<Page>
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)
1221 Avenue of the Americas, New York, New York 10020
(Address of principal executive offices) (Zip code)
Ronald E. Robison
1221 Avenue of the Americas, New York, New York 10020
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: July 31, 2003
Date of reporting period: July 31, 2003
Item 1 - Report to Shareholders
<Page>
WELCOME, SHAREHOLDER:
IN THIS REPORT, YOU'LL LEARN ABOUT HOW YOUR INVESTMENT IN MORGAN STANLEY
STRATEGIST FUND PERFORMED DURING THE ANNUAL PERIOD. THE PORTFOLIO MANAGEMENT
TEAM WILL PROVIDE AN OVERVIEW OF THE MARKET CLIMATE AND DISCUSS SOME OF THE
FACTORS THAT HELPED OR HINDERED PERFORMANCE DURING THE REPORTING PERIOD. IN
ADDITION, THIS REPORT INCLUDES THE FUND'S FINANCIAL STATEMENTS AND A LIST OF
FUND INVESTMENTS, AS WELL AS OTHER INFORMATION.
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 THE MARKET
VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND, THEREFORE, THE VALUE OF
THE FUND SHARES MAY BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN
LOSE MONEY INVESTING IN THIS FUND.
<Page>
FUND REPORT
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED JULY 31, 2003
<Table>
<Caption>
LEHMAN LIPPER
S&P BROTHERS FLEXIBLE
500 U.S. GOV./ PORTFOLIO
CLASS A CLASS B CLASS C CLASS D INDEX(1) CREDIT INDEX(2) FUND INDEX(3)
10.11% 9.20% 9.09% 10.25% 10.65% 7.11% 9.21%
</Table>
THE PERFORMANCE OF THE FUND'S FOUR SHARE CLASSES VARIES BECAUSE EACH HAS
DIFFERENT EXPENSES. THE FUND'S TOTAL RETURN FIGURES ASSUME THE REINVESTMENT OF
ALL DISTRIBUTIONS, BUT DO NOT REFLECT THE DEDUCTION OF ANY APPLICABLE SALES
CHARGES. SUCH COSTS WOULD LOWER PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS. SEE PERFORMANCE SUMMARY FOR STANDARDIZED PERFORMANCE
INFORMATION.
MARKET CONDITIONS
The 12-month period ended July 31, 2003 was a volatile time for the capital
markets. While the equity markets dominated the headlines, it was the bond
markets that provided a more dramatic story. The period began with the 10-year
bond at a yield of 4 percent, and ended at roughly the same level. That seeming
stability belied an enormous amount of volatility, however, as the bond market
veered from expectations of poor but stable economic conditions to fears of
outright deflation following a speech by an influential Federal Reserve banker.
These fears led to a steep drop in bond yields, which were then driven lower by
trading involving mortgage-backed securities and other technical events. During
this period, which lasted until the early spring of 2003, bonds handily
outperformed the stock market, which suffered from continued weakness in
economic and corporate results. Equity performance worsened in the early months
of 2003 as uncertainty over the war in Iraq led investors to seek the relative
safety of bonds.
The equity market began to rally sharply in March, however, as investors began
to perceive the beneficial effects of accommodative monetary and fiscal policy
on economic results and corporate earnings. The rally continued through the end
of the period, and erased much of the equity market's losses from earlier
months. The bond market continued to perform strongly through much of the equity
rally, with yields falling steadily until the first half of June. At that point,
however, signs of economic growth led investors to fear that interest rates were
unsustainably low. Bond prices (which move in opposition to yields) fell sharply
through the end of the period as investors allocated assets out of the debt
markets.
PERFORMANCE ANALYSIS
The Fund performed in line with its benchmark and peer indexes for the 12-month
period. In keeping with the Fund's mandate, we made only one major change to its
asset allocation during the period. For the bulk of the measurement period, we
maintained an overweighted position in the equity market and underweighted
bonds. This stance was a net drag on performance in the first part of the
period, as equity markets sagged while the bond market rallied. It helped
greatly, however, when the equity markets began their rally, and even more so
when bond yields spiked in the last weeks of June. We made a shift in allocation
at the very end of the period to take advantage of what we believed to be
oversold prices for bonds by increasing that position from a substantial to a
slight underweight.
The equity portion of the portfolio entered the period balanced between moderate
overexposures in the more cyclical technology and basic materials sectors and
defensive positions in consumer goods and foods. Conversely, the portfolio was
underweighted in utilities and consumer cyclicals. As stocks became cheaper
through March, we realigned the equity portfolio to benefit from an improving
economy. We increased the Fund's holdings of technology and basic materials and
added to its positions in industrial and other cyclical stocks. At the same
time, we kept the portfolio underweighted in consumer-related sectors such as
food
2
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and health care. This served the Fund well during the rally, which favored more
cyclical sectors.
Our expectations for an economic recovery led us to be fairly conservative in
the Fund's bond portfolio. We kept the Fund's interest rate sensitivity low
relative to that of the broader market, and kept its credit quality high. We
also invested in higher-coupon mortgage-backed securities that, while offering
protection from rising interest rates, underperformed for much of the period.
TOP 10 HOLDINGS
<Table>
U.S. Treasury Bond 14.2%
Federal National Mortgage Assoc. 4.3%
Federal Home Loan Mortgage Corp. 3.4%
Caterpillar Inc. 1.9%
Celgene Corp. 1.8%
Gilead Sciences Inc. 1.7%
Citigroup Inc. 1.7%
Honda Motor Co., Ltd 1.7%
Fisher Scientific Intl. 1.6%
American Express 1.6%
</Table>
PORTFOLIO COMPOSITION
<Table>
Common Stocks 70.5%
U.S. Government Agencies and Obligations 21.9%
Short-Term 8.2%
Corporate Bonds 6.4%
Asset-Backed 1.4%
</Table>
SUBJECT TO CHANGE DAILY. ALL PERCENTAGES ARE AS A PERCENTAGE OF NET ASSETS.
PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE DEEMED AS A
RECOMMENDATION TO BUY 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 MANAGER ACTIVELY ALLOCATES THE FUND'S ASSETS AMONG THE MAJOR ASSET
CLASSES OF EQUITY SECURITIES, FIXED-INCOME SECURITIES AND MONEY MARKET
INSTRUMENTS.
- - IN DETERMINING WHICH SECURITIES TO BUY, HOLD OR SELL FOR THE FUND, THE FUND'S
MANAGER 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.
ANNUAL 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 AND 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) 350-6414, 8:00 AM TO 8:00 PM, E.T.
ONCE OUR CUSTOMER SERVICE CENTER HAS RECEIVED YOUR INSTRUCTIONS, WE WILL BEGIN
SENDING INDIVIDUAL COPIES FOR EACH ACCOUNT WITHIN 30 DAYS.
PROXY VOTING POLICIES AND PROCEDURES
A DESCRIPTION OF THE FUND'S POLICIES AND PROCEDURES WITH RESPECT TO THE VOTING
OF PROXIES RELATING TO THE FUND'S PORTFOLIO SECURITIES IS AVAILABLE WITHOUT
CHARGE, UPON REQUEST, BY CALLING (800) 869-NEWS. THIS INFORMATION IS ALSO
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEBSITE AT
http://www.sec.gov.
3
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PERFORMANCE SUMMARY
[CHART]
PERFORMANCE OF A $10,000 INVESTMENT--CLASS B
<Table>
<Caption>
FUND S&P 500(1) LEHMAN(2) LIPPER(3)
7/31/1993 $ 10,000 $ 10,000 $ 10,000 $ 10,000
7/31/1994 $ 10,353 $ 10,516 $ 9,987 $ 10,328
7/31/1995 $ 12,016 $ 13,262 $ 10,998 $ 12,031
7/31/1996 $ 13,394 $ 15,459 $ 11,582 $ 13,091
7/31/1997 $ 17,376 $ 23,515 $ 12,832 $ 16,871
7/31/1998 $ 19,595 $ 28,053 $ 13,867 $ 18,857
7/31/1999 $ 21,403 $ 33,720 $ 14,190 $ 20,828
7/31/2000 $ 24,140 $ 36,744 $ 15,001 $ 22,125
7/31/2001 $ 22,439 $ 31,476 $ 16,907 $ 20,835
7/31/2002 $ 18,675 $ 24,044 $ 18,071 $ 17,485
7/31/2003 $ 20,394(^) $ 26,604 $ 19,357 $ 19,095
</Table>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE. WHEN YOU SELL FUND SHARES, THEY MAY BE WORTH
LESS THAN THEIR ORIGINAL COST. THE GRAPH AND TABLE DO 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.
4
<Page>
AVERAGE ANNUAL TOTAL RETURNS--PERIOD ENDED JULY 31, 2003
<Table>
<Caption>
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES+ CLASS D SHARES++
07/28/97 10/31/88 07/28/97 07/28/97
SYMBOL SRTAX SRTBX SRTCX SRTDX
1 YEAR 10.11(4)% 9.20(4)% 9.09(4)% 10.25(4)%
4.33(5) 4.20(5) 8.09(5)
5 YEARS 1.57(4) 0.80(4) 0.77(4) 1.77(4)
0.48(5) 0.52(5) 0.77(5)
10 YEARS 7.39(4)
7.39(5)
SINCE INCEPTION 3.78(4) 9.41(4) 2.98(4) 4.01(4)
2.86(5) 9.41(5) 2.98(5)
</Table>
- ----------
Notes on Performance
(1) THE STANDARD AND POOR'S 500 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 DOES NOT INCLUDE ANY EXPENSES, 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 DOES NOT
INCLUDE ANY EXPENSES, FEES OR SALES CHARGES. 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.
(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.
* 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.
+ THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C IS 1% FOR SHARES
REDEEMED WITHIN ONE YEAR OF PURCHASE.
++ CLASS D HAS NO SALES CHARGE.
^ CLOSING VALUE ASSUMING A COMPLETE REDEMPTION ON JULY 31, 2003.
5
<Page>
MORGAN STANLEY STRATEGIST FUND
PORTFOLIO OF INVESTMENTS - JULY 31, 2003
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------
COMMON STOCKS (70.5%)
AEROSPACE & DEFENSE (1.5%)
198,000 Northrop Grumman Corp. $ 18,263,520
---------------
AGRICULTURAL COMMODITIES/MILLING (1.3%)
1,200,000 Archer-Daniels-Midland Co. 15,768,000
---------------
APPAREL/FOOTWEAR RETAIL (2.4%)
900,000 Gap, Inc. (The) 16,191,000
270,000 Ross Stores, Inc. 12,339,000
---------------
28,530,000
---------------
BIOTECHNOLOGY (5.3%)
100,000 Amgen Inc.* 6,958,000
450,000 Applera Corp. - Celera Genomics Group* 4,527,000
570,000 Celgene Corp.* 20,867,700
199,000 Cephalon, Inc.* 9,946,020
304,000 Gilead Sciences, Inc.* 20,839,200
---------------
63,137,920
---------------
CHEMICALS: MAJOR DIVERSIFIED (1.4%)
480,000 Dow Chemical Co. (The) 16,944,000
---------------
COMPUTER COMMUNICATIONS (1.2%)
762,000 Cisco Systems, Inc.* 14,874,240
---------------
COMPUTER PROCESSING HARDWARE (2.6%)
846,000 Apple Computer, Inc.* 17,808,300
398,000 Dell Inc.* 13,404,640
---------------
31,212,940
---------------
CONTRACT DRILLING (0.7%)
450,000 Diamond Offshore Drilling, Inc. 8,757,000
---------------
DISCOUNT STORES (1.0%)
320,040 Costco Wholesale Corp.* 11,857,482
---------------
ELECTRICAL PRODUCTS (0.5%)
103,000 Emerson Electric Co. 5,531,100
---------------
ELECTRONIC COMPONENTS (0.6%)
600,000 Flextronics International, Ltd. (Singapore)* 6,600,000
---------------
ELECTRONIC PRODUCTION EQUIPMENT (1.0%)
636,900 Applied Materials, Inc.* 12,419,550
---------------
ENVIRONMENTAL SERVICES (1.5%)
735,000 Waste Management, Inc. 17,559,150
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
6
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------
FINANCIAL CONGLOMERATES (4.8%)
430,000 American Express Co. $ 18,993,100
450,000 Citigroup Inc. 20,160,000
505,000 J.P. Morgan Chase & Co. 17,700,250
---------------
56,853,350
---------------
FINANCIAL PUBLISHING/SERVICES (1.3%)
845,000 eSPEED, Inc (Class A)* 15,750,800
---------------
FOOD: MAJOR DIVERSIFIED (0.8%)
282,000 Kellogg Co. 9,681,060
---------------
FOOD: MEAT/FISH/DAIRY (1.4%)
551,820 Dean Foods Co.* 16,515,973
---------------
INDUSTRIAL CONGLOMERATES (1.5%)
630,000 General Electric Co. 17,917,200
---------------
INFORMATION TECHNOLOGY SERVICES (2.5%)
835,000 Accenture Ltd. (Class A) (Bermuda)* 16,215,700
162,000 International Business Machines Corp. 13,162,500
---------------
29,378,200
---------------
INTERNET RETAIL (1.4%)
400,000 Amazon.com, Inc.* 16,688,000
---------------
MAJOR BANKS (2.5%)
180,000 Bank of America Corp. 14,862,600
300,000 Wells Fargo & Co. 15,159,000
---------------
30,021,600
---------------
MANAGED HEALTH CARE (1.0%)
285,000 Oxford Health Plans, Inc.* 12,169,500
---------------
MEDIA CONGLOMERATES (0.8%)
600,000 AOL Time Warner Inc.* 9,258,000
---------------
MEDICAL SPECIALTIES (1.5%)
260,000 Bard (C.R.), Inc. 17,825,600
---------------
MOTOR VEHICLES (1.7%)
1,000,000 Honda Motor Co., Ltd. (ADR) (Japan) 19,760,000
---------------
MULTI-LINE INSURANCE (1.3%)
240,937 American International Group, Inc. 15,468,155
---------------
OIL & GAS PRODUCTION (1.1%)
290,000 Burlington Resources Inc. 13,389,300
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
7
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------
OILFIELD SERVICES/EQUIPMENT (2.5%)
701,000 Halliburton Co. $ 15,541,170
388,000 Smith International, Inc.* 13,905,920
---------------
29,447,090
---------------
PACKAGED SOFTWARE (2.0%)
400,000 Microsoft Corp. 10,560,000
1,112,000 Oracle Corp.* 13,344,000
---------------
23,904,000
---------------
PHARMACEUTICALS: MAJOR (3.7%)
197,000 Lilly (Eli) & Co. 12,970,480
563,000 Pfizer Inc. 18,781,680
271,000 Wyeth 12,352,180
---------------
44,104,340
---------------
PROPERTY - CASUALTY INSURERS (2.9%)
420,000 ACE Ltd. (Bermuda) 13,855,800
250,000 Allstate Corp. (The) 9,507,500
690,180 Travelers Property Casualty Corp. (Class B) 11,139,505
---------------
34,502,805
---------------
RAILROADS (1.4%)
150,000 Burlington Northern Santa Fe Corp. 4,134,000
400,000 CSX Corp. 12,520,000
---------------
16,654,000
---------------
SEMICONDUCTORS (3.2%)
481,700 Intel Corp. 12,018,415
1,067,300 Micron Technology, Inc.* 15,625,272
1,058,832 Taiwan Semiconductor Manufacturing Co. Ltd. (ADR) (Taiwan)* 10,588,320
---------------
38,232,007
---------------
SPECIALTY STORES (1.2%)
381,440 Bed Bath & Beyond, Inc.* 14,811,315
---------------
STEEL (2.4%)
250,000 Nucor Corp. 12,330,000
1,010,000 United States Steel Corp. 15,917,600
---------------
28,247,600
---------------
TELECOMMUNICATION EQUIPMENT (2.3%)
1,800,000 Motorola, Inc. 16,272,000
693,000 Nokia Corp. (ADR) (Finland) 10,602,900
---------------
26,874,900
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
8
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------
TRUCKS/CONSTRUCTION/FARM MACHINERY (1.9%)
343,000 Caterpillar Inc. $ 23,142,210
---------------
WHOLESALE DISTRIBUTORS (1.6%)
520,000 Fisher Scientific International, Inc.* 19,656,000
---------------
WIRELESS TELECOMMUNICATIONS (0.8%)
550,000 Nextel Communications, Inc. (Class A)* 10,043,000
---------------
TOTAL COMMON STOCKS
(COST $690,214,865) 841,750,907
---------------
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
--------- ------ --------
CORPORATE BONDS (6.4%)
AEROSPACE & DEFENSE (0.2%)
$ 315 Boeing Co. 6.625% 02/15/38 303,243
190 Goodrich Corp. 7.625 12/15/12 206,458
540 Lockheed Martin Corp. 7.75 05/01/26 611,648
325 Lockheed Martin Corp. 8.50 12/01/29 398,732
335 Raytheon Co. 6.15 11/01/08 364,295
897 Systems 2001 Asset Trust - 144A** 6.664 09/15/13 1,003,799
---------------
2,888,175
---------------
AIRLINES (0.3%)
1,358 American West Airlines 7.10 04/02/21 1,387,307
1,125 Continental Airlines, Inc. 6.90 01/02/18 1,058,860
575 Southwest Airlines Co. 5.496 11/01/06 609,403
---------------
3,055,570
---------------
BROADCASTING (0.1%)
610 Clear Channel Communications, Inc. 7.65 09/15/10 697,925
---------------
BUILDING PRODUCTS (0.0%)
195 Celulosa Arauco Constitution - 144A** (Chile) 5.125 07/09/13 182,643
265 Masco Corp. 6.50 08/15/32 262,941
---------------
445,584
---------------
CABLE/SATELLITE TV (0.2%)
430 Comcast Corp. 6.50 01/15/15 448,391
485 Cox Communications, Inc. 7.125 10/01/12 541,790
460 Liberty Media Corp. 5.70 05/15/13 428,020
550 TCI Communications, Inc. 7.875 02/15/26 598,857
---------------
2,017,058
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
9
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------
CHEMICALS: AGRICULTURAL (0.0%)
$ 305 Monsanto Co. 7.375% 08/15/12 $ 343,409
---------------
CONTAINERS/PACKAGING (0.0%)
355 Sealed Air Corp - 144A** 5.625 07/15/13 339,473
---------------
DEPARTMENT STORES (0.2%)
300 Federated Department Stores, Inc. 6.625 09/01/08 329,642
600 Federated Department Stores, Inc. 6.90 04/01/29 610,095
980 May Department Stores Co. 5.95 11/01/08 1,033,770
---------------
1,973,507
---------------
DRUGSTORE CHAINS (0.1%)
1,505 CVS Corp. 5.625 03/15/06 1,620,476
---------------
ELECTRIC UTILITIES (0.3%)
220 Appalachian Power Co. (Series H) 5.95 05/15/33 197,816
250 Cincinnati Gas & Electric Co. 5.70 09/15/12 259,285
180 Cincinnati Gas & Electric Co. (Series A) 5.40 06/15/33 157,032
215 Cincinnati Gas & Electric Co. (Series B) 5.375 06/15/33 186,851
175 Columbus Southern Power Co. - 144A** 6.60 03/01/33 176,447
480 Constellation Energy Group, Inc. 7.60 04/01/32 515,972
140 Detroit Edison Co. 6.125 10/01/10 148,587
135 Detroit Edison Co. 6.35 10/15/32 134,806
345 Duke Energy Corp. 4.50 04/01/10 341,314
265 Exelon Corp. 6.75 05/01/11 291,790
170 Florida Power & Light Co. 4.85 02/01/13 168,974
200 Ohio Power Co. - 144A** 6.60 02/15/33 201,673
380 Public Service Electric & Gas Co. 5.00 01/01/13 373,478
155 South Carolina Electric & Gas Co. 5.30 05/15/33 136,913
70 Wisconsin Electric Power Co. 5.625 05/15/33 64,431
125 Wisconsin Energy Corp. 6.20 04/01/33 120,719
---------------
3,476,088
---------------
ELECTRICAL PRODUCTS (0.1%)
620 Cooper Industries Inc. 5.25 07/01/07 652,519
---------------
ENVIRONMENTAL SERVICES (0.0%)
305 Waste Management, Inc. 6.875 05/15/09 338,163
---------------
FINANCE/RENTAL/LEASING (0.4%)
1,135 American General Finance Corp. 5.875 07/14/06 1,230,926
710 Countrywide Home Loans, Inc. 3.25 05/21/08 686,347
50 Ford Motor Credit Co. 7.25 10/25/11 49,493
635 Ford Motor Credit Co. 7.375 10/28/09 648,106
200 Household Finance Corp. 6.375 10/15/11 213,694
185 Household Finance Corp. 6.40 06/17/08 202,977
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
10
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------
$ 280 Household Finance Corp. 6.75% 05/15/11 $ 306,283
235 International Lease Finance Corp. 3.75 08/01/07 235,220
100 MBNA Capital I (Series A) 8.278 12/01/26 100,166
705 MBNA Corp. 6.125 03/01/13 729,319
---------------
4,402,531
---------------
FINANCIAL CONGLOMERATES (0.8%)
910 AXA Financial Inc. 6.50 04/01/08 1,002,432
350 Boeing Capital Corp. 6.10 03/01/11 363,045
150 Boeing Capital Corp. 6.50 02/15/12 157,713
920 Chase Manhattan Corp. 6.00 02/15/09 990,849
530 Citigroup Inc. 6.00 02/21/12 560,652
490 Citigroup Inc. 5.625 08/27/12 499,995
1,325 General Electric Capital Corp. 6.75 03/15/32 1,388,979
240 General Motors Acceptance Corp. 4.50 07/15/06 240,454
485 General Motors Acceptance Corp. 6.875 09/15/11 473,830
1,480 General Motors Acceptance Corp. 8.00 11/01/31 1,365,566
1,035 Prudential Holdings, LLC - 144A** 8.695 12/18/23 1,205,941
1,250 Prudential Holdings, LLC (Series B FSA) 144A** 7.245 12/18/23 1,347,488
---------------
9,596,944
---------------
FOOD RETAIL (0.1%)
70 Albertson's Inc. 7.45 08/01/29 73,057
515 Albertson's Inc. 7.50 02/15/11 576,556
985 Kroger Co. 6.80 04/01/11 1,068,242
---------------
1,717,855
---------------
FOOD: MAJOR DIVERSIFIED (0.0%)
65 Kraft Foods Inc. 5.625 11/01/11 65,655
390 Kraft Foods Inc. 6.25 06/01/12 408,250
---------------
473,905
---------------
FOREIGN GOVERNMENT OBLIGATIONS (0.1%)
925 United Mexican States Corp. (Mexico) 8.00 09/24/22 948,125
800 United Mexican States Corp. (Mexico) 8.30 08/15/31 834,000
---------------
1,782,125
---------------
FOREST PRODUCTS (0.1%)
680 Weyerhaeuser Co. 6.75 03/15/12 724,374
---------------
GAS DISTRIBUTORS (0.1%)
460 Consolidated Natural Gas Co. 6.25 11/01/11 495,734
415 Ras Laffan Liquid Natural Gas Co.
Ltd. - 144A** (Qatar) 8.294 03/15/14 468,950
185 Sempra Energy 6.00 02/01/13 191,351
---------------
1,156,035
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
11
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------
HOME BUILDING (0.0%)
$ 280 Centex Corp. 7.875% 02/01/11 $ 320,214
220 Pulte Homes, Inc. 6.375 05/15/33 198,824
---------------
519,038
---------------
HOME FURNISHINGS (0.0%)
290 Mohawk Industries Inc. 7.20 04/15/12 318,839
---------------
HOME IMPROVEMENT CHAINS (0.1%)
750 Lowe's Companies, Inc. 8.25 06/01/10 904,955
---------------
HOSPITAL/NURSING MANAGEMENT (0.2%)
1,950 Manor Care, Inc. 8.00 03/01/08 2,123,063
---------------
HOTELS/RESORTS/CRUISELINES (0.2%)
510 Hyatt Equities LLC - 144A** 6.875 06/15/07 517,442
1,255 Marriott International, Inc. (Series E) 7.00 01/15/08 1,385,031
---------------
1,902,473
---------------
INDUSTRIAL CONGLOMERATES (0.1%)
885 Honeywell International, Inc. 6.125 11/01/11 948,393
335 Hutchinson Whampoa International Ltd. - 144A**
(Virgin Islands) 6.50 02/13/13 333,820
---------------
1,282,213
---------------
INFORMATION TECHNOLOGY SERVICES (0.0%)
45 Electronic Data Systems Corp. 7.125 10/15/09 47,475
260 Electronic Data Systems Corp. - 144A** 6.00 08/01/13 243,164
---------------
290,639
---------------
INTEGRATED OIL (0.2%)
700 Amerada Hess Corp. 7.875 10/01/29 759,574
995 Conoco Inc. 6.95 04/15/29 1,075,340
---------------
1,834,914
---------------
INVESTMENT BANKS/BROKERS (0.1%)
365 Goldman Sachs Group Inc. 6.125 02/15/33 347,785
640 Goldman Sachs Group Inc. 6.60 01/15/12 697,609
395 Goldman Sachs Group Inc. 6.875 01/15/11 440,281
---------------
1,485,675
---------------
LIFE/HEALTH INSURANCE (0.2%)
1,005 American General Corp. 7.50 07/15/25 1,134,435
800 John Hancock 144A** 7.375 02/15/24 856,016
---------------
1,990,451
---------------
MAJOR BANKS (0.1%)
180 Bank One Corp. 6.00 02/17/09 194,525
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
12
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------
$ 275 Citicorp. 6.75% 08/15/05 $ 299,777
485 Fleetboston Financial Corp. 7.25 09/15/05 535,880
595 UFJ Finance Aruba AEC (Aruba) 6.75 07/15/13 575,944
---------------
1,606,126
---------------
MAJOR TELECOMMUNICATIONS (0.3%)
420 AT&T Corp. 8.50 11/15/31 444,224
235 British Telecom PLC (United Kingdom) 8.875 12/15/30 288,665
600 Deutsche Telekom International
Finance Corp. (Netherlands) 8.75 06/15/30 702,510
1,700 GTE Corp. 6.94 04/15/28 1,726,008
365 Verizon Global Funding Corp. 7.75 12/01/30 407,241
---------------
3,568,648
---------------
MANAGED HEALTH CARE (0.2%)
920 Aetna, Inc. 7.875 03/01/11 1,061,771
225 Cigna Corp. 6.375 10/15/11 236,055
530 Wellpoint Health Network, Inc. 6.375 06/15/06 583,378
---------------
1,881,204
---------------
MEDIA CONGLOMERATES (0.2%)
190 AOL Time Warner Inc. 7.70 05/01/32 199,289
1,250 News America Holdings, Inc. 7.75 12/01/45 1,342,264
310 Time Warner, Inc. 6.625 05/15/29 287,494
---------------
1,829,047
---------------
MOTOR VEHICLES (0.2%)
630 DaimlerChrysler North American Holdings Co. 8.50 01/18/31 687,956
325 Ford Motor Co 6.625 10/01/28 255,991
1,415 Ford Motor Co. 7.45 07/16/31 1,208,397
---------------
2,152,344
---------------
MULTI-LINE INSURANCE (0.4%)
1,920 Farmers Exchange Capital - 144A** 7.05 07/15/28 1,636,704
95 Hartford Financial Services Group, Inc. 2.375 06/01/06 93,452
900 Hartford Financial Services Group, Inc. 7.90 06/15/10 1,053,788
295 Nationwide Mutual Insurance Co. - 144A** 7.50 02/15/24 291,271
1,090 Nationwide Mutual Insurance Co. - 144A** 8.25 12/01/31 1,217,305
---------------
4,292,520
---------------
OIL & GAS PRODUCTION (0.1%)
70 Devon Financing Corp. 6.875 09/30/11 77,224
140 Devon Financing Corp 7.875 09/30/31 159,909
125 Kerr-McGee Corp. 5.875 09/15/06 133,763
165 Kerr-McGee Corp. 6.875 09/15/11 179,560
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
13
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------
$ 430 Pemex Project Funding Master Trust 8.00% 11/15/11 $ 466,550
285 Pemex Project Funding Master Trust 8.625 02/01/22 297,825
145 Pemex Project Funding Master Trust 9.125 10/13/10 167,475
70 Petro-Canada 4.00 07/15/13 63,145
280 Petro-Canada 5.35 07/15/33 240,685
---------------
1,786,136
---------------
OIL REFINING/MARKETING (0.0%)
315 Marathon Oil Corp. 6.80 03/15/32 317,752
---------------
OTHER CONSUMER SERVICES (0.1%)
300 Cendant Corp. 7.125 03/15/15 325,083
460 Cendant Corp. 7.375 01/15/13 511,106
---------------
836,189
---------------
OTHER METALS/MINERALS (0.1%)
355 BHP Finance USA Ltd. (Australia) 4.80 04/15/13 344,050
580 Inco Ltd. (Canada) 7.20 09/15/32 575,743
190 Inco Ltd. (Canada) 7.75 05/15/12 211,311
---------------
1,131,104
---------------
PROPERTY - CASUALTY INSURERS (0.0%)
295 Florida Windstorm Underwrting Assoc. - 144A** 7.125 02/25/19 324,009
---------------
PULP & PAPER (0.1%)
390 International Paper Co. 5.85 10/30/12 399,460
305 International Paper Co. - 144A** 5.30 04/01/15 289,702
290 MeadWestVaco Corp. 6.85 04/01/12 316,299
305 Sappi Papier Holding AG - 144A** (Austria) 6.75 06/15/12 324,219
---------------
1,329,680
---------------
REAL ESTATE DEVELOPMENT (0.1%)
999 World Financial Properties - 144A** 6.91 09/01/13 1,095,203
---------------
REAL ESTATE INVESTMENT TRUSTS (0.2%)
770 EOP Operating LP 6.763 06/15/07 847,772
145 Simon Property Group LP 6.35 08/28/12 151,583
700 Simon Property Group LP 6.375 11/15/07 758,998
375 Vornado Realty 5.625 06/15/07 390,167
---------------
2,148,520
---------------
SAVINGS BANKS (0.0%)
470 Washington Mutual Bank 5.50 01/15/13 475,692
---------------
SERVICES TO THE HEALTH INDUSTRY (0.1%)
230 Anthem Insurance - 144A** 9.00 04/01/27 280,917
650 Anthem Insurance - 144A** 9.125 04/01/10 783,435
---------------
1,064,352
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
14
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------
TOBACCO (0.0%)
$ 360 Altria Group, Inc. 7.75% 01/15/27 $ 347,061
---------------
TOTAL CORPORATE BONDS
(COST $73,596,579) 76,539,563
---------------
U.S. GOVERNMENT AGENCY MORTGAGE BACKED
SECURITIES (7.7%)
Federal Home Loan Mortgage Corp.
34,450 6.50 + 35,451,117
2,275 7.50 + 2,418,609
2,353 7.50 11/01/29-08/01/32 2,501,280
36 8.00 07/01/30 38,372
Federal National Mortgage Assoc.
3,425 7.00 + 3,589,828
16,789 7.00 12/01/29-01/01/33 17,603,511
12,631 7.50 09/01/29-03/01/32 13,389,144
15,741 8.00 05/01/09-02/01/32 16,911,607
---------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE BACKED
SECURITIES
(COST $91,847,568) 91,903,468
---------------
U.S. GOVERNMENT OBLIGATIONS (14.2%)
250 U.S. Treasury Bond 5.50 08/15/28 249,610
5,550 U.S. Treasury Bond 8.125 08/15/19 7,280,473
9,900 U.S. Treasury Bond 8.125 08/15/21 13,069,931
3,000 U.S. Treasury Note 3.50 11/15/06 3,087,423
150,000 U.S. Treasury Note 3.625 05/15/13 139,945,350
4,850 U.S. Treasury Note 6.50 02/15/10 5,584,697
---------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $171,232,806) 169,217,484
---------------
ASSET-BACKED SECURITIES (1.4%)
FINANCE/RENTAL/LEASING
2,300 American Express Credit Account 5.53 10/15/08 2,470,483
196 BMW Vehicle Owner Trust 2002-A 2.83 12/25/04 196,318
2,960 Chase Credit Card Master Trust 2001-4A 5.50 11/17/08 3,182,597
5 Chase Manhattan Auto Owner Trust 2002-A 2.63 10/15/04 4,748
2,230 Citibank Credit Issuance Trust 2000-A1 6.90 10/15/07 2,443,339
524 Daimler Chrysler Auto Trust 2000-E 6.11 11/08/04 526,198
1,165 Daimler Chrysler Auto Trust 2002-A 2.90 12/06/04 1,169,132
650 Ford Credit Auto Owner Trust 2001-B 5.12 10/15/04 653,855
319 Ford Credit Auto Owner Trust 2002-B 2.97 06/15/04 319,127
158 Ford Credit Auto Owner Trust 2002-B 6.74 06/15/04 158,808
993 Harley-Davidson Motorcycle Trust 2002-1 3.02 09/15/06 999,473
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
15
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------
$ 52 Honda Auto Receivables Owner Trust 2000-1 6.62% 07/15/04 $ 51,728
674 Honda Auto Receivables Owner Trust 2002-2 2.91 09/15/04 675,626
1,550 MBNA Master Credit Card Trust 5.90 08/15/11 1,684,464
70 National City Auto Receivables Trust 2002-A 3.00 01/15/05 70,122
1,800 Nissan Auto Receivables Owner Trust 2001-C 4.80 02/15/07 1,866,770
443 Nissan Auto Receivables Owner Trust 2002-B 3.07 08/16/04 443,486
---------------
TOTAL ASSET-BACKED SECURITIES
(COST $16,198,821) 16,916,274
---------------
SHORT-TERM INVESTMENTS (8.2%)
U.S. GOVERNMENT OBLIGATIONS (a) (0.1%)
500 U.S. Treasury Bill*** 1.15 09/25/03 499,122
400 U.S. Treasury Bill*** 0.935 01/15/04 398,265
---------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $897,387) 897,387
---------------
REPURCHASE AGREEMENTS (8.1%)
36,900 Joint repurchase agreement account
(dated 07/31/03; proceeds $36,901,138) (b)
(COST $36,900,000) 1.11 08/01/03 36,900,000
59,703 The Bank of New York
(dated 07/31/03; proceeds $59,704,398) (c)
(COST $59,702,947) 0.875 08/01/03 59,702,947
---------------
TOTAL REPURCHASE AGREEMENTS
(COST $96,602,947) 96,602,947
---------------
TOTAL SHORT-TERM INVESTMENTS
(COST $97,500,334) 97,500,334
---------------
TOTAL INVESTMENTS
(COST $1,140,590,973) (d)(e) 108.4% 1,293,828,030
LIABILITIES IN EXCESS OF OTHER ASSETS (8.4) (100,284,439)
----- ---------------
NET ASSETS 100.0% $ 1,193,543,591
===== ===============
</Table>
- ----------
ADR AMERICAN DEPOSITORY RECEIPT.
* NON-INCOME PRODUCING SECURITY.
** RESALE IS RESTRICTED TO QUALIFIED INSTITUTIONAL INVESTORS.
*** ALL OR A PORTION OF THESE SECURITIES HAVE BEEN PHYSICALLY SEGREGATED
IN CONNECTION WITH OPEN FUTURES CONTRACTS.
+ SECURITIES PURCHASED ON A FORWARD COMMITMENT BASIS WITH AN APPROXIMATE
PRINCIPAL AMOUNT AND NO DEFINITE MATURITY DATE; THE ACTUAL PRINCIPAL
AMOUNT AND MATURITY DATE WILL BE DETERMINED UPON SETTLEMENT.
(a) PURCHASED ON A DISCOUNT BASIS. THE INTEREST RATE SHOWN HAS BEEN
ADJUSTED TO REFLECT A MONEY MARKET EQUIVALENT YIELD.
(b) COLLATERALIZED BY FEDERAL AGENCY AND U.S. TREASURY OBLIGATIONS.
(c) COLLATERALIZED BY U.S. TREASURY NOTE 2.00% DUE 11/30/04 VALUED AT
$60,897,079.
SEE NOTES TO FINANCIAL STATEMENTS
16
<Page>
(d) SECURITIES HAVE BEEN DESIGNATED AS COLLATERAL IN AN AMOUNT EQUAL TO
$63,900,883 IN CONNECTION WITH OPEN FUTURES CONTRACTS AND SECURITIES
PURCHASE ON A FORWARD COMMITMENT BASIS.
(e) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $1,149,647,757.
THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $195,804,803 AND THE
AGGREGATE GROSS UNREALIZED DEPRECIATION IS $51,624,530, RESULTING IN
NET UNREALIZED APPRECIATION OF $144,180,273.
FUTURES CONTRACTS OPEN AT JULY 31, 2003:
<Table>
<Caption>
UNDERLYING
NUMBER OF DESCRIPTION, DELIVERY FACE AMOUNT UNREALIZED
CONTRACTS LONG/SHORT MONTH, AND YEAR AT VALUE APPRECIATION
- ----------------------------------------------------------------------------------------------------------
5 Short U.S. Treasury Note 5 year, September 2003 $ (556,641) $ 5,951
21 Short U.S. Treasury Note 2 year, September 2003 (4,507,453) 31,915
149 Short U.S. Treasury Note 10 year, September 2003 (16,483,125) 820,881
13 Short U.S. Treasury Note 20 year, September 2003 (1,373,125) 87,997
---------------
Total unrealized appreciation $ 946,744
===============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
17
<Page>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 2003
<Table>
ASSETS:
Investments in securities, at value (cost $1,140,590,973) $ 1,293,828,030
Cash 84,250,147
Receivable for:
Investments sold 20,321,730
Interest 3,685,650
Shares of beneficial interest sold 1,066,349
Dividends 498,600
Variation margin 244,078
Prepaid expenses and other assets 88,224
---------------
TOTAL ASSETS 1,403,982,808
---------------
LIABILITIES:
Payable for:
Investments purchased 206,542,186
Shares of beneficial interest redeemed 2,135,707
Distribution fee 933,481
Investment management fee 573,946
Accrued expenses and other payables 253,897
---------------
TOTAL LIABILITIES 210,439,217
---------------
NET ASSETS $ 1,193,543,591
===============
COMPOSITION OF NET ASSETS:
Paid-in-capital $ 1,320,463,422
Net unrealized appreciation 154,184,610
Dividends in excess of net investment income (210,400)
Accumulated net realized loss (280,894,041)
---------------
NET ASSETS $ 1,193,543,591
===============
CLASS A SHARES:
Net Assets $ 53,951,414
Shares Outstanding (unlimited authorized, $.01 par value) 3,666,103
NET ASSET VALUE PER SHARE $ 14.72
===============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of
net asset value) $ 15.54
===============
CLASS B SHARES:
Net Assets $ 1,041,817,961
Shares Outstanding (unlimited authorized, $.01 par value) 70,722,646
NET ASSET VALUE PER SHARE $ 14.73
===============
CLASS C SHARES:
Net Assets $ 36,351,094
Shares Outstanding (unlimited authorized, $.01 par value) 2,479,782
NET ASSET VALUE PER SHARE $ 14.66
===============
CLASS D SHARES:
Net Assets $ 61,423,122
Shares Outstanding (unlimited authorized, $.01 par value) 4,169,111
NET ASSET VALUE PER SHARE $ 14.73
===============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
18
<Page>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 2003
<Table>
NET INVESTMENT INCOME:
INCOME
Interest $ 12,899,964
Dividends (net of $105,635 foreign withholding tax) 10,036,787
---------------
TOTAL INCOME 22,936,751
---------------
EXPENSES
Distribution fee (Class A shares) 140,490
Distribution fee (Class B shares) 10,606,022
Distribution fee (Class C shares) 339,131
Investment management fee 6,860,966
Transfer agent fees and expenses 1,675,768
Shareholder reports and notices 147,429
Professional fees 75,040
Registration fees 51,783
Trustees' fees and expenses 23,058
Other 31,212
---------------
TOTAL EXPENSES 19,950,899
---------------
NET INVESTMENT INCOME 2,985,852
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
NET REALIZED LOSS ON:
Investments (63,530,018)
Futures contracts (2,843,321)
---------------
NET REALIZED LOSS (66,373,339)
---------------
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON:
Investments 157,447,678
Futures contracts 1,400,629
---------------
NET APPRECIATION 158,848,307
---------------
NET GAIN 92,474,968
---------------
NET INCREASE $ 95,460,820
===============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
19
<Page>
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JULY 31, 2003 JULY 31, 2002
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 2,985,852 $ 13,000,843
Net realized loss (66,373,339) (99,598,492)
Net change in unrealized depreciation 158,848,307 (221,381,038)
--------------- ---------------
NET INCREASE (DECREASE) 95,460,820 (307,978,687)
--------------- ---------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME
Class A shares (867,122) (1,681,731)
Class B shares (4,004,321) (15,594,689)
Class C shares (103,363) (441,710)
Class D shares (806,241) (1,437,376)
--------------- ---------------
TOTAL DIVIDENDS (5,781,047) (19,155,506)
--------------- ---------------
Net decrease from transactions in shares of beneficial interest (284,302,141) (355,197,919)
--------------- ---------------
NET DECREASE (194,622,368) (682,332,112)
NET ASSETS:
Beginning of period 1,388,165,959 2,070,498,071
--------------- ---------------
END OF PERIOD
(Including dividends in excess of net investment income of
$210,400 and accumulated undistributed net investment income
of $123,826, respectively) $ 1,193,543,591 $ 1,388,165,959
=============== ===============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
20
<Page>
NOTES TO FINANCIAL STATEMENTS - JULY 31, 2003
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 non-diversified, open-end
management investment company. The Fund's investment objective is to maximize
the total return of its investments. The Fund seeks to achieve its objective by
actively allocating its assets among major asset categories of equity and
fixed-income securities and money market instruments. The Fund was organized as
a Massachusetts business trust on August 5, 1988 and commenced operations on
October 31, 1988. On July 28, 1997, the Fund converted to a multiple class share
structure.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity portfolio security listed or traded
on the New York 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 equity 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) for equity securities traded on foreign exchanges, the last reported
sale price or the latest bid price may be used if there were no sales on a
particular day; (5) futures are valued at the latest price published by the
commodities exchange on which they trade; (6) when market quotations are not
readily available or Morgan Stanley Investment Advisors Inc. (the "Investment
Manager") determines that the latest sale price, the bid price or the mean
between the last reported bid and 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; (7) certain portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees; and (8) 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.
21
<Page>
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. Interest income is accrued daily.
C. REPURCHASE AGREEMENTS -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated
entities managed by the Investment Manager, may transfer uninvested cash
balances into one or more joint repurchase agreement accounts. These balances
are invested in one or more repurchase agreements and are collateralized by
cash, U.S. Treasury or federal agency obligations. The Fund may also invest
directly with institutions in repurchase agreements. The Fund's custodian
receives the collateral, which is marked-to-market daily to determine that the
value of the collateral does not decrease below the repurchase price plus
accrued interest.
D. 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.
E. FOREIGN CURRENCY TRANSLATION AND FORWARD FOREIGN CURRENCY CONTRACTS -- The
books and records of the Fund are maintained in U.S. dollars as follows: (1) the
foreign currency market value of investment securities, other assets and
liabilities and forward foreign currency contracts ("forward contracts") are
translated at the exchange rates prevailing at the end of the period; and (2)
purchases, sales, income and expenses are translated at the exchange rates
prevailing on the respective dates of such transactions. The resultant exchange
gains and losses are recorded as realized and unrealized gain/loss on foreign
exchange transactions. Pursuant to U.S. Federal income tax regulations, certain
foreign exchange gains/losses included in realized and unrealized gain/loss are
included in or are a reduction of ordinary income for federal income tax
purposes. The Fund does not isolate that portion of the results of operations
arising as a result of changes in the foreign exchange rates from the changes in
the market prices of the securities. Forward contracts are valued daily at the
appropriate exchange rates. The resultant unrealized exchange gains and losses
are recorded as unrealized foreign currency gain or loss. The Fund records
realized gains or losses on delivery of the currency or at the time the forward
contract is extinguished (compensated) by entering into a closing transaction
with the same counterparty prior to delivery.
22
<Page>
F. 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.
G. FEDERAL INCOME TAX POLICY -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.
H. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions to
shareholders are recorded on the ex-dividend date.
I. 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 MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
following annual rates to the net assets of the Fund determined at the close of
each business day: 0.60% to the portion of daily net assets not exceeding $500
million; 0.55% to the portion of daily net assets exceeding $500 million but not
exceeding $1 billion; 0.50% to the portion of daily net assets exceeding $1
billion but not exceeding $1.5 billion; 0.475% to the portion of daily net
assets exceeding $1.5 billion but not exceeding $2 billion; 0.45% to the portion
of daily net assets exceeding $2 billion but not exceeding $3 billion; and
0.425% to the portion of daily net assets in excess of $3 billion.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The Plan
provides that the Fund will pay the Distributor a fee which is accrued daily and
paid monthly at the following annual rates: (i) Class A -- up to 0.25% of the
average daily net assets of Class A; (ii) Class B -- 1.0% of the lesser of: (a)
the average daily aggregate gross sales of
23
<Page>
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 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.
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
$23,604,027 at July 31, 2003.
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 or other selected
broker-dealer representatives may be reimbursed in the subsequent calendar year.
For the year ended July 31, 2003, the distribution fee was accrued for Class A
shares and Class C shares at the annual rate of 0.20% and 1.0%, respectively.
The Distributor has informed the Fund that for the year ended July 31, 2003, it
received contingent deferred sales charges from certain redemptions of the
Fund's Class A shares, Class B shares and Class C shares of $1,663, $1,500,244
and $10,582, respectively and received $85,004 in front-end sales charges from
sales of the Fund's Class A shares. The respective shareholders pay such charges
which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/maturities/prepayments of
portfolio securities, excluding short-term investments, for the year ended July
31, 2003 aggregated $1,376,814,408, and $1,505,655,253, respectively. Included
in the aforementioned are purchases and sales/maturities/prepayments of U.S.
Government securities of $822,853,115 and $726,728,287, respectively. Included
in the aforementioned are purchases and sales of $13,492,371 and $1,872,000,
respectively, with other Morgan Stanley Funds including a net realized gain of
$413,541.
24
<Page>
For the year ended July 31, 2003, the Fund incurred brokerage commissions of
$345,325 with Morgan Stanley & Co., Inc. an affiliate of the Investment Manager
and Distributor, for portfolio transactions executed on behalf of the Fund. At
July 31, 2003, the Fund's receivable for investments sold and payable for
investments purchased included unsettled trades with Morgan Stanley & Co. of
$1,261,112 and $5,489,982, respectively.
Morgan Stanley Trust, an affiliate of the Investment Manager and Distributor, is
the Fund's transfer agent. At July 31, 2003, the Fund had transfer agent fees
and expenses payable of approximately $18,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended July 31, 2003 included in
Trustees' fees and expenses in the Statement of Operations amounted to $9,632.
At July 31, 2003, the Fund had an accrued pension liability of $76,749 which is
included in accrued expenses in the Statement of Assets and Liabilities.
5. 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.
The tax character of distributions paid was as follows:
<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JULY 31, 2003 JULY 31, 2002
-------------- --------------
Ordinary Income $ 5,781,047 $ 19,155,506
</Table>
As of July 31, 2003, the tax-basis components of accumulated losses were as
follows:
<Table>
Undistributed ordinary income $ 162,353
Undistributed long-term gains --
--------------
Net accumulated earnings 162,353
Capital loss carryforward* (271,186,519)
Temporary differences (76,749)
Net unrealized appreciation 144,181,084
--------------
Total accumulated losses $ (126,919,831)
==============
</Table>
25
<Page>
* As of July 31, 2003, the Fund had a net capital loss carryforward of
$271,186,519 of which $16,425,882 will expire on July 31, 2009, $158,335,545
will expire on July 31, 2010 and $96,425,092 will expire on July 31, 2011 to
offset future capital gains to the extent provided by regulations.
As of July 31, 2003, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales and straddles,
mark-to-market of open futures contracts and book amortization of premiums on
debt securities and permanent book/tax differences attributable to losses on
paydowns and tax adjustments on debt securities sold by the Fund. To reflect
reclassifications arising from the permanent differences, accumulated net
realized loss was charged and dividends in excess of net investment income was
credited $2,460,969.
6. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into forward contracts to facilitate settlement of foreign
currency denominated portfolio transactions or to manage foreign currency
exposure associated with foreign currency denominated securities. The Fund may
invest in futures to facilitate the reallocation of its assets ("futures
contracts").
Forward contracts and futures contracts involve elements of market risk in
excess of the amount reflected in the Statement of Assets and Liabilities. The
Fund bears the risk of an unfavorable change in the value of the underlying
securities or in the foreign exchange rates underlying the forward contracts.
Risks may also arise upon entering into these contracts from the potential
inability of the counterparties to meet the terms of their contracts.
At July 31, 2003, there were outstanding futures contracts and no outstanding
forward contracts.
26
<Page>
7. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JULY 31, 2003 JULY 31, 2002
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- --------------- ----------- ---------------
CLASS A SHARES
Sold 1,845,888 $ 24,260,526 3,521,343 $ 54,004,509
Reinvestment of dividends 44,688 590,931 72,055 1,091,984
Redeemed (4,032,753) (52,770,954) (4,869,870) (74,349,220)
----------- --------------- ----------- ---------------
Net decrease -- Class A (2,142,177) (27,919,497) (1,276,472) (19,252,727)
----------- --------------- ----------- ---------------
CLASS B SHARES
Sold 5,788,543 78,164,128 9,830,411 152,646,505
Reinvestment of dividends 267,210 3,508,089 903,464 13,721,081
Redeemed (25,138,244) (334,420,291) (32,096,615) (489,833,764)
----------- --------------- ----------- ---------------
Net decrease -- Class B (19,082,491) (252,748,074) (21,362,740) (323,466,178)
----------- --------------- ----------- ---------------
CLASS C SHARES
Sold 594,700 7,963,172 687,657 10,604,697
Reinvestment of dividends 7,120 93,720 26,732 405,978
Redeemed (701,340) (9,319,392) (923,012) (14,008,932)
----------- --------------- ----------- ---------------
Net decrease -- Class C (99,520) (1,262,500) (208,623) (2,998,257)
----------- --------------- ----------- ---------------
CLASS D SHARES
Sold 609,164 8,132,406 1,246,420 19,113,212
Reinvestment of dividends 56,139 745,232 88,193 1,341,447
Redeemed (839,347) (11,249,708) (1,951,913) (29,935,416)
----------- --------------- ----------- ---------------
Net decrease -- Class D (174,044) (2,372,070) (617,300) (9,480,757)
----------- --------------- ----------- ---------------
Net decrease in Fund (21,498,232) $ (284,302,141) (23,465,135) $ (355,197,919)
=========== =============== =========== ===============
</Table>
27
<Page>
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<Table>
<Caption>
FOR THE YEAR ENDED JULY 31,
---------------------------------------------------------------------
2003 2002 2001 2000 1999
----------- ----------- ----------- ----------- -----------
CLASS A SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 13.53 $ 16.43 $ 20.64 $ 20.16 $ 20.23
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income++ 0.14 0.22 0.44 0.44 0.32
Net realized and unrealized gain (loss) 1.21 (2.84) (1.55) 2.16 1.46
----------- ----------- ----------- ----------- -----------
Total income (loss) from investment
operations 1.35 (2.62) (1.11) 2.60 1.78
----------- ----------- ----------- ----------- -----------
Less dividends and distributions from:
Net investment income (0.16) (0.28) (0.50) (0.37) (0.32)
Net realized gain - - (2.60) (1.75) (1.53)
----------- ----------- ----------- ----------- -----------
Total dividends and distributions (0.16) (0.28) (3.10) (2.12) (1.85)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 14.72 $ 13.53 $ 16.43 $ 20.64 $ 20.16
=========== =========== =========== =========== ===========
TOTAL RETURN+ 10.11% (16.14)% (6.24)% 13.48% 10.01%
RATIOS TO AVERAGE NET ASSETS(1):
Expenses 0.93% 0.88% 0.85% 0.88% 0.87%
Net investment income 0.95% 1.44% 2.41% 2.06% 1.66%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 53,951 $ 78,583 $ 116,383 $ 110,600 $ 64,418
Portfolio turnover rate 124% 164% 136% 187% 121%
</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) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
SEE NOTES TO FINANCIAL STATEMENTS
28
<Page>
<Table>
<Caption>
FOR THE YEAR ENDED JULY 31,
---------------------------------------------------------------------
2003 2002 2001 2000 1999
----------- ----------- ----------- ----------- -----------
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 13.54 $ 16.43 $ 20.65 $ 20.16 $ 20.23
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income++ 0.02 0.10 0.30 0.29 0.19
Net realized and unrealized gain (loss) 1.22 (2.84) (1.57) 2.18 1.46
----------- ----------- ----------- ----------- -----------
Total income (loss) from investment
operations 1.24 (2.74) (1.27) 2.47 1.65
----------- ----------- ----------- ----------- -----------
Less dividends and distributions from:
Net investment income (0.05) (0.15) (0.35) (0.23) (0.19)
Net realized gain - - (2.60) (1.75) (1.53)
----------- ----------- ----------- ----------- -----------
Total dividends and distributions (0.05) (0.15) (2.95) (1.98) (1.72)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 14.73 $ 13.54 $ 16.43 $ 20.65 $ 20.16
=========== =========== =========== =========== ===========
TOTAL RETURN+ 9.20% (16.77)% (7.05)% 12.79% 9.23%
RATIOS TO AVERAGE NET ASSETS(1):
Expenses 1.73% 1.67% 1.63% 1.53% 1.57%
Net investment income 0.15% 0.64% 1.63% 1.41% 0.96%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 1,041,818 $ 1,216,023 $ 1,826,910 $ 2,043,540 $ 1,833,935
Portfolio turnover rate 124% 164% 136% 187% 121%
</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) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
SEE NOTES TO FINANCIAL STATEMENTS
29
<Page>
<Table>
<Caption>
FOR THE YEAR ENDED JULY 31,
---------------------------------------------------------------------
2003 2002 2001 2000 1999
----------- ----------- ----------- ----------- -----------
CLASS C SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 13.46 $ 16.36 $ 20.57 $ 20.11 $ 20.19
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income (loss)++ 0.03 0.10 0.29 0.29 0.16
Net realized and unrealized gain (loss) 1.21 (2.83) (1.55) 2.15 1.47
----------- ----------- ----------- ----------- -----------
Total income (loss) from investment
operations 1.24 (2.73) (1.26) 2.44 1.63
----------- ----------- ----------- ----------- -----------
Less dividends and distributions from:
Net investment income (0.04) (0.17) (0.35) (0.23) (0.18)
Net realized gain - - (2.60) (1.75) (1.53)
----------- ----------- ----------- ----------- -----------
Total dividends and distributions (0.04) (0.17) (2.95) (1.98) (1.71)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 14.66 $ 13.46 $ 16.36 $ 20.57 $ 20.11
=========== =========== =========== =========== ===========
TOTAL RETURN+ 9.09% (16.70)% (7.00)% 12.62% 9.15%
RATIOS TO AVERAGE NET ASSETS(1):
Expenses 1.73% 1.67% 1.63% 1.63% 1.65%
Net investment income 0.15% 0.64% 1.63% 1.31% 0.88%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 36,351 $ 34,727 $ 45,612 $ 39,006 $ 16,147
Portfolio turnover rate 124% 164% 136% 187% 121%
</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) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
SEE NOTES TO FINANCIAL STATEMENTS
30
<Page>
<Table>
<Caption>
FOR THE YEAR ENDED JULY 31,
---------------------------------------------------------------------
2003 2002 2001 2000 1999
----------- ----------- ----------- ----------- -----------
CLASS D SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 13.55 $ 16.45 $ 20.67 $ 20.18 $ 20.25
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income++ 0.16 0.26 0.48 0.48 0.37
Net realized and unrealized gain (loss) 1.21 (2.85) (1.56) 2.18 1.45
----------- ----------- ----------- ----------- -----------
Total income (loss) from investment
operations 1.37 (2.59) (1.08) 2.66 1.82
----------- ----------- ----------- ----------- -----------
Less dividends and distributions from:
Net investment income (0.19) (0.31) (0.54) (0.42) (0.36)
Net realized gain - - (2.60) (1.75) (1.53)
----------- ----------- ----------- ----------- -----------
Total dividends and distributions (0.19) (0.31) (3.14) (2.17) (1.89)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 14.73 $ 13.55 $ 16.45 $ 20.67 $ 20.18
=========== =========== =========== =========== ===========
TOTAL RETURN+ 10.25% (15.94)% (6.07)% 13.79% 10.23%
RATIOS TO AVERAGE NET ASSETS(1):
Expenses 0.73% 0.67% 0.63% 0.63% 0.65%
Net investment income 1.15% 1.64% 2.63% 2.31% 1.88%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 61,423 $ 58,834 $ 81,594 $ 80,925 $ 72,554
Portfolio turnover rate 124% 164% 136% 187% 121%
</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) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
SEE NOTES TO FINANCIAL STATEMENTS
31
<Page>
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF
TRUSTEES OF MORGAN STANLEY STRATEGIST FUND:
We have audited the accompanying statement of assets and liabilities of Morgan
Stanley Strategist Fund (the "Fund"), including the portfolio of investments, as
of July 31, 2003, and the related statements of operations for the year then
ended and changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of July 31, 2003, by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Morgan
Stanley Strategist Fund as of July 31, 2003, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended, in conformity with accounting principles generally
accepted in the United States of America.
Deloitte & Touche LLP
NEW YORK, NEW YORK
SEPTEMBER 12, 2003
2003 FEDERAL TAX NOTICE (UNAUDITED)
During the fiscal year ended July 31, 2003, 97.81% of the income dividends
paid by the Fund qualified for the dividends received deduction available
to corporations.
Of the Fund's ordinary income dividends paid during the fiscal year ended
July 31, 2003, 8.39% was attributable to qualifying Federal obligations.
Please consult your tax advisor to determine if any portion of the
dividends you received is exempt from state income tax.
Additionally, please note that of the Fund's ordinary income dividends of
$5,781,047 paid during the fiscal year ended July 31, 2003, $4,915,775
qualified for the lower income tax rate available to individuals under the
recently enacted Jobs and Growth Tax Relief Reconciliation Act of 2003.
32
<Page>
TRUSTEE AND OFFICER INFORMATION
INDEPENDENT TRUSTEES:
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
POSITION(S) OFFICE AND COMPLEX
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* DURING PAST 5 YEARS** BY TRUSTEE*** HELD BY TRUSTEE
- ------------------------------------- ----------- ------------ ------------------------ ------------- --------------------
Michael Bozic (62) Trustee Since Retired; Director or 216 Director of Weirton
c/o Mayer, Brown, Rowe & Maw LLP April 1994 Trustee of the Retail Steel Corporation.
Counsel to the Independent Directors Funds and TCW/DW Term
1675 Broadway Trust 2003 (since April
New York, NY 1994) and the
Institutional Funds
(since July 2003);
formerly Vice Chairman
of Kmart Corporation
(December 1998-October
2000), Chairman and
Chief Executive Officer
of Levitz Furniture
Corporation (November
1995-November 1998) and
President and Chief
Executive Officer of
Hills Department Stores
(May 1991-July 1995);
formerly variously
Chairman, Chief
Executive Officer,
President and Chief
Operating Officer
(1987-1991) of the Sears
Merchandise Group of
Sears, Roebuck & Co.
Edwin J. Garn (70) Trustee Since Director or Trustee of 216 Director of Franklin
c/o Summit Ventures LLC January 1993 the Retail Funds and Covey (time
1 Utah Center TCW/DW Term Trust 2003 management systems),
201 S. Main Street (since January 1993) and BMW Bank of North
Salt Lake City, UT the Institutional Funds America, Inc.
(since July 2003); (industrial loan
member of the Utah corporation), United
Regional Advisory Board Space Alliance
of Pacific Corp.; (joint venture
formerly United States between Lockheed
Senator (R-Utah) Martin and the
(1974-1992) and Boeing Company) and
Chairman, Senate Banking Nuskin Asia Pacific
Committee (1980-1986), (multilevel
Mayor of Salt Lake City, marketing); member
Utah (1971-1974), of the board of
Astronaut, Space Shuttle various civic and
Discovery (April 12-19, charitable
1985), and Vice organizations.
Chairman, Huntsman
Corporation (chemical
company).
Wayne E. Hedien (69) Trustee Since Retired; Director or 216 Director of The PMI
c/o Mayer, Brown, Rowe & Maw LLP September Trustee of the Retail Group Inc. (private
Counsel to the Independent Directors 1997 Funds and TCW/DW Term mortgage insurance);
1675 Broadway Trust 2003; (Since Trustee and Vice
New York, NY September 1997) and the Chairman of The
Institutional Funds Field Museum of
(since July 2003); Natural History;
formerly associated with director of various
the Allstate Companies other business and
(1966-1994), most charitable
recently as Chairman of organizations.
The Allstate Corporation
(March 1993-December
1994) and Chairman and
Chief Executive Officer
of its wholly-owned
subsidiary, Allstate
Insurance Company (July
1989-December 1994).
</Table>
33
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
POSITION(S) OFFICE AND COMPLEX
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* DURING PAST 5 YEARS** BY TRUSTEE*** HELD BY TRUSTEE
- ------------------------------------- ----------- ------------ ------------------------ ------------- --------------------
Dr. Manuel H. Johnson (54) Trustee Since Chairman of the Audit 216 Director of NVR,
c/o Johnson Smick International, Inc. July 1991 Committee and Director Inc. (home
2099 Pennsylvania Avenue, N.W. or Trustee of the Retail construction);
Suite 950 Funds and TCW/DW Term Chairman and Trustee
Washington, D.C. Trust 2003 (since July of the Financial
1991) and the Accounting
Institutional Funds Foundation
(since July 2003); (oversight
Senior Partner, Johnson organization of the
Smick International, Financial Accounting
Inc., a consulting firm; Standards Board);
Co-Chairman and a Director of RBS
founder of the Group of Greenwich Capital
Seven Council (G7C), an Holdings (financial
international economic holding company).
commission; formerly
Vice Chairman of the
Board of Governors of
the Federal Reserve
System and Assistant
Secretary of the U.S.
Treasury.
Joseph J. Kearns (60) Trustee Since Deputy Chairman of the 217 Director of Electro
PMB754 July 2003 Audit Committee and Rent Corporation
23852 Pacific Coast Highway Director or Trustee of (equipment leasing),
Malibu, CA the Retail Funds and The Ford Family
TCW/DW Term Trust 2003 Foundation, and the
(since July 2003) and UCLA Foundation.
the Institutional Funds
(since August 1994);
previously Chairman of
the Audit Committee of
the Institutional Funds
(October 2001-July
2003); President, Kearns
& Associates LLC
(investment consulting);
formerly CFO of the
J. Paul Getty Trust.
Michael E. Nugent (67) Trustee Since Chairman of the 216 Director of various
c/o Triumph Capital, L.P. July 1991 Insurance Committee and business
445 Park Avenue Director or Trustee of organizations.
New York, NY the Retail Funds and
TCW/DW Term Trust 2003
(since July 1991) and
the Institutional Funds
(since July 2001);
General Partner of
Triumph Capital, L.P., a
private investment
partnership; formerly
Vice President, Bankers
Trust Company and BT
Capital Corporation
(1984-1988).
Fergus Reid (70) Trustee Since Chairman of the 217 Trustee and Director
85 Charles Colman Blvd. July 2003 Governance Committee and of certain
Pawling, NY Director or Trustee of investment companies
the Retail Funds and in the JPMorgan
TCW/DW Term Trust 2003 Funds complex
(since July 2003) and managed by JP Morgan
the Institutional Funds Investment
(since June 1992); Management Inc.
Chairman of Lumelite
Plastics Corporation.
</Table>
34
<Page>
INTERESTED TRUSTEES:
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
POSITION(S) OFFICE AND COMPLEX
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
INTERESTED TRUSTEE REGISTRANT TIME SERVED* DURING PAST 5 YEARS** BY TRUSTEE*** HELD BY TRUSTEE
- ------------------------------------- ----------- ------------ ------------------------ ------------- --------------------
Charles A. Fiumefreddo (70) Chairman Since Chairman and Director or 216 None
c/o Morgan Stanley Trust of the July 1991 Trustee of the Retail
Harborside Financial Center, Board and Funds and TCW/DW Term
Plaza Two, Trustee Trust 2003 (since July
Jersey City, NJ 1991) and the
Institutional Funds
(since July 2003);
formerly Chief Executive
Officer of the Retail
Funds and the TCW/DW
Term Trust 2003 (until
September 2002).
James F. Higgins (55) Trustee Since Director or Trustee of 216 Director of AXA
c/o Morgan Stanley Trust June 2000 the Retail Funds and Financial, Inc. and
Harborside Financial Center, TCW/DW Term Trust 2003 The Equitable Life
Plaza Two, (since June 2000) and Assurance Society of
Jersey City, NJ the Institutional Funds the United States
(since July 2003); (financial
Senior Advisor of Morgan services).
Stanley (since August
2000); Director of the
Distributor and Dean
Witter Realty Inc.;
previously President and
Chief Operating Officer
of the Private Client
Group of Morgan Stanley
(May 1999-August 2000),
and President and Chief
Operating Officer of
Individual Securities of
Morgan Stanley (February
1997-May 1999).
Philip J. Purcell (59) Trustee Since Director or Trustee of 216 Director of American
1585 Broadway April 1994 the Retail Funds and Airlines, Inc. and
New York, NY TCW/DW Term Trust 2003 its parent company,
(since April 1994) and AMR Corporation.
the Institutional Funds
(since July 2003);
Chairman of the Board of
Directors and Chief
Executive Officer of
Morgan Stanley and
Morgan Stanley DW Inc.;
Director of the
Distributor; Chairman of
the Board of Directors
and Chief Executive
Officer of Novus Credit
Services Inc.; Director
and/or officer of
various Morgan Stanley
subsidiaries.
</Table>
- ----------
* THIS IS THE EARLIEST DATE THE TRUSTEE BEGAN SERVING THE FUNDS ADVISED BY
MORGAN STANLEY INVESTMENT ADVISORS INC. (THE "INVESTMENT MANAGER") (THE
"RETAIL FUNDS").
** THE DATES REFERENCED BELOW INDICATING COMMENCEMENT OF SERVICES AS
DIRECTOR/TRUSTEE FOR THE RETAIL FUNDS AND THE FUNDS ADVISED BY MORGAN
STANLEY INVESTMENT MANAGEMENT INC., MORGAN STANLEY INVESTMENTS LP AND
MORGAN STANLEY AIP GP LP (THE "INSTITUTIONAL FUNDS") REFLECT THE EARLIEST
DATE THE DIRECTOR/TRUSTEE BEGAN SERVING THE RETAIL OR INSTITUTIONAL FUNDS
AS APPLICABLE.
*** THE FUND COMPLEX INCLUDES ALL OPEN-END AND CLOSED-END FUNDS (INCLUDING ALL
OF THEIR PORTFOLIOS) ADVISED BY THE INVESTMENT MANAGER AND ANY FUNDS THAT
HAVE AN INVESTMENT ADVISOR THAT IS AN AFFILIATED PERSON OF THE INVESTMENT
MANAGER (INCLUDING BUT NOT LIMITED TO MORGAN STANLEY INVESTMENT MANAGEMENT
INC. AND MORGAN STANLEY INVESTMENTS LP).
35
<Page>
OFFICERS:
<Table>
<Caption>
TERM OF
POSITION(S) OFFICE AND
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF
EXECUTIVE OFFICER REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS**
- ------------------------------------- ----------- ----------------- --------------------------------------------------------
Mitchell M. Merin (49) President Since May 1999 President and Chief Operating Officer of Morgan Stanley
1221 Avenue of the Americas Investment Management Inc.; President, Director and Chief
New York, NY Executive Officer of the Investment Manager and Morgan
Stanley Services; Chairman, Chief Executive Officer and
Director of the Distributor; Chairman and Director of the
Transfer Agent; Director of various Morgan Stanley
subsidiaries; President Morgan Stanley Investments LP
(since February 2003); President of the Institutional
Funds (since July 2003) and President of the Retail Funds
and TCW/DW Term Trust 2003 (since May 1999); Trustee
(since July 2003) and President (since December 2002) of
the Van Kampen Closed-End Funds; Trustee (since May 1999)
and President (since October 2002) of the Van Kampen
Open-End Funds.
Ronald E. Robison (64) Executive Since April 2003 Chief Global Operations Officer and Managing Director of
1221 Avenue of the Americas Vice Morgan Stanley Investment Management Inc.; Managing
New York, NY President DIrector of Morgan Stanley & Co. Incorporated; Managing
and DIrector of Morgan Stanley; Managing Director, Chief
Principal Administrative Officer and Director of the Investment
Executive Manager and Morgan Stanley Services; Chief Executive
Officer Officer and Director of the Transfer Agent; Executive Vice
President and Principal Executive Officer of the
Institutional Funds (since July 2003); and the TCW/DW Term
Trust 2003 (since April 2003); previously President of the
Institutional Funds (March 2001-July 2003) and Director of
the Institutional Funds (March 2001-July 2003).
Barry Fink (48) Vice Since General Counsel (since May 2000) and Managing Director
1221 Avenue of the Americas President February 1997 (since December 2000) of Morgan Stanley Investment
New York, NY and General Management; Managing Director (since December 2000),
Counsel Secretary (since February 1997) and Director (since
July 1998) of the Investment Manager and Morgan Stanley
Services; Assistant Secretary of Morgan Stanley DW;
Chief Legal Officer of Morgan Stanley Investments LP
(since July 2002); Vice President of the Institutional
Funds (since July 2003); Vice President and Secretary
of the Distributor; previously Secretary of the Retail
Funds (February 1997-July 2003); previously Vice
President and Assistant General Counsel of the
Investment Manager and Morgan Stanley Services
(February 1997-December 2001).
Joseph J. McAlinden (60) Vice Since July 1995 Managing Director and Chief Investment Officer of the
1221 Avenue of the Americas President Investment Manager, Morgan Stanley Investment
New York, NY Management Inc. and Morgan Stanley Investments LP;
Director of the Transfer Agent, Chief Investment
Officer of the Van Kampen Funds; Vice President of the
Institutional Funds (since July 2003) and the Retail
Funds (since July 1995).
Stefanie V. Chang (36) Vice Since July 2003 Executive Director of Morgan Stanley & Co. and Morgan
1221 Avenue of the Americas President Stanley Investment Management Inc. and Vice President
New York, NY of the Institutional Funds (since December 1997) and
the Retail Funds (since July 2003); formerly practiced
law with the New York law firm of Rogers & Wells (now
Clifford Chance LLP).
</Table>
36
<Page>
<Table>
<Caption>
TERM OF
POSITION(S) OFFICE AND
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF
EXECUTIVE OFFICER REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS**
- ------------------------------------- ----------- ----------------- --------------------------------------------------------
Francis Smith (37) Treasurer Treasurer since Executive Director of the Investment Manager and Morgan
c/o Morgan Stanley Trust and July 2003 and Stanley Services (since December 2001); previously Vice
Harborside Financial Center, Chief Chief Financial President of the Retail Funds (September 2002-July 2003);
Plaza Two, Financial Officer since previously Vice President of the Investment Manager and
Jersey City, NJ Officer September 2002 Morgan Stanley Services (August 2000-November 2001) and
Senior Manager at PricewaterhouseCoopers LLP (January
1998-August 2000).
Thomas F. Caloia (57) Vice Since July 2003 Executive Director (since December 2002) and Assistant
c/o Morgan Stanley Trust President Treasurer of the Investment Manager, the Distributor and
Harborside Financial Center, Morgan Stanley Services; previously Treasurer of the
Plaza Two, Retail Funds (April 1989-July 2003); formerly First Vice
Jersey City, NJ President of the Investment Manager, the Distributor and
Morgan Stanley Services.
Mary E. Mullin (36) Secretary Since July 2003 Vice President of Morgan Stanley & Co. Incorporated and
1221 Avenue of the Americas Morgan Stanley Investment Management Inc.; Secretary of
New York, NY the Institutional Funds (since June 1999) and the Retail
Funds (since July 2003); formerly practiced law with the
New York law firms of McDermott, Will & Emery and Skadden,
Arps, Slate, Meagher & Flom LLP.
</Table>
- -------
* THIS IS THE EARLIEST DATE THE OFFICER BEGAN SERVING THE RETAIL FUNDS. EACH
OFFICER SERVES AN INDEFINITE TERM, UNTIL HIS OR HER SUCCESSOR IS ELECTED.
** THE DATES REFERENCED BELOW INDICATING COMMENCEMENT OF SERVICE AS AN OFFICER
FOR THE RETAIL AND INSTITUTIONAL FUNDS REFLECT THE EARLIEST DATE THE
OFFICER BEGAN SERVING THE RETAIL OR INSTITUTIONAL FUNDS AS APPLICABLE.
37
<Page>
[GRAPHIC]
MORGAN STANLEY
STRATEGIST FUND
ANNUAL REPORT
JULY 31, 2003
[MORGAN STANLEY LOGO]
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael E. Nugent
Philip J. Purcell
Fergus Reid
OFFICERS
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
Mitchell M. Merin
PRESIDENT
Ronald E. Robison
EXECUTIVE VICE PRESIDENT and PRINCIPAL EXECUTIVE OFFICER
Barry Fink
VICE PRESIDENT and GENERAL COUNSEL
Joseph J. McAlinden
VICE PRESIDENT
Stefanie V. Chang
VICE PRESIDENT
Francis Smith
TREASURER and CHIEF FINANCIAL OFFICER
Thomas F. Caloia
VICE PRESIDENT
Mary E. Mullin
SECRETARY
TRANSFER AGENT
Morgan Stanley Trust
Harborside Financial Center, Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
INVESTMENT MANAGER
Morgan Stanley Investment Advisors Inc.
1221 Avenue of the Americas
New York, New York 10020
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.
Investments and services offered through Morgan Stanley DW Inc., member SIPC.
Morgan Stanley Distributors Inc., member NASD.
(C) 2003 Morgan Stanley
[MORGAN STANLEY LOGO]
38585RPT-12080H03-AP-8/03
<Page>
Item 2. Code of Ethics.
(a) The Fund has adopted a code of ethics (the "Code of Ethics") that applies to
its principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the Fund or a third
party.
(b) No information need be disclosed pursuant to this paragraph.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f)
(1) The Fund's Code of Ethics is attached hereto as Exhibit A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Fund's Board of Trustees has determined that it has two "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Trustees: Dr. Manuel H. Johnson and Joseph J. Kearns. Under
applicable securities laws, a person who is determined to be an audit committee
financial expert will not be deemed an "expert" for any purpose, including
without limitation for the purposes of Section 11 of the Securities Act of 1933,
as a result of being designated or identified as an audit committee financial
expert. The designation or identification of a person as an audit committee
financial expert does not impose on such person any duties, obligations, or
liabilities that are greater than the duties, obligations, and liabilities
imposed on such person as a member of the audit committee and Board of Trustees
in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services
Applicable only for reports covering fiscal years ending on or after
December 15, 2003.
<Page>
Item 5. Audit Committee of Listed Registrants.
Applicable only for reports covering periods ending on or after the earlier of
(i) the first annual shareholder meeting after January 15, 2004 or (ii) October
31, 2004.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Applicable only to annual reports filed by closed-end funds.
Item 8. [Reserved.]
Item 9 - 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.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Fund's internal controls
or in other factors that could significantly affect the Fund's internal controls
subsequent to the date of their evaluation.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
<Page>
Item 10 Exhibits
(a) The Code of Ethics for Principal Executive and Senior Financial Officers is
attached hereto.
(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
September 22, 2003
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
September 22, 2003
/s/ Francis Smith
Francis Smith
Principal Financial Officer
September 22, 2003
<Page>
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
December 8, 2003
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
December 8, 2003
/s/ Francis Smith
Francis Smith
Principal Financial Officer
December 8, 2003