------ ------ ------

Total dividends and distributions............ (1.42) (1.58) (0.17) (0.12) (0.10) (0.05)
------ ------ ------ ------ ------ ------

Net asset value, end of period............... $19.07 $20.63 $19.79 $18.36 $16.29 $14.73
====== ====== ====== ====== ====== ======

Total Return+................................ (0.92)%(1) 12.50 % 8.72 % 13.49 % 11.24 % 9.20 %

Ratios to Average Net Assets(3):
Total expenses (before expense offset)....... 1.64 %(2)(4) 1.67 % 1.68 % 1.68 % 1.71 % 1.73 %

Net investment income........................ 1.73 %(2)(4) 1.69 % 1.03 % 0.73 % 0.48 % 0.15 %

Supplemental Data:
Net assets, end of period, in millions....... $226 $276 $303 $398 $971 $1,042

Portfolio turnover rate...................... 24 %(1) 42 % 43 % 48 % 42 % 124 %
</Table>

- ----------

<Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
FINANCIAL HIGHLIGHTS continued

<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED JULY 31,
MONTHS ENDED -----------------------------------------------
JANUARY 31, 2008 2007 2006 2005 2004 2003
---------------- ------- ------- ------- ------- -------
(unaudited)

Class C Shares
Selected Per Share Data:

Net asset value, beginning of period......... $20.48 $19.66 $18.24 $16.21 $14.66 $13.46
------ ------ ------ ------ ------ ------

Income (loss) from investment operations:
Net investment income++................... 0.18 0.35 0.20 0.13 0.08 0.03
Net realized and unrealized gain (loss)... (0.32) 2.06 1.40 2.04 1.57 1.21
------ ----- ----- ----- ----- -----

Total income (loss) from investment
operations.................................. (0.14) 2.41 1.60 2.17 1.65 1.24
------- ----- ----- ----- ----- -----

Less dividends and distributions from:
Net investment income..................... (0.19) (0.36) (0.18) (0.14) (0.10) (0.04)
Net realized gain......................... (1.23) (1.23) -- -- -- --
------ ------ ----- ----- ----- -----

Total dividends and distributions............ (1.42) (1.59) (0.18) (0.14) (0.10) (0.04)
------ ------ ------ ------ ------ ------

Net asset value, end of period............... $18.92 $20.48 $19.66 $18.24 $16.21 $14.66
====== ====== ====== ====== ====== ======
Total Return+................................ (0.89)%(1) 12.47 % 8.79 % 13.44 % 11.25 % 9.09 %

Ratios to Average Net Assets(3):
Total expenses (before expense offset)....... 1.62 %(2)(4) 1.64 %(5) 1.64 % 1.65 % 1.71 % 1.73 %

Net investment income........................ 1.75 %(2)(4) 1.72 %(5) 1.07 % 0.76 % 0.48 % 0.15 %

Supplemental Data:
Net assets, end of period, in thousands...... $46,649 $48,192 $39,887 $41,621 $41,697 $36,351

Portfolio turnover rate...................... 24 %(1) 42 % 43 % 48 % 42 % 124 %
</Table>

- ----------

<Table>

++ 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.
(4) Reflects waivers of certain Fund expenses in connection with the
investments in Morgan Stanley Institutional Liquidity Money Market
Portfolio -- Institutional Class during the period. As a result of such
waivers the expenses as a percentage of its net assets had an effect of
0.02%.
(5) If the Fund had borne all of its expenses that were reimbursed or waived
by the Investment Adviser and Administrator, the annualized expense and
net investment income ratios would have been 1.67% and 1.69%,
respectively.
</Table>

See Notes to Financial Statements

Morgan Stanley Strategist Fund
FINANCIAL HIGHLIGHTS continued

Class D Shares
Selected Per Share Data:

Net asset value, beginning of period......... $20.59 $19.76 $18.34 $16.29 $14.73 $13.55
------ ------ ------ ------ ------ ------

Income (loss) from investment operations:
Net investment income++................... 0.28 0.55 0.39 0.30 0.24 0.16
Net realized and unrealized gain (loss)... (0.32) 2.07 1.39 2.06 1.58 1.21
------ ----- ----- ----- ----- -----

Total income (loss) from investment
operations.................................. (0.04) 2.62 1.78 2.36 1.82 1.37
------- ----- ----- ----- ----- -----

Less dividends and distributions from:
Net investment income..................... (0.29) (0.56) (0.36) (0.31) (0.26) (0.19)
Net realized gain......................... (1.23) (1.23) -- -- -- --
------ ------ ----- ----- ----- -----
Total dividends and distributions............ (1.52) (1.79) (0.36) (0.31) (0.26) (0.19)
------ ------ ------ ------ ------ ------

Net asset value, end of period............... $19.03 $20.59 $19.76 $18.34 $16.29 $14.73
------ ------ ------ ------ ------ ------

Total Return+................................ (0.40)%(1) 13.62% 9.80 % 14.60 % 12.37 % 10.25%

Ratios to Average Net Assets(3):
Total expenses (before expense offset)....... 0.64 %(2)(4) 0.67% 0.68 % 0.68 % 0.71 % 0.73%

Net investment income........................ 2.73 %(2)(4) 2.69% 2.03 % 1.73 % 1.48 % 1.15%

Supplemental Data:
Net assets, end of period, in thousands...... $36,698 $66,753 $58,521 $58,707 $60,177 $61,423

Portfolio turnover rate...................... 24 %(1) 42% 43 % 48 % 42 % 124%
</Table>

- ----------

<Table>

++ 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.
(4) Reflects waivers of certain Fund expenses in connection with the
investments in Morgan Stanley Institutional Liquidity Money Market
Portfolio - Institutional Class during the period. As a result of such
waivers the expenses as a percentage of its net assets had an effect of
0.02%.
</Table>

See Notes to Financial Statements

TRUSTEES

Frank L. Bowman
Michael Bozic
Kathleen A. Dennis
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Michael E. Nugent
W. Allen Reed
Fergus Reid

OFFICERS

Michael E. Nugent
Chairman of the Board

Ronald E. Robison
President and Principal Executive Officer

J. David Germany
Vice President

Dennis F. Shea
Vice President

Amy R. Doberman
Vice President

Carsten Otto
Chief Compliance Officer

Stefanie V. Chang Yu
Vice President

Francis J. Smith
Treasurer and Chief Financial Officer

Mary E. Mullin
Secretary

TRANSFER AGENT

Morgan Stanley Trust
Harborside Financial Center, Plaza Two
Jersey City, New Jersey 07311

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281

LEGAL COUNSEL

Clifford Chance US LLP
31 West 52nd Street
New York, NY 10019

COUNSEL TO THE INDEPENDENT TRUSTEES

Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, NY 10036

INVESTMENT ADVISER

Morgan Stanley Investment Advisors Inc.
522 Fifth Avenue
New York, New York 10036

The financial statements included herein have been taken from the records of the
Fund without examination by the independent auditors and accordingly they do not
express an opinion thereon.

This report is submitted for the general information of the shareholders of the
Fund. For more detailed information about the Fund, its fees and expenses and
other pertinent information, please read its Prospectus. The Fund's Statement of
Additional Information contains additional information about the Fund, including
its trustees. It is available, without charge, by calling (800) 869-NEWS.

This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective Prospectus. Read the
Prospectus carefully before investing.

Morgan Stanley Distributors Inc., member FINRA.

[MORGAN STANLEY LOGO]

MORGAN STANLEY FUNDS

Morgan Stanley
Strategist Fund

Semiannual Report
January 31, 2008

SRTSAN
IU08-0151OP-Y01/08

Item 2. Code of Ethics.

Not applicable for semiannual reports.

Item 3. Audit Committee Financial Expert.

Not applicable for semiannual reports.

Item 4. Principal Accountant Fees and Services

Not applicable for semiannual reports.

Item 5. Audit Committee of Listed Registrants.

Not applicable for semiannual reports.

Item 6.

Refer to Item 1.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.

Not applicable for semiannual reports.

Item 8. Portfolio Managers of Closed-End Management Investment Companies

Applicable only to reports filed by closed-end funds.

Item 9. Closed-End Fund Repurchases

Applicable to reports filed by closed-end funds.

Item 10. Submission of Matters to a Vote of Security Holders

Not applicable.

Item 11. Controls and Procedures

(a) The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.

(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the second fiscal quarter of the period covered
by this report that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.

Item 12. Exhibits

(a) Code of Ethics - Not applicable for semiannual reports.

(b) A separate certification for each principal executive officer and principal
financial officer of the registrant are attached hereto as part of EX-99.CERT.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

Morgan Stanley Strategist Fund

/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
March 20, 2008

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.

/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
March 20, 2008

/s/ Francis Smith
Francis Smith
Principal Financial Officer
March 20, 2008