<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 28, 2000
REGISTRATION NOS.: 333-06935
811-7683
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 7 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 8 [X]
----------------
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copy to:
STUART M. STRAUSS, ESQ.
MAYER, BROWN & PLATT
1675 BROADWAY
NEW YORK, NEW YORK 10019
----------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
immediately upon filing pursuant to paragraph (b)
---
X on September 29, 2000 pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a)
---
on (date) pursuant to paragraph (a) of rule 485.
---
----------------
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
===============================================================================
<PAGE>
PROSPECTUS -- SEPTEMBER 29, 2000
MORGAN STANLEY DEAN WITTER
-------------------------------------------------------
SPECIAL VALUE FUND
[GRAPHIC OMITTED]
A MUTUAL FUND THAT SEEKS LONG-TERM CAPITAL APPRECIATION
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
The Fund Investment Objective .......................................................................1
Principal Investment Strategies ............................................................1
Principal Risks ............................................................................2
Past Performance ...........................................................................3
Fees and Expenses ..........................................................................4
Additional Investment Strategy Information .................................................5
Additional Risk Information ................................................................6
Fund Management ............................................................................8
Shareholder Information Pricing Fund Shares ........................................................................9
How to Buy Shares ..........................................................................9
How to Exchange Shares ....................................................................11
How to Sell Shares ........................................................................13
Distributions ............................................................................14
Tax Consequences ..........................................................................15
Share Class Arrangements ..................................................................16
Financial Highlights ..........................................................................................24
Our Family of Funds .......................................................................... Inside Back Cover
</TABLE>
This Prospectus contains important information about the Fund. Please
read it carefully and keep it for future reference.
<PAGE>
THE FUND
[GRAPHIC OMITTED]
INVESTMENT OBJECTIVE
--------------------
Morgan Stanley Dean Witter Special Value Fund seeks long-term capital
appreciation.
[GRAPHIC OMITTED]
PRINCIPAL INVESTMENT STRATEGIES
-------------------------------
The Fund will normally invest at least 65% of its total assets in common stocks
of small companies that the Fund's "Investment Manager," Morgan Stanley Dean
Witter Advisors Inc., believes are undervalued relative to the marketplace or
similar companies. Companies within a capitalization range of $100 million to
$1.5 billion are considered small companies. In deciding which securities to
buy, hold or sell, the Investment Manager will pursue a value oriented approach
that seeks to identify securities whose market value is less than their
intrinsic value. The Investment Manager will focus on securities with
market-to-book ratios and price-earnings ratios that are lower than those of the
general market averages or similar companies. The Investment Manager also may
consider a company's dividend yield, growth in sales, balance sheet, management
capabilities, earnings and cash flow, as well as other factors.
[sidebar]
CAPITAL APPRECIATION
An investment objective having the goal of selecting securities with the
potential to rise in price rather than pay out income.
[end sidebar]
As part of the value-oriented approach, the Investment Manager may also seek to
identify companies with growth opportunities that are not fairly valued in the
marketplace. These growth opportunities may include valuable franchises or other
intangibles, ownership of trademarks or trade names, control of distribution
networks, ownership of undervalued real estate, and other factors that would
identify the company as a potential takeover target or turnaround candidate. In
addition, the Investment Manager may select securities because it believes there
is some potential catalyst to cause a stock's price to rise. A catalyst might
include increased investor attention, asset sales, corporate reorganizations, a
cyclical turnaround of a depressed business or industry, a new
product/innovation, significant changes in management, or regulatory shifts.
In addition, the Fund may invest in common stocks of medium-sized and large
companies, convertible and non-convertible fixed-income and preferred equity
securities, real estate investment trusts (commonly known as "REITs") and
foreign securities (including depository receipts).
Common stock is a share ownership or equity interest in a corporation. It may or
may not pay dividends, as some companies reinvest all of their profits back into
their businesses, while others pay out some of their profits to shareholders as
dividends. A depository receipt is generally issued by a bank or financial
institution and represents an ownership interest in the common stock or other
equity securities of a foreign company.
1
<PAGE>
In pursuing the Fund's investment objective, the Investment Manager has
considerable leeway in deciding which investments it buys, holds or sells on a
day-to-day basis -- and which trading strategies it uses. For example, the
Investment Manager in its discretion may determine to use some permitted trading
strategies while not using others.
[GRAPHIC OMITTED]
PRINCIPAL RISKS
---------------
There is no assurance that the Fund will achieve its investment objective. The
Fund's share price will fluctuate with changes in the market value of the Fund's
portfolio securities. When you sell Fund shares, they may be worth less than
what you paid for them and, accordingly, you can lose money investing in this
Fund.
A principal risk of investing in the Fund is associated with its investments in
common stocks. In general, stock values fluctuate in response to activities
specific to the company as well as general market, economic and political
conditions. These prices can fluctuate widely.
Investing in securities of small companies may involve greater risk than is
customarily associated with investing in more established companies. Often,
small companies and the industries in which they are focused are still evolving,
and they are more sensitive to changing market conditions than larger companies
in more established industries. Small companies often have limited product
lines, limited financial resources and less experienced management. As a
consequence, their securities may be more volatile and have returns that vary,
sometimes significantly, from the overall stock market. Securities of small
companies also may be less liquid than established companies.
Other Risks. The performance of the Fund also will depend on whether the
Investment Manager is successful in pursuing the Fund's investment strategy. The
Fund is also subject to other risks from its permissible investments including
the risks associated with the common stocks of medium-sized and large companies,
convertible and non-convertible fixed-income securities, foreign securities and
REITs. For more information about these risks, see the "Additional Risk
Information" section.
Shares of the Fund are not bank deposits and are not guaranteed or insured by
the FDIC or any other government agency.
2
<PAGE>
[GRAPHIC OMITTED]
PAST PERFORMANCE
----------------
The bar chart and table below provide some indication of the risks of investing
in the Fund. The Fund's past performance does not indicate how the Fund will
perform in the future.
[sidebar]
ANNUAL TOTAL RETURNS
This chart shows how the performance of the Fund's Class B shares has varied
from year to year over the past 3 calendar years.
[end sidebar]
ANNUAL TOTAL RETURNS -- CALENDAR YEARS
[GRAPHIC OMITTED]
1997 ......................... 26.41%
'98 ......................... -7.25%
'99 ......................... 4.50%
The bar chart reflects the performance of Class B shares; the performance of the
other Classes will differ because the Classes have different ongoing fees. The
performance information in the bar chart does not reflect the deduction of sales
charges; if these amounts were reflected, returns would be less than shown.
Year-to-date total return as of June 30, 2000 was 7.52%.
During the periods shown in the bar chart, the highest return for a calendar
quarter was 18.62% (quarter ended June 30, 1999) and the lowest return for a
calendar quarter was -16.93% (quarter ended September 30, 1998).
[sidebar]
AVERAGE ANNUAL TOTAL RETURNS
This table compares the Fund's average annual total returns with those of a
broad measure of market performance over time. The Fund's returns include the
maximum applicable sales charge for each Class and assume you sold your shares
at the end of each period.
[end sidebar]
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1999)
---------------------------------------------------------------
LIFE OF THE FUND
PAST 1 YEAR (SINCE OCTOBER 29, 1996)
---------------------------------------------------------------
<S> <C> <C>
Class A(1) -0.19% --
---------------------------------------------------------------
Class B -0.50% 7.26%
---------------------------------------------------------------
Class C(1) 3.60% --
---------------------------------------------------------------
Class D(1) 5.51% --
---------------------------------------------------------------
Russell 2000 Index(2) 21.26% 14.98%(3)
---------------------------------------------------------------
</TABLE>
(1) Classes A, C and D commenced operations on July 28, 1997.
(2) The Russell 2000 Index is a capitalization-weighted index, which is
comprised of 2000 of the smallest stocks in the Russell 3000 Index. The
Index does not include any expenses, fees or charges. The Index is unmanaged
and should not be considered an investment.
(3) For the period October 31, 1996 to December 31, 1999.
3
<PAGE>
[GRAPHIC OMITTED]
FEES AND EXPENSES
-----------------
The table below briefly describes the fees and expenses that you may pay if you
buy and hold shares of the Fund. The Fund offers four Classes of shares: Classes
A, B, C and D. Each Class has a different combination of fees, expenses and
other features. The Fund does not charge account or exchange fees. See the
"Share Class Arrangements" section for further fee and expense information.
[sidebar]
SHAREHOLDER FEES
These fees are paid directly from your investment.
[end sidebar]
[sidebar]
ANNUAL FUND OPERATING EXPENSES
These expenses are deducted from the Fund's assets and are based on expenses
paid for the fiscal year ended July 31, 2000.
[end sidebar]
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
------------------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
purchases (as a percentage of offering price) 5.25%(1) None None None
------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a
percentage based on the lesser of the offering
price or net asset value at redemption) None(2) 5.00%(3) 1.00%(4) None
------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
------------------------------------------------------------------------------------------------------
Management fee 0.75% 0.75% 0.75% 0.75%
------------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.23% 1.00% 0.98% None
------------------------------------------------------------------------------------------------------
Other expenses 0.25% 0.25% 0.25% 0.25%
------------------------------------------------------------------------------------------------------
Total annual Fund operating expenses 1.23% 2.00% 1.98% 1.00%
------------------------------------------------------------------------------------------------------
</TABLE>
(1) Reduced for purchases of $25,000 and over.
(2) Investments that are not subject to any sales charge at the time of purchase
are subject to a contingent deferred sales charge ("CDSC") of 1.00% that
will be imposed if you sell your shares within one year after purchase,
except for certain specific circumstances.
(3) The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter. See "Share Class Arrangements" for a complete discussion of the
CDSC.
(4) Only applicable if you sell your shares within one year after purchase.
4
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund, your investment has a
5% return each year, and the Fund's operating expenses remain the same. Although
your actual costs may be higher or lower, the tables below show your costs at
the end of each period based on these assumptions depending upon whether or not
you sell your shares at the end of each period.
<TABLE>
<CAPTION>
IF YOU SOLD YOUR SHARES: IF YOU HELD YOUR SHARES:
------------------------------------------------- ---------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A $644 $895 $1,165 $1,935 $644 $895 $1,165 $1,935
------------------------------------------------- ---------------------------------------
CLASS B $703 $927 $1,278 $2,327 $203 $627 $1,078 $2,327
------------------------------------------------- ---------------------------------------
CLASS C $301 $621 $1,068 $2,306 $201 $621 $1,068 $2,306
------------------------------------------------- ---------------------------------------
CLASS D $102 $318 $ 552 $1,225 $102 $318 $ 552 $1,225
------------------------------------------------- ---------------------------------------
</TABLE>
Long-term shareholders of Class B and Class C may pay more in sales charges,
including distribution fees, than the economic equivalent of the maximum
front-end sales charges permitted by the NASD.
[GRAPHIC OMITTED]
ADDITIONAL INVESTMENT STRATEGY INFORMATION
-------------------------------------------
This section provides additional information relating to the Fund's principal
investment strategies.
Other Securities. The Fund may invest up to 35% of its total assets in common
stocks of medium-sized and large companies, convertible securities, fixed-income
securities and REITs. The fixed-income securities in which the Fund may invest
include U.S. government securities and corporate debt securities.
Junk Bonds. The Fund may invest up to 20% of its assets in convertible
securities rated below investment grade or, if unrated, of comparable quality as
determined by the Investment Manager. In addition, the Fund may invest up to 5%
of its assets in non-convertible fixed-income securities rated below investment
grade or, if unrated, of comparable quality as determined by the Investment
Manager. Securities rated below investment grade are commonly known as "junk
bonds."
Foreign Securities. The Fund may invest in foreign securities (including
depository receipts) that are listed in the U.S. on a national securities
exchange.
Defensive Investing. The Fund may take temporary "defensive" positions in
attempting to respond to adverse market conditions. The Fund may invest any
amount of its assets
5
<PAGE>
in cash or money market instruments in a defensive posture when the Investment
Manager believes it is advisable to do so. Although taking a defensive posture
is designed to protect the Fund from an anticipated market downturn, it could
have the effect of reducing the benefit from any upswing in the market. When the
Fund takes a defensive position, it may not achieve its investment objective.
The percentage limitations relating to the composition of the Fund's portfolio
apply at the time the Fund acquires an investment. Subsequent percentage changes
that result from market fluctuations will not require the Fund to sell any
portfolio security. The Fund may change its principal investment strategies
without shareholder approval; however, you would be notified of any changes.
[GRAPHIC OMITTED]
ADDITIONAL RISK INFORMATION
---------------------------
This section provides additional information relating to the principal risks of
investing in the Fund.
Fixed-Income Securities. Principal risks of investing in the Fund are also
associated with its fixed-income securities. All fixed-income securities are
subject to two types of risk: credit risk and interest rate risk.
Credit risk refers to the possibility that the issuer of a security will be
unable to make interest payments and/or repay the principal on its debt. While
the Fund invests in investment grade securities, certain of these securities
have speculative characteristics.
Interest rate risk refers to fluctuations in the value of a fixed-income
security resulting from changes in the general level of interest rates. When the
general level of interest rates goes up, the prices of most fixed-income
securities go down. When the general level of interest rates goes down, the
prices of most fixed-income securities go up.
Convertible Securities. The Fund's investments in convertible securities subject
the Fund to the risks associated with both fixed-income securities and common
stocks. To the extent that a convertible security's investment value is greater
than its conversion value, its price will likely increase when interest rates
fall and decrease when interest rates rise, as with a fixed-income security. If
the conversion value exceeds the investment value, the price of the convertible
security will tend to fluctuate directly with the price of the underlying equity
security.
Junk Bonds. Any "junk bond" investments of the Fund pose significant risks. The
prices of these securities are likely to be more sensitive to adverse economic
changes or individual corporate developments than higher rated securites. During
an economic downturn or substantial period of rising interest rates, junk bond
issuers and, in particular, highly leveraged issuers may experience financial
stress that would adversely affect their ability to service their principal and
interest payment obligations,
6
<PAGE>
to meet their projected business goals or to obtain additional financing. In the
event of a default, the Fund may incur additional expenses to seek recovery. In
addition, periods of economic uncertainty and change probably would result in an
increased volatility of market prices of junk bond securities and a
corresponding volatility in the Fund's net asset value.
Foreign Securities. The Fund's investments in foreign securities involve risks
that are in addition to the risks associated with domestic securities. One
additional risk is currency risk. While the price of Fund shares is quoted in
U.S. dollars, the Fund generally converts U.S. dollars to a foreign market's
local currency to purchase a security in that market. If the value of that local
currency falls relative to the U.S. dollar, the U.S. dollar value of the foreign
security will decrease. This is true even if the foreign security's local price
remains unchanged.
Foreign securities (including depository receipts) have risks related to
economic and political developments abroad, including expropriations,
confiscatory taxation, exchange control regulation, limitations on the use or
transfer of Fund assets and any effects of foreign social, economic or political
instability. Foreign companies, in general, are not subject to the regulatory
requirements of U.S. companies and, as such, there may be less publicly
available information about these companies. Moreover, foreign accounting,
auditing and financial reporting standards generally are different from those
applicable to U.S. companies. Finally, in the event of a default of any foreign
debt obligations, it may be more difficult for the Fund to obtain or enforce a
judgment against the issuers of the securities.
Real Estate Investment Trusts ("REITs"). REITs pool investors' funds for
investments primarily in commercial real estate properties. Like mutual funds,
REITs have expenses, including advisory and administration fees that are paid by
their shareholders. As a result, you will absorb duplicate levels of fees if the
Fund invests in REITs. The performance of any Fund REIT holdings ultimately
depends on the types of real property in which the REITs invest and how well the
property is managed. A general downturn in real estate values also can hurt REIT
performance.
7
<PAGE>
[GRAPHIC OMITTED]
FUND MANAGEMENT
---------------
The Fund has retained the Investment Manager -- Morgan Stanley Dean Witter
Advisors Inc. -- to provide administrative services, manage its business affairs
and invest its assets, including the placing of orders for the purchase and sale
of portfolio securities. The Investment Manager is a wholly-owned subsidiary of
Morgan Stanley Dean Witter & Co., a preeminent global financial services firm
that maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services. Its main business office is
located at Two World Trade Center, New York, NY 10048.
[sidebar]
MORGAN STANLEY DEAN WITTER ADVISORS INC.
The Investment Manager is widely recognized as a leader in the mutual fund
industry and together with Morgan Stanley Dean Witter Services Company Inc.,
its wholly-owned subsidiary, had approximately $155 billion in assets under
management as of August 31, 2000.
[end sidebar]
The Fund's portfolio is managed within the Investment Manager's Growth Group.
Jenny Beth Jones, Senior Vice President of the Investment Manager, has been the
Fund's primary portfolio manager since its inception in October 1996. Prior to
joining the Investment Manager in August 1996, Ms. Jones was a portfolio manager
with Oppenheimer Capital.
The Fund pays the Investment Manager a monthly management fee as full
compensation for the services and facilities furnished to the Fund, and for Fund
expenses assumed by the Investment Manager. The fee is based on the Fund's
average daily net assets. For the fiscal year ended July 31, 2000 the Fund
accrued total compensation to the Investment Manager amounting to 0.75% of the
Fund's average daily net assets.
8
<PAGE>
SHAREHOLDER INFORMATION
[GRAPHIC OMITTED]
PRICING FUND SHARES
-------------------
The price of Fund shares (excluding sales charges), called "net asset value," is
based on the value of the Fund's portfolio securities. While the assets of each
Class are invested in a single portfolio of securities, the net asset value of
each Class will differ because the Classes have different ongoing distribution
fees.
The net asset value per share of the Fund is determined once daily at 4:00 p.m.
Eastern time on each day that the New York Stock Exchange is open (or, on days
when the New York Stock Exchange closes prior to 4:00 p.m., at such earlier
time). Shares will not be priced on days that the New York Stock Exchange is
closed.
The value of the Fund's portfolio securities is based on the securities' market
price when available. When a market price is not readily available, including
circumstances under which the Investment Manager determines that a security's
market price is not accurate, a portfolio security is valued at its fair value,
as determined under procedures established by the Fund's Board of Trustees. In
these cases, the Fund's net asset value will reflect certain portfolio
securities' fair value rather than their market price.
An exception to the Fund's general policy of using market prices concerns its
short-term debt portfolio securities. Debt securities with remaining maturities
of sixty days or less at the time of purchase are valued at amortized cost.
However, if the cost does not reflect the securities' market value, these
securities will be valued at their fair value.
[GRAPHIC OMITTED]
HOW TO BUY SHARES
-----------------
You may open a new account to buy Fund shares or buy additional Fund shares for
an existing account by contacting your Morgan Stanley Dean Witter Financial
Advisor or other authorized financial representative. Your Financial Advisor
will assist you, step-by-step, with the procedures to invest in the Fund. You
may also purchase shares directly by calling the Fund's transfer agent and
requesting an application.
[sidebar]
CONTACTING A FINANCIAL ADVISOR
If you are new to the Morgan Stanley Dean Witter Family of Funds and would like
to contact a Financial Advisor, call (877) 937-MSDW (toll-free) for the
telephone number of the Morgan Stanley Dean Witter office nearest you. You may
also access our office locator on our Internet site at: www.msdwadvice.com/funds
[end sidebar]
Because every investor has different immediate financial needs and long-term
investment goals, the Fund offers investors four Classes of shares: Classes A,
B, C and D. Class D shares are only offered to a limited group of investors.
Each Class of shares offers a distinct structure of sales charges, distribution
and service fees, and other features that are designed to address a variety of
needs. Your Financial Advisor or other authorized financial representative can
help you decide which Class may be most appropriate for you. When purchasing
Fund shares, you must specify which Class of shares you wish to purchase.
9
<PAGE>
When you buy Fund shares, the shares are purchased at the next share price
calculated (less any applicable front-end sales charge for Class A shares) after
we receive your purchase order. Your payment is due on the third business day
after you place your purchase order. We reserve the right to reject any order
for the purchase of Fund Shares.
[sidebar]
EASYINVEST(SM)
A purchase plan that allows you to transfer money automatically from your
checking or savings account or from a Money Market Fund on a semi-monthly,
monthly or quarterly basis. Contact your Morgan Stanley Dean Witter Financial
Advisor for further information about this service.
[end sidebar]
<TABLE>
<CAPTION>
MINIMUM INVESTMENT AMOUNTS
-----------------------------------------------------------------------------
MINIMUM INVESTMENT
----------------------
INVESTMENT OPTIONS INITIAL ADDITIONAL
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Regular Accounts $1,000 $100
-----------------------------------------------------------------------------
Individual Retirement Accounts: Regular IRAs $1,000 $100
Education IRAs $ 500 $100
-----------------------------------------------------------------------------
EasyInvest(SM)
(Automatically from your
checking or savings account
or Money Market Fund) $ 100* $100*
-----------------------------------------------------------------------------
</TABLE>
* Provided your schedule of investments totals $1,000 in twelve months.
There is no minimum investment amount if you purchase Fund shares through: (1)
the Investment Manager's mutual fund asset allocation plan, (2) a program,
approved by the Fund's distributor, in which you pay an asset-based fee for
advisory, administrative and/or brokerage services, (3) the following programs
approved by the Fund's distributor: (i) qualified state tuition plans described
in Section 529 of the Internal Revenue Code and (ii) certain other investment
programs that do not charge an asset- based fee, or (4) employer-sponsored
employee benefit plan accounts.
Investment Options for Certain Institutional and Other Investors/Class D Shares.
To be eligible to purchase Class D shares, you must qualify under one of the
investor categories specified in the "Share Class Arrangements" section of this
Prospectus.
Subsequent Investments Sent Directly to the Fund. In addition to buying
additional Fund shares for an existing account by contacting your Morgan Stanley
Dean Witter Financial Advisor, you may send a check directly to the Fund. To buy
additional shares in this manner:
o Write a "letter of instruction" to the Fund specifying the name(s) on the
account, the account number, the social security or tax identification number,
the Class of shares you wish to purchase and the investment amount (which
would include any applicable front-end sales charge). The letter must be
signed by the account owner(s).
10
<PAGE>
o Make out a check for the total amount payable to: Morgan Stanley Dean Witter
Special Value Fund.
o Mail the letter and check to Morgan Stanley Dean Witter Trust FSB at P.O. Box
1040, Jersey City, NJ 07303.
[GRAPHIC OMITTED]
HOW TO EXCHANGE SHARES
----------------------
Permissible Fund Exchanges. You may exchange shares of any Class of the Fund for
the same Class of any other continuously offered Multi-Class Fund, or for shares
of a No-Load Fund, a Money Market Fund, North American Government Income Trust
or Short-Term U.S. Treasury Trust, without the imposition of an exchange fee. In
addition, Class A shares of the Fund may be exchanged for shares of an FSC Fund
(funds subject to a front-end sales charge). See the inside back cover of this
Prospectus for each Morgan Stanley Dean Witter Fund's designation as a
Multi-Class Fund, No-Load Fund, Money Market Fund or FSC Fund. If a Morgan
Stanley Dean Witter Fund is not listed, consult the inside back cover of that
fund's prospectus for its designation.
Exchanges may be made after shares of the Fund acquired by purchase have been
held for thirty days. There is no waiting period for exchanges of shares
acquired by exchange or dividend reinvestment. The current prospectus for each
fund describes its investment objective(s), policies and investment minimums,
and should be read before investment. Since exchanges are available only into
continuously offered Morgan Stanley Dean Witter Funds, exchanges are not
available into any new Morgan Stanley Dean Witter Fund during its initial
offering period, or when shares of a particular Morgan Stanley Dean Witter Fund
are not being offered for purchase.
Exchange Procedures. You can process an exchange by contacting your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative. Otherwise, you must forward an exchange privilege authorization
form to the Fund's transfer agent -- Morgan Stanley Dean Witter Trust FSB -- and
then write the transfer agent or call (800) 869-NEWS to place an exchange order.
You can obtain an exchange privilege authorization form by contacting your
Financial Advisor or other authorized financial representative or by calling
(800) 869-NEWS. If you hold share certificates, no exchanges may be processed
until we have received all applicable share certificates.
An exchange to any Morgan Stanley Dean Witter Fund (except a Money Market Fund)
is made on the basis of the next calculated net asset values of the funds
involved after the exchange instructions are accepted. When exchanging into a
Money Market Fund, the Fund's shares are sold at their next calculated net asset
value and the Money Market Fund's shares are purchased at their net asset value
on the following business day.
11
<PAGE>
The Fund may terminate or revise the exchange privilege upon required notice.
The check writing privilege is not available for Money Market Fund shares you
acquire in an exchange.
Telephone Exchanges. For your protection when calling Morgan Stanley Dean Witter
Trust FSB, we will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. These procedures may
include requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number. Telephone
instructions also may be recorded.
Telephone instructions will be accepted if received by the Fund's transfer agent
between 9:00 a.m. and 4:00 p.m. Eastern time on any day the New York Stock
Exchange is open for business. During periods of drastic economic or market
changes, it is possible that the telephone exchange procedures may be difficult
to implement, although this has not been the case with the Fund in the past.
Margin Accounts. If you have pledged your Fund shares in a margin account,
contact your Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative regarding restrictions on the exchange of such shares.
Tax Considerations of Exchanges. If you exchange shares of the Fund for shares
of another Morgan Stanley Dean Witter Fund there are important tax
considerations. For tax purposes, the exchange out of the Fund is considered a
sale of Fund shares -- and the exchange into the other fund is considered a
purchase. As a result, you may realize a capital gain or loss.
You should review the "Tax Consequences" section and consult your own tax
professional about the tax consequences of an exchange.
Limitations on Exchanges. Certain patterns of past exchanges and/or purchase or
sale transactions involving the Fund or other Morgan Stanley Dean Witter Funds
may result in the Fund limiting or prohibiting, at its discretion, additional
purchases and/or exchanges. Determinations in this regard may be made based on
the frequency or dollar amount of the previous exchanges or purchase or sale
transactions. You will be notified in advance of limitations on your exchange
privileges.
CDSC Calculations on Exchanges. See the "Share Class Arrangements" section of
this Prospectus for a further discussion of how applicable contingent deferred
sales charges (CDSCs) are calculated for shares of one Morgan Stanley Dean
Witter Fund that are exchanged for shares of another.
For further information regarding exchange privileges, you should contact your
Morgan Stanley Dean Witter Financial Advisor or call (800) 869-NEWS.
12
<PAGE>
[GRAPHIC OMITTED]
HOW TO SELL SHARES
------------------
You can sell some or all of your Fund shares at any time. If you sell Class A,
Class B or Class C shares, your net sale proceeds are reduced by the amount of
any applicable CDSC. Your shares will be sold at the next price calculated after
we receive your order to sell as described below.
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
---------------------------------------------------------------------------------------------------------------------
<S> <C>
Contact Your To sell your shares, simply call your Morgan Stanley Dean Witter Financial Advisor or other
Financial Advisor authorized financial representative.
-----------------------------------------------------------------------------------------------
[GRAPHIC OMITTED] Payment will be sent to the address to which the account is registered or deposited in your
brokerage account.
---------------------------------------------------------------------------------------------------------------------
By Letter You can also sell your shares by writing a "letter of instruction" that includes:
o your account number;
[GRAPHIC OMITTED] o the dollar amount or the number of shares you wish to sell;
o the Class of shares you wish to sell; and
o the signature of each owner as it appears on the account.
-----------------------------------------------------------------------------------------------
If you are requesting payment to anyone other than the registered owner(s) or that payment
be sent to any address other than the address of the registered owner(s) or pre-designated
bank account, you will need a signature guarantee. You can obtain a signature guarantee from
an eligible guarantor acceptable to Morgan Stanley Dean Witter Trust FSB. (You should
contact Morgan Stanley Dean Witter Trust FSB at (800) 869-NEWS for a determination as to
whether a particular institution is an eligible guarantor.) A notary public cannot provide a
signature guarantee. Additional documentation may be required for shares held by a
corporation, partnership, trustee or executor.
-----------------------------------------------------------------------------------------------
Mail the letter to Morgan Stanley Dean Witter Trust FSB at P.O. Box 983, Jersey City, NJ
07303. If you hold share certificates, you must return the certificates, along with the letter
and any required additional documentation.
-----------------------------------------------------------------------------------------------
A check will be mailed to the name(s) and address in which the account is registered, or
otherwise according to your instructions.
---------------------------------------------------------------------------------------------------------------------
Systematic If your investment in all of the Morgan Stanley Dean Witter Family of Funds has a total
Withdrawal Plan market value of at least $10,000, you may elect to withdraw amounts of $25 or more, or in
any whole percentage of a fund's balance (provided the amount is at least $25), on a monthly,
[GRAPHIC OMITTED] quarterly, semi-annual or annual basis, from any fund with a balance of at least $1,000. Each
time you add a fund to the plan, you must meet the plan requirements.
-----------------------------------------------------------------------------------------------
Amounts withdrawn are subject to any applicable CDSC. A CDSC may be waived under
certain circumstances. See the Class B waiver categories listed in the "Share Class
Arrangements" section of this Prospectus.
-----------------------------------------------------------------------------------------------
To sign up for the Systematic Withdrawal Plan, contact your Morgan Stanley Dean Witter
Financial Advisor or call (800) 869-NEWS. You may terminate or suspend your plan at any
time. Please remember that withdrawals from the plan are sales of shares, not Fund
"distributions," and ultimately may exhaust your account balance. The Fund may terminate or
revise the plan at any time.
-----------------------------------------------------------------------------------------------
</TABLE>
Payment for Sold Shares. After we receive your complete instructions to sell as
described above, a check will be mailed to you within seven days, although we
will attempt to make payment within one business day. Payment may also be sent
to your brokerage account.
13
<PAGE>
Payment may be postponed or the right to sell your shares suspended under
unusual circumstances. If you request to sell shares that were recently
purchased by check, your sale will not be effected until it has been verified
that the check has been honored.
Tax Considerations. Normally, your sale of Fund shares is subject to federal and
state income tax. You should review the "Tax Consequences" section of this
Prospectus and consult your own tax professional about the tax consequences of a
sale.
Reinstatement Privilege. If you sell Fund shares and have not previously
exercised the reinstatement privilege, you may, within 35 days after the date of
sale, invest any portion of the proceeds in the same Class of Fund shares at
their net asset value and receive a pro rata credit for any CDSC paid in
connection with the sale.
Involuntary Sales. The Fund reserves the right, on sixty days' notice, to sell
the shares of any shareholder (other than shares held in an IRA or 403(b)
Custodial Account) whose shares, due to sales by the shareholder, have a value
below $100, or in the case of an account opened through EasyInvest(SM), if after
12 months the shareholder has invested less than $1,000 in the account.
However, before the Fund sells your shares in this manner, we will notify you
and allow you sixty days to make an additional investment in an amount that will
increase the value of your account to at least the required amount before the
sale is processed. No CDSC will be imposed on any involuntary sale.
Margin Accounts. If you have pledged your Fund shares in a margin account,
contact your Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative regarding restrictions on the sale of such shares.
[GRAPHIC OMITTED]
DISTRIBUTIONS
-------------
The Fund passes substantially all of its earnings from income and capital gains
along to its investors as "distributions." The Fund earns income from stocks and
interest from fixed-income investments. These amounts are passed along to Fund
shareholders as "income dividend distributions." The Fund realizes capital gains
whenever it sells securities for a higher price than it paid for them. These
amounts may be passed along as "capital gain distributions."
[sidebar]
TARGETED DIVIDENDS(SM)
You may select to have your Fund distributions automatically invested in other
Classes of Fund shares or Classes of another Morgan Stanley Dean Witter Fund
that you own. Contact your Morgan Stanley Dean Witter Financial Advisor for
further information about this service.
[end sidebar]
The Fund declares income dividends separately for each Class. Distributions paid
on Class A and Class D shares usually will be higher than for Class B and Class
C because distribution fees that Class B and Class C pay are higher. Normally,
income dividends are distributed to shareholders annually. Capital gains, if
any, are usually distributed in December. The Fund, however, may retain and
14
<PAGE>
reinvest any long-term capital gains. The Fund may at times make payments from
sources other than income or capital gains that represent a return of a portion
of your investment.
Distributions are reinvested automatically in additional shares of the same
Class and automatically credited to your account, unless you request in writing
that all distributions be paid in cash. If you elect the cash option, the Fund
will mail a check to you no later than seven business days after the
distribution is declared. However, if you purchase Fund shares through a
Financial Advisor within three business days prior to the record date for the
distribution, the distribution will automatically be paid to you in cash, even
if you did not request to receive all distributions in cash. No interest will
accrue on uncashed checks. If you wish to change how your distributions are
paid, your request should be received by the Fund's transfer agent, Morgan
Stanley Dean Witter Trust FSB, at least five business days prior to the record
date of the distributions.
[GRAPHIC OMITTED]
TAX CONSEQUENCES
----------------
As with any investment, you should consider how your Fund investment will be
taxed. The tax information in this Prospectus is provided as general
information. You should consult your own tax professional about the tax
consequences of an investment in the Fund.
Unless your investment in the Fund is through a tax-deferred retirement account,
such as a 401(k) plan or IRA, you need to be aware of the possible tax
consequences when:
o The Fund makes distributions; and
o You sell Fund shares, including an exchange to another Morgan Stanley Dean
Witter Fund.
Taxes on Distributions. Your distributions are normally subject to federal and
state income tax when they are paid, whether you take them in cash or reinvest
them in Fund shares. A distribution also may be subject to local income tax. Any
income dividend distributions and any short-term capital gain distributions are
taxable to you as ordinary income. Any long-term capital gain distributions are
taxable as long-term capital gains, no matter how long you have owned shares in
the Fund.
Every January, you will be sent a statement (IRS Form 1099-DIV) showing the
taxable distributions paid to you in the previous year. The statement provides
information on your dividends and capital gains for tax purposes.
Taxes on Sales. Your sale of Fund shares normally is subject to federal and
state income tax and may result in a taxable gain or loss to you. A sale also
may be subject to local income tax. Your exchange of Fund shares for shares of
another Morgan Stanley Dean Witter Fund is treated for tax purposes like a sale
of your original shares and a purchase
15
<PAGE>
of your new shares. Thus, the exchange may, like a sale, result in a taxable
gain or loss to you and will give you a new tax basis for your new shares.
When you open your Fund account, you should provide your social security or tax
identification number on your investment application. By providing this
information, you will avoid being subject to a federal backup withholding tax of
31% on taxable distributions and redemption proceeds. Any withheld amount would
be sent to the IRS as an advance tax payment.
[GRAPHIC OMITTED]
SHARE CLASS ARRANGEMENTS
------------------------
The Fund offers several Classes of shares having different distribution
arrangements designed to provide you with different purchase options according
to your investment needs. Your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative can help you decide which Class may be
appropriate for you.
The general public is offered three Classes: Class A shares, Class B shares and
Class C shares, which differ principally in terms of sales charges and ongoing
expenses. A fourth Class, Class D shares, is offered only to a limited category
of investors. Shares that you acquire through reinvested distributions will not
be subject to any front-end sales charge or CDSC -- contingent deferred sales
charge. Sales personnel may receive different compensation for selling each
Class of shares. The sales charges applicable to each Class provide for the
distribution financing of shares of that Class.
The chart below compares the sales charge and annual 12b-1 fee applicable to
each Class:
<TABLE>
<CAPTION>
MAXIMUM
CLASS SALES CHARGE ANNUAL 12b-1 FEE
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
A Maximum 5.25% initial sales charge reduced for purchase of $25,000 or more;
shares sold without an initial sales charge are generally subject to a 1.0% CDSC
during the first year 0.25%
------------------------------------------------------------------------------------------------------------
B Maximum 5.0% CDSC during the first year decreasing to 0% after six years 1.0%
------------------------------------------------------------------------------------------------------------
C 1.0% CDSC during the first year 1.0%
------------------------------------------------------------------------------------------------------------
D None None
------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
CLASS A SHARES Class A shares are sold at net asset value plus an initial sales
charge of up to 5.25%. The initial sales charge is reduced for purchases of
$25,000 or more according to the schedule below. Investments of $1 million or
more are not subject to an initial sales charge, but are generally subject to a
contingent deferred sales charge, or CDSC, of 1.0% on sales made within one year
after the last day of the month of purchase. The CDSC will be assessed in the
same manner and with the same CDSC waivers as with Class B shares. Class A
shares are also subject to a distribution (12b-1) fee of up to 0.25% of the
average daily net assets of the Class.
The offering price of Class A shares includes a sales charge (expressed as a
percentage of the offering price) on a single transaction as shown in the
following table:
[sidebar]
FRONT-END SALES CHARGE OR FSC
An initial sales charge you pay when purchasing Class A shares that is based on
a percentage of the offering price. The percentage declines based upon the
dollar value of Class A shares you purchase. We offer three ways to reduce your
Class A sales charges -- the Combined Purchase Privilege, Right of Accumulation
and Letter of Intent.
[end sidebar]
<TABLE>
<CAPTION>
FRONT-END SALES CHARGE
------------------------------------------------
PERCENTAGE OF PUBLIC APPROXIMATE PERCENTAGE OF
AMOUNT OF SINGLE TRANSACTION OFFERING PRICE NET AMOUNT INVESTED
---------------------------------------------------------------------------------------
<S> <C> <C>
Less than $25,000 5.25% 5.54%
---------------------------------------------------------------------------------------
$25,000 but less than $50,000 4.75% 4.99%
---------------------------------------------------------------------------------------
$50,000 but less than $100,000 4.00% 4.17%
---------------------------------------------------------------------------------------
$100,000 but less than $250,000 3.00% 3.09%
---------------------------------------------------------------------------------------
$250,000 but less than $1 million 2.00% 2.04%
---------------------------------------------------------------------------------------
$1 million and over 0 0
---------------------------------------------------------------------------------------
</TABLE>
The reduced sales charge schedule is applicable to purchases of Class A shares
in a single transaction by:
o A single account (including an individual, trust or fiduciary account).
o Family member accounts (limited to husband, wife and children under the age
of 21).
o Pension, profit sharing or other employee benefit plans of companies and their
affiliates.
o Tax-exempt organizations.
o Groups organized for a purpose other than to buy mutual fund shares.
17
<PAGE>
Combined Purchase Privilege. You also will have the benefit of reduced sales
charges by combining purchases of Class A shares of the Fund in a single
transaction with purchases of Class A shares of other Multi-Class Funds and
shares of FSC Funds.
Right of Accumulation. You also may benefit from a reduction of sales charges if
the cumulative net asset value of Class A shares of the Fund purchased in a
single transaction, together with shares of other funds you currently own which
were previously purchased at a price including a front-end sales charge
(including shares acquired through reinvestment of distributions), amounts to
$25,000 or more. Also, if you have a cumulative net asset value of all your
Class A and Class D shares equal to at least $5 million (or $25 million for
certain employee benefit plans), you are eligible to purchase Class D shares of
any Fund subject to the Fund's minimum initial investment requirement.
You must notify your Morgan Stanley Dean Witter Financial Advisor or other
authorized financial representative (or Morgan Stanley Dean Witter Trust FSB if
you purchase directly through the Fund), at the time a purchase order is placed,
that the purchase qualifies for the reduced sales charge under the Right of
Accumulation. Similar notification must be made in writing when an order is
placed by mail. The reduced sales charge will not be granted if: (i)
notification is not furnished at the time of the order; or (ii) a review of the
records of Dean Witter Reynolds or other authorized dealer of Fund shares or the
Fund's transfer agent does not confirm your represented holdings.
Letter of Intent. The schedule of reduced sales charges for larger purchases
also will be available to you if you enter into a written "letter of intent." A
letter of intent provides for the purchase of Class A shares of the Fund or
other Multi-Class Funds or shares of FSC Funds within a thirteen-month period.
The initial purchase under a letter of intent must be at least 5% of the stated
investment goal. To determine the applicable sales charge reduction, you may
also include: (1) the cost of shares of other Morgan Stanley Dean Witter Funds
which were previously purchased at a price including a front-end sales charge
during the 90-day period prior to the distributor receiving the letter of
intent, and (2) the cost of shares of other funds you currently own acquired in
exchange for shares of funds purchased during that period at a price including a
front-end sales charge. You can obtain a letter of intent by contacting your
Morgan Stanley Dean Witter Financial Advisor or other authorized financial
representative, or by calling (800) 869-NEWS. If you do not achieve the stated
investment goal within the thirteen-month period, you are required to pay the
difference between the sales charges otherwise applicable and sales charges
actually paid, which may be deducted from your investment.
Other Sales Charge Waivers. In addition to investments of $1 million or more,
your purchase of Class A shares is not subject to a front-end sales charge (or a
CDSC upon sale) if your account qualifies under one of the following categories:
18
<PAGE>
o A trust for which Morgan Stanley Dean Witter Trust FSB provides discretionary
trustee services.
o Persons participating in a fee-based investment program (subject to all of its
terms and conditions, including termination fees, mandatory sale or transfer
restrictions on termination) approved by the Fund's distributor pursuant to
which they pay an asset-based fee for investment advisory, administrative
and/or brokerage services.
o Qualified state tuition plans described in Section 529 of the Internal Revenue
Code (subject to all applicable terms and conditions) and certain other
investment programs that do not charge an asset-based fee and have been
approved by the Fund's distributor.
o Employer-sponsored employee benefit plans, whether or not qualified under the
Internal Revenue Code, for which Morgan Stanley Dean Witter Trust FSB serves
as trustee or Morgan Stanley Dean Witter's Retirement Plan Services serves as
recordkeeper under a written Recordkeeping Services Agreement ("MSDW Eligible
Plans") which have at least 200 eligible employees.
o An MSDW Eligible Plan whose Class B shares have converted to Class A shares,
regardless of the plan's asset size or number of eligible employees.
o A client of a Morgan Stanley Dean Witter Financial Advisor who joined us from
another investment firm within six months prior to the date of purchase of
Fund shares, and you used the proceeds from the sale of shares of a
proprietary mutual fund of that Financial Advisor's previous firm that imposed
either a front-end or deferred sales charge to purchase Class A shares,
provided that: (1) you sold the shares not more than 60 days prior to the
purchase of Fund shares, and (2) the sale proceeds were maintained in the
interim in cash or a money market fund.
o Current or retired Directors/Trustees of the Morgan Stanley Dean Witter Funds,
such persons' spouses and children under the age of 21, and trust accounts for
which any of such persons is a beneficiary.
o Current or retired directors, officers and employees of Morgan Stanley Dean
Witter & Co. and any of its subsidiaries, such persons' spouses and children
under the age of 21, and trust accounts for which any of such persons is a
beneficiary.
CLASS B SHARES Class B shares are offered at net asset value with no initial
sales charge but are subject to a contingent deferred sales charge, or CDSC, as
set forth in the table below. For the purpose of calculating the CDSC, shares
are deemed to have been purchased on the last day of the month during which they
were purchased.
19
<PAGE>
[sidebar]
CONTINGENT DEFERRED SALES CHARGE OR CDSC
A fee you pay when you sell shares of certain Morgan Stanley Dean Witter Funds
purchased without an initial sales charge. This fee declines the longer you hold
your shares as set forth in the table.
[end sidebar]
<TABLE>
<CAPTION>
CDSC AS A PERCENTAGE
YEAR SINCE PURCHASE PAYMENT MADE OF AMOUNT REDEEMED
----------------------------------------------------------
<S> <C>
First 5.0%
----------------------------------------------------------
Second 4.0%
----------------------------------------------------------
Third 3.0%
----------------------------------------------------------
Fourth 2.0%
----------------------------------------------------------
Fifth 2.0%
----------------------------------------------------------
Sixth 1.0%
----------------------------------------------------------
Seventh and thereafter None
----------------------------------------------------------
</TABLE>
Each time you place an order to sell or exchange shares, shares with no CDSC
will be sold or exchanged first, then shares with the lowest CDSC will be sold
or exchanged next. For any shares subject to a CDSC, the CDSC will be assessed
on an amount equal to the lesser of the current market value or the cost of the
shares being sold.
CDSC Waivers. A CDSC, if otherwise applicable, will be waived in the case of:
o Sales of shares held at the time you die or become disabled (within the
definition in Section 72(m)(7) of the Internal Revenue Code which relates to the
ability to engage in gainful employment), if the shares are: (i) registered
either in your name (not a trust) or in the names of you and your spouse as
joint tenants with right of survivorship; or (ii) held in a qualified corporate
or self-employed retirement plan, IRA or 403(b) Custodial Account, provided in
either case that the sale is requested within one year of your death or initial
determination of disability.
o Sales in connection with the following retirement plan "distributions:" (i)
lump-sum or other distributions from a qualified corporate or self-employed
retirement plan following retirement (or, in the case of a "key employee" of a
"top heavy" plan, following attainment of age 59 1/2); (ii) distributions from
an IRA or 403(b) Custodial Account following attainment of age 59 1/2; or
(iii) a tax-free return of an excess IRA contribution (a "distribution" does
not nclude a direct transfer of IRA, 403(b) Custodial Account or retirement
plan assets to a successor custodian or trustee).
o Sales of shares held for you as a participant in an MSDW Eligible Plan.
o Sales of shares in connection with the Systematic Withdrawal Plan of up to 12%
annually of the value of each fund from which plan sales are made. The
percentage is determined on the date you establish the Systematic Withdrawal
Plan and based on the next calculated share price. You may have this CDSC
waiver applied in amounts up to 1% per month, 3% per quarter, 6% semi-annually
or 12% annually. Shares with no CDSC will be sold first, followed by those
with the lowest CDSC. As such, the waiver benefit will be reduced by the
amount of your shares that are not subject to a CDSC. If
20
<PAGE>
you suspend your participation in the plan, you may later resume plan payments
without requiring a new determination of the account value for the 12% CDSC
waiver.
o Sales of shares if you simultaneously invest the proceeds in the Investment
Manager's mutual fund asset allocation program, pursuant to which investors
pay an asset-based fee. Any shares you acquire in connection with the
Investment Manager's mutual fund asset allocation program are subject to all
of the terms and conditions of that program, including termination fees,
mandatory sale or transfer restrictions on termination.
All waivers will be granted only following the Fund's distributor receiving
confirmation of your entitlement. If you believe you are eligible for a CDSC
waiver, please contact your Financial Advisor or call (800) 869-NEWS.
Distribution Fee. Class B shares are subject to an annual distribution (12b-1)
fee of 1.0% of the average daily net assets of Class B.
Conversion Feature. After ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund with no initial sales charge. The
ten year period runs from the last day of the month in which the shares were
purchased, or in the case of Class B shares acquired through an exchange, from
the last day of the month in which the original Class B shares were purchased;
the shares will convert to Class A shares based on their relative net asset
values in the month following the ten year period. At the same time, an equal
proportion of Class B shares acquired through automatically reinvested
distributions will convert to Class A shares on the same basis. (Class B shares
held before May 1, 1997, however, will convert to Class A shares in May 2007.)
In the case of Class B shares held in an MSDW Eligible Plan, the plan is treated
as a single investor and all Class B shares will convert to Class A shares on
the conversion date of the Class B shares of a Morgan Stanley Dean Witter Fund
purchased by that plan.
Currently, the Class B share conversion is not a taxable event; the conversion
feature may be cancelled if it is deemed a taxable event in the future by the
Internal Revenue Service.
If you exchange your Class B shares for shares of a Money Market Fund, a No-Load
Fund, North American Government Income Trust or Short-Term U.S. Treasury Trust,
the holding period for conversion is frozen as of the last day of the month of
the exchange and resumes on the last day of the month you exchange back into
Class B shares.
Exchanging Shares Subject to a CDSC. There are special considerations when you
exchange Fund shares that are subject to a CDSC. When determining the length of
time
21
<PAGE>
you held the shares and the corresponding CDSC rate, any period (starting at the
end of the month) during which you held shares of a fund that does not charge a
CDSC will not be counted. Thus, in effect the "holding period" for purposes of
calculating the CDSC is frozen upon exchanging into a fund that does not charge
a CDSC.
For example, if you held Class B shares of the Fund for one year, exchanged to
Class B of another Morgan Stanley Dean Witter Multi-Class Fund for another year,
then sold your shares, a CDSC rate of 4% would be imposed on the shares based on
a two year holding period -- one year for each fund. However, if you had
exchanged the shares of the Fund for a Money Market Fund (which does not charge
a CDSC) instead of the Multi-Class Fund, then sold your shares, a CDSC rate of
5% would be imposed on the shares based on a one year holding period. The one
year in the Money Market Fund would not be counted. Nevertheless, if shares
subject to a CDSC are exchanged for a fund that does not charge a CDSC, you will
receive a credit when you sell the shares equal to the distribution (12b-1)
fees, if any, you paid on those shares while in that fund up to the amount of
any applicable CDSC.
In addition, shares that are exchanged into or from a Morgan Stanley Dean Witter
Fund subject to a higher CDSC rate will be subject to the higher rate, even if
the shares are re-exchanged into a fund with a lower CDSC rate.
CLASS C SHARES Class C shares are sold at net asset value with no initial sales
charge but are subject to a CDSC of 1.0% on sales made within one year after the
last day of the month of purchase. The CDSC will be assessed in the same manner
and with the same CDSC waivers as with Class B shares.
Distribution Fee. Class C shares are subject to an annual distribution (12b-1)
fee of up to 1.0% of the average daily net assets of that Class. The Class C
shares' distribution fee may cause that Class to have higher expenses and pay
lower dividends than Class A or Class D shares. Unlike Class B shares, Class C
shares have no conversion feature and, accordingly, an investor that purchases
Class C shares may be subject to distribution (12b-1) fees applicable to Class C
shares for an indefinite period.
CLASS D SHARES Class D shares are offered without any sales charge on purchases
or sales and without any distribution (12b-1) fee. Class D shares are offered
only to investors meeting an initial investment minimum of $5 million ($25
million for MSDW Eligible Plans) and the following investor categories:
o Investors participating in the Investment Manager's mutual fund asset
allocation program (subject to all of its terms and conditions, including
termination fees, mandatory sale or transfer restrictions on termination)
pursuant to which they pay an asset-based fee.
o Persons participating in a fee-based investment program (subject to all of its
terms and conditions, including termination fees, mandatory sale or transfer
restrictions on
22
<PAGE>
termination) approved by the Fund's distributor pursuant to which they pay an
asset-based fee for investment advisory, administrative and/or brokerage
services.
o Certain investment programs that do not charge an asset-based fee and have
been approved by the Fund's distributor. However, Class D shares are not
offered for investments made through Section 529 plans (regardless of the size
of the investment).
o Employee benefit plans maintained by Morgan Stanley Dean Witter & Co. or any
of its subsidiaries for the benefit of certain employees of Morgan Stanley
Dean Witter & Co. and its subsidiaries.
o Certain unit investment trusts sponsored by Dean Witter Reynolds.
o Certain other open-end investment companies whose shares are distributed by
the Fund's distributor.
o Investors who were shareholders of the Dean Witter Retirement Series on
September 11, 1998 for additional purchases for their former Dean Witter
Retirement Series accounts.
Meeting Class D Eligibility Minimums. To meet the $5 million ($25 million for
MSDW Eligible Plans) initial investment to qualify to purchase Class D shares
you may combine: (1) purchases in a single transaction of Class D shares of the
Fund and other Morgan Stanley Dean Witter Multi-Class Funds; and/or (2) previous
purchases of Class A and Class D shares of Multi-Class Funds and shares of FSC
Funds you currently own, along with shares of Morgan Stanley Dean Witter Funds
you currently own that you acquired in exchange for those shares.
NO SALES CHARGES FOR REINVESTED CASH DISTRIBUTIONS If you receive a cash payment
representing an income dividend or capital gain and you reinvest that amount in
the applicable Class of shares by returning the check within 30 days of the
payment date, the purchased shares would not be subject to an initial sales
charge or CDSC.
PLAN OF DISTRIBUTION (RULE 12b-1 FEES) The Fund has adopted a Plan of
Distribution in accordance with Rule 12b-1 under the Investment Company Act of
1940 with respect to the distribution of Class A, Class B and Class C shares.
The Plan allows the Fund to pay distribution fees for the sale and distribution
of these shares. It also allows the Fund to pay for services to shareholders of
Class A, Class B and Class C shares. Because these fees are paid out of the
Fund's assets on an ongoing basis, over time these fees will increase the cost
of your investment in these Classes and may cost you more than paying other
types of sales charges.
23
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the periods indicated. Certain information reflects
financial results for a single Fund share throughout each year. The total
returns in the table represent the rate an investor would have earned or lost
on an investment in the Fund (assuming reinvestment of all dividends and
distributions).
This information has been audited by Deloitte & Touche LLP, independent
auditors, whose report, along with the Fund's financial statements, is included
in the annual report, which is available upon request. The financial highlights
for each of the years in the period ended July 31, 1999 have been audited by
other independent auditors.
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED ENDED THROUGH
JULY 31, 2000 JULY 31, 1999 JULY 31, 1998 JULY 31, 1997
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES++
--------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
--------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.89 $11.68 $12.21 $12.10
--------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.08 0.06 0.03 --
Net realized and unrealized gain 0.83 0.38 0.32 0.11
-------- -------- -------- --------
Total income from investment operations 0.91 0.44 0.35 0.11
--------------------------------------------------------------------------------------------------------------------
Less distributions from net realized gain (0.01) (1.23) (0.88) --
--------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.79 $10.89 $11.68 $12.21
--------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 8.32% 4.94% 2.79% 0.91%(1)
--------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
--------------------------------------------------------------------------------------------------------------------
Expenses 1.23%(3) 1.22%(3) 1.20% 1.20%(2)
--------------------------------------------------------------------------------------------------------------------
Net investment income 0.75%(3) 0.59%(3) 0.25% 2.27%(2)
--------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
--------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $7,105 $6,689 $7,265 $10
--------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 69% 74% 123% 57%(1)
--------------------------------------------------------------------------------------------------------------------
</TABLE>
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
24
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR FOR THE YEAR OCTOBER 29, 1996*
ENDED ENDED ENDED THROUGH
JULY 31, 2000 JULY 31, 1999 JULY 31, 1998 JULY 31, 1997**
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS B SHARES++
-------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.71 $11.59 $12.21 $10.00
-------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss -- (0.02) (0.05) --
Net realized and unrealized gain 0.81 0.37 0.31 2.24
-------- -------- -------- --------
Total income from investment operations 0.81 0.35 0.26 2.24
-------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions from:
Net investment income -- -- -- (0.01)
Net realized gain (0.01) (1.23) (0.88) (0.02)
-------- -------- -------- --------
Total dividends and distributions (0.01) (1.23) (0.88) (0.03)
-------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.51 $10.71 $11.59 $12.21
-------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 7.53% 4.14% 2.02% 22.41%(1)
-------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
-------------------------------------------------------------------------------------------------------------------------
Expenses 2.00%(3) 1.99%(3) 1.94% 2.01%(2)
-------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.02)%(3) (0.18)%(3) (0.36)% (0.03)%(2)
-------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
-------------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $202,446 $269,916 $372,933 $280,288
-------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 69% 74% 123% 57%(1)
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations.
** Prior to July 28, 1997, the Fund issued one class of shares. All shares
of the Fund held prior to that date have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
25
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED ENDED THROUGH
JULY 31, 2000 JULY 31, 1999 JULY 31, 1998 JULY 31, 1997
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS C SHARES++
----------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.72 $11.59 $12.21 $12.10
----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss -- (0.01) (0.06) --
Net realized and unrealized gain 0.81 0.37 0.32 0.11
-------- -------- -------- --------
Total income from investment operations 0.81 0.36 0.26 0.11
----------------------------------------------------------------------------------------------------------------
Less distributions from net realized gain (0.01) (1.23) (0.88) --
----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.52 $10.72 $11.59 $12.21
----------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 7.52% 4.24% 2.02% 0.91%(1)
----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
----------------------------------------------------------------------------------------------------------------
Expenses 1.98%(3) 1.88%(3) 1.95% 1.94%(2)
----------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.00%(3) (0.07)%(3) (0.50)% 1.49%(2)
----------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
----------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $4,905 $4,962 $4,728 $11
----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 69% 74% 123% 57%(1)
----------------------------------------------------------------------------------------------------------------
</TABLE>
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
26
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED ENDED THROUGH
JULY 31, 2000 JULY 31, 1999 JULY 31, 1998 JULY 31, 1997
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS D SHARES++
-------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
-------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.94 $11.71 $12.21 $12.10
-------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.09 0.09 0.06 --
Net realized and unrealized gain 0.85 0.37 0.32 0.11
-------- -------- -------- --------
Total income from investment operations 0.94 0.46 0.38 0.11
-------------------------------------------------------------------------------------------------------------------
Less distributions from net realized gain (0.01) (1.23) (0.88) --
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.87 $10.94 $11.71 $12.21
-------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 8.56% 5.11% 3.04% 0.91%(1)
-------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
-------------------------------------------------------------------------------------------------------------------
Expenses 1.00%(3) 0.99%(3) 0.94% 0.94%(2)
-------------------------------------------------------------------------------------------------------------------
Net investment income 0.98%(3) 0.82%(3) 0.50% 2.53%(2)
-------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
-------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $1,875 $1,268 $1,448 $10
-------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 69% 74% 123% 57%(1)
-------------------------------------------------------------------------------------------------------------------
</TABLE>
* The date shares were first issued.
++ 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.
27
<PAGE>
NOTES
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28
<PAGE>
MORGAN STANLEY DEAN WITTER
FAMILY OF FUNDS
The Morgan Stanley Dean Witter Family of Funds offers
investors a wide range of investment choices. Come on
in and meet the family!
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GROWTH FUNDS GROWTH FUNDS THEME FUNDS
Aggressive Equity Fund Financial Services Trust
American Opportunities Fund Health Sciences Trust
Capital Growth Securities Information Fund
Developing Growth Securities Natural Resource Development Securities
Growth Fund Technology Fund
Market Leader Trust
Mid-Cap Equity Trust GLOBAL/INTERNATIONAL FUNDS
New Discoveries Fund Competitive Edge Fund - "Best Ideas"
Next Generation Trust Portfolio
Small Cap Growth Fund European Growth Fund
Special Value Fund Fund of Funds - International Portfolio
Tax-Managed Growth Fund International Fund
21st Century Trend Fund International SmallCap Fund
Japan Fund
Latin American Growth Fund
Pacific Growth Fund
--------------------------------------------------------------------------------------------------------------
GROWTH & INCOME FUNDS Balanced Growth Fund Total Market Index Fund
Balanced Income Fund Total Return Trust
Convertible Securities Trust Value Fund
Dividend Growth Securities Value-Added Market Series/Equity Portfolio
Equity Fund
Fund of Funds - Domestic Portfolio THEME FUNDS
Income Builder Fund Real Estate Fund
S&P 500 Index Fund Utilities Fund
S&P 500 Select Fund
Strategist Fund GLOBAL FUNDS
Global Dividend Growth Securities
Global Utilities Fund
--------------------------------------------------------------------------------------------------------------
INCOME FUNDS GOVERNMENT INCOME FUNDS GLOBAL INCOME FUNDS
Federal Securities Trust North American Government Income Trust
Short-Term U.S. Treasury Trust World Wide Income Trust
U.S. Government Securities Trust
TAX-FREE INCOME FUNDS
DIVERSIFIED INCOME FUNDS California Tax-Free Income Fund
Diversified Income Trust Hawaii Municipal Trust(FSC)
Limited Term Municipal Trust(NL)
CORPORATE INCOME FUNDS Multi-State Municipal Series Trust(FSC)
High Yield Securities New York Tax-Free Income Fund
Intermediate Income Securities Tax-Exempt Securities Trust
Short-Term Bond Fund(NL)
--------------------------------------------------------------------------------------------------------------
MONEY MARKET FUNDS TAXABLE MONEY MARKET FUNDS TAX-FREE MONEY MARKET FUNDS
Liquid Asset Fund(MM) California Tax-Free Daily Income Trust(MM)
U.S. Government Money Market Trust(MM) New York Municipal Money Market Trust(MM)
Tax-Free Daily Income Trust(MM)
</TABLE>
There may be funds created after this Prospectus was published. Please consult
the inside back cover of a new fund's prospectus for its designations, e.g.,
Multi-Class Fund or Money Market Fund.
Unless otherwise noted, each listed Morgan Stanley Dean Witter Fund, except for
North American Government Income Trust and Short-Term U.S. Treasury Trust is a
Multi-Class Fund. A Multi-Class Fund is a mutual fund offering multiple Classes
of shares. The other types of funds are: NL -- No-Load (Mutual) Fund; MM --
Money Market Fund; FSC -- A mutual fund sold with a front-end sales charge and a
distribution (12b-1) fee.
<PAGE>
PROSPECTUS -- SEPTEMBER 29, 2000
Additional information about the Fund's investments is available in the Fund's
Annual and Semi-Annual Reports to Shareholders. In the Fund's Annual Report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. The
Fund's Statement of Additional Information also provides additional information
about the Fund. The Statement of Additional Information is incorporated herein
by reference (legally is part of this Prospectus). For a free copy of any of
these documents, to request other information about the Fund, or to make
shareholder inquiries, please call:
(800) 869-NEWS
You also may obtain information about the Fund by calling your Morgan Stanley
Dean Witter Financial Advisor or by visiting our Internet site at:
WWW.MSDWADVICE.COM/FUNDS
Information about the Fund (including the Statement of Additional Information)
can be viewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington, DC. Information about the Reference Room's
operations may be obtained by calling the SEC at (202) 942-8090. Reports and
other information about the Fund are available on the EDGAR Database on the
SEC's Internet site (www.sec.gov), and copies of this information may be
obtained after paying a duplicating fee, by electronic request at the following
E-mail address: [email protected], or by writing to the Public Reference
Section of the SEC, Washington, DC 20549-0102.
TICKER SYMBOLS:
Class A: SVFAX
---------------------------
Class B: SVFBX
---------------------------
Class C: SVFCX
---------------------------
Class D: SVFDX
---------------------------
(THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-7683)
MORGAN STANLEY DEAN WITTER
--------------------------------------------------------------------------------
SPECIAL VALUE FUND
[GRAPHIC OMITTED]
A MUTUAL FUND THAT SEEKS
LONG-TERM CAPITAL APPRECIATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MORGAN STANLEY DEAN WITTER
SPECIAL VALUE FUND
SEPTEMBER 29, 2000
--------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. The
Prospectus (dated September 29, 2000) for the Morgan Stanley Dean Witter
Special Value Fund may be obtained without charge from the Fund at its address
or telephone number listed below or from Dean Witter Reynolds at any of its
branch offices.
Morgan Stanley Dean Witter Special Value Fund
Two World Trade Center
New York, New York 10048
(800) 869-NEWS
<PAGE>
TABLE OF CONTENTS
--------------------------------------------------------------------------------
I. Fund History ................................................... 4
II. Description of the Fund and Its Investments and Risks .......... 4
A. Classification ........................................... 4
B. Investment Strategies and Risks .......................... 4
C. Fund Policies/Investment Restrictions .................... 9
III. Management of the Fund ......................................... 10
A. Board of Trustees ........................................ 10
B. Management Information ................................... 10
C. Compensation ............................................. 15
IV. Control Persons and Principal Holders of Securities ............ 17
V. Investment Management and Other Services ....................... 17
A. Investment Manager ....................................... 17
B. Principal Underwriter .................................... 17
C. Services Provided by the Investment Manager .............. 18
D. Dealer Reallowances ...................................... 19
E. Rule 12b-1 Plan .......................................... 19
F. Other Service Providers .................................. 23
G. Codes of Ethics .......................................... 23
VI. Brokerage Allocation and Other Practices ....................... 23
A. Brokerage Transactions ................................... 23
B. Commissions .............................................. 24
C. Brokerage Selection ...................................... 24
D. Directed Brokerage ....................................... 25
E. Regular Broker-Dealers ................................... 25
VII. Capital Stock and Other Securities ............................. 25
VIII. Purchase, Redemption and Pricing of Shares ..................... 26
A. Purchase/Redemption of Shares ............................ 26
B. Offering Price ........................................... 27
IX. Taxation of the Fund and Shareholders .......................... 27
X. Underwriters ................................................... 29
XI. Calculation of Performance Data ................................ 29
XII. Financial Statements ........................................... 31
2
<PAGE>
GLOSSARY OF SELECTED DEFINED TERMS
The terms defined in this glossary are frequently used in this Statement
of Additional Information (other terms used occasionally are defined in the
text of the document).
"Custodian" - The Bank of New York.
"Dean Witter Reynolds" - Dean Witter Reynolds Inc., a wholly-owned
broker-dealer subsidiary of MSDW.
"Distributor" - Morgan Stanley Dean Witter Distributors Inc., a
wholly-owned broker-dealer subsidiary of MSDW.
"Financial Advisors" - Morgan Stanley Dean Witter authorized financial
services representatives.
"Fund" - Morgan Stanley Dean Witter Special Value Fund, a registered
open-end investment company.
"Independent Trustees" - Trustees who are not "interested persons" (as
defined by the Investment Company Act) of the Fund.
"Investment Manager" - Morgan Stanley Dean Witter Advisors Inc., a
wholly-owned investment advisor subsidiary of MSDW.
"Morgan Stanley & Co." - Morgan Stanley & Co. Incorporated, a wholly-owned
broker-dealer subsidiary of MSDW.
"Morgan Stanley Dean Witter Funds" - Registered investment companies (i)
for which the Investment Manager serves as the investment advisor and (ii) that
hold themselves out to investors as related companies for investment and
investor services.
"MSDW" - Morgan Stanley Dean Witter & Co., a preeminent global financial
services firm.
"MSDW Services Company" - Morgan Stanley Dean Witter Services Company
Inc., a wholly-owned fund services subsidiary of the Investment Manager.
"Transfer Agent" - Morgan Stanley Dean Witter Trust FSB, a wholly-owned
transfer agent subsidiary of MSDW.
"Trustees" - The Board of Trustees of the Fund.
3
<PAGE>
I. FUND HISTORY
--------------------------------------------------------------------------------
The Fund was organized as a Massachusetts business trust, under a
Declaration of Trust, on June 21, 1996, with the name Dean Witter Special Value
Fund. Effective June 22, 1998, the Fund's name was changed to Morgan Stanley
Dean Witter Special Value Fund.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
--------------------------------------------------------------------------------
A. CLASSIFICATION
The Fund is an open-end, diversified management investment company whose
investment objective is to seek long-term capital appreciation.
B. INVESTMENT STRATEGIES AND RISKS
The following discussion of the Fund's investment strategies and risks
should be read with the sections of the Fund's Prospectus titled "Principal
Investment Strategies," "Principal Risks," "Additional Investment Strategy
Information," and "Additional Risk Information."
STOCK INDEX FUTURES CONTRACTS. The Fund may invest in stock index futures
contracts. Futures contracts on indexes do not require the physical delivery of
securities, but provide for a final cash settlement on the expiration date
which reflects accumulated profits and losses credited or debited to each
party's account. An index futures contract sale creates an obligation by the
Fund, as seller, to deliver cash at a specified future time. An index futures
contract purchase would create an obligation by the Fund, as purchaser, to take
delivery of cash at a specified future time.
The Fund will purchase or sell stock index futures contracts for the
purpose of hedging its equity portfolio (or anticipated portfolio) securities
against changes in their prices. If the Investment Manager anticipates that the
prices of stock held by the Fund may fall, the Fund may sell a stock index
futures contract. Conversely, if the Investment Manager wishes to hedge against
anticipated price rises in those stocks which the Fund intends to purchase, the
Fund may purchase stock index futures contracts. In addition, stock index
futures contracts will be bought or sold in order to close out a short or long
position in a corresponding futures contract.
A futures contract sale is closed out by effecting a futures contract
purchase for the same aggregate amount of the specific type of security and the
same delivery date. If the sale price exceeds the offsetting purchase price,
the seller would be paid the difference and would realize a gain. If the
offsetting purchase price exceeds the sale price, the seller would pay the
difference and would realize a loss. Similarly, a futures contract purchase is
closed out by effecting a futures contract sale for the same aggregate amount
of the specific type of security and the same delivery date. If the offsetting
sale price exceeds the purchase price, the purchaser would realize a gain,
whereas if the purchase price exceeds the offsetting sale price, the purchaser
would realize a loss. There is no assurance that the Fund will be able to enter
into a closing transaction.
Margin. If the Fund enters into a futures contract, it is initially
required to deposit an "initial margin" of cash or U.S. Government securities
or other liquid portfolio securities ranging from approximately 2% to 5% of the
contract amount. Initial margin requirements are established by the exchanges
on which futures contracts trade and may, from time to time, change. In
addition, brokers may establish margin deposit requirements in excess of those
required by the exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing
of funds by a broker's client but is, rather, a good faith deposit on the
futures contract which will be returned to the Fund upon the proper termination
of the futures contract. The margin deposits made are marked to market daily
and the Fund may be required to make subsequent deposits of cash or U.S.
Government securities, called "variation margin," which are reflective of price
fluctuations in the futures contract.
4
<PAGE>
Limitations on Futures Contracts. The Fund may enter into futures
contracts provided that not more than 5% of its total assets, after taking into
account unrealized gains and unrealized losses on such contracts it has entered
into. However, there is no overall limitation on the percentage of the Fund's
net assets which may be subject to a hedge position.
Risks of Transactions in Futures Contracts. The prices of indexes subject
to futures contracts (and thereby the futures contract prices) may correlate
imperfectly with the behavior of the cash prices of the Fund's portfolio
securities. Also, prices of futures contracts may not move in tandem with the
changes in prevailing interest rates and market movements against which the
Fund seeks a hedge. A correlation may also be distorted (a) temporarily, by
short-term traders' seeking to profit from the difference between a contract or
security price objective and their cost of borrowed funds; (b) by investors in
futures contracts electing to close out their contracts through offsetting
transactions rather than meet margin deposit requirements; (c) by investors in
futures contracts opting to make or take delivery of underlying securities
rather than engage in closing transactions, thereby reducing liquidity of the
futures market; and (d) temporarily, by speculators who view the deposit
requirements in the futures markets as less onerous than margin requirements in
the cash market. Due to the possibility of price distortion in the futures
market and because of the possible imperfect correlation between movements in
the prices of securities and movements in the prices of futures contracts, a
correct forecast of interest rate and/or market movement trends by the
Investment Manager may still not result in a successful hedging transaction.
There is no assurance that a liquid secondary market will exist for
futures contracts in which the Fund may invest. In the event a liquid market
does not exist, it may not be possible to close out a futures position and, in
the event of adverse price movements, the Fund would continue to be required to
make daily cash payments of variation margin. The absence of a liquid market in
futures contracts might cause the Fund to make or take delivery of the
underlying securities at a time when it may be disadvantageous to do so.
Exchanges also limit the amount by which the price of a futures contract
may move on any day. If the price moves equal the daily limit on successive
days, then it may prove impossible to liquidate a futures position until the
daily limit moves have ceased. In the event of adverse price movements, the
Fund would continue to be required to make daily cash payments of variation
margin on open futures positions. In these situations, if the Fund has
insufficient cash, it may have to sell portfolio securities to meet daily
variation margin requirements at a time when it may be disadvantageous to do
so. The inability to close out options and futures positions could also have an
adverse impact on the Fund's ability to effectively hedge its portfolio.
If the Fund maintains a short position in a futures contract or has sold a
call option in a futures contract, it will cover this position by holding, in a
segregated account maintained on the books of the Fund, cash, U.S. government
securities or other liquid portfolio securities equal in value (when added to
any initial or variation margin on deposit) to the market value of the
securities underlying the futures contract or the exercise price of the option.
Such a position may also be covered by owning the securities underlying the
futures contract (in the case of a stock index futures contract a portfolio of
securities substantially replicating the relevant index), or by holding a call
option permitting the Fund to purchase the same contract at a price no higher
than the price at which the short position was established.
In addition, if the Fund holds a long position in a futures contract or
has sold a put option on a futures contract, it will hold cash, U.S. government
securities or other liquid portfolio securities equal to the purchase price of
the contract or the exercise price of the put option (less the amount of
initial or variation margin on deposit) in a segregated account maintained on
the books of the Fund. Alternatively, the Fund could cover its long position by
purchasing a put option on the same futures contract with an exercise price as
high or higher than the price of the contract held by the Fund.
MONEY MARKET SECURITIES. The Fund may invest in various money market
securities for cash management purposes or when assuming a temporary defensive
position, which among others may include commercial paper, bank acceptances,
bank obligations, corporate debt securities, certificates of deposit, U.S.
Government securities, obligations of savings institutions and repurchase
agreements. Such securities are limited to:
5
<PAGE>
U.S. Government Securities. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as the
Federal Home Loan Bank), including Treasury bills, notes and bonds;
Bank Obligations. Obligations (including certificates of deposit, time
deposits and bankers' acceptances) of banks subject to regulation by the U.S.
Government and having total assets of $1 billion or more, and instruments
secured by such obligations, not including obligations of foreign branches of
domestic banks except to the extent below;
Eurodollar Certificates of Deposit. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1 billion
or more;
Obligations of Savings Institutions. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more;
Fully Insured Certificates of Deposit. Certificates of deposit of banks
and savings institutions, having total assets of less than $1 billion, if the
principal amount of the obligation is federally insured by the Bank Insurance
Fund or the Savings Association Insurance Fund (each of which is administered
by the FDIC), limited to $100,000 principal amount per certificate and to 10%
or less of the Fund's total assets in all such obligations and in all illiquid
assets, in the aggregate;
Commercial Paper. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation ("S&P") or the two highest grade by Moody's
Investors Service, Inc. ("Moody's") or, if not rated, issued by a company
having an outstanding debt issue rated at least AA by S&P or Aa by Moody's; and
Repurchase Agreements. The Fund may invest in repurchase agreements. When
cash may be available for only a few days, it may be invested by the Fund in
repurchase agreements until such time as it may otherwise be invested or used
for payments of obligations of the Fund. These agreements, which may be viewed
as a type of secured lending by the Fund, typically involve the acquisition by
the Fund of debt securities from a selling financial institution such as a
bank, savings and loan association or broker-dealer. The agreement provides
that the Fund will sell back to the institution, and that the institution will
repurchase, the underlying security serving as collateral at a specified price
and at a fixed time in the future, usually not more than seven days from the
date of purchase. The collateral will be marked-to-market daily to determine
that the value of the collateral, as specified in the agreement, does not
decrease below the purchase price plus accrued interest. If such decrease
occurs, additional collateral will be requested and, when received, added to
the account to maintain full collateralization. The Fund will accrue interest
from the institution until the time when the repurchase is to occur. Although
this date is deemed by the Fund to be the maturity date of a repurchase
agreement, the maturities of securities subject to repurchase agreements are
not subject to any limits.
While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions
whose financial condition will be continually monitored by the Investment
Manager subject to procedures established by the Trustees. In addition, as
described above, the value of the collateral underlying the repurchase
agreement will be at least equal to the repurchase price, including any accrued
interest earned on the repurchase agreement. In the event of a default or
bankruptcy by a selling financial institution, the Fund will seek to liquidate
such collateral. However, the exercising of the Fund's right to liquidate such
collateral could involve certain costs or delays and, to the extent that
proceeds from any sale upon a default of the obligation to repurchase were less
than the repurchase price, the Fund could suffer a loss.
LENDING PORTFOLIO SECURITIES. The Fund may lend its portfolio securities
to brokers, dealers and other financial institutions, provided that the loans
are callable at any time by the Fund, and are at all times secured by cash or
cash equivalents, which are maintained in a segregated account pursuant to
applicable regulations and that are equal to at least 100% of the market value,
determined daily, of the
6
<PAGE>
loaned securities. The advantage of these loans is that the Fund continues to
receive the income on the loaned securities while at the same time earning
interest on the cash amounts deposited as collateral, which will be invested in
short-term obligations. The Fund will not lend more than 25% of the value of
its total assets.
As with any extensions of credit, there are risks of delay in recovery
and, in some cases, even loss of rights in the collateral should the borrower
of the securities fail financially. However, these loans of portfolio
securities will only be made to firms deemed by the Fund's management to be
creditworthy and when the income which can be earned from such loans justifies
the attendant risks. Upon termination of the loan, the borrower is required to
return the securities to the Fund. Any gain or loss in the market price during
the loan period would inure to the Fund.
When voting or consent rights which accompany loaned securities pass to
the borrower, the Fund will follow the policy of calling the loaned securities,
to be delivered within one day after notice, to permit the exercise of the
rights if the matters involved would have a material effect on the Fund's
investment in the loaned securities. The Fund will pay reasonable finder's,
administrative and custodial fees in connection with a loan of its securities.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From
time to time the Fund may purchase securities on a when-issued or delayed
delivery basis or may purchase or sell securities on a forward commitment
basis. When these transactions are negotiated, the price is fixed at the time
of the commitment, but delivery and payment can take place a month or more
after the date of commitment. While the Fund will only purchase securities on a
when-issued, delayed delivery or forward commitment basis with the intention of
acquiring the securities, the Fund may sell the securities before the
settlement date, if it is deemed advisable. The securities so purchased or sold
are subject to market fluctuation and no interest or dividends accrue to the
purchaser prior to the settlement date.
At the time the Fund makes the commitment to purchase or sell securities
on a when-issued, delayed delivery or forward commitment basis, it will record
the transaction and thereafter reflect the value, each day, of such security
purchased, or if a sale, the proceeds to be received, in determining its net
asset value. At the time of delivery of the securities, their value may be more
or less than the purchase or sale price. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a when-issued, delayed
delivery or forward commitment basis may increase the volatility of its net
asset value. The Fund will also establish a segregated account on the Fund's
books in which it will continually maintain cash or cash equivalents or other
liquid portfolio securities equal in value to commitments to purchase
securities on a when-issued, delayed delivery or forward commitment basis.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization or debt restructuring. The commitment for the purchase
of any such security will not be recognized in the portfolio of the Fund until
the Investment Manager determines that issuance of the security is probable. At
that time, the Fund will record the transaction and, in determining its net
asset value, will reflect the value of the security daily. At that time, the
Fund will also establish a segregated account on the Fund's books in which it
will maintain cash or cash equivalents or other liquid portfolio securities
equal in value to recognized commitments for such securities.
An increase in the percentage of the Fund's assets committed to the
purchase of securities on a "when, as and if issued" basis may increase the
volatility of its net asset value. The Fund may also sell securities on a
"when, as and if issued" basis provided that the issuance of the security will
result automatically from the exchange or conversion of a security owned by the
Fund at the time of sale.
PRIVATE PLACEMENTS. The Fund may invest up to 15% of its net assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933 (the "Securities Act"), or
which are otherwise not readily marketable. (Securities eligible for resale
pursuant to Rule 144A under the Securities Act, and determined to be liquid
pursuant to the procedures discussed in the following paragraph, are not
subject to the foregoing restriction.) These securities are
7
<PAGE>
generally referred to as private placements or restricted securities.
Limitations on the resale of these securities may have an adverse effect on
their marketability, and may prevent the Fund from disposing of them promptly
at reasonable prices. The Fund may have to bear the expense of registering the
securities for resale and the risk of substantial delays in effecting the
registration.
Rule 144A permits the Fund to sell restricted securities to qualified
institutional buyers without limitation. The Investment Manager, pursuant to
procedures adopted by the Trustees, will make a determination as to the
liquidity of each restricted security purchased by the Fund. If a restricted
security is determined to be "liquid," the security will not be included within
the category "illiquid securities," which may not exceed 15% of the Fund's net
assets. However, investing in Rule 144A securities could have the effect of
increasing the level of Fund illiquidity to the extent the Fund, at a
particular point in time, may be unable to find qualified institutional buyers
interested in purchasing such securities.
WARRANTS AND SUBSCRIPTION RIGHTS. The Fund may acquire warrants and/or
rights which are attached to other securities. A warrant is, in effect, an
option to purchase equity securities at a specific price, generally valid for a
specific period of time, and has no voting rights, pays no dividends and has no
rights with respect to the corporation issuing it.
A subscription right is a privilege granted to existing shareholders of a
corporation to subscribe to shares of a new issue of common stock before it is
offered to the public. A subscription right normally has a life of two to four
weeks and a subscription price lower than the current market value of the
common stock.
ZERO COUPON SECURITIES. A portion of the fixed-income securities purchased
by the Fund may be zero coupon securities. Such securities are purchased at a
discount from their face amount, giving the purchaser the right to receive
their full value at maturity. The interest earned on such securities is,
implicitly, automatically compounded and paid out at maturity. While such
compounding at a constant rate eliminates the risk of receiving lower yields
upon reinvestment of interest if prevailing interest rates decline, the owner
of a zero coupon security will be unable to participate in higher yields upon
reinvestment of interest received on interest-paying securities if prevailing
interest rates rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will
not receive current cash available for distribution to shareholders. In
addition, zero coupon securities are subject to substantially greater price
fluctuations during periods of changing prevailing interest rates than are
comparable securities which pay interest on a current basis. Current federal
tax law requires that a holder (such as the Fund) of a zero coupon security
accrue a portion of the discount at which the security was purchased as income
each year even though the Fund receives no interest payments in cash on the
security during the year.
ENHANCED AND SYNTHETIC CONVERTIBLES. The Fund may invest up to 25% of its
total assets in "enhanced" convertible securities. Enhanced convertible
securities offer holders the opportunity to obtain higher current income than
would be available from a traditional equity security issued by the same
company, in return for reduced participation or a cap on appreciation in the
underlying common stock of the issuer which the holder can realize. In
addition, in many cases, enhanced convertible securities are convertible into
the underlying common stock of the issuer automatically at maturity, unlike
traditional convertible securities which are convertible only at the option of
the security holder. Enhanced convertible securities may be more volatile than
traditional convertible securities due to the mandatory conversion feature.
The Fund also may invest up to 10% in "synthetic" convertible securities.
Unlike traditional convertible securities whose conversion values are based on
the common stock of the issuer of the convertible security, "synthetic"
convertible securities are preferred stocks or debt obligations of an issuer
which are combined with an equity component whose conversion value is based on
the value of the common stock of a different issuer or a particular benchmark
(which may include a foreign issuer or basket of foreign stocks, or a company
whose stock is not yet publicly traded). In many cases, "synthetic" convertible
securities are not convertible prior to maturity, at which time the value of
the security is paid in cash by the issuer.
8
<PAGE>
"Synthetic" convertible securities may be less liquid than traditional
convertible securities and their price changes may be more volatile. Reduced
liquidity may have an adverse impact on the Fund's ability to sell particular
synthetic securities promptly at favorable prices and may also make it more
difficult for the Fund to obtain market quotations based on actual trades, for
purposes of valuing the Fund's portfolio securities.
The Fund may invest without limitation in "exchangeable" convertible bonds
and convertible preferred stock which are issued by one company, but
convertible into the common stock of a different publicly traded company. These
securities generally have liquidity trading and risk characteristics similar to
traditional convertible securities.
C. FUND POLICIES/INVESTMENT RESTRICTIONS
The investment objective, policies and restrictions listed below have been
adopted by the Fund as fundamental policies. Under the Investment Company Act
of 1940 (the "Investment Company Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the
Fund. The Investment Company Act defines a majority as the lesser of (a) 67% or
more of the shares present at a meeting of shareholders, if the holders of 50%
of the outstanding shares of the Fund are present or represented by proxy; or
(b) more than 50% of the outstanding shares of the Fund. For purposes of the
following restrictions: (i) all percentage limitations apply immediately after
a purchase or initial investment; and (ii) any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in
total or net assets does not require elimination of any security from the
portfolio.
The Fund will:
1. Seek long-term capital appreciation.
The Fund may not:
1. Invest more than 5% of the value of its total assets in the securities
of one issuer (other than obligations issued or guaranteed by the
United States government, its agencies or instrumentalities), except
that the Fund may invest all or substantially all of its assets in
another registered investment company having the same investment
objective and policies and substantially the same investment
restrictions (a "Qualifying Portfolio").
2. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to
obligations issued or guaranteed by the United States government, its
agencies or instrumentalities.
3. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than 3
years of continuous operation. This restriction shall not apply to any
investment in a Qualifying Portfolio or any obligation of the United
States government, its agencies or instrumentalities.
4. Purchase more than 10% of all outstanding voting securities of any
issuer, except that the Fund may invest all or substantially all of
its assets in a Qualifying Portfolio.
5. Purchase or sell real estate or interests therein (including limited
partnership interests), although the Fund may purchase securities of
issuers which engage in real estate operations and securities secured
by real estate or interests therein.
6. Purchase or sell commodities or commodities contracts, except that the
Fund may purchase or sell financial or index futures contracts and
related options thereon.
7. Purchase oil, gas or other mineral leases, rights or royalty contracts
or exploration or development programs, except that the Fund may
invest in the securities of companies which operate, invest in, or
sponsor these programs.
8. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition
of assets. This restriction does not apply to an investment by the
Fund in a Qualifying Portfolio.
9
<PAGE>
9. Borrow money, except that the Fund may borrow from a bank for
temporary or emergency purposes in amounts not exceeding 5% (taken at
the lower of cost or current value) of its total assets (not including
the amount borrowed).
10. Pledge its assets or assign or otherwise encumber them, except to
secure permitted borrowings.
11. Issue senior securities as defined in the Investment Company Act,
except insofar as the Fund may be deemed to have issued a senior
security by reason of (a) entering into any repurchase agreement; (b)
purchasing or selling any futures contracts or options; (c) borrowing
money; (d) purchasing any securities on a when-issued or delayed
delivery basis; or (e) lending portfolio securities.
12. Make loans of money or securities, except: (a) by the purchase of
debt obligations; (b) by investment in repurchase agreements; or (c)
by lending its portfolio securities.
13. Make short sales of securities.
14. Purchase securities on margin, except for short-term loans as are
necessary for the clearance of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options thereon is not considered the
purchase of a security on margin.
15. Engage in the underwriting of securities, except insofar as the
Fund may be deemed an underwriter under the Securities Act in
disposing of a portfolio security.
16. Invest for the purpose of exercising control or management of any
other issuer.
17. Invest in securities of any issuer if in the exercise of reasonable
diligence, the Fund has determined that any officer or
trustee/director of the Fund or of the Investment Manager owns more
than 1|M/2 of 1% of the outstanding securities of such issuer, and
such officers and trustees/directors who own more than 1|M/2 of 1% own
in the aggregate more than 5% of the outstanding securities of such
issuer.
In addition, the Fund, as a non-fundamental policy, will not invest more
than 5% of the value of its net assets in warrants, including not more than 2%
of such assets in warrants not listed on the New York or American Stock
Exchange. However, the acquisition of warrants attached to other securities is
not subject to this restriction.
III. MANAGEMENT OF THE FUND
--------------------------------------------------------------------------------
A. BOARD OF TRUSTEES
The Board of Trustees of the Fund oversees the management of the Fund but
does not itself manage the Fund. The Trustees review various services provided
by or under the direction of the Investment Manager to ensure that the Fund's
general investment policies and programs are properly carried out. The Trustees
also conduct their review to ensure that administrative services are provided
to the Fund in a satisfactory manner.
Under state law, the duties of the Trustees are generally characterized as
a duty of loyalty and a duty of care. The duty of loyalty requires a Trustee to
exercise his or her powers in the interest of the Fund and not the Trustee's
own interest or the interest of another person or organization. A Trustee
satisfies his or her duty of care by acting in good faith with the care of an
ordinarily prudent person and in a manner the Trustee reasonably believes to be
in the best interest of the Fund and its shareholders.
B. MANAGEMENT INFORMATION
TRUSTEES AND OFFICERS. The Board of the Fund consists of nine (9)
Trustees. These same individuals also serve as directors or trustees for all of
the Morgan Stanley Dean Witter Funds. Six Trustees (67% of the total number)
have no affiliation or business connection with the Investment
10
<PAGE>
Manager or any of its affiliated persons and do not own any stock or other
securities issued by the Investment Manager's parent company, MSDW. These are
the "non-interested" or "independent" Trustees. The other three Trustees (the
"management Trustees") are affiliated with the Investment Manager.
The Trustees and executive officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with the
Investment Manager, and with the Morgan Stanley Dean Witter Funds (there were
93 such Funds as of the calendar year ended December 31, 1999), are shown
below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
------------------------------------------- ----------------------------------------------------
<S> <C>
Michael Bozic (59) ........................ Vice Chairman of Kmart Corporation (since
Trustee December 1998); Director or Trustee of the Morgan
c/o Kmart Corporation Stanley Dean Witter Funds; formerly Chairman
3100 West Big Beaver Road and Chief Executive Officer of Levitz Furniture
Troy, Michigan 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
and Co.; Director of Weirton Steel Corporation.
Charles A. Fiumefreddo* (67) .............. Chairman, Director or Trustee and Chief Executive
Chairman of the Board, Officer of the Morgan Stanley Dean Witter Funds;
Chief Executive Officer and Trustee formerly Chairman, Chief Executive Officer and
Two World Trade Center Director of the Investment Manager, the Distributor
New York, New York and MSDW Services Company; Executive Vice
President and Director of Dean Witter Reynolds;
Chairman and Director of the Transfer Agent;
formerly Director and/or officer of various MSDW
subsidiaries (until June 1998).
Edwin J. Garn (67) ........................ Director or Trustee of the Morgan Stanley Dean
Trustee Witter Funds; formerly United States Senator
c/o Summit Ventures LLC (R-Utah) (1974-1992) and Chairman, Senate
1 Utah Center Banking Committee (1980-1986); formerly Mayor
201 S. Main Street of Salt Lake City, Utah (1971-1974); formerly
Salt Lake City, Utah Astronaut, Space Shuttle Discovery (April 12-19,
1985); Vice Chairman, Huntsman Corporation
(chemical company); Director of Franklin Covey
(time management systems), BMW Bank of North
America, Inc. (industrial loan corporation), United
Space Alliance (joint venture between Lockheed
Martin and the Boeing Company) and Nuskin Asia
Pacific (multilevel marketing); member of the Utah
Regional Advisory Board of Pacific Corp.; member
of the board of various civic and charitable
organizations.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
------------------------------------------- ----------------------------------------------------
<S> <C>
Wayne E. Hedien (66) ...................... Retired; Director or Trustee of the Morgan Stanley
Trustee Dean Witter Funds; Director of The PMI Group,
c/o Mayer, Brown & Platt Inc. (private mortgage insurance); Trustee and
Counsel to the Independent Trustees Vice Chairman of The Field Museum of Natural
1675 Broadway History; formerly associated with the Allstate
New York, New York Companies (1966-1994), most recently as
Chairman of 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); director of various other business and
charitable organizations.
James F. Higgins* (52) .................... Chairman of the Private Client Group of MSDW
Trustee (since August 2000); Director of the Transfer Agent
Two World Trade Center and Dean Witter Realty Inc.; Director or Trustee of
New York, New York the Morgan Stanley Dean Witter Funds (since
June 2000); previously President and Chief
Operating Officer of the Private Client Group of
MSDW (May 1999-August 2000), President and
Chief Operating Officer of Individual Securities of
MSDW (February 1997-May 1999), President and
Chief Operating Officer of Dean Witter Securities
of MSDW (1995-February 1997), and President
and Chief Operating Officer of Dean Witter
Financial (1989-1995) and Director (1985-1997) of
Dean Witter Reynolds.
Dr. Manuel H. Johnson (51) ................ Senior Partner, Johnson Smick International, Inc.,
Trustee a consulting firm; Co-Chairman and a founder of
c/o Johnson Smick International, Inc. the Group of Seven Council (G7C), an international
1133 Connecticut Avenue, N.W. economic commission; Chairman of the Audit
Washington, D.C. Committee and Director or Trustee of the Morgan
Stanley Dean Witter Funds; Director of Greenwich
Capital Markets, Inc. (broker-dealer), Independence
Standards Board (private sector organization
governing independence of auditors) and NVR,
Inc. (home construction); Chairman and Trustee of
the Financial Accounting Foundation (oversight
organization of the Financial Accounting Standards
Board); formerly Vice Chairman of the Board of
Governors of the Federal Reserve System and
Assistant Secretary of the U.S. Treasury.
Michael E. Nugent (64) .................... General Partner, Triumph Capital, L.P., a private
Trustee investment partnership; Chairman of the Insurance
c/o Triumph Capital, L.P. Committee and Director or Trustee of the Morgan
237 Park Avenue Stanley Dean Witter Funds; formerly Vice
New York, New York President, Bankers Trust Company and BT Capital
Corporation; director of various business
organizations.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
------------------------------------------- -----------------------------------------------------
<S> <C>
Philip J. Purcell* (57) ................... Chairman of the Board of Directors and Chief
Trustee Executive Officer of MSDW, Dean Witter Reynolds
1585 Broadway and Novus Credit Services Inc.; Director of the
New York, New York Distributor; Director or Trustee of the Morgan
Stanley Dean Witter Funds; Director of American
Airlines, Inc. and its parent company, AMR
Corporation; Director and/or officer of various
MSDW subsidiaries.
John L. Schroeder (70) .................... Retired; Chairman of the Derivatives Committee
Trustee and Director or Trustee of the Morgan Stanley
c/o Mayer, Brown & Platt Dean Witter Funds; Director of Citizens Utilities
Counsel to the Independent Trustees Company (telecommunications, gas, electric and
1675 Broadway water utilities company); formerly Executive Vice
New York, New York President and Chief Investment Officer of the
Home Insurance Company (August 1991-
September 1995).
Mitchell M. Merin (47) .................... President and Chief Operating Officer of Asset
President Management of MSDW (since December 1998);
Two World Trade Center President and Director (since April 1997) and Chief
New York, New York Executive Officer (since June 1998) of the
Investment Manager and MSDW Services
Company; Chairman, Chief Executive Officer and
Director of the Distributor (since June 1998);
Chairman and Chief Executive Officer (since June
1998) and Director (since January 1998) of the
Transfer Agent; Director of various MSDW
subsidiaries; President of the Morgan Stanley Dean
Witter Funds (since May 1999); Trustee of various
Van Kampen investment companies (since
December 1999); previously Chief Strategic Officer
of the Investment Manager and MSDW Services
Company and Executive Vice President of the
Distributor (April 1997-June 1998), Vice President
of the Morgan Stanley Dean Witter Funds (May
1997-April 1999), and Executive Vice President of
Dean Witter, Discover & Co.
Barry Fink (45) ........................... General Counsel of Asset Management of MSDW
Vice President, Secretary (since May 2000); Executive Vice President (since
and General Counsel December 1999) and Secretary and General
Two World Trade Center Counsel (since February 1997) and Director (since
New York, New York July 1998) of the Investment Manager and MSDW
Services Company; Vice President, Secretary and
General Counsel of the Morgan Stanley Dean
Witter Funds (since February 1997); Vice President
and Secretary of the Distributor; previously, Senior
Vice President (March 1997-December 1999), First
Vice President, Assistant Secretary and Assistant
General Counsel of the Investment Manager and
MSDW Services Company.
Jenny Beth Jones (42) ..................... Senior Vice President of the Investment Manager
Vice President (since August 1996); formerly Senior Vice President
Two World Trade Center and Manager of the Small Cap Department of
New York, New York Oppenheimer Capital.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
------------------------------------------- ----------------------------------------------------
<S> <C>
Thomas F. Caloia (54) ..................... First Vice President and Assistant Treasurer of the
Treasurer Investment Manager, the Distributor and MSDW
Two World Trade Center Services Company; Treasurer of the Morgan
New York, New York Stanley Dean Witter Funds.
</TABLE>
----------
* Denotes Trustees who are "interested persons" of the Fund as defined by the
Investment Company Act.
In addition, Ronald E. Robison, Executive Vice President, Chief
Administrative Officer and Director of the Investment Manager and MSDW Services
Company, Robert S. Giambrone, Senior Vice President of the Investment Manager,
MSDW Services Company, the Distributor and the Transfer Agent and Director of
the Transfer Agent, and Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of the Investment Manager and Director of the Transfer
Agent, and Peter Hermann Jr., Vice President of the Investment Manager, are
Vice Presidents of the Fund. John S. Roscoe, Vice President of the Investment
Manager is an Assistant Vice President of the Fund.
In addition, Marilyn K. Cranney, Todd Lebo, Lou Anne D. McInnis, Carsten
Otto and Ruth Rossi, First Vice Presidents and Assistant General Counsels of
the Investment Manager and MSDW Services Company, and Natasha Kassian,
Assistant Vice President and Assistant General Counsel of the Investment
Manager and MSDW Services Company, are Assistant Secretaries of the Fund.
INDEPENDENT DIRECTORS/TRUSTEES AND THE COMMITTEES. Law and regulation
establish both general guidelines and specific duties for the independent
directors/trustees. The Morgan Stanley Dean Witter Funds seek as independent
directors/trustees individuals of distinction and experience in business and
finance, government service or academia; these are people whose advice and
counsel are in demand by others and for whom there is often competition. To
accept a position on the Funds' boards, such individuals may reject other
attractive assignments because the Funds make substantial demands on their
time. All of the independent directors/trustees serve as members of the Audit
Committee. In addition, three of the directors/trustees, including two
independent directors/trustees, serve as members of the Derivatives Committee
and the Insurance Committee.
The independent directors/trustees are charged with recommending to the
full board approval of management, advisory and administration contracts, Rule
12b-1 plans and distribution and underwriting agreements; continually reviewing
Fund performance; checking on the pricing of portfolio securities, brokerage
commissions, transfer agent costs and performance, and trading among Funds in
the same complex; and approving fidelity bond and related insurance coverage
and allocations, as well as other matters that arise from time to time. The
independent directors/trustees are required to select and nominate individuals
to fill any independent director/trustee vacancy on the board of any Fund that
has a Rule 12b-1 plan of distribution. Most of the Morgan Stanley Dean Witter
Funds have a Rule 12b-1 plan.
The Audit Committee is charged with recommending to the full board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of the services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
board.
The board of each Fund has a Derivatives Committee to approve parameters
for and monitor the activities of the Fund with respect to derivative
investments, if any, made by the Fund.
14
<PAGE>
Finally, the board of each Fund has formed an Insurance Committee to
review and monitor the insurance coverage maintained by the Fund.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT DIRECTORS/TRUSTEES
FOR ALL MORGAN STANLEY DEAN WITTER FUNDS. The independent directors/trustees
and the Funds' management believe that having the same independent
directors/trustees for each of the Morgan Stanley Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as independent directors/trustees for each of the Funds or
even of sub-groups of Funds. They believe that having the same individuals
serve as independent directors/trustees of all the Funds tends to increase
their knowledge and expertise regarding matters which affect the Fund complex
generally and enhances their ability to negotiate on behalf of each Fund with
the Fund's service providers. This arrangement also precludes the possibility
of separate groups of independent directors/trustees arriving at conflicting
decisions regarding operations and management of the Funds and avoids the cost
and confusion that would likely ensue. Finally, having the same independent
trustees serve on all Fund boards enhances the ability of each Fund to obtain,
at modest cost to each separate Fund, the services of independent
directors/trustees, of the caliber, experience and business acumen of the
individuals who serve as independent directors/trustees of the Morgan Stanley
Dean Witter Funds.
TRUSTEE AND OFFICER INDEMNIFICATION. The Fund's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Fund is liable to
the Fund or to a shareholder, nor is any Trustee, officer, employee or agent
liable to any third persons in connection with the affairs of the Fund, except
as such liability may arise from his/her or its own bad faith, willful
misfeasance, gross negligence or reckless disregard of his/her or its duties.
It also provides that all third persons shall look solely to the Fund property
for satisfaction of claims arising in connection with the affairs of the Fund.
With the exceptions stated, the Declaration of Trust provides that a Trustee,
officer, employee or agent is entitled to be indemnified against all liability
in connection with the affairs of the Fund.
C. COMPENSATION
The Fund pays each Independent Trustee an annual fee of $800 plus a per
meeting fee of $50 for meetings of the Board of Trustees, the Independent
Trustees or Committees of the Board of Trustees attended by the Trustee (the
Fund pays the Chairman of the Audit Committee an additional annual fee of $750
and the Chairmen of the Derivatives and Insurance Committees additional annual
fees of $500). If a Board meeting and a meeting of the Independent Trustees or
a Committee meeting, or a meeting of the Independent Trustees and/or more than
one Committee meeting, take place on a single day, the Trustees are paid a
single meeting fee by the Fund. The Fund also reimburses such Trustees for
travel and other out-of-pocket expenses incurred by them in connection with
attending such meetings. Trustees and officers of the Fund who are or have been
employed by the Investment Manager or an affiliated company receive no
compensation or expense reimbursement from the Fund for their services as
Trustee.
The following table illustrates the compensation that the Fund paid to its
Independent Trustees for the fiscal year ended July 31, 2000.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
--------------------------- -------------
<S> <C>
Michael Bozic .......................................... $1,600
Edwin J. Garn .......................................... 1,600
Wayne E. Hedien ........................................ 1,600
Dr. Manuel H. Johnson .................................. 2,350
Michael E. Nugent ...................................... 2,100
John L. Schroeder ...................................... 2,050
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1999 for services
to the 93 Morgan Stanley Dean Witter Funds that were in operation at December
31, 1999.
15
<PAGE>
CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
TOTAL CASH
COMPENSATION
FOR SERVICES TO 93
MORGAN STANLEY
DEAN WITTER
NAME OF INDEPENDENT TRUSTEE FUNDS
--------------------------- -----
<S> <C>
Michael Bozic ...................................... $134,600
Edwin J. Garn ...................................... 138,700
Wayne E. Hedien .................................... 138,700
Dr. Manuel H. Johnson .............................. 208,638
Michael E. Nugent .................................. 193,324
John L. Schroeder .................................. 193,324
</TABLE>
As of the date of this Statement of Additional Information, 55 of the
Morgan Stanley Dean Witter Funds, not including the Fund, have adopted a
retirement program under which an independent director/trustee who retires
after serving for at least five years (or such lesser period as may be
determined by the board) as an independent director/trustee of any Morgan
Stanley Dean Witter Fund that has adopted the retirement program (each such
Fund referred to as an "Adopting Fund" and each such director/trustee referred
to as an "Eligible Trustee") is entitled to retirement payments upon reaching
the eligible retirement age (normally, after attaining age 72). Annual payments
are based upon length of service.
Currently, upon retirement, each Eligible Trustee is entitled to receive
from the Adopting Fund, commencing as of his or her retirement date and
continuing for the remainder of his or her life, an annual retirement benefit
(the "Regular Benefit") equal to 30.22% of his or her Eligible Compensation
plus 0.5036667% of such Eligible Compensation for each full month of service as
an independent director/ trustee of any Adopting Fund in excess of five years
up to a maximum of 60.44% after ten years of service. The foregoing percentages
may be changed by the board.(1) "Eligible Compensation" is one-fifth of the
total compensation earned by such Eligible Trustee for service to the Adopting
Fund in the five year period prior to the date of the Eligible Trustee's
retirement. Benefits under the retirement program are accrued as expenses on
the books of the Adopting Funds. Such benefits are not secured or funded by the
Adopting Funds.
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the 55 Morgan Stanley Dean Witter Funds (not
including the Fund) for the year ended December 31, 1999, and the estimated
retirement benefits for the Independent Trustees, to commence upon their
retirement, from the 55 Morgan Stanley Dean Witter Funds as of December 31,
1999.
RETIREMENT BENEFITS FROM ALL MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS ESTIMATED
---------------------------- RETIREMENT ANNUAL
ESTIMATED BENEFITS BENEFITS
CREDITED ACCRUED AS UPON
YEARS ESTIMATED EXPENSES RETIREMENT
OF SERVICE AT PERCENTAGE OF BY ALL FROM ALL
RETIREMENT ELIGIBLE ADOPTING ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUNDS FUNDS(2)
--------------------------- ------------ ------------ ----- --------
<S> <C> <C> <C> <C>
Michael Bozic ................. 10 60.44% $20,933 $50,588
Edwin J. Garn ................. 10 60.44 31,737 50,675
Wayne E. Hedien ............... 9 51.37 39,566 43,000
Dr. Manuel H. Johnson ......... 10 60.44 13,129 75,520
Michael E. Nugent ............. 10 60.44 23,175 67,209
John L. Schroeder ............. 8 50.37 41,558 52,994
</TABLE>
----------
(1) An Eligible Trustee may elect alternative payments of his or her
retirement benefits based upon the combined life expectancy of the
Eligible Trustee and his or her spouse on the date of such Eligible
Trustee's retirement. In addition, the Eligible Trustee may elect that
the surviving spouse's periodic payment of benefits will be equal to a
lower percentage of the periodic amount when both spouses were alive. The
amount estimated to be payable under this method, through the remainder
of the later of the lives of the Eligible Trustee and spouse, will be the
actuarial equivalent of the Regular Benefit.
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1)
above.
16
<PAGE>
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
--------------------------------------------------------------------------------
The following owned 5% or more of the outstanding Class A shares of the
Fund as of September 11, 2000: Dean Witter Trust FSB, Trustee, Denman & Davis
Profit Sharing & 401(k) Plan, P.O. Box 957, Jersey City, NJ 07303-0957 - 7.448%
and George W. Andrews Trustee, George W. Andrews Revocable Trust, U/A DTD
05/09/94, 862 Rosewood Dr., Villa Hills, KY 41017-1352 - 7.188%. The following
owned 5% or more of the outstanding Class D shares of the Fund as of September
11, 2000: Hare & Co., c/o The Bank of New York, P.O. Box 11203, New York, NY
10286-1203 - 72.859% and Mitchell M. Merin & Miriam H. Merin, JT TEN, Two World
Trade Center, New York, NY 10048 - 24.359%.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1% of the Fund's shares of
beneficial interest outstanding.
V. INVESTMENT MANAGEMENT AND OTHER SERVICES
--------------------------------------------------------------------------------
A. INVESTMENT MANAGER
The Investment Manager to the Fund is Morgan Stanley Dean Witter Advisors
Inc., a Delaware corporation, whose address is Two World Trade Center, New
York, NY 10048. The Investment Manager is a wholly-owned subsidiary of MSDW, a
Delaware corporation. MSDW is a preeminent global financial services firm that
maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services.
Pursuant to an Investment Management Agreement (the "Management
Agreement") with the Investment Manager, the Fund has retained the Investment
Manager to provide administrative services and manage the investment of the
Fund's assets, including the placing of orders for the purchase and sale of
portfolio securities. The Fund pays the Investment Manager monthly compensation
calculated daily at the following annual rates: 0.75% of the Fund's average net
assets not exceeding $500 million and 0.725% of the Fund's average net assets
exceeding $500 million. The management fee is allocated among the Classes pro
rata based on the net assets of the Fund attributable to each Class. For the
fiscal years ended July 31, 1998, 1999 and 2000, the Investment Manager accrued
total compensation under the Management Agreement in the amounts of $2,761,954,
$2,338,728 and $1,749,834, respectively.
The Investment Manager has retained its wholly-owned subsidiary, MSDW
Services Company, to perform administrative services for the Fund.
B. PRINCIPAL UNDERWRITER
The Fund's principal underwriter is the Distributor (which has the same
address as the Investment Manager). In this capacity, the Fund's shares are
distributed by the Distributor. The Distributor has entered into a selected
dealer agreement with Dean Witter Reynolds, which through its own sales
organization sells shares of the Fund. In addition, the Distributor may enter
into similar agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of MSDW.
The Distributor bears all expenses it may incur in providing services
under the Distribution Agreement. These expenses include the payment of
commissions for sales of the Fund's shares and incentive compensation to
Financial Advisors, the cost of educational and/or business-related trips, and
educational and/or promotional and business-related expenses. The Distributor
also pays certain expenses in connection with the distribution of the Fund's
shares, including the costs of preparing, printing and distributing advertising
or promotional materials, and the costs of printing and distributing
prospectuses and supplements thereto used in connection with the offering and
sale of the Fund's shares. The Fund bears the costs of initial typesetting,
printing and distribution of prospectuses and supplements thereto to
shareholders. The Fund also bears the costs of registering the Fund and its
shares under federal and state securities laws and pays filing fees in
accordance with state securities laws.
17
<PAGE>
The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act. Under the
Distribution Agreement, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.
C. SERVICES PROVIDED BY THE INVESTMENT MANAGER
The Investment Manager manages the investment of the Fund's assets,
including the placing of orders for the purchase and sale of portfolio
securities. The Investment Manager obtains and evaluates the information and
advice relating to the economy, securities markets, and specific securities as
it considers necessary or useful to continuously manage the assets of the Fund
in a manner consistent with its investment objective.
Under the terms of the Management Agreement, in addition to managing the
Fund's investments, the Investment Manager maintains certain of the Fund's
books and records and furnishes, at its own expense, the office space,
facilities, equipment, clerical help, bookkeeping and certain legal services as
the Fund may reasonably require in the conduct of its business, including the
preparation of prospectuses, proxy statements and reports required to be filed
with federal and state securities commissions (except insofar as the
participation or assistance of independent accountants and attorneys is, in the
opinion of the Investment Manager, necessary or desirable). In addition, the
Investment Manager pays the salaries of all personnel, including officers of
the Fund, who are employees of the Investment Manager. The Investment Manager
also bears the cost of telephone service, heat, light, power and other
utilities provided to the Fund.
Expenses not expressly assumed by the Investment Manager under the
Management Agreement or by the Distributor, will be paid by the Fund. These
expenses will be allocated among the four Classes of shares pro rata based on
the net assets of the Fund attributable to each Class, except as described
below. Such expenses include, but are not limited to: expenses of the Plan of
Distribution pursuant to Rule 12b-1; charges and expenses of any registrar,
custodian, stock transfer and dividend disbursing agent; brokerage commissions;
taxes; engraving and printing share certificates; registration costs of the
Fund and its shares under federal and state securities laws; the cost and
expense of printing, including typesetting, and distributing prospectuses of
the Fund and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Trustees' meetings and of preparing, printing and mailing of
proxy statements and reports to shareholders; fees and travel expenses of
Trustees or members of any advisory board or committee who are not employees of
the Investment Manager or any corporate affiliate of the Investment Manager;
all expenses incident to any dividend, withdrawal or redemption options;
charges and expenses of any outside service used for pricing of the Fund's
shares; fees and expenses of legal counsel, including counsel to the Trustees
who are not interested persons of the Fund or of the Investment Manager (not
including compensation or expenses of attorneys who are employees of the
Investment Manager); fees and expenses of the Fund's independent accountants;
membership dues of industry associations; interest on Fund borrowings; postage;
insurance premiums on property or personnel (including officers and Trustees)
of the Fund which inure to its benefit; extraordinary expenses (including, but
not limited to, legal claims and liabilities and litigation costs and any
indemnification relating thereto); and all other costs of the Fund's operation.
The 12b-1 fees relating to a particular Class will be allocated directly to
that Class. In addition, other expenses associated with a particular Class
(except advisory or custodial fees) may be allocated directly to that Class,
provided that such expenses are reasonably identified as specifically
attributable to that Class and the direct allocation to that Class is approved
by the Trustees.
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Investment Manager is not liable to the Fund or any
of its investors for any act or omission by the Investment Manager or for any
losses sustained by the Fund or its investors.
18
<PAGE>
The Management Agreement will remain in effect from year to year, provided
continuance of the Management Agreement is approved at least annually by the
vote of the holders of a majority, as defined in the Investment Company Act, of
the outstanding shares of the Fund, or by the Trustees; provided that in either
event such continuance is approved annually by the vote of a majority of the
Trustees, including a majority of the Independent Trustees.
D. DEALER REALLOWANCES
Upon notice to selected broker-dealers, the Distributor may reallow up to
the full applicable front-end sales charge during periods specified in such
notice. During periods when 90% or more of the sales charge is reallowed, such
selected broker-dealers may be deemed to be underwriters as that term is
defined in the Securities Act.
E. RULE 12B-1 PLAN
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Investment Company Act (the "Plan") pursuant to which each Class, other
than Class D, pays the Distributor compensation accrued daily and payable
monthly at the following annual rates: 0.25%, 1.0% and 1.0% of the average
daily net assets of Class A, Class B and Class C, respectively.
The Distributor also receives the proceeds of front-end sales charges
("FSCs") and of contingent deferred sales charges ("CDSCs") imposed on certain
redemptions of shares, which are separate and apart from payments made pursuant
to the Plan. The Distributor has informed the Fund that it and/or Dean Witter
Reynolds received the proceeds of CDSCs and FSCs, for the last three fiscal
years ended July 31, in approximate amounts as provided in the table below (the
Distributor did not retain any of these amounts).
<TABLE>
<CAPTION>
2000 1999 1998
--------------------- ------------------------ ---------------------
<S> <C> <C> <C> <C> <C> <C>
Class A .......... FSCs:(1) $ 22,004 FSCs:(1) $ 25,477 FSCs:(1) $176,211
CDSCs: $ 2,671 CDSCs: $ 0 CDSCs: $ 0
Class B .......... CDSCs: $713,785 CDSCs: $1,044,946 CDSCs: $768,105
Class C .......... CDSCs: $ 2,331 CDSCs: $ 5,945 CDSCs: $ 2,492
</TABLE>
----------
(1) FSCs apply to Class A only.
The Distributor has informed the Fund that the entire fee payable by Class
A and a portion of the fees payable by each of Class B and Class C each year
pursuant to the Plan equal to 0.25% of such Class' average daily net assets are
currently each characterized as a "service fee" under the Rules of the National
Association of Securities Dealers, Inc. (of which the Distributor is a member).
The "service fee" is a payment made for personal service and/or the maintenance
of shareholder accounts. The remaining portion of the Plan fees payable by a
Class, if any, is characterized as an "asset-based sales charge" as such is
defined by the Rules of the Association.
Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each calendar quarter a written report
provided by the Distributor of the amounts expended under the Plan and the
purpose for which such expenditures were made. For the fiscal year ended July
31, 2000, Class B shares of the Fund accrued amounts payable to the Distributor
under the Plan of $2,207,883. This amount is equal to 1.00% of the average
daily net assets of Class B. For the fiscal year ended July 31, 2000, Class A
and Class C shares of the Fund accrued payments under the Plan amounting to
$15,173 and $44,541, respectively, which amounts are equal to 0.23% and 0.98%
of the average daily net assets of Class A and Class C, respectively, for the
fiscal year.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four
Classes, each with a different distribution arrangement.
19
<PAGE>
With respect to Class A shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from proceeds of the FSC, commissions for
the sale of Class A shares, currently a gross sales credit of up to 5.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.25% of the current value
of the respective accounts for which they are the Financial Advisors or dealers
of record in all cases. On orders of $1 million or more (for which no sales
charge was paid) or net asset value purchases by employer-sponsored employee
benefit plans, whether or not qualified under the Internal Revenue Code, for
which the Transfer Agent serves as Trustee or MSDW's Retirement Plan Services
serves as recordkeeper pursuant to a written Recordkeeping Services Agreement
("MSDW Eligible Plans"), the Investment Manager compensates Financial Advisors
by paying them, from its own funds, a gross sales credit of 1.0% of the amount
sold.
With respect to Class B shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class B shares, currently a gross sales credit of up to 5.0% of the amount
sold (except as provided in the following sentence) and an annual residual
commission, currently a residual of up to 0.25% of the current value (not
including reinvested dividends or distributions) of the amount sold in all
cases. In the case of Class B shares purchased by MSDW Eligible Plans, Dean
Witter Reynolds compensates its Financial Advisors by paying them, from its own
funds, a gross sales credit of 3.0% of the amount sold.
With respect to Class C shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class C shares, currently a gross sales credit of up to 1.0% of the amount
sold and an annual residual commission, currently up to 1.0% of the current
value of the respective accounts for which they are the Financial Advisors of
record.
With respect to Class D shares other than shares held by participants in
the Investment Manager's mutual fund asset allocation program, the Investment
Manager compensates Dean Witter Reynolds' Financial Advisors by paying them,
from its own funds, commissions for the sale of Class D shares, currently a
gross sales credit of up to 1.0% of the amount sold. There is a chargeback of
100% of the amount paid if the Class D shares are redeemed in the first year
and a chargeback of 50% of the amount paid if the Class D shares are redeemed
in the second year after purchase. The Investment Manager also compensates Dean
Witter Reynolds' Financial Advisors by paying them, from its own funds, an
annual residual commission, currently up to 0.10% of the current value of the
respective accounts for which they are the Financial Advisors of record (not
including accounts of participants in the Investment Manager's mutual fund
asset allocation program).
The gross sales credit is a charge which reflects commissions paid by Dean
Witter Reynolds to its Financial Advisors and Dean Witter Reynolds'
Fund-associated distribution-related expenses, including sales compensation,
and overhead and other branch office distribution-related expenses including
(a) the expenses of operating Dean Witter Reynolds' branch offices in
connection with the sale of Fund shares, including lease costs, the salaries
and employee benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies, (b) the costs of
client sales seminars, (c) travel expenses of mutual fund sales coordinators to
promote the sale of Fund shares and (d) other expenses relating to branch
promotion of Fund sales.
The Investment Manager pays a retention fee to Financial Advisors at an
annual rate of 0.05% of the value of shares of the Fund sold after January 1,
2000 and held for at least one year. Shares purchased through the reinvestment
of dividends will be eligible for a retention fee, provided that such dividends
were earned on shares otherwise eligible for a retention fee payment. Shares
owned in variable annuities, closed-end fund shares and shares held in 401(k)
plans where the Transfer Agent or MSDW's Retirement Plan Services is either
recordkeeper or trustee are not eligible for a retention fee.
For the first year only, the retention fee is paid on any shares of the
Fund sold after January 1, 2000 and held by shareholders on December 31, 2000.
The retention fees are paid by the Investment Manager from its own assets,
which may include profits from investment management fees payable under the
Management Agreement, as well as from borrowed funds.
20
<PAGE>
The distribution fee that the Distributor receives from the Fund under the
Plan, in effect, offsets distribution expenses incurred under the Plan on
behalf of the Fund and, in the case of Class B shares, opportunity costs, such
as the gross sales credit and an assumed interest charge thereon ("carrying
charge"). These expenses may include the cost of Fund-related educational
and/or business-related trips or payment of Fund-related educational and/or
promotional expenses of Financial Advisors. In the Distributor's reporting of
the distribution expenses to the Fund, in the case of Class B shares, such
assumed interest (computed at the "broker's call rate") has been calculated on
the gross credit as it is reduced by amounts received by the Distributor under
the Plan and any contingent deferred sales charges received by the Distributor
upon redemption of shares of the Fund. No other interest charge is included as
a distribution expense in the Distributor's calculation of its distribution
costs for this purpose. The broker's call rate is the interest rate charged to
securities brokers on loans secured by exchange-listed securities.
The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments at
the end of each month. The amount of each monthly payment may in no event
exceed an amount equal to a payment at the annual rate of 0.25%, in the case of
Class A, and 1.0%, in the case of Class C, of the average net assets of the
respective Class during the month. No interest or other financing charges, if
any, incurred on any distribution expenses on behalf of Class A and Class C
will be reimbursable under the Plan. With respect to Class A, in the case of
all expenses other than expenses representing the service fee, and, with
respect to Class C, in the case of all expenses other than expenses
representing a gross sales credit or a residual to Financial Advisors and other
authorized financial representatives, such amounts shall be determined at the
beginning of each calendar quarter by the Trustees, including, a majority of
the Independent Trustees. Expenses representing the service fee (for Class A)
or a gross sales credit or a residual to Financial Advisors and other
authorized financial representatives (for Class C) may be reimbursed without
prior determination. In the event that the Distributor proposes that monies
shall be reimbursed for other than such expenses, then in making quarterly
determinations of the amounts that may be reimbursed by the Fund, the
Distributor will provide and the Trustees will review a quarterly budget of
projected distribution expenses to be incurred on behalf of the Fund, together
with a report explaining the purposes and anticipated benefits of incurring
such expenses. The Trustees will determine which particular expenses, and the
portions thereof, that may be borne by the Fund, and in making such a
determination shall consider the scope of the Distributor's commitment to
promoting the distribution of the Fund's Class A and Class C shares.
Each Class paid 100% of the amounts accrued under the Plan with respect to
that Class for the fiscal year ended July 31, 2000 to the Distributor. The
Distributor and Dean Witter Reynolds estimate that they have spent, pursuant to
the Plan, $27,251,499 on behalf of Class B since the inception of the Plan. It
is estimated that this amount was spent in approximately the following ways:
(i) 15.63% ($4,258,815) - advertising and promotional expenses; (ii) 1.10%
($299,654) - printing of prospectuses for distribution to other than current
shareholders; and (iii) 83.27% ($22,693,030) - other expenses, including the
gross sales credit and the carrying charge, of which 9.41% ($2,135,566)
represents carrying charges, 37.50% ($8,510,790) represents commission credits
to Dean Witter Reynolds branch offices and other selected broker-dealers for
payments of commissions to Financial Advisors and other authorized financial
representatives, and 53.09% ($12,046,674) represents overhead and other branch
office distribution-related expenses. The amounts accrued by Class A and a
portion of the amounts accrued by Class C under the Plan during the fiscal year
ended July 31, 2000 were service fees. The remainder of the amounts accrued by
Class C were for expenses which relate to compensation of sales personnel and
associated overhead expenses.
In the case of Class B shares, at any given time, the expenses of
distributing shares of the Fund may be more or less than the total of (i) the
payments made by the Fund pursuant to the Plan; and (ii) the proceeds of CDSCs
paid by investors upon redemption of shares. For example, if $1 million in
expenses in distributing Class B shares of the Fund had been incurred and
$750,000 had been received as described in (i) and (ii) above, the excess
expense would amount to $250,000. The Distributor has
21
<PAGE>
advised the Fund that in the case of Class B shares the excess distribution
expenses, including the carrying charge designed to approximate the opportunity
costs incurred by Dean Witter Reynolds which arise from it having advanced
monies without having received the amount of any sales charges imposed at the
time of sale of the Fund's Class B shares, totaled $13,797,699 as of July 31,
2000 (the end of the Fund's fiscal year), which was equal to 6.82% of the net
assets of Class B on such date. Because there is no requirement under the Plan
that the Distributor be reimbursed for all distribution expenses with respect
to Class B shares or any requirement that the Plan be continued from year to
year, this excess amount does not constitute a liability of the Fund. 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 CDSCs 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. Any cumulative expenses incurred, but not yet recovered
through distribution fees or CDSCs, may or may not be recovered through future
distribution fees or CDSCs.
In the case of Class A 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 commission credited to Morgan Stanley Dean Witter Financial
Advisors and other authorized financial representatives at the time of sale may
be reimbursed in the subsequent calendar year. The Distributor has advised the
Fund that there were no such expenses that may be reimbursed in the subsequent
year in the case of Class A or Class C at December 31, 1999. No interest or
other financing charges will be incurred on any Class A or Class C distribution
expenses incurred by the Distributor under the Plan or on any unreimbursed
expenses due to the Distributor pursuant to the Plan.
No interested person of the Fund nor any Independent Trustee has any
direct financial interest in the operation of the Plan except to the extent
that the Distributor, the Investment Manager, Dean Witter Reynolds, MSDW
Services Company or certain of their employees may be deemed to have such an
interest as a result of benefits derived from the successful operation of the
Plan or as a result of receiving a portion of the amounts expended thereunder
by the Fund.
On an annual basis, the Trustees, including a majority of the Independent
Trustees, consider whether the Plan should be continued. Prior to approving the
last continuation of the Plan, the Trustees requested and received from the
Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to continue
the Plan, the Trustees considered: (1) the Fund's experience under the Plan and
whether such experience indicates that the Plan is operating as anticipated;
(2) the benefits the Fund had obtained, was obtaining and would be likely to
obtain under the Plan, including that: (a) the Plan is essential in order to
give Fund investors a choice of alternatives for payment of distribution and
service charges and to enable the Fund to continue to grow and avoid a pattern
of net redemptions which, in turn, are essential for effective investment
management; and (b) without the compensation to individual brokers and the
reimbursement of distribution and account maintenance expenses of Dean Witter
Reynolds' branch offices made possible by the 12b-1 fees, Dean Witter Reynolds
could not establish and maintain an effective system for distribution,
servicing of Fund shareholders and maintenance of shareholder accounts; and (3)
what services had been provided and were continuing to be provided under the
Plan to the Fund and its shareholders. Based upon their review, the Trustees,
including each of the Independent Trustees, determined that continuation of the
Plan would be in the best interest of the Fund and would have a reasonable
likelihood of continuing to benefit the Fund and its shareholders. In the
Trustees' quarterly review of the Plan, they will consider its continued
appropriateness and the level of compensation provided therein.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of the
affected Class or Classes of the Fund, and all material amendments to the Plan
must also be approved by the Trustees in the manner described above. The Plan
may be terminated at any time, without payment of any penalty, by vote of a
majority of the Independent Trustees or by a vote of a majority of the
outstanding voting securities of the Fund
22
<PAGE>
(as defined in the Investment Company Act) on not more than thirty days'
written notice to any other party to the Plan. So long as the Plan is in
effect, the election and nomination of Independent Trustees shall be committed
to the discretion of the Independent Trustees.
F. OTHER SERVICE PROVIDERS
(1) TRANSFER AGENT/DIVIDEND-PAYING AGENT
Morgan Stanley Dean Witter Trust FSB is the Transfer Agent for the Fund's
shares and the Dividend Disbursing Agent for payment of dividends and
distributions on Fund shares and Agent for shareholders under various
investment plans. The principal business address of the Transfer Agent is
Harborside Financial Center, Plaza Two, Jersey City, NJ 07311.
(2) CUSTODIAN AND INDEPENDENT AUDITORS
The Bank of New York, 100 Church Street, New York, NY 10007 is the
Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
These balances may, at times, be substantial.
Deloitte & Touche LLP, Two World Financial Center, New York, NY 10281,
serves as the independent auditors of the Fund. The independent auditors are
responsible for auditing the annual financial statements of the Fund.
(3) AFFILIATED PERSONS
The Transfer Agent is an affiliate of the Investment Manager, and of the
Distributor. As Transfer Agent and Dividend Disbursing Agent, the Transfer
Agent's responsibilities include maintaining shareholder accounts, disbursing
cash dividends and reinvesting dividends, processing account registration
changes, handling purchase and redemption transactions, mailing prospectuses
and reports, mailing and tabulating proxies, processing share certificate
transactions, and maintaining shareholder records and lists. For these
services, the Transfer Agent receives a per shareholder account fee from the
Fund and is reimbursed for its out-of-pocket expenses in connection with such
services.
G. CODES OF ETHICS
The Fund, the Investment Manager and the Distributor have each adopted a
Code of Ethics pursuant to Rule 17j-1 under the Investment Company Act. The
Codes of Ethics are designed to detect and prevent improper personal trading.
The Codes of Ethics permit personnel subject to the Codes to invest in
securities, including securities that may be purchased, sold or held by the
Fund, subject to a number of restrictions and controls including prohibitions
against purchases of securities in an Initial Public Offering and a
preclearance requirement with respect to personal securities transactions.
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
--------------------------------------------------------------------------------
A. BROKERAGE TRANSACTIONS
Subject to the general supervision of the Trustees, the Investment Manager
is responsible for decisions to buy and sell securities for the Fund, the
selection of brokers and dealers to effect the transactions, and the
negotiation of brokerage commissions, if any. Purchases and sales of securities
on a stock exchange are effected through brokers who charge a commission for
their services. In the over-the-counter market, securities are generally traded
on a "net" basis with dealers acting as principal for their own accounts
without a stated commission, although the price of the security usually
includes a profit to the dealer. The Fund also expects that securities will be
purchased at times in underwritten offerings where the price includes a fixed
amount of compensation, generally referred to as the underwriter's concession
or discount. Futures transactions will usually be effected through a broker and
a commission will be charged. On occasion, the Fund may also purchase certain
money market instruments directly from an issuer, in which case no commissions
or discounts are paid.
23
<PAGE>
For the fiscal years ended July 31, 1998, 1999 and 2000, the Fund paid a
total of $1,686,749, $1,007,878 and $660,054, respectively, in brokerage
commissions.
B. COMMISSIONS
Pursuant to an order of the SEC, the Fund may effect principal
transactions in certain money market instruments with Dean Witter Reynolds. The
Fund will limit its transactions with Dean Witter Reynolds to U.S. Government
and government agency securities, bank money instruments (i.e., certificates of
deposit and bankers' acceptances) and commercial paper. The transactions will
be effected with Dean Witter Reynolds only when the price available from Dean
Witter Reynolds is better than that available from other dealers.
During the fiscal years ended July 31, 1998, 1999 and 2000, the Fund did
not effect any principal transactions with Dean Witter Reynolds.
Brokerage transactions in securities listed on exchanges or admitted to
unlisted trading privileges may be effected through Dean Witter Reynolds,
Morgan Stanley & Co. and other affiliated brokers and dealers. In order for an
affiliated broker or dealer to effect any portfolio transactions on an exchange
for the Fund, the commissions, fees or other remuneration received by the
affiliated broker or dealer must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on an exchange during a comparable period of time. This standard would
allow the affiliated broker or dealer to receive no more than the remuneration
which would be expected to be received by an unaffiliated broker in a
commensurate arm's-length transaction. Furthermore, the Trustees, including the
Independent Trustees, have adopted procedures which are reasonably designed to
provide that any commissions, fees or other remuneration paid to an affiliated
broker or dealer are consistent with the foregoing standard. The Fund does not
reduce the management fee it pays to the Investment Manager by any amount of
the brokerage commissions it may pay to an affiliated broker or dealer.
During the fiscal years ended July 31, 1998, 1999 and 2000, the Fund paid
a total of $109,942, $102,705 and $48,639, respectively, in brokerage
commissions to Dean Witter Reynolds. During the fiscal year ended July 31,
2000, the brokerage commissions paid to Dean Witter Reynolds represented
approximately 7.37% of the total brokerage commissions paid by the Fund during
the year and were paid on account of transactions having an aggregate dollar
value equal to approximately 9.11% of the aggregate dollar value of all
portfolio transactions of the Fund during the year for which commissions were
paid.
During the fiscal years ended July 31, 1998, 1999 and 2000, the Fund paid
a total of $0, $48,620, $47,065 and $5,750, respectively, in brokerage
commissions to Morgan Stanley & Co. During the fiscal year ended July 31, 2000,
the brokerage commissions paid to Morgan Stanley & Co. represented
approximately 0.87% of the total brokerage commissions paid by the Fund for
this period and were paid on account of transactions having an aggregate dollar
value equal to approximately 0.64% of the aggregate dollar value of all
portfolio transactions of the Fund during the year for which commissions were
paid.
C. BROKERAGE SELECTION
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid
in all circumstances. The Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund and the Investment Manager from obtaining a high quality of
brokerage and research services. In seeking to determine the reasonableness of
brokerage commissions paid in any transaction, the Investment Manager relies
upon its experience and knowledge regarding commissions generally charged by
various brokers and on its judgment in evaluating the
24
<PAGE>
brokerage and research services received from the broker effecting the
transaction. These determinations are necessarily subjective and imprecise, as
in most cases an exact dollar value for those services is not ascertainable.
The Fund anticipates that certain of its transactions involving foreign
securities will be effected on foreign securities exchanges. Fixed commissions
on such transactions are generally higher than negotiated commissions on
domestic transactions. There is also generally less government supervision and
regulation of foreign securities exchanges and brokers than in the United
States.
In seeking to implement the Fund's policies, the Investment Manager
effects transactions with those brokers and dealers who the Investment Manager
believes provide the most favorable prices and are capable of providing
efficient executions. If the Investment Manager believes the prices and
executions are obtainable from more than one broker or dealer, it may give
consideration to placing portfolio transactions with those brokers and dealers
who also furnish research and other services to the Fund or the Investment
Manager. The services may include, but are not limited to, any one or more of
the following: information as to the availability of securities for purchase or
sale; statistical or factual information or opinions pertaining to investment;
wire services; and appraisals or evaluations of portfolio securities. The
information and services received by the Investment Manager from brokers and
dealers may be of benefit to the Investment Manager in the management of
accounts of some of its other clients and may not in all cases benefit the Fund
directly.
The Investment Manager currently serves as investment manager to a number
of clients, including other investment companies, and may in the future act as
investment manager or advisor to others. It is the practice of the Investment
Manager to cause purchase and sale transactions to be allocated among the Fund
and others whose assets it manages in such manner as it deems equitable. In
making such allocations among the Fund and other client accounts, various
factors may be considered, including the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held and the opinions of the persons responsible for managing the
portfolios of the Fund and other client accounts. In the case of certain
initial and secondary public offerings, the Investment Manager utilizes a pro
rata allocation process based on the size of the relevant funds and/or client
accounts involved and the number of shares available from the public offering.
D. DIRECTED BROKERAGE
During the fiscal year ended July 31, 2000, the Fund paid $561,944 in
brokerage commissions in connection with transactions in the aggregate amount
of $166,933,687 to brokers because of research services provided.
E. REGULAR BROKER-DEALERS
During the fiscal year ended July 31, 2000, the Fund did not purchase
securities issued by brokers or dealers that were among the ten brokers or ten
dealers which executed transactions for or with the Fund in the largest dollar
amounts during the year. At July 31, 2000, the Fund did not own any securities
issued by any such issuers.
VII. CAPITAL STOCK AND OTHER SECURITIES
--------------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full
share of beneficial interest held. The Fund is authorized to issue an unlimited
number of shares of beneficial interest. All shares of beneficial interest of
the Fund are of $0.01 par value and are equal as to earnings, assets and voting
privileges except that each Class will have exclusive voting privileges with
respect to matters relating to distribution expenses borne solely by such Class
or any other matter in which the interests of one Class differ from the
interests of any other Class. In addition, Class B shareholders will have the
right to vote on any proposed material increase in Class A's expenses, if such
proposal is submitted separately to Class A shareholders. Also, Class A, Class
B and Class C bear expenses related to the distribution of their respective
shares.
25
<PAGE>
The Fund's Declaration of Trust permits the Trustees to authorize the
creation of additional series of shares (the proceeds of which would be
invested in separate, independently managed portfolios) and additional Classes
of shares within any series. The Trustees have not presently authorized any
such additional series or Classes of shares other than as set forth in the
Prospectus.
The Fund is not required to hold annual meetings of shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call special meetings of shareholders for action by shareholder
vote as may be required by the Investment Company Act or the Declaration of
Trust. Under certain circumstances, the Trustees may be removed by the actions
of the Trustees. In addition, under certain circumstances, the shareholders may
call a meeting to remove the Trustees and the Fund is required to provide
assistance in communicating with shareholders about such a meeting. The voting
rights of shareholders are not cumulative, so that holders of more than 50
percent of the shares voting can, if they choose, elect all Trustees being
selected, while the holders of the remaining shares would be unable to elect
any Trustees.
Under Massachusetts law, shareholders of a business trust may, under
certain limited circumstances, be held personally liable as partners for the
obligations of the Fund. However, the Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Fund,
requires that notice of such Fund obligations include such disclaimer, and
provides for indemnification out of the Fund's property for any shareholder
held personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability, and
the nature of the Fund's assets and operations, the possibility of the Fund
being unable to meet its obligations is remote and thus, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.
All of the Trustees, except for James F. Higgins, have been elected by the
shareholders of the Fund, most recently at a Special Meeting of Shareholders
held on May 21, 1997. The Trustees themselves have the power to alter the
number and the terms of office of the Trustees (as provided for in the
Declaration of Trust), and they may at any time lengthen or shorten their own
terms or make their terms of unlimited duration and appoint their own
successors, provided that always at least a majority of the Trustees has been
elected by the shareholders of the Fund.
VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
--------------------------------------------------------------------------------
A. PURCHASE/REDEMPTION OF SHARES
Information concerning how Fund shares are offered to the public (and how
they are redeemed and exchanged) is provided in the Fund's Prospectus.
TRANSFER AGENT AS AGENT. With respect to the redemption or repurchase of
Fund shares, the application of proceeds to the purchase of new shares in the
Fund or any other Morgan Stanley Dean Witter Funds and the general
administration of the exchange privilege, the Transfer Agent acts as agent for
the Distributor and for the shareholder's authorized broker-dealer, if any, in
the performance of such functions. With respect to exchanges, redemptions or
repurchases, the Transfer Agent shall be liable for its own negligence and not
for the default or negligence of its correspondents or for losses in transit.
The Fund shall not be liable for any default or negligence of the Transfer
Agent, the Distributor or any authorized broker-dealer.
The Distributor and any authorized broker-dealer have appointed the
Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of shares of any
other Morgan Stanley Dean Witter Fund and the general administration of the
exchange privilege. No commission or discounts will be paid to the Distributor
or any authorized broker-dealer for any transaction pursuant to the exchange
privilege.
TRANSFERS OF SHARES. In the event a shareholder requests a transfer of
Fund shares to a new registration, the shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the CDSC or free of such charge (and with regard to the
26
<PAGE>
length of time shares subject to the charge have been held), any transfer
involving less than all of the shares in an account will be made on a pro rata
basis (that is, by transferring shares in the same proportion that the
transferred shares bear to the total shares in the account immediately prior to
the transfer). The transferred shares will continue to be subject to any
applicable CDSC as if they had not been so transferred.
B. OFFERING PRICE
The Fund's Class B, Class C and Class D shares are offered at net asset
value per share and the Class A shares are offered at net asset value per share
plus any applicable FSC which is distributed among the Fund's Distributor, Dean
Witter Reynolds and other authorized dealers as described in Section "V.
Investment Management and Other Services - E. Rule 12b-1 Plan." The price of
Fund shares, called "net asset value," is based on the value of the Fund's
portfolio securities. Net asset value per share of each Class is calculated by
dividing the value of the portion of the Fund's securities and other assets
attributable to that Class, less the liabilities attributable to that Class, by
the number of shares of that Class outstanding. The assets of each Class of
shares are invested in a single portfolio. The net asset value of each Class,
however, will differ because the Classes have different ongoing fees.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange, NASDAQ,
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 latest bid 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 pursuant to procedures adopted by the Trustees); and (2) all other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest bid price. When market quotations are not
readily available, including circumstances under which it is determined by the
Investment Manager that sale or bid prices are not reflective of a security's
market value, portfolio securities are valued at their fair value as determined
in good faith under procedures established by and under the general supervision
of the Fund's Trustees. For valuation purposes, quotations of foreign portfolio
securities, other assets and liabilities and forward contracts stated in
foreign currency are translated into U.S. dollar equivalents at the prevailing
market rates prior to the close of the New York Stock Exchange.
Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may
utilize a matrix system incorporating security quality, maturity and coupon as
the evaluation model parameters, and/or research evaluations by its staff,
including review of broker-dealer market price quotations in determining what
it believes is the fair valuation of the portfolio securities valued by such
pricing service.
Futures are valued at the latest sale price on the commodities exchange on
which they trade unless the Trustees determine such price does not reflect
their market value, in which case they will be valued at their fair value as
determined in good faith under procedures established by and under the
supervision of the Trustees.
IX. TAXATION OF THE FUND AND SHAREHOLDERS
--------------------------------------------------------------------------------
The Fund generally will make two basic types of distributions: ordinary
dividends and long-term capital gain distributions. These two types of
distributions are reported differently on a shareholder's income tax return and
they are also subject to different rates of tax. The tax treatment of the
investment activities of the Fund will affect the amount and timing and
character of the distributions made by the Fund. Tax issues relating to the
Fund are not generally a consideration for shareholders such as tax-exempt
entities and tax-advantaged retirement vehicles such as an IRA or 401(k) plan.
Shareholders are urged to consult their own tax professionals regarding
specific questions as to federal, state or local taxes.
27
<PAGE>
INVESTMENT COMPANY TAXATION. The Fund intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986. As such, the Fund will not be subject to federal income tax on its net
investment income and capital gains, if any, to the extent that it distributes
such income and capital gains to its shareholders.
The Fund generally intends to distribute sufficient income and gains so
that the Fund will not pay corporate income tax on its earnings. The Fund also
generally intends to distribute to its shareholders in each calendar year a
sufficient amount of ordinary income and capital gains to avoid the imposition
of a 4% excise tax. However, the Fund may instead determine to retain all or
part of any net long-term capital gains in any year for reinvestment. In such
event, the Fund will pay federal income tax (and possibly excise tax) on such
retained gains.
Gains or losses on sales of securities by the Fund will be long-term
capital gains or losses if the securities have a tax holding period of more
than one year. Gains or losses on the sale of securities with a tax holding
period of one year or less will be short-term gains or losses.
Gains or losses on the Fund's transactions in listed non-equity options,
futures and options on futures generally are treated as 60% long-term and 40%
short-term. When the Fund engages in options and futures transactions, various
tax rules may accelerate or defer recognition of certain gains and losses,
change the character of certain gains or losses, or alter the holding period of
other investments held by the Fund. The application of these rules would
therefore also affect the amount, timing and character of distributions made by
the Fund.
Under certain tax rules, the Fund may be required to accrue a portion of
any discount at which certain securities are purchased as income each year even
though the Fund receives no payments in cash on the security during the year.
In addition, if the Fund invests in an equity security of a non-U.S.
corporation classified as a "passive foreign investment company" for U.S. tax
purposes, the application of certain technical tax provisions applying to
investments in such companies may result in the Fund being required to accrue
income in respect of the security without any receipt of cash attributable to
such income. To the extent that the Fund invests in such securities, it would
be required to pay out such accrued income as an income distribution in each
year in order to avoid taxation at the Fund level. Such distributions will be
made from the available cash of the Fund or by liquidation of portfolio
securities if necessary. If a distribution of cash necessitates the liquidation
of portfolio securities, the Investment Manager will select which securities to
sell. The Fund may realize a gain or loss from such sales. In the event the
Fund realizes net capital gains from such transactions, its shareholders may
receive a larger capital gain distribution, if any, than they would in the
absence of such transactions.
TAXATION OF DIVIDENDS AND DISTRIBUTIONS. Shareholders normally will have
to pay federal income taxes, and any state and/or local income taxes, on the
dividends and other distributions they receive from the Fund. Such dividends
and distributions, to the extent that they are derived from net investment
income or short-term capital gains, are taxable to the shareholder as ordinary
income regardless of whether the shareholder receives such payments in
additional shares or in cash.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. The maximum tax rate on long-term
capital gains realized by non-corporate shareholders is 20%.
Shareholders are generally taxed on any ordinary dividend or capital gain
distributions from the Fund in the year they are actually distributed. However,
if any such dividends or distributions are declared in October, November or
December and paid in January then such amounts will be treated for tax purposes
as received by the shareholders on December 31, to shareholders of record of
such month.
Subject to certain exceptions, a corporate shareholder may be eligible for
a 70% dividends received deduction to the extent that the Fund earns and
distributes qualifying dividends from its investments. Distributions of net
capital gains by the Fund will not be eligible for the dividends received
deduction.
Shareholders who are not citizens or residents of the United States and
certain foreign entities may be subject to withholding of United States tax on
distributions made by the Fund of investment income and short-term capital
gains.
28
<PAGE>
After the end of each calendar year, shareholders will be sent information
on their dividends and capital gain distributions for tax purposes, including
the portion taxable as ordinary income, and the portion taxable as long-term
capital gains.
PURCHASES AND REDEMPTIONS AND EXCHANGES OF FUND SHARES. Any dividend or
capital gains distribution received by a shareholder from any investment
company will have the effect of reducing the net asset value of the
shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, such dividends and capital gains
distributions are subject to federal income taxes. If the net asset value of
the shares should be reduced below a shareholder's cost as a result of the
payment of dividends or the distribution of realized long-term capital gains,
such payment or distribution would be in part a return of the shareholder's
investment but nonetheless would be taxable to the shareholder. Therefore, an
investor should consider the tax implications of purchasing Fund shares
immediately prior to a distribution record date.
In general, a sale of shares results in capital gain or loss, and for
individual shareholders, is taxable at a federal rate dependent upon the length
of time the shares were held. A redemption of a shareholder's Fund shares is
normally treated as a sale for tax purposes. Fund shares held for a period of
one year or less will, for tax purposes, generally result in short-term gains
or losses and those held for more than one year generally result in long-term
gain or loss. Under current law, the maximum tax rate on long-term capital
gains realized by non-corporate shareholders is 20%. Any loss realized by
shareholders upon a sale or redemption of shares within six months of the date
of their purchase will be treated as a long-term capital loss to the extent of
any distributions of net long-term capital gains with respect to such shares
during the six-month period.
Gain or loss on the sale or redemption of shares in the Fund is measured
by the difference between the amount received and the tax basis of the shares.
Shareholders should keep records of investments made (including shares acquired
through reinvestment of dividends and distributions) so they can compute the
tax basis of their shares. Under certain circumstances a shareholder may
compute and use an average cost basis in determining the gain or loss on the
sale or redemption of shares.
Exchanges of Fund shares for shares of another fund, including shares of
other Morgan Stanley Dean Witter Funds, are also subject to similar tax
treatment. Such an exchange is treated for tax purposes as a sale of the
original shares in the first fund, followed by the purchase of shares in the
second fund.
If a shareholder realizes a loss on the redemption or exchange of a fund's
shares and reinvests in that fund's shares within 30 days before or after the
redemption or exchange, the transactions may be subject to the "wash sale"
rules, resulting in a postponement of the recognition of such loss for tax
purposes.
X. UNDERWRITERS
--------------------------------------------------------------------------------
The Fund's shares are offered to the public on a continuous basis. The
Distributor, as the principal underwriter of the shares, has certain
obligations under the Distribution Agreement concerning the distribution of the
shares. These obligations and the compensation the Distributor receives are
described above in the sections titled "Principal Underwriter" and "Rule 12b-1
Plan."
XI. CALCULATION OF PERFORMANCE DATA
--------------------------------------------------------------------------------
From time to time, the Fund may quote its "total return" in advertisements
and sales literature. These figures are computed separately for Class A, Class
B, Class C and Class D shares. The Fund's "average annual total return"
represents an annualization of the Fund's total return over a particular period
and is computed by finding the annual percentage rate which will result in the
ending redeemable value of a hypothetical $1,000 investment made at the
beginning of a one, five or ten year period, or for the period from the date of
commencement of operations, if shorter than any of the foregoing. The ending
redeemable value is reduced by any contingent deferred sales charge ("CDSC") at
the end of the one,
29
<PAGE>
five, ten year or other period. For the purpose of this calculation, it is
assumed that all dividends and distributions are reinvested. The formula for
computing the average annual total return involves a percentage obtained by
dividing the ending redeemable value by the amount of the initial investment
(which in the case of Class A shares is reduced by the Class A initial sales
charge), taking a root of the quotient (where the root is equivalent to the
number of years in the period) and subtracting 1 from the result. Based on this
calculation, the average annual total returns for Class B for the one year
period ended July 31, 2000 and for the period October 29, 1996 (commencement of
operations) through July 31, 2000 were 2.53% and 8.93%, respectively. The
average annual total returns of Class A for the fiscal year ended July 31, 2000
and for the period July 28, 1997 (inception of the Class) through July 31, 2000
were 2.63% and 3.75%, respectively. The average annual total returns of Class C
for the fiscal year ended July 31, 2000 and for the period July 28, 1997
through July 31, 2000 were 6.52% and 4.87%, respectively. The average annual
total returns of Class D for the fiscal year ended July 31, 2000 and for the
period July 28, 1997 through July 31, 2000 were 8.56% and 5.85%, respectively.
In addition, the Fund may advertise its total return for each Class over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. These calculations may or may not reflect the
imposition of the maximum front-end sales charge for Class A or the deduction
of the CDSC for each of Class B and Class C which, if reflected, would reduce
the performance quoted. For example, the average annual total return of the
Fund may be calculated in the manner described above, but without deduction for
any applicable sales charge. Based on this calculation, the average annual
total returns of Class B for the one year period ended July 31, 2000 and for
the period October 29, 1996 (commencement of operations) through July 31, 2000
were 7.53% and 9.35%, respectively. The average annual total returns of Class A
for the fiscal year ended July 31, 2000 and for the period July 28, 1997
(inception of the Class) through July 31, 2000 were 8.32% and 5.63%,
respectively. The average annual total returns of Class C for the fiscal year
ended July 31, 2000 and for the period July 28, 1997 through July 31, 2000 were
7.52% and 4.87%, respectively. The average annual total returns of Class D for
the fiscal year ended July 31, 2000 and for the period July 28, 1997 through
July 31, 2000 were 8.56% and 5.85%, respectively.
In addition, the Fund may compute its aggregate total return for each
Class for specified periods by determining the aggregate percentage rate which
will result in the ending value of a hypothetical $1,000 investment made at the
beginning of the period. For the purpose of this calculation, it is assumed
that all dividends and distributions are reinvested. The formula for computing
aggregate total return involves a percentage obtained by dividing the ending
value (without reduction for any sales charge) by the initial $1,000 investment
and subtracting 1 from the result. Based on this calculation, the total returns
of Class B for the one year period ended July 31, 2000 and for the period
October 29, 1996 (commencement of operations) through July 31, 2000 were 7.53%
and 39.84%, respectively. The total returns of Class A for the fiscal year
ended July 31, 2000 and for the period July 28, 1997 (inception of the Class)
through July 31, 2000 were 8.32% and 17.90%, respectively. The total returns of
Class C for the fiscal year ended July 31, 2000 and for the period July 28,
1997 through July 31, 2000 were 7.52% and 15.38%, respectively. The total
returns of Class D for the fiscal year ended July 31, 2000 and for the period
July 28, 1997 through July 31, 2000 were 8.56% and 18.64%, respectively.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in each Class of shares of the Fund by adding 1
to the Fund's aggregate total return to date (expressed as a decimal and
without taking into account the effect of any applicable CDSC) and multiplying
by $9,475, $48,000 and $97,000 in the case of Class A (investments of $10,000,
$50,000 and $100,000 adjusted for the initial sales charge) or by $10,000,
$50,000 and $100,000 in the case of each of Class B, Class C and Class D, as
the case may be. Investments of $10,000, $50,000 and $100,000 in each Class at
inception of the Class would have grown to the following amounts at July 31,
2000:
30
<PAGE>
INVESTMENT AT INCEPTION OF:
INCEPTION --------------------------------
CLASS DATE: $10,000 $50,000 $100,000
----- --------- ------- ------- --------
Class A ......... 07/28/97 $11,171 $56,592 $114,363
Class B ......... 10/29/96 13,984 69,920 139,840
Class C ......... 07/28/97 11,538 57,690 115,380
Class D ......... 07/28/97 11,864 59,320 118,640
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by recognized organizations.
XII. FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
EXPERTS. The financial statements of the Fund for the fiscal year ended
July 31, 2000 included in this Statement of Additional Information and
incorporated by reference in the Prospectus have been so included and
incorporated in reliance on the report of Deloitte & Touche LLP, independent
auditors, given on the authority of said firm as experts in auditing and
accounting.
* * * * *
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the SEC. The complete Registration Statement may be obtained from
the SEC.
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<PAGE>
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
PORTFOLIO OF INVESTMENTS July 31, 2000
NUMBER OF
SHARES VALUE
---------- ------------
COMMON STOCKS (92.0%)
Advertising (1.4%)
45,000 Getty Images, Inc.* .................... $ 1,628,437
65,000 Netratings, Inc.* ...................... 1,308,125
------------
2,936,562
------------
Air Freight/Delivery Services (2.6%)
110,000 Circle International Group, Inc. ....... 3,107,500
175,000 Fritz Companies, Inc.* ................. 2,603,125
------------
5,710,625
------------
Airlines (0.3%)
25,000 Midwest Express Holdings, Inc.*......... 587,500
------------
Apparel (1.3%)
127,100 Kellwood Co. ........................... 2,843,862
------------
Beverages - Non-Alcoholic (0.4%)
225,000 Packaged Ice Inc.* ..................... 843,750
------------
Canadian Oil & Gas (0.8%)
490,000 Hurricane Hydrocarbons Ltd.
(Class A) (Canada)* .................... 1,812,363
------------
Casino/Gambling (0.8%)
430,500 GameTech International, Inc.* .......... 1,789,266
------------
Catalog/Specialty Distribution (0.4%)
150,000 1-800-Flowers.com, Inc. (Class A)*...... 895,312
------------
Clothing/Shoe/Accessory Stores (2.7%)
225,000 Charming Shoppes, Inc.* ................ 1,265,625
50,000 Men's Wearhouse, Inc. (The)* ........... 1,296,875
155,000 Ross Stores, Inc. ...................... 2,383,125
60,000 Venator Group, Inc.* ................... 847,500
------------
5,793,125
------------
Construction/Agricultural
Equipment/Trucks (1.8%)
230,000 Terex Corp.* ........................... 3,795,000
------------
Consumer Electronics/
Appliances (0.6%)
20,000 Harman International Industries,
Inc. ................................... 1,265,000
------------
Containers/Packaging (2.3%)
96,500 Aptargroup, Inc. ....................... 2,406,469
206,000 Gaylord Container Corp.
(Class A)* ............................. 540,750
178,000 Packaging Corp. of America* ............ 2,024,750
------------
4,971,969
------------
Discount Chains (0.2%)
100,000 Bradlees, Inc.* ........................ $ 362,500
------------
Diversified Commercial
Services (0.7%)
208,600 GP Strategies Corp.* ................... 1,173,375
16,100 MAXIMUS, Inc.* ......................... 384,387
------------
1,557,762
------------
Diversified Electronic
Products (5.6%)
260,000 Fargo Electronics Inc.* ................ 2,015,000
807,000 Paxar Corp.* ........................... 9,986,625
------------
12,001,625
------------
Diversified Manufacturing (2.2%)
182,500 Ametek, Inc. ........................... 3,798,281
50,000 Valmont Industries, Inc. ............... 1,015,625
------------
4,813,906
------------
E.D.P. Services (0.3%)
50,000 Complete Business Solutions, Inc.* 637,500
------------
Electrical Products (1.9%)
115,000 Cable Design Technologies Corp.*........ 4,053,750
------------
Electronic Components (1.0%)
60,000 Artesyn Technologies, Inc.* ............ 2,040,000
------------
Electronic Distributors (1.1%)
85,000 Anixter International, Inc.* ........... 2,470,312
------------
Industrial Machinery/Components (1.2%)
200,000 Denison International PLC (ADR)
(United Kingdom)* ...................... 2,600,000
------------
Industrial Specialties (1.2%)
73,000 Rogers Corp.* .......................... 2,609,750
------------
Insurance Brokers/Services (3.3%)
257,700 Corvel Corp.* .......................... 7,086,750
------------
Internet Services (0.2%)
20,000 Ask Jeeves, Inc.* ...................... 362,500
------------
Life Insurance (1.3%)
115,000 Annuity and Life Re (Holdings),
Ltd. ................................... 2,831,875
------------
Medical Equipment & Supplies (4.2%)
270,000 DENTSPLY International, Inc. ........... 9,129,375
------------
SEE NOTES TO FINANCIAL STATEMENTS
32
<PAGE>
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
PORTFOLIO OF INVESTMENTS July 31, 2000, continued
NUMBER OF
SHARES VALUE
--------- ------------
Medical Specialties (5.8%)
121,300 CONMED Corp.* ......................... $ 1,622,387
92,700 Invacare Corp. ........................ 2,143,687
130,900 Orthofix International N.V.* .......... 2,601,637
300,000 ProMedCo Management Co.* .............. 403,125
195,400 Scott Technologies, Inc. * ............ 3,761,450
100,000 Sybron International Corp.* ........... 2,081,250
------------
12,613,536
------------
Military/Gov't/Technical (5.0%)
153,000 Alliant Techsystems, Inc.* ............ 10,824,750
------------
Natural Gas (3.9%)
166,500 MDU Resources Group, Inc. ............. 3,871,125
180,000 Washington Gas Light Co. .............. 4,432,500
------------
8,303,625
------------
Oil & Gas Production (3.7%)
68,100 Evergreen Resources, Inc.* ............ 1,864,238
165,000 Forest Oil Corp.* ..................... 2,124,375
225,000 Santa Fe Snyder Corp.* ................ 2,250,000
61,000 St. Mary Land & Exploration Co......... 1,826,188
------------
8,064,801
------------
Oil/Gas Transmission (1.0%)
115,000 Western Gas Resources, Inc. ........... 2,098,750
------------
Other Consumer Services (3.3%)
123,600 Ambassadors International, Inc.*....... 2,025,881
175,000 Chemed Corp. .......................... 5,042,188
------------
7,068,069
------------
Other Telecommunications (0.6%)
35,000 Asia Satellite Telecommunications
Holdings Ltd. (ADR) (Hong Kong) 1,174,688
------------
Package Goods/Cosmetics (1.5%)
262,000 Playtex Products, Inc.* ............... 3,176,750
------------
Property - Casualty Insurers (6.2%)
250,000 RenaissanceRe Holdings, Ltd.
(Bermuda) ............................. 11,640,625
105,000 Trenwick Group Inc. ................... 1,850,625
------------
13,491,250
------------
Railroads (0.9%)
214,000 RailWorks Corp.* ...................... 1,979,500
------------
Real Estate Investment Trusts (6.6%)
125,000 Alexandria Real Estate Equities,
Inc. .................................. $ 4,476,563
125,000 INDYMAC Bancorp Inc.* ................. 2,140,625
402,800 Mid-Atlantic Realty Trust ............. 4,380,450
105,000 Parkway Properties, Inc. .............. 3,360,000
------------
14,357,638
------------
Rental/Leasing Companies (0.3%)
100,000 Willis Lease Finance Corp.* ........... 662,500
------------
Semiconductors (0.4%)
16,000 Intersil Holding Corp. (Class A)*...... 917,000
------------
Services to the Health Industry (3.1%)
235,440 Morrison Management Specialists,
Inc. .................................. 6,783,615
------------
Smaller Banks (2.0%)
200,000 Banknorth Group, Inc. ................. 3,062,500
55,400 Texas Regional Bancshares, Inc.
(Class A) ............................. 1,319,213
------------
4,381,713
------------
Specialty Chemicals (1.1%)
168,800 TETRA Technologies, Inc.* ............. 2,342,100
------------
Specialty Foods/Candy (3.2%)
189,100 American Italian Pasta Co.
(Class A)* ............................ 3,734,725
216,000 J & J Snack Foods Corp.* .............. 3,213,000
------------
6,947,725
------------
Specialty Insurers (1.3%)
264,100 CNA Surety Corp. ...................... 2,872,088
------------
Specialty Steels (0.8%)
100,000 Quanex Corp. .......................... 1,800,000
------------
Steel/Iron Ore (0.5%)
43,700 Cleveland-Cliffs, Inc. ................ 1,084,306
------------
Textiles (0.3%)
85,000 Polymer Group, Inc. ................... 653,438
------------
Water Supply (0.7%)
52,600 American States Water Co. ............. 1,584,575
------------
TOTAL COMMON STOCKS
(Cost $184,130,694).................... 198,984,356
------------
SEE NOTES TO FINANCIAL STATEMENTS
33
<PAGE>
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
PORTFOLIO OF INVESTMENTS July 31, 2000, continued
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
---------- ------------
CONVERTIBLE BOND (0.5%)
$ 1,200 Charming Shoppes, Inc. 7.50%
due 07/15/06 (Cost $1,070,888)...... $ 1,092,756
------------
SHORT-TERM INVESTMENTS (7.3%)
U.S. GOVERNMENT AGENCY (a) (6.9%)
15,000 Federal Home Loan Banks 6.43%
due 08/01/00 (Cost $15,000,000) 15,000,000
------------
REPURCHASE AGREEMENT (0.4%)
878 The Bank of New York 6.50%
due 08/01/00 (dated 07/31/00;
proceeds $877,820) (b)
(Cost $877,661)..................... 877,661
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $15,877,661).................. 15,877,661
------------
TOTAL INVESTMENTS
(Cost $201,079,243) (c).............. 99.8% 215,954,773
OTHER ASSETS IN EXCESS OF
LIABILITIES ......................... 0.2 376,771
----- ------------
NET ASSETS .......................... 100.0% $216,331,544
===== ============
-------------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Purchased on a discount basis. The interest rate shown has been adjusted
to reflect a money market equivalent yield.
(b) Collateralized by $882,599 U.S. Treasury Note 5.875% due
02/15/04 valued at $895,217.
(c) The aggregate cost for federal income tax purposes approximates
the aggregate cost for book purposes. The aggregate gross
unrealized appreciation is $30,206,655 and the aggregate gross
unrealized depreciation is $15,331,125, resulting in net
unrealized appreciation of $14,875,530.
See Notes to Financial Statements
34
<PAGE>
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2000
ASSETS:
Investments in securities, at value
(cost $201,079,243) ....................................... $215,954,773
Receivable for :
Investments sold ......................................... 1,448,339
Shares of beneficial interest sold ....................... 1,288,407
Dividends ................................................ 66,875
Deferred organizational expenses ............................ 44,568
Prepaid expenses and other assets ........................... 38,508
------------
TOTAL ASSETS ............................................. 218,841,470
------------
LIABILITIES:
Payable for:
Investments purchased .................................... 1,960,724
Plan of distribution fee ................................. 177,107
Shares of beneficial interest repurchased ................ 164,809
Investment management fee ................................ 137,343
Accrued expenses and other payables ......................... 69,943
------------
TOTAL LIABILITIES ........................................ 2,509,926
------------
NET ASSETS ............................................... $216,331,544
============
COMPOSITION OF NET ASSETS:
Paid-in-capital ............................................. $207,822,768
Net unrealized appreciation ................................. 14,875,530
Accumulated undistributed net investment income ............. 148,748
Accumulated net realized loss ............................... (6,515,502)
------------
NET ASSETS ............................................... $216,331,544
============
CLASS A SHARES:
Net Assets .................................................. $7,105,030
Shares Outstanding (unlimited authorized, $.01 par value) ... 602,492
NET ASSET VALUE PER SHARE ................................ $11.79
======
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ........ $12.44
======
CLASS B SHARES:
Net Assets .................................................. $202,446,365
Shares Outstanding (unlimited authorized, $.01 par value) ... 17,593,326
NET ASSET VALUE PER SHARE ................................ $11.51
======
CLASS C SHARES:
Net Assets .................................................. $4,905,387
Shares Outstanding (unlimited authorized, $.01 par value) ... 425,746
NET ASSET VALUE PER SHARE ................................ $11.52
======
CLASS D SHARES:
Net Assets .................................................. $1,874,762
Shares Outstanding (unlimited authorized, $.01 par value) ... 157,952
NET ASSET VALUE PER SHARE ................................ $11.87
======
SEE NOTES TO FINANCIAL STATEMENTS
35
<PAGE>
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
FINANCIAL STATEMENTS, Continued
STATEMENT OF OPERATIONS
For the year ended July 31, 2000
NET INVESTMENT INCOME:
INCOME
Dividends (net of $1,350 foreign withholding tax) ......... $ 3,475,396
Interest .................................................. 1,145,942
------------
TOTAL INCOME ........................................... 4,621,338
------------
EXPENSES
Plan of distribution fee (Class A shares) ................. 15,173
Plan of distribution fee (Class B shares) ................. 2,207,883
Plan of distribution fee (Class C shares) ................. 44,541
Investment management fee ................................. 1,749,834
Transfer agent fees and expenses .......................... 285,698
Professional fees ......................................... 78,742
Registration fees ......................................... 72,560
Shareholder reports and notices ........................... 58,899
Organizational expenses ................................... 35,923
Custodian fees ............................................ 20,849
Trustees' fees and expenses ............................... 11,191
Other ..................................................... 9,965
------------
TOTAL EXPENSES ......................................... 4,591,258
------------
NET INVESTMENT INCOME .................................. 30,080
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss ......................................... (4,983,260)
Net change in unrealized depreciation ..................... 17,020,664
------------
NET GAIN ............................................... 12,037,404
------------
NET INCREASE .............................................. $ 12,067,484
============
SEE NOTES TO FINANCIAL STATEMENTS
36
<PAGE>
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
FINANCIAL STATEMENTS, Continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JULY 31, 2000 JULY 31, 1999
--------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) ......................... $ 30,080 $ (502,469)
Net realized loss .................................... (4,983,260) (23,565)
Net change in unrealized depreciation ................ 17,020,664 4,383,296
------------ ------------
NET INCREASE ...................................... 12,067,484 3,857,262
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN:
Class A shares ....................................... (3,427) (748,492)
Class B shares ....................................... (110,185) (36,928,990)
Class C shares ....................................... (2,468) (560,902)
Class D shares ....................................... (1,412) (64,041)
------------ ------------
TOTAL DISTRIBUTIONS ............................... (117,492) (38,302,425)
------------ ------------
Net decrease from transactions in shares of beneficial
interest ........................................... (78,453,260) (69,094,754)
------------ ------------
NET DECREASE ...................................... (66,503,268) (103,539,917)
NET ASSETS:
Beginning of period .................................. 282,834,812 386,374,729
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$148,748 and $33,585, respectively) ............... $216,331,544 $282,834,812
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE>
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS July 31, 2000
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Special Value 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
long-term capital appreciation. The Fund seeks to achieve its objective by
investing primarily in domestic equity securities of small capitalization
companies. The Fund was organized as a Massachusetts business trust on June 21,
1996 and commenced operations on October 29, 1996. On July 28, 1997, the Fund
converted to a multiple class share structure.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year,
six years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS - (1) an equity portfolio security listed or traded
on the New York or American Stock Exchange, NASDAQ, 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 latest bid price (in
cases where securities are traded on more than one exchange, the security is
valued on the exchange designated as the primary market pursuant to procedures
adopted by the Trustees); (2) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price; (3) when market quotations are not readily
available, including circumstances under which it is determined by Morgan
Stanley Dean Witter Advisors Inc. (the "Investment Manager") that sale or bid
prices are not reflective of a security's market value, portfolio securities
are valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Trustees (valuation of
debt securities for which market quotations are not readily available may be
based upon current market prices of securities which are comparable in coupon,
rating and maturity or an appropriate matrix utilizing similar factors); (4)
certain portfolio securities may be valued by an outside pricing service
approved by the Trustees. The pricing service may utilize a matrix system
incorporating security quality, maturity and coupon as the evaluation model
parameters, and/or research and evaluations
38
<PAGE>
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS July 31, 2000, continued
by its staff, including review of broker-dealer market price quotations, if
available, in determining what it believes is the fair valuation of the
portfolio securities valued by such pricing service; and (5) short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS - Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily.
C. MULTIPLE CLASS ALLOCATIONS - Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date
such items are recognized. Distribution fees are charged directly to the
respective class.
D. FEDERAL INCOME TAX STATUS - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which
may differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for tax purposes are reported as distributions of paid-in-capital.
F. ORGANIZATIONAL EXPENSES - The Investment Manager paid the organizational
expenses of the Fund in the amount of $179,229 which was reimbursed for the
full amount thereof. Such expenses have been deferred and are being amortized
on the straight-line method over a period not to exceed five years from the
commencement of operations.
39
<PAGE>
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS July 31, 2000, continued
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 as of the close
of each business day: 0.75% to the portion of net assets not exceeding $500
million and 0.725% to the portion of daily net assets exceeding $500 million.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A - up
to 0.25% of the average daily net assets of Class A; (ii) Class B - 1.0% of the
average daily net assets of Class B; and (iii) Class C - up to 1.0% of the
average daily net assets of Class C.
In the case of Class 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
$13,797,699 at July 31, 2000.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the year ended July 31, 2000, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.23% and
0.98%, respectively.
The Distributor has informed the Fund that for the year ended July 31, 2000, it
received contingent deferred sales charges from certain redemptions of the
Fund's Class A shares, Class B shares and Class C shares of $2,671, $713,785
and $2,331, respectively and received $22,004 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.
40
<PAGE>
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS July 31, 2000, continued
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended July 31, 2000 aggregated
$149,278,317 and $217,632,611, respectively.
For the year ended July 31, 2000, the Fund incurred brokerage commissions of
$48,639 with Dean Witter Reynolds Inc., an affiliate of the Investment Manager
and Distributor, for portfolio transactions executed on behalf of the Fund
For the year ended July 31, 2000, the Fund incurred brokerage commissions of
$5,750 with Morgan Stanley & Co., Inc., an affiliate of the Investment Manager
and Distributor, for portfolio transactions executed on behalf of the Fund.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent. At July 31, 2000, the Fund had
transfer agent fees and expenses payable of approximately $4,000.
5. FEDERAL INCOME TAX STATUS
Capital losses incurred after October 31 ("post-October losses") within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
approximately $3,353,000 during fiscal 2000.
As of July 31, 2000, the Fund had temporary book/tax differences primarily
attributable to post-October losses and capital loss deferrals on wash sales
and permanent book/tax differences primarily attributable to tax adjustments on
real estate investment trusts sold by the Fund. To reflect reclassifications
arising from the permanent differences, paid-in-capital was charged $253,422,
accumulated net realized loss was credited $168,339 and accumulated
undistributed net investment income was credited $85,083.
41
<PAGE>
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS July 31, 2000, continued
6. 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, 2000 JULY 31, 1999
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------ -----------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold .................................. 743,193 $ 7,984,430 963,374 $ 9,880,837
Reinvestment of distributions ......... 308 3,364 75,716 743,536
Redeemed .............................. (755,160) (8,073,321) (1,046,979) (10,827,716)
----------- -------------- ---------- --------------
Net decrease - Class A ................ (11,659) (85,527) (7,889) (203,343)
----------- -------------- ---------- --------------
CLASS B SHARES
Sold .................................. 3,426,579 37,060,879 5,320,075 54,845,651
Reinvestment of distributions ......... 9,555 102,041 3,522,840 34,206,767
Redeemed .............................. (11,049,325) (115,616,179) (15,819,028) (158,291,490)
----------- -------------- ----------- --------------
Net decrease - Class B ................ (7,613,191) (78,453,259) (6,976,113) (69,239,072)
----------- -------------- ----------- --------------
CLASS C SHARES
Sold .................................. 194,982 2,045,906 219,871 2,236,613
Reinvestment of distributions ......... 221 2,365 56,098 544,707
Redeemed .............................. (232,333) (2,430,797) (221,117) (2,179,796)
----------- -------------- ----------- --------------
Net increase (decrease) - Class C ..... (37,130) (382,526) 54,852 601,524
----------- -------------- ----------- --------------
CLASS D SHARES
Sold .................................. 992,507 10,550,632 993,032 10,206,536
Reinvestment of distributions ......... 22 244 832 8,206
Redeemed .............................. (950,517) (10,082,824) (1,001,549) (10,468,605)
----------- -------------- ----------- --------------
Net increase (decrease) - Class D ..... 42,012 468,052 (7,685) (253,863)
----------- -------------- ----------- --------------
Net decrease in Fund .................. (7,619,968) $ (78,453,260) (6,936,835) $ (69,094,754)
=========== ============== =========== ==============
</TABLE>
42
<PAGE>
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED JULY 31 JULY 28, 1997*
------------------------------------------------- THROUGH
2000 1999 1998 JULY 31, 1997
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $10.89 $11.68 $12.21 $12.10
------ ------ ------ ------
Income from investment operations:
Net investment income ............................ 0.08 0.06 0.03 -
Net realized and unrealized gain ................. 0.83 0.38 0.32 0.11
------ ------ ------ ------
Total income from investment operations ........... 0.91 0.44 0.35 0.11
------ ------ ------ ------
Less distributions from net realized gain ......... (0.01) (1.23) (0.88) -
------ ------ ------- ------
Net asset value, end of period .................... $11.79 $10.89 $11.68 $12.21
====== ====== ======= ======
TOTAL RETURN+ ..................................... 8.32% 4.94% 2.79% 0.91%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .......................................... 1.23%(3) 1.22%(3) 1.20% 1.20%(2)
Net investment income ............................. 0.75%(3) 0.59%(3) 0.25% 2.27%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $7,105 $6,689 $7,265 $10
Portfolio turnover rate ........................... 69% 74% 123% 57%(1)
</TABLE>
-------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
FINANCIAL HIGHLIGHTS, Continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED JULY 31 OCTOBER 29, 1996*
--------------------------------------------- THROUGH
2000 1999 1998 JULY 31, 1997**
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS B SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............ $10.71 $11.59 $12.21 $10.00
------ ------ ------ ------
Income (loss) from investment operations:
Net investment loss ............................ - (0.02) (0.05) -
Net realized and unrealized gain ............... 0.81 0.37 0.31 2.24
------ ------ ------ ------
Total income from investment operations ......... 0.81 0.35 0.26 2.24
------ ------ ------ ------
Less dividends and distributions from:
Net investment income .......................... - - - (0.01)
Net realized gain .............................. (0.01) (1.23) (0.88) (0.02)
------ ------ ------ ------
Total dividends and distributions ............... (0.01) (1.23) (0.88) (0.03)
------ ------ ------ ------
Net asset value, end of period .................. $11.51 $10.71 $11.59 $12.21
====== ====== ====== ======
TOTAL RETURN+ ................................... 7.53 % 4.14 % 2.02 % 22.41 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 2.00 %(3) 1.99 %(3) 1.94 % 2.01 %(2)
Net investment loss ............................. (0.02)%(3) (0.18)%(3) (0.36)% (0.03)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $202,446 $269,916 $372,933 $280,288
Portfolio turnover rate ......................... 69 % 74 % 123 % 57 %(1)
</TABLE>
-------------
* Commencement of operations.
** Prior to July 28, 1997, the Fund issued one class of shares. All shares
of the Fund held prior to that date have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
44
<PAGE>
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
FINANCIAL HIGHLIGHTS, Continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED JULY 31 JULY 28, 1997*
---------------------------------------- THROUGH
2000 1999 1998 JULY 31, 1997
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $10.72 $11.59 $12.21 $12.10
------ ------ ------ ------
Income (loss) from investment operations:
Net investment loss .............................. - (0.01) (0.06) -
Net realized and unrealized gain ................. 0.81 0.37 0.32 0.11
------ ------ ------ ------
Total income from investment operations ........... 0.81 0.36 0.26 0.11
------ ------ ------ ------
Less distributions from net realized gain ......... (0.01) (1.23) (0.88) -
------ ------ ------ ------
Net asset value, end of period .................... $11.52 $10.72 $11.59 $12.21
====== ====== ====== ======
TOTAL RETURN+ ..................................... 7.52% 4.24 % 2.02 % 0.91%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .......................................... 1.98%(3) 1.88 %(3) 1.95 % 1.94%(2)
Net investment income (loss) ...................... 0.00%(3) (0.07)%(3) (0.50)% 1.49%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $4,905 $4,962 $4,728 $11
Portfolio turnover rate ........................... 69% 74 % 123 % 57%(1)
</TABLE>
-------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
FINANCIAL HIGHLIGHTS, Continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED JULY 31 JULY 28, 1997*
-------------------------------------------- THROUGH
2000 1999 1998 JULY 31, 1997
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $10.94 $11.71 $12.21 $12.10
------ ------ ------ ------
Income from investment operations:
Net investment income ............................ 0.09 0.09 0.06 -
Net realized and unrealized gain ................. 0.85 0.37 0.32 0.11
------ ------ ------ ------
Total income from investment operations ........... 0.94 0.46 0.38 0.11
------ ------ ------ ------
Less distributions from net realized gain ......... (0.01) (1.23) (0.88) -
------ ------ ------- ------
Net asset value, end of period .................... $11.87 $10.94 $11.71 $12.21
====== ====== ======= ======
TOTAL RETURN+ ..................................... 8.56% 5.11% 3.04% 0.91%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .......................................... 1.00%(3) 0.99%(3) 0.94% 0.94%(2)
Net investment income ............................. 0.98%(3) 0.82%(3) 0.50% 2.53%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $1,875 $1,268 $1,448 $10
Portfolio turnover rate ........................... 69% 74% 123% 57%(1)
</TABLE>
-------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
46
<PAGE>
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND:
We have audited the accompanying statement of assets and liabilities of Morgan
Stanley Dean Witter Special Value Fund (the "Fund"), including the portfolio of
investments, as of July 31, 2000, and the related statements of operations and
changes in net assets, and financial highlights for the year 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 audit. The statement
of changes in net assets for the year ended July 31, 1999 and the financial
highlights for each of the respective stated periods ended July 31, 1999 were
audited by other auditors whose report, dated September 10, 1999, expressed an
unqualified opinion on that statement and the financial highlights.
We conducted our audit 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 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 at July
31, 2000 by correspondence with the custodian and brokers. 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 audit provides a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Morgan Stanley Dean
Witter Special Value Fund as of July 31, 2000, the results of its operations,
the changes in its net assets and the financial highlights for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.
Deloitte & Touche LLP
New York, New York
September 18, 2000
2000 FEDERAL TAX NOTICE (unaudited)
During the fiscal year ended July 31, 2000, the Fund paid to its
shareholders $0.01 per share from long-term capital gains.
47
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
Morgan Stanley Dean Witter Special Value Fund
In our opinion, the statement of changes in net assets and the financial
highlights of Morgan Stanley Dean Witter Special Value Fund (the "Fund") (not
presented separately herein) present fairly, in all material respects, the
changes in its net assets for the year ended July 31, 1999 and the financial
highlights for each of the years in the period ended July 31, 1999, in
conformity with generally accepted accounting principles. This financial
statement and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above. We have not
audited the financial statements or financial highlights of the Fund for any
period subsequent to July 31, 1999.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
September 10, 1999
48
<PAGE>
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
CHANGE IN INDEPENDENT ACCOUNTANTS
On July 1, 2000 PricewaterhouseCoopers LLP resigned as independent accountants
of the Fund.
The reports of PricewaterhouseCoopers LLP on the financial statements of the
Fund for the past two fiscal years contained no adverse opinion or disclaimer
of opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle.
In connection with its audits for the two most recent fiscal years and through
July 1, 2000, there have been no disagreements with PricewaterhouseCoopers LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of PricewaterhouseCoopers LLP would have caused them to
make reference thereto in their report on the financial statements for such
years.
The Fund, with the approval of its Board of Trustees and its Audit Committee,
engaged Deloitte & Touche LLP as its new independent accountants as of July 1,
2000.
49
<PAGE>
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
PART C OTHER INFORMATION
Item 23. Exhibits
-------- --------
1(a). Declaration of Trust of the Registrant, dated June 21, 1996,
is incorporated by reference to Exhibit 1(a) to the Initial
Registration Statement on Form N-1A, filed on June 27, 1996.
1(b). Instrument Establishing and Designating Additional Classes,
dated July 28, 1997, is incorporated by reference to Exhibit 1
of Post-Effective Amendment No. 2 to the Registration
Statement on Form N-1A, filed on July 22, 1997.
1(c). Amendment to the Declaration of Trust of the Registrant, dated
June 22, 1998, is incorporated by reference to Exhibit 1 of
Post-Effective Amendment No. 4 to the Registration Statement
on Form N-1A, filed on September 29, 1998.
2. Amended and Restated By-Laws of the Registrant, dated May 1,
1999, is incorporated by reference to Exhibit 2 of
Post-Effective Amendment No. 5 to the Registration Statement
on Form N-1A, filed on July 27, 1999.
3. Not applicable.
4. Amended Investment Management Agreement dated May 1, 1999
between the Registrant and Morgan Stanley Dean Witter Advisors
Inc. is incorporated by reference to Exhibit 4 of
Post-Effective Amendment No. 4 to the Registration Statement
on Form N-1A, filed on July 27, 1999.
5(a). Amended Distribution Agreement between the Registrant and
Morgan Stanley Dean Witter Distributors Inc., dated June 22,
1998, is incorporated by reference to Exhibit 6 of
Post-Effective Amendment No. 4 to the Registration Statement
on Form N-1A, filed on September 29, 1998.
5(b). Selected Dealers Agreement between Dean Witter Distributors
Inc. and Dean Witter Reynolds Inc. is incorporated by
reference to Exhibit 5(b) of Pre-Effective Amendment No.1 to
the Registration Statement on Form N-1A, filed on
August 21, 1996.
5(c). Omnibus Selected Dealer Agreement between Morgan Stanley Dean
Witter Distributors Inc. and National Financial Services
Corporation, dated October 17, 1998 is incorporated by
reference to Exhibit 5(c) of Post-Effective Amendment No. 5 to
the Registration Statement on Form N-1A, filed on July 27,
1999.
<PAGE>
6. Not applicable.
7. Custody Agreement between the Registrant and The Bank of New
York is incorporated by reference to Exhibit 8(a) of
Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A, filed on August 21, 1996.
8(a). Form of Amended & Restated Transfer Agency and Services
Agreement between the Registrant and Morgan Stanley Dean
Witter Trust FSB, dated September 1, 2000, filed herein.
8(b). Amended Services Agreement, dated May 1, 1999, between Morgan
Stanley Dean Witter Advisors Inc. and Morgan Stanley
Dean Witter Services Company Inc. is incorporated by reference
to Exhibit 8(b) of Post-Effective Amendment No. 5 to
the Registration Statement on Form N-1A, filed on July 27,
1999.
9(a). Opinion of Sheldon Curtis, Esq., dated August 19, 1996, is
incorporated by reference to Exhibit 10(a) of Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A,
filed on August 21, 1996.
9(b). Opinion of Lane, Altman & Owens LLP, dated August 16, 1996,
is incorporated by reference to Exhibit 10(b) of
Pre-Effective Amendment No. 1 to the Registration Statement
on Form N-1A, filed on August 21, 1996.
10(a) Consent of Independent Auditors, filed herein.
10(b). Consent of PricewaterhouseCoopers LLP, filed herein.
11. Not applicable.
12. Not applicable.
13. Amended Plan of Distribution pursuant to Rule 12b-1, dated
July 28, 1997, between the Registrant and Morgan Stanley Dean
Witter Distributors Inc., is incorporated by reference
to Exhibit 15 of Post-Effective Amendment No. 2 to the
Registration Statement on Form N-1A, filed on July 22, 1997.
14. Amended Multiple Class Plan pursuant to Rule 18f-3, dated
August 15, 2000, filed herein.
15. Not Applicable
<PAGE>
16(a) Code of Ethics of Morgan Stanley Dean Witter Advisors Inc.,
Morgan Stanley Dean Witter Services Company Inc. and
Morgan Stanley Dean Witter Distributors Inc., filed herein.
16(b) Code of Ethics of the Morgan Stanley Dean Witter Funds, filed
herein.
Other. Powers of Attorney of Trustees are incorporated by reference
to Exhibit (Other) of Pre-Effective Amendment No. 1 to
the Registration Statement on Form N-1A, filed on August 21,
1996 and of Post-Effective Amendment No. 3 to the
Registration Statement on Form N-1A filed on September 29,
1997. The Power of Attorney for James F. Higgins is filed
herein.
Item 24. Persons Controlled by or Under Common Control with the Fund.
None
Item 25. Indemnification.
Pursuant to Section 5.3 of the Registrant's Declaration of Trust and under
Section 4.8 of the Registrant's By-Laws, the indemnification of the Registrant's
trustees, officers, employees and agents is permitted if it is determined that
they acted under the belief that their actions were in or not opposed to the
best interest of the Registrant, and, with respect to any criminal proceeding,
they had reasonable cause to believe their conduct was not unlawful. In
addition, indemnification is permitted only if it is determined that the actions
in question did not render them liable by reason of willful misfeasance, bad
faith or gross negligence in the performance of their duties or by reason of
reckless disregard of their obligations and duties to the Registrant. Trustees,
officers, employees and agents will be indemnified for the expense of litigation
if it is determined that they are entitled to indemnification against any
liability established in such litigation. The Registrant may also advance money
for these expenses provided that they give their undertakings to repay the
Registrant unless their conduct is later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust
and paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the Registrant
shall be liable for any action or failure to act, except in the case of bad
faith, willful misfeasance, gross negligence or reckless disregard of duties to
the Registrant.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such trustee,
officer or controlling person in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such
<PAGE>
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the
indemnification provision of its by-laws in a manner consistent with Release
11330 of the Securities and Exchange Commission under the Investment Company Act
of 1940, so long as the interpretation of Sections 17(h) and 17(i) of such Act
remains in effect.
Registrant, in conjunction with the Investment Manager,
Registrant's Trustees, and other registered investment management companies
managed by the Investment Manager, maintains insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of Registrant, or who is or
was serving at the request of Registrant as a trustee, director, officer,
employee or agent of another trust or corporation, against any liability
asserted against him and incurred by him or arising out of his position.
However, in no event will Registrant maintain insurance to indemnify any such
person for any act for which Registrant itself is not permitted to indemnify
him.
Item 26. Business and Other Connections of Investment Advisor
See "The Fund and Its Management" in the Prospectus regarding the
business of the investment advisor. The following information is given regarding
officers of Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"). MSDW
Advisors is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
The term "Morgan Stanley Dean Witter Funds" refers to the following
registered investment companies:
Closed-End Investment Companies
-------------------------------
(1) Morgan Stanley Dean Witter California Insured Municipal Income Trust
(2) Morgan Stanley Dean Witter California Quality Municipal Securities
(3) Morgan Stanley Dean Witter Government Income Trust
(4) Morgan Stanley Dean Witter High Income Advantage Trust
(5) Morgan Stanley Dean Witter High Income Advantage Trust II
(6) Morgan Stanley Dean Witter High Income Advantage Trust III
(7) Morgan Stanley Dean Witter Income Securities Inc.
(8) Morgan Stanley Dean Witter Insured California Municipal Securities
(9) Morgan Stanley Dean Witter Insured Municipal Bond Trust
(10) Morgan Stanley Dean Witter Insured Municipal Income Trust
(11) Morgan Stanley Dean Witter Insured Municipal Securities
(12) Morgan Stanley Dean Witter Insured Municipal Trust
(13) Morgan Stanley Dean Witter Municipal Income Opportunities Trust
(14) Morgan Stanley Dean Witter Municipal Income Opportunities Trust II
(15) Morgan Stanley Dean Witter Municipal Income Opportunities Trust III
(16) Morgan Stanley Dean Witter Municipal Income Trust
(17) Morgan Stanley Dean Witter Municipal Income Trust II
(18) Morgan Stanley Dean Witter Municipal Income Trust III
(19) Morgan Stanley Dean Witter Municipal Premium Income Trust
(20) Morgan Stanley Dean Witter New York Quality Municipal Securities
(21) Morgan Stanley Dean Witter Prime Income Trust
(22) Morgan Stanley Dean Witter Quality Municipal Income Trust
(23) Morgan Stanley Dean Witter Quality Municipal Investment Trust
<PAGE>
(24) Morgan Stanley Dean Witter Quality Municipal Securities
Open-end Investment Companies
-----------------------------
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Institutional Money Trust
(4) Active Assets Money Trust
(5) Active Assets Premier Money Trust
(6) Active Assets Tax-Free Trust
(7) Morgan Stanley Dean Witter 21st Century Trend Fund
(8) Morgan Stanley Dean Witter Aggressive Equity Fund
(9) Morgan Stanley Dean Witter American Opportunities Fund
(10) Morgan Stanley Dean Witter Balanced Growth Fund
(11) Morgan Stanley Dean Witter Balanced Income Fund
(12) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(13) Morgan Stanley Dean Witter California Tax-Free Income Fund
(14) Morgan Stanley Dean Witter Capital Growth Securities
(15) Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas
Portfolio"
(16) Morgan Stanley Dean Witter Convertible Securities Trust
(17) Morgan Stanley Dean Witter Developing Growth Securities Trust
(18) Morgan Stanley Dean Witter Diversified Income Trust
(19) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(20) Morgan Stanley Dean Witter Equity Fund
(21) Morgan Stanley Dean Witter European Growth Fund Inc.
(22) Morgan Stanley Dean Witter Federal Securities Trust
(23) Morgan Stanley Dean Witter Financial Services Trust
(24) Morgan Stanley Dean Witter Fund of Funds
(25) Morgan Stanley Dean Witter Global Dividend Growth Securities
(26) Morgan Stanley Dean Witter Global Utilities Fund
(27) Morgan Stanley Dean Witter Growth Fund
(28) Morgan Stanley Dean Witter Hawaii Municipal Trust
(29) Morgan Stanley Dean Witter Health Sciences Trust
(30) Morgan Stanley Dean Witter High Yield Securities Inc.
(31) Morgan Stanley Dean Witter Income Builder Fund
(32) Morgan Stanley Dean Witter Information Fund
(33) Morgan Stanley Dean Witter Intermediate Income Securities
(34) Morgan Stanley Dean Witter International Fund
(35) Morgan Stanley Dean Witter International SmallCap Fund
(36) Morgan Stanley Dean Witter Japan Fund
(37) Morgan Stanley Dean Witter Latin American Growth Fund
(38) Morgan Stanley Dean Witter Limited Term Municipal Trust
(39) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(40) Morgan Stanley Dean Witter Market Leader Trust
(41) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(42) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(43) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(44) Morgan Stanley Dean Witter New Discoveries Fund
(45) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(46) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(47) Morgan Stanley Dean Witter Next Generation Trust
(48) Morgan Stanley Dean Witter North American Government Income Trust
<PAGE>
(49) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(50) Morgan Stanley Dean Witter Real Estate Fund
(51) Morgan Stanley Dean Witter S&P 500 Index Fund
(52) Morgan Stanley Dean Witter S&P 500 Select Fund
(53) Morgan Stanley Dean Witter Select Dimensions Investment Series
(54) Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
(55) Morgan Stanley Dean Witter Short-Term Bond Fund
(56) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(57) Morgan Stanley Dean Witter Small Cap Growth Fund
(58) Morgan Stanley Dean Witter Special Value Fund
(59) Morgan Stanley Dean Witter Strategist Fund
(60) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(61) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(62) Morgan Stanley Dean Witter Tax-Managed Growth Fund
(63) Morgan Stanley Dean Witter Technology Fund
(64) Morgan Stanley Dean Witter Total Market Index Fund
(65) Morgan Stanley Dean Witter Total Return Trust
(66) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(67) Morgan Stanley Dean Witter U.S. Government Securities Trust
(68) Morgan Stanley Dean Witter Utilities Fund
(69) Morgan Stanley Dean Witter Value-Added Market Series
(70) Morgan Stanley Dean Witter Value Fund
(71) Morgan Stanley Dean Witter Variable Investment Series
(72) Morgan Stanley Dean Witter World Wide Income Trust
<TABLE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
---------------------- ------------------------------------------------
<S> <C>
Mitchell M. Merin President and Chief Operating Officer of Asset
President, Chief Management of Morgan Stanley Dean Witter & Co.
Executive Officer and ("MSDW); Chairman, Chief Executive Officer and Director
Director of Morgan Stanley Dean Witter Distributors Inc. ("MSDW
Distributors") and Morgan Stanley Dean Witter Trust FSB
("MSDW Trust"); President, Chief Executive Officer and
Director of Morgan Stanley Dean Witter Services Company
Inc. ("MSDW Services"); President of the Morgan Stanley
Dean Witter Funds; Executive Vice President and Director
of Dean Witter Reynolds Inc. ("DWR"); Director of various
MSDW subsidiaries; Trustee of various Van Kampen investment
companies.
Barry Fink General Counsel of Asset Management of MSDW;
Executive Vice President, Executive Vice President, Secretary, General Counsel
Secretary, General Counsel and Director of MSDW Services; Vice President and
and Director Secretary of MSDW Distributors; Vice President, Secretary
and General Counsel of the Morgan Stanley Dean Witter Funds.
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
--------------------- -------------------------------------------------
<S> <C>
Joseph J. McAlinden Vice President of the Morgan Stanley Dean Witter Funds;
Executive Vice President Director of MSDW Trust.
and Chief Investment
Officer
Ronald E. Robison Executive Vice President, Chief Administrative Officer
Executive Vice President, and Director of MSDW Services; Vice President of the
Chief Administrative Morgan Stanley Dean Witter Funds.
Officer and Director
Edward C. Oelsner, III
Executive Vice President
Joseph R. Arcieri Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Peter M. Avelar Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the High
Yield Group
Mark Bavoso Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Douglas Brown
Senior Vice President
Rosalie Clough
Senior Vice President
and Director of Marketing
Richard G. DeSalvo
Senior Vice President
and Director of Investment
Management Services
Richard Felegy
Senior Vice President
Sheila A. Finnerty Vice President of Morgan Stanley Dean Witter Prime
Senior Vice President Income Trust.
Edward F. Gaylor Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Director of the Research
Group
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
--------------------- -------------------------------------------------
<S> <C>
Robert S. Giambrone Senior Vice President of MSDW Services, MSDW
Senior Vice President Distributors and MSDW Trust and Director of MSDW Trust;
Vice President of the Morgan Stanley Dean Witter Funds.
Rajesh K. Gupta Vice President of various Morgan Stanley Dean Witter
Senior Vice President, Funds.
Director of the Taxable
Fixed Income Group and
Chief Administrative Officer -
Investments
Kenton J. Hinchliffe Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Kevin Hurley Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Jenny Beth Jones Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Michelle Kaufman Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
John B. Kemp, III President of MSDW Distributors.
Senior Vice President
Anita H. Kolleeny Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of Sector
Rotation
Jonathan R. Page Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the Money
Market Group
Ira N. Ross Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Guy G. Rutherfurd, Jr. Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the Growth
Group
Rochelle G. Siegel Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
---------------------- ------------------------------------------------
<S> <C>
James Solloway Jr.
Senior Vice President
Katherine H. Stromberg Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
Paul D. Vance Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the Growth
and Income Group
Elizabeth A. Vetell
Senior Vice President
and Director of Shareholder
Communication
James F. Willison Vice President of various Morgan Stanley Dean Witter
Senior Vice President Funds.
and Director of the
Tax-Exempt Fixed
Income Group
Raymond A. Basile
First Vice President
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President MSDW Services; Assistant Treasurer of MSDW
and Assistant Distributors; Treasurer and Chief Financial and
Accounting Treasurer Officer of the Morgan Stanley
Dean Witter Funds.
Thomas Chronert
First Vice President
Richard Colville First Vice President and Controller of MSDW Services;
Vice President First Assistant Treasurer of MSDW Distributors; First Vice
and Controller President and Treasurer of MSDW Trust.
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President and
First Vice President Assistant Secretary of MSDW Services; Assistant
and Assistant Secretary Secretary of MSDW Distributors and the Morgan Stanley
Dean Witter Funds.
Salvatore DeSteno First Vice President of MSDW Services.
First Vice President
Peter W. Gurman
First Vice President
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
---------------------- -------------------------------------------------
<S> <C>
David Johnson
First Vice President
Stanley Kapica
First Vice President
Douglas J. Ketterer
First Vice President
Todd Lebo First Vice President and Assistant Secretary of MSDW
First Vice President and Services; Assistant Secretary of MSDW Distributors and
Assistant Secretary the Morgan Stanley Dean Witter Funds.
Lou Anne D. McInnis First Vice President and Assistant Secretary of MSDW
First Vice President and Services; Assistant Secretary of MSDW Distributors and
Assistant Secretary the Morgan Stanley Dean Witter Funds.
Carsten Otto First Vice President and Assistant Secretary of MSDW
First Vice President Services; Assistant Secretary of MSDW Distributors and
and Assistant Secretary the Morgan Stanley Dean Witter Funds.
Carl F. Sadler
First Vice President
Ruth Rossi First Vice President and Assistant Secretary of MSDW
First Vice President and Services; Assistant Secretary of MSDW Distributors and
Assistant Secretary the Morgan Stanley Dean Witter Funds.
James P. Wallin
First Vice President
Robert Abreu
Vice President
Dale Albright
Vice President
Joan G. Allman
Vice President
Andrew Arbenz Vice President of Morgan Stanley Dean Witter Global
Vice President Utilities Fund.
Sean Aurigemma
Vice President
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
---------------------- --------------------------------------------------
<S> <C>
Armon Bar-Tur Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Thomas A. Bergeron
Vice President
Philip Bernstein
Vice President
Dale Boettcher
Vice President
Michelina Calandrella
Vice President
Ronald Caldwell
Vice President
Joseph Cardwell
Vice President
Liam Carroll
Vice President
Philip Casparius
Vice President
Annette Celenza
Vice President
Aaron Clark Vice President of Morgan Stanley Dean Witter Market
Vice President Leader Trust
William Connerly
Vice President
Virginia Connors
Vice President
Michael J. Davey
Vice President
David Dineen Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
June Ewers
Vice President
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
---------------------- -------------------------------------------------
<S> <C>
Jeffrey D. Geffen Vice President of Morgan Stanley Dean Witter U.S.
Vice President Government Securities Trust
Sandra Gelpieryn
Vice President
Charmaine George
Vice President
Michael Geringer
Vice President
Gail Gerrity Burke
Vice President
Peter Gewirtz
Vice President
Mina Gitsevich
Vice President
Ellen Gold
Vice President
Amy Golub
Vice President
Stephen Greenhut
Vice President
Joan Hamilton
Vice President
Trey Hancock
Vice President
Matthew T. Haynes Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Peter Hermann Jr. Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
David T. Hoffman
Vice President
Thomas G. Hudson II
Vice President
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
---------------------- -------------------------------------------------
<S> <C>
Linda Jones
Vice President
Norman Jones
Vice President
Kevin Jung Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Carol Espejo-Kane
Vice President
Nancy Karole Kennedy
Vice President
Paula LaCosta Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Kimberly LaHart
Vice President
Thomas Lawlor
Vice President
Lester Lay
Vice President
Phuong Le
Vice President
Gerard J. Lian Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Cameron J. Livingstone
Vice President
Nancy Login Cole
Vice President
Sharon Loguercio
Vice President
Stephanie Lovinger
Vice President
Steven MacNamara
Vice President
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
---------------------- ------------------------------------------------
<S> <C>
Catherine Maniscalco Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Peter R. McDowell
Vice President
Albert McGarity
Vice President
Teresa McRoberts Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Mark Mitchell
Vice President
Thomas Moore
Vice President
Julie Morrone Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Mary Beth Mueller
Vice President
David Myers Vice President of Morgan Stanley Dean Witter Natural
Vice President Resource Development Securities Inc.
James Nash
Vice President
Daniel Niland
Vice President
Richard Norris
Vice President
Hilary A. O'Neill
Vice President
Steven Orlov
Vice President
Mori Paulsen
Vice President
Anne Pickrell
Vice President
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
---------------------- ------------------------------------------------
<S> <C>
Reginald Rigaud
Vice President
Frances Roman
Vice President
Dawn Rorke
Vice President
John Roscoe Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Hugh Rose
Vice President
Robert Rossetti Vice President of Morgan Stanley Dean Witter Competitive
Vice President Edge Fund.
Sally Sancimino Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Deborah Santaniello
Vice President
Patrice Saunders
Vice President
Donna Savoca
Vice President
Howard A. Schloss Vice President of Morgan Stanley Dean Witter Federal
Vice President Securities Trust.
Alison M. Sharkey
Vice President
Peter J. Seeley Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Ronald B. Silvestri Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
Herbert Simon
Vice President
Martha Slezak
Vice President
<PAGE>
<CAPTION>
NAME AND POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
MORGAN STANLEY DEAN OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
WITTER ADVISORS INC. AND NATURE OF CONNECTION
---------------------- -------------------------------------------------
<S> <C>
Frank Smith
Vice President
Otha Smith
Vice President
Stuart Smith
Vice President
Robert Stearns
Vice President
Naomi Stein
Vice President
William Stevens
Vice President
Michael Strayhorn
Vice President
Marybeth Swisher
Vice President
Michael Thayer
Vice President
Bradford Thomas
Vice President
Barbara Toich
Vice President
Robert Vanden Assem
Vice President
Frank Vindigni
Vice President
David Walsh
Vice President
Alice Weiss Vice President of various Morgan Stanley Dean Witter
Vice President Funds.
John Wong
Vice President
</TABLE>
<PAGE>
The principal address of MSDW Advisors, MSDW Services, MSDW
Distributors, DWR, and the Morgan Stanley Dean Witter Funds is Two World Trade
Center, New York, New York 10048. The principal address of MSDW is 1585
Broadway, New York, New York 10036. The principal address of MSDW Trust is 2
Harborside Financial Center, Jersey City, New Jersey 07311.
Item 27. Principal Underwriters
(a) Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors"), a
Delaware corporation, is the principal underwriter of the Registrant. MSDW
Distributors is also the principal underwriter of the following investment
companies:
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Institutional Money Trust
(4) Active Assets Money Trust
(5) Active Assets Premier Money Trust
(6) Active Assets Tax-Free Trust
(7) Morgan Stanley Dean Witter 21st Century Trend Fund
(8) Morgan Stanley Dean Witter Aggressive Equity Fund
(9) Morgan Stanley Dean Witter American Opportunities Fund
(10) Morgan Stanley Dean Witter Balanced Growth Fund
(11) Morgan Stanley Dean Witter Balanced Income Fund
(12) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(13) Morgan Stanley Dean Witter California Tax-Free Income Fund
(14) Morgan Stanley Dean Witter Capital Growth Securities
(15) Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas
Portfolio"
(16) Morgan Stanley Dean Witter Convertible Securities Trust
(17) Morgan Stanley Dean Witter Developing Growth Securities Trust
(18) Morgan Stanley Dean Witter Diversified Income Trust
(19) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(20) Morgan Stanley Dean Witter Equity Fund
(21) Morgan Stanley Dean Witter European Growth Fund Inc.
(22) Morgan Stanley Dean Witter Federal Securities Trust
(23) Morgan Stanley Dean Witter Financial Services Trust
(24) Morgan Stanley Dean Witter Fund of Funds
(25) Morgan Stanley Dean Witter Global Dividend Growth Securities
(26) Morgan Stanley Dean Witter Global Utilities Fund
(27) Morgan Stanley Dean Witter Growth Fund
(28) Morgan Stanley Dean Witter Hawaii Municipal Trust
(29) Morgan Stanley Dean Witter Health Sciences Trust
(30) Morgan Stanley Dean Witter High Yield Securities Inc.
(31) Morgan Stanley Dean Witter Income Builder Fund
(32) Morgan Stanley Dean Witter Information Fund
(33) Morgan Stanley Dean Witter Intermediate Income Securities
(34) Morgan Stanley Dean Witter International Fund
(35) Morgan Stanley Dean Witter International SmallCap Fund
(36) Morgan Stanley Dean Witter Japan Fund
(37) Morgan Stanley Dean Witter Latin American Growth Fund
(38) Morgan Stanley Dean Witter Limited Term Municipal Trust
<PAGE>
(39) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(40) Morgan Stanley Dean Witter Market Leader Trust
(41) Morgan Stanley Dean Witter Mid-Cap Equity Trust
(42) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(43) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(44) Morgan Stanley Dean Witter New Discoveries Fund
(45) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(46) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(47) Morgan Stanley Dean Witter Next Generation Trust
(48) Morgan Stanley Dean Witter North American Government Income Trust
(49) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(50) Morgan Stanley Dean Witter Prime Income Trust
(51) Morgan Stanley Dean Witter Real Estate Fund
(52) Morgan Stanley Dean Witter S&P 500 Index Fund
(53) Morgan Stanley Dean Witter S&P 500 Select Fund
(54) Morgan Stanley Dean Witter Short-Term Bond Fund
(55) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(56) Morgan Stanley Dean Witter Small Cap Growth Fund
(57) Morgan Stanley Dean Witter Special Value Fund
(58) Morgan Stanley Dean Witter Strategist Fund
(59) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(60) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(61) Morgan Stanley Dean Witter Tax-Managed Growth Fund
(62) Morgan Stanley Dean Witter Technology Fund
(63) Morgan Stanley Dean Witter Total Market Index Fund
(64) Morgan Stanley Dean Witter Total Return Trust
(65) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(66) Morgan Stanley Dean Witter U.S. Government Securities Trust
(67) Morgan Stanley Dean Witter Utilities Fund
(68) Morgan Stanley Dean Witter Value-Added Market Series
(69) Morgan Stanley Dean Witter Value Fund
(70) Morgan Stanley Dean Witter Variable Investment Series
(71) Morgan Stanley Dean Witter World Wide Income Trust
(b) The following information is given regarding directors and officers of MSDW
Distributors not listed in Item 26 above. The principal address of MSDW
Distributors is Two World Trade Center, New York, New York 10048. Other than
Messrs. Higgins and Purcell, who are Trustees of the Registrant, none of the
following persons has any position or office with the Registrant.
Name Positions and Office with MSDW Distributors
---- -------------------------------------------
James F. Higgins Director
Philip J. Purcell Director
John Schaeffer Director
Charles Vadala Senior Vice President and Financial Principal.
<PAGE>
Item 28. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained by the Investment Manager at its offices, except records relating to
holders of shares issued by the Registrant, which are maintained by the
Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 29. Management Services
Registrant is not a party to any such management-related service contract.
Item 30. Undertakings
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 28th day of September, 2000.
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
By /s/ Barry Fink
-----------------------------
Barry Fink
Vice President and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 7 has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
(1) Principal Executive Officer Chief Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo
----------------------------------- 09/28/00
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 09/28/00
-----------------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
James F. Higgins
By /s/ Barry Fink 09/28/00
-----------------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
Wayne E. Hedien John L. Schroeder
By /s/ David M. Butowsky 09/28/00
-----------------------------------
David M. Butowsky
Attorney-in-Fact
</TABLE>
<PAGE>
MORGAN STANLEY DEAN WITTER SPECIAL VALUE FUND
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C>
8 (a). Form of Amended and Restated Transfer Agency and Service Agreement.
10 (a). Consent of Independent Auditors.
10 (b). Consent of PricewaterhouseCoopers LLP.
14. Amended Multiple Class Plan pursuant to Rule 18f-3.
16 (a). Code of Ethics of Morgan Stanley Dean Witter Advisors Inc., Morgan Stanley Dean
Witter Services Company Inc. and Morgan Stanley Dean Witter Distributors Inc.
16 (b). Code of Ethics of the Morgan Stanley Dean Witter Funds.
Other Power of Attorney of James F. Higgins.
</TABLE>
